Roofstock's founder used his REIT connections to secure 100 homes for launch, then offered a 30-day money-back guarantee on home purchases to build buyer trust. Only a handful of returns happened monthly, making it cheap insurance that made the marketplace work.
Chapters
Going back to the very beginning of Roofstock, you know, what were the actual kind of first steps that you all took to start as a marketplace? And, you know, as marketplace founders, you know, we typically face the kind of the chicken and the egg or the cold start problem, right? So how did you kind of solve for that in the very beginning?
So I would say I was fortunate in that when I left the REIT that I was running, I had really good industry relationships. I knew all of the other REIT CEOs and large fund participants. And as soon as I left, the next day I just started calling them up and said, hey, I'm thinking of starting this company. We're going to sell leased homes online. I know you have lots of homes that you would like to sell at some point. I need you to gimme 20 houses and I'll sell 'em for a really low fee. If it works, then I could be a terrific outlet for you on the disposition side. And you're going to see all the homes that I'm selling from everyone else and you'll be able to buy them. Because otherwise it was very inefficient for them to sell these homes. And so I got a lot of these people to give me 20 houses. So very quickly we got 100 homes that we could put on our site. Otherwise it was very difficult to get to the retail end user and convince them to sell a home with a tenant in place, not on the MLS, And oh yeah, and we're going to attract a bunch of investors. So I would say we knew we had the supply side nailed. You know, I think when you're starting a marketplace, if you could have one side, it's really important nailed. It's hard to get 2 going from— and so that helped. And then on the— and then once we had good inventory, then it was just about attracting people to the site. And I would say, If you make these early decisions too, some things are very, you know, critical. One of the things we realized was there was a lot of people looking at homes and engaging, but no one was buying right away. And so I talked to Marc Benioff actually, who's, you know, founder of Salesforce. He was one of our early investors and said, you know, what can we do to like get people off the dime? He said, you got to build trust. I said, you know, if you were a buyer, what would be like really important for you to be able to pull the trigger? And I'm like, well, what if there was like a guarantee, a money-back guarantee like there is on a hotel room or an airline fare or whatever? It's like, yeah, great. So we did it. We put in an unconditional money-back guarantee for 30 days on any home you bought through the marketplace. So if you didn't like the color of it, you could call us on day 29. And say, we don't want any more. And very few people did it. So it was one of those things, if you could find something where the perceived value is a lot greater than the actual cost to you, and the theoretical cost to us could have been huge, but you have to take some of these risks, right? And the reality was we didn't, if we couldn't stand behind the product we were selling in the marketplace, then maybe we shouldn't be doing it. And it gave people a lot of confidence. And, you know, we'd get maybe, you know, one every month or 2 that would do it, and we would end up buying it back and then reselling it on the marketplace. And sometimes we'd make a little or lose a little, but it was basically break even. But it was, sometimes you have to do things that will really lubricate activity and build trust. And I think in marketplaces, building trust is really essential. It's an obvious statement, but without that, you don't have a business.
