How do you raise a large debt facility alongside venture capital?

Jason Kirby (00:02.326) Welcome back to episode 27 of Fundraising Demystified. Today we have Paul Kormitos, co-founder and CEO of Summer, a fintech property management platform that enables investors to acquire and manage vacation rentals in a new way. They've closed over 80 million in funding. And on this episode, Paul walks us through what it's like building a company where he had no industry experience by hiring experts to fill the gaps, how he secured both equity and debt facility by running a structured fundraising process and how he differentiates himself with better unit economics against his competitors. As a reminder, if you're not already subscribed and you wanna get updates when we release new podcast or a newsletter, be sure to go to join.thunder.vc. Again, join.thunder.vc. Let's go ahead and get started with the show. Thanks for joining us, Paul. Paul Kromidas (00:07.583) Thanks for having me, Jason. Pleasure to be here. Jason Kirby (00:08.77) Yeah, so Paul is the founder and CEO of Summer, and they have gone on to raise over $80 million. So Paul, I'm so excited to hear about your story, your journey and how you've gotten to where you are today. Would you mind just giving a little bit of color about your background and what led you to starting summer for the audience? Paul Kromidas (00:28.324) Yeah, before I got started on summer, I had a variety of roles, which I think all kind of played a role in the entrepreneurial journey in terms of getting there. Started my career in more form of finance, the credit world, sort of underpins. I still think back to some of those lessons when I'm negotiating debt facilities and talking to lenders right now. I think being able to speak that language a little bit certainly been helpful on the journey. and know what it's like to go into those offices and talk to those types of people. Moved over to management consulting, strategy and operations work, M&A work after that. And I have a lot to bring forth from that experience that I think led me into what I'm doing now as a founder. But then most relevantly, that world, being M&A led me to Airbnb. So I was at Airbnb for a number of years, initially through an acquisition they were doing, helped them lead that acquisition, bring that company in, figure out what to do with it. And then I stuck around after that and actually led a product team there, building out consumer facing products for a number of years and strategy operations work as well on the side there. And sort of had the core idea come to me while I was there. So one of the things I noticed, you know, anyone who's used Airbnb probably, they just figured this out, maybe not her shattering information, but the quality hosts do very well on the platform. People who can drive whatever the moniker is, and Airbnb's changed it a lot. There was Superhost, there was Airbnb Plus, now it's Guest Choice, I believe Brian just came out with a month ago, it's the new moniker, they're calling it. I'm a Guest Choice as well, yeah. Summer Homes are Guest Choice Homes, that's great. Whatever, we had verified at one point it stays on Airbnb. So they're hitting it at the core principle, right? The core principle is quality stays, consistent five-star reviews, professional photography, the amenities you expect. Jason Kirby (02:01.502) Yeah. I'm making a choice. Yeah. Paul Kromidas (02:23.424) Um, we'll perform better than someone taking a home, throwing some Ikea furniture in and putting up a couple of like granny iPhone pictures. And maybe there's some questionable views, right? Like I've got kids. Yeah. You, you understand where you're coming from. Like you don't want to get anything to go wrong. So you want to book that and you can pay charge a premium for that. And therefore, you know, get a premium as well. Those homes are booked more than others. The thing I noticed about you know, whatever is at Airbnb was we could not onboard enough of that supply fast enough, you know, and Airbnb is a marketplace and supply and demand. There's a lot of demand for it, but there's not enough supply. And why is there not enough supply? So I started to think through this and unpack this, um, you know, the individual owners, a lot of times of these properties, the ones who currently own them, or who want to own them are sometimes very ill equipped for actually running in outsource, but at the end of the day is now source hospitality, uh, distributed hospitality operation, right? Um, How are you creating a experience on the ground that is akin to staying in a hotel, right? I don't think people stay in short-term rentals to stay in a hotel. Clearly, you're making that decision. You know you're not getting the Courtyard Marriott, but you're getting a short-term rental. But I think too many people get lost in the shuffle, and they're not thinking consumer first about that. I'm like, well, if I'm requiring someone to take out the trash, I mean, there's all these jokes online. Take out the trash, bag the... and bag this, do this, clean this, and have all these things you got to hoops, you got to jump through five locks. Uh, you know, what kind of experience are you really driving? People get annoyed about that. At the end of the day, they're consumers and not everyone is, is a consumer facing mindset. Um, so. Started to think through like, well, you know, these customers who are buying these homes have a need to get more out of them or buy them new and figure out how to remove the risk in this process. Cause people can make money doing it, but it's very risky and it's time consuming. And people just. don't understand the data that goes into it all that. So the idea for Samba really came from that. Can we increase the amount of supply in a lot of the short-term rental marketplaces, Airbnb, Robo, et cetera, and our own platform, we rent out directly. But, uh, you know, linearizing the process, we will run homes through data and underwriting to understand actually what they're going to make, not like boost up numbers and something way out of left field, like we can run it through and say this home on this block will generate this much, uh, you know, Jason, whether you already own the home or want to buy the home, here's what we can do to maximize that. Um. Paul Kromidas (04:46.2) We will finance that purchase for you if you want to buy it new, or we can finance improvements you'd like to make to your current property. And then lastly, we will manage the home, price the home, generate the yield, but do it with a trusted brand in front of it, Summerhelms, that is well known to renters and owners alike as a quality owner operator of these assets that cares for them like their own. And we find the feedback loops on that are very strong in building a network that resonates with consumers. Jason Kirby (05:14.186) I'm glad you kind of walked through and gave us the overview of summer and also just walking through the background of just how relevant your background was to starting this. And especially having the insights at Airbnb and being able to see the supply and demand problem that was there. Did you ever have your own property prior to doing this yourself or did you jump into it? Paul Kromidas (05:37.108) It's crazy actually. No, I did not. I did not own or operate a short-term rental officially. I had been adjacent to it for many years at Airbnb and looked at the numbers. I talked to a lot of owners themselves. I wore a bunch of different hats at Airbnb, but my last hat I wore was on the product team. Obviously, one of the big jobs of any product person in any business is consumer focus, right? You're, you're understanding who you're building your product for. You're understanding the customers, right? And oftentimes at Airbnb, who are the two customers in the marketplace, it's your supply and demand. It's your hosts and your guests, right? And I had the fortune of being able to work on both ends of the product and you're talking to hosts constantly. And one of the things that Brian always emphasizes is how important hosts are. You walk through the halls of Airbnb and you see pictures of actual hosts to remind you like, this is, you know, here's Jason and he has a property here and he lists on Airbnb and There he is, some great black and white photo, but it's true. And you can't help but remember you're doing this for Jason and other people out there to list their homes and put them on this platform and create that procreating of supply and demand. But you're getting to know their pain points or understanding what that problem is and trying to solve that for them. I think Airbnb is traditionally why I jumped on this opportunity was, you know, Airbnb is a marketplace and they'd like to remain a marketplace. So, you know, keeping things that are both operational and financial for them. at an arm's length, I think is very important. And that's an opportunity for us here to obviously do something both on those angles, but also through the technology we're building at Capofano. Jason Kirby (07:08.703) And I think you guys have done it a little bit differently than some others. And, you know, I'm really curious to learn, you know, one, the show's about fundraising, but I do want to just kind of get down to like, you know, the, the model behind it, because you guys raised a sizable debt facility to make this a reality. Paul Kromidas (07:23.114) Thank you. Jason Kirby (07:24.118) And, you know, whereas most people are maybe just over glorify property managers, you actually are, you know, financing the, this side of the deal. And so I'm curious at like, how you guys did that and why you chose to go down the financing route and taking on that, that risk along with the homeowner. Paul Kromidas (07:34.104) Yeah. Paul Kromidas (07:42.828) Yeah, that's a good question. Um, you know, I think the initial thought was, um, you know, we wanted to try to help more people become owners and operators of these homes themselves or owners of these homes and be able to get that experience of owning a vacation home and do it in a way that made sense. Right. That was sort of the crux of the original idea that was putting out there. And. You know, I think one of the things we realized is as we were doing this was, Hey, we're running, we're building this, this model top of funnel, this algorithm top of funnel that's proven to be really accurate and finding the right homes and sort of informing our investment decisions here on, you know, how can we help you, Jason, if you're someone new who wants to buy a vacation? I'm like, you're coming into this market. You're driving, I'm sitting here in New York city. You're driving upstate, that's a value. You're driving to the Hamptons and you're looking at homes and you're wondering, is this home good or is this home good or, you know, I kind of want to do this and And getting those people, there's a lot of people in this tiering, you know, what we call sort of like the mass affluent, the middle middle, upper class. Like what's interesting about that group is they have the funds. Typically they have the money to actually transact and buy a decent home. It may not be like a mega mansion, but it's a decent home. A lot of people would love to stay in it. It's actually, those are the homes that perform best via short-term metal. They're not the mega mansions. They're typically like just the really nice properties, right? Um, but what's interesting about that customer is they have a higher risk tolerance despite having the money because that money that they have. or the asset that they've already bought represents an outsized portion of their household savings or them and their spouse, or maybe just them. So they're more thoughtful about it and they want to make sure they're not making a stupid decision or a decision that's going to put them in a hole. And I think that was the insight that I stumbled into was, Hey, there's a lot of people who already own these homes who are looking for sort of more yield out of them, right? And we can help them out and tell you where to invest in, you know, what to do and say, like improve this, improve that. we can help you finance that. And then on the other side, we have this model called gradual ownership, which if we find a home that we're that confident in, and it all starts with that technology like I mentioned, I realized that we're building this technology to make our own investment decisions. We can afford to take the risk because the risk isn't really there if this is as accurate as we built it to be. And so far it has been, where we are able to say, this home is going to predict this much. I'm that confident in it, Jason, that I'm not just gonna tell you it's gonna predict this much. I'm actually gonna buy it for you, let you rent to own it. Paul Kromidas (10:06.308) for up to two years and let, like, I'll show you myself. I will rent it out when you're not there. I will show you what we get on it. And it's gonna match up with what I told you it will. And then, you know, at that point, you're buying it back, hopefully buying it back from us as de-risked as it can come because you're seeing excellent management that we put forth, the five-star reviews we're getting, the yields that we're getting on the property, all in that interim period. I'm comfortable taking that risk because I'm that comfortable in the numbers and top of funnel underwriting. So I think it was a... Initially a creative wedge to both differentiate ourselves from the rest of the ecosystem out there of, you know, sort of just straight property managers just taking whatever they can get and like trying to, you know, squeeze them for all their worth, but also a way to create more cam in this marketplace and create more owners in this ecosystem. That makes sense and get them on a risk free way. Jason Kirby (10:57.546) No, and that's good contacts. And you know, when it's, you haven't. you know, being in the fundraising space and seeing lots of companies come by. Like I think you have a good model, but inherently still like heavily dependent on real estate. And, and when going out and raising capital, a lot of VCs see these models, like the linear growth, real estate, you know, where's, where's the tech, why are you raising so much money? You know, these types of things. So, you know, what was your fundraising experience like in the early days? And, you know, when you kind of got your first initial round, kind of walk us through what your strategy was and how. Paul Kromidas (11:10.361) Yep. Paul Kromidas (11:20.163) Yeah. Jason Kirby (11:31.704) Was it cash right off the get-go, easy as can be, or was it a crazy journey to kind of find your fit there? Paul Kromidas (11:34.651) Hahaha Paul Kromidas (11:38.984) Yeah, well, I mean, we raised our first round of institutional capital, our seed round at the end of 21. So certainly, it was a different world for a lot of people, right? In a lot of ways, it's funny. I look back at it now and I have mixed feelings. Really because, you know, I hate it because I think obviously a lot of valuations and expectations were just inflated for a lot of people, not just our company, companies throughout PropTech, Fintech. the entire ecosystem really, probably everything was overvalued, which I think sets up companies poorly down the line, especially companies that took a lot of capital in those environments, right? We were fortunate enough to really only take one round in that crazy environment. So there's a lot of time to sort of right-size things to more achievable valuations, let's say, as you track your company and grow it, that I didn't really understand before I came in and started. understanding the fundraise game and you know, you get presented with a term sheet in 2021 and your valuation is this and you're like, oh wow, that's amazing, right? Like, uh, I'm worth this money. I did it, right? Uh, but you realize that really quickly that you have a long journey ahead of you and there's no guarantee of an exit and you've, you've got to prove that valuation, right? Every time you get a term sheet, you're now getting notched up a bit and you're notched up a bit and you're notched up a bit. And if you're not actually justifying what Jason Kirby (12:42.071) I did it! Paul Kromidas (12:59.532) your value down on paper in private markets, like that will bite you eventually, whether it's now or six years from now. And I think you see that throughout the entire ecosystem. Right. So I think that was the negative. I think the blessing from it, honestly, when I look back is, you know, and a lot of people have told me this, like, wow, you had sort of like perfect founder market fit for the idea you're going after. Right. You worked at Airbnb, you have product experience, you have strategy operations work before that and finance work before that. Like that's literally what it takes to get something right off the ground. Um, of course, like, you know, VCs are going to be interested in talking to someone like you and that was correct. Uh, but I tell people all the time, you know, had I tried to start this business this year, I don't know if I could have even done it because I think there is an initial quantum of capital that it takes to get something like this off the ground. Um, and that unfortunately is just not here without some type of traction or evidence. in like 2022, 2023, and I think in 2024. So I think I needed the initial environment to get that injection, but then, you know, I'm glad it was able to get into where we are today, I think because it's a more healthy environment, provided you can fundraise. Jason Kirby (14:10.954) Yeah. And I think that's very insightful for you, you know, being able to reflect and acknowledge that, because I think that, you know, is true for a lot of different businesses, but you were smart enough to realize it and pace yourself accordingly, where I feel like a lot of other companies took that money and lit it on fire as fast as they could, thinking that there was going to be a twice as much a few months later. Paul Kromidas (14:23.598) Yeah. Paul Kromidas (14:34.002) It's tough though. I have a lot of sympathy for some of those founders. I do. I think especially the first time ones, right? You know, and I can empathize with this being a first time founder myself. You know, you think that, I think it's a journey for a lot of founders to have high conviction and high confidence. And I think a lot of founders don't want to admit it, but most people have, and most people in any walk of life, you know, when they're doing something new, they're stepping into a new role, there's a bit of imposter syndrome, you know. Yeah, you're running a company, all of a sudden you're the CEO of a company and you've got some money, but you've got a big name investor telling you to do X, Y, and Z, or you've got, you know, Sequoia is not on my cap table, so I'll just throw the name out, but they're big names like Sequoia is telling you to do whatever or SoftBank is telling you to do whatever, right? Like you're saying to yourself, wow, that's so and so, or these people know what they're talking about. And, um, you know, not to say that they don't know what they're talking about, but they have different objectives than you, right? And I think you realize that as you, as you grow as a founder, as you grow as a CEO, their objectives are different and doesn't mean they're wrong or bad. Jason Kirby (15:10.318) I'm going to go ahead and turn it off. Paul Kromidas (15:28.472) But you have to understand that. You have to understand why they're telling you to spend the money, what they want out of that and what their, their end result that they want for your company is versus what you might want for your own company. So I think it was very easy for a lot of folks to just get that money. And sometimes it even had strings attached. I'm like, you have to go spend it. Uh, so yeah, I feel fortunate that none of that happened with me, but I have a lot of empathy. I think it gets kind of blown up in the media. I'm like founder X pulled in all this money and blew it yesterday. I'm like, there's a lot of people are on the table that condoned. that blowing of $100 million. It wasn't just that person. Sure, it was ultimately their call, but you don't know what was going on in the boardroom or behind the scenes with some of this stuff. Jason Kirby (15:58.652) Yeah. Jason Kirby (16:08.226) It's a good way to put it. You know, it wasn't like it was a runaway founder that had no oversight of any kind or people that were... Paul Kromidas (16:13.768) Yeah, there might be a couple of those stories out there that we've heard in the last few years, but you know, I don't want to judge everyone off of that, let's put it that way, but yeah, there's someone you're scratching your heads, I won't name names, you're like, oh, did they have any diligence on that? What was going on there? Jason Kirby (16:27.654) The answer is no. So you leverage the timing, you get a sizeable seed round, $11 million, massive. And then you come out, I guess, when did you close your Series A? Paul Kromidas (16:34.384) Mm-hmm. Yeah. Mm-hmm. Paul Kromidas (16:45.092) We closed our Series A over the summer. So we recently announced it about a month ago, primarily because when we first closed, we got a lot of bounce backs from reporters over the summer saying, hey, out of office, don't talk to me right now. So I was like, oh, you know what? Then I started digging with a couple of folks in September and got a small add on or two. And then it was like, well, I gotta get this announcement out there before the end of the year. It's been. been sitting over me. So we were fortunate enough to close it over the summer and then pick up a little bit more along the way. And, uh, yeah, recently got it out. So it closed an $18 million seed or series a, I should say, um, this time I had colleagues involved, which was interesting, but, um, you know, it's certainly a different ecosystem to raise in than in 2021 night and day in a lot of ways, uh, super fast in 2021. I think it took us. Yeah. I want to say from the time we started to the time we actually had money wired, it'd be two months. Jason Kirby (17:21.985) Yep. Paul Kromidas (17:42.192) 2021. Um, I think we went out there in early October and we were closed with our seed by Thanksgiving and, uh, right around the early, early part of December. And, um, we, you know, had multiple term sheets, uh, you know, fortunately, and, uh, it was a very different environment. And then the series A rolls around and I think it's a, if a founder hasn't gone through it already, they will. And it's a, you know, I tell everyone I talked to, it's a very different world out there, the biggest piece of advice I'd give to people is like, um, You know, make sure you give yourself time. It's not impossible, but it is absolutely harder. And the tables have turned where, you know, in 2021, there was so much capital to go around. VCs were looking for places to stuff it, right? They needed to deploy their own capital. Uh, and, and now it's the opposite way. They don't need to deploy anything for anything. They're kind of safeguarding it. And they've got 10 companies they're looking at and really only enough out of it to do two or three deals. So, uh, Jason Kirby (18:30.925) Yeah. Paul Kromidas (18:39.704) it's possible to get a deal done, but they're going to be very picky and choosy about who they invest in, why they're investing, and they're going to make sure that diligence takes as long as they want it to take. So give yourself the extra time. I say, give people, I tell people to give yourself, take whatever you think it's going to take you and add three months on at least, because that's what you can expect out there right now. Jason Kirby (18:59.758) I would completely agree. That's exactly what I'm seeing in the market. And once you actually finally get down the funnel with VCs and you get a term sheet, you think you're done. I was like, no, there's still a lot more to go. Paul Kromidas (19:07.264) Yeah. Just the beginning, honestly. Like it's great. It's a checkpoint, but like until the money is, that is something I'm sure a lot of other founders have learned too. Until the money is in your bank account, you are not done and things can happen along the way and I've seen, I've either had it happen or I've heard of other people and I'm sure you can test as well. Jason Kirby (19:30.914) I've had term sheets pulled a couple weeks after being issued. Granted, it was a pandemic. It was March 2020 when I had a term sheet pulled from us, like a Series A term sheet. Like, we did it. Yeah. That was like, no, goodbye. All gone. Never came back. I had to go and start from scratch a year later. But so going, it's all right. So 11 million seed, you go on and you give the A done. But. Paul Kromidas (19:32.778) Mm-hmm. Paul Kromidas (19:36.528) Mm-hmm. Paul Kromidas (19:42.284) Yeah. Yep. Jason Kirby (19:57.29) Why did you choose your strategy around the ASC? You raised 18 million in equity. You also secured a $50 million debt facility. What I want to understand is what was your strategy on deciding on those two vehicles and the amount of those? Paul Kromidas (20:02.224) Mm-hmm. Paul Kromidas (20:13.412) I think, well, you know, stepping back for a second, it really, you know, I remember honestly, I sat down initially in August of 20, we're sitting here at the end of 23. I sat down in August of 22 and said to myself like, Hey, we, we should go out and fundraise. Like, I think we should start getting things in order because I don't like where the world is heading right now. Uh, I'm seeing the storm clouds already starting to form this like summer 22. Jason Kirby (20:43.228) Yeah. Paul Kromidas (20:43.508) wasn't complete doom and gloom, but interest rates were shooting up really fast. And I'm saying to myself, this doesn't look good. Um, I don't know how long this is going to last, but I want to make sure we batten down the hatches and, you know, make it all the way through. Uh, I should try to go back out and see if we can get something done. We've got enough initial traction. We've got initial product market fit. Let me go do that. Um, no, I brought that at first to, uh, the board. and some of the insiders and said, Hey, look, here's what I'm thinking. This was the fall of 22. Like I'd like to go out and do this. I'm going to go out and do this. So you're all aware. I'm going to go out and fundraise an A, um, would love your all support in that process. No expectations other than that. Right. Just support I think is all you can expect from your insiders, whether they put money into that. Um, and at that point, I had the fortune of one of our insiders actually saying, Hey, well, before you go out there and, you know, talk to everyone, um, maybe we're interested in. leading the A again from your seed. And they dug in, you know, they liked what they saw and presented a term sheet towards the end of 2022, which traditionally looking back again, if founder hasn't realized this yet, don't start fundraising right now. This like December, November and December is probably the worst time of the calendar year outside of, you know, the summer to raise from DCs. Like there are windows of the year you wanna be ready for. And I think, you know, again, something learned now. You want to be ready to go on Labor Day with your fundraise, and you want to be ready to go on January 2nd with your fundraise, right? And you want to have it wrapped by 4th of July, and you want to have it wrapped by Thanksgiving in both of those seasons. Don't raise in the 4th of July at Labor Day and don't raise in the November, December windows. So I figured that out really quickly. Hey, a lot of quick... diligence, but then like, you know, I'm busy with this or holidays or let's check back in and like, okay, this is going to take a little bit longer. Um, then I, then I initially anticipated sort of step back literally a calendar year ago today, re-architected, rethought through how we were going to market, what we were going to market with, you know, what the initial feedback points I had heard were and decided to really hit the ground running in January with a, with a much more aggressive approach to getting it done. Um, Paul Kromidas (22:58.948) But the impetus to raise really just came from, hey, I want to grow the business. I think we're doing something compelling here. I got that validation from insiders and obviously some outsiders because it was an outside and an inside round, a lead round, which was great. And I wanna make sure we've got the money to carry us through that growth responsibility over the next, call it two, three, four years in a way that, I don't know how long. the interest rate environment is going to be, how long, you know, this pseudo recession we're in or whatever you want to call it is going to be. I hope and think it's probably 2024. And then I think hopefully clear skies in 25. Jason Kirby (23:40.594) Yeah, I'm in a similar camp in terms of where we see things going macro economically, but when it came to that strategy, you know, so it sounds like you had some internal discussions and then you kind of really, you know, button down the pitch and the story in January. So it really came down to like how much time you'll have with that capital. And as far as like milestones, is this, is this like, is this profitability round, is this the growth round? Like what, what do you guys do with the business? You think you're going to go back out for another sizeable raise? Do you think you need to? Paul Kromidas (24:09.037) Yeah. Paul Kromidas (24:13.784) Yeah, I think, you know, I also learned, I think there's something to be said for being opportunistic, right? I had this, I had this very naive mindset as well. When I first raised the seed back in 21, like, uh, I probably looking back, I probably could have picked up a few extra million dollars after I closed the round and announced, um, back in the end of 21, um, from people who were just heard about it and like, Hey, I miss you. And I really like what you're doing here. Can I, you know, can we do something? Can we dig in? I kind of had this like, evergreen mentality of like, oh, that'll always be there. I just closed around pretty quickly and like I'm sure there will always be more capital whenever I'm ready for it to go out to market. And a lot of founders had that mentality before the last few years. I probably should have been opportunistic about picking up a little bit here and a little bit there. I don't think a lot of people regret that if they do. And I think, so the door is certainly open on my end. I don't think we're aggressively going out and fundraising anything in the near term future, given what we were able to do. But opportunistically with the right kinds of partners, for sure, I'm open to digging in and taking on some more. I don't think we're going to need a giant slug of capital to grow the business. I think the idea from this fundraise was responsible growth, but also hopefully focus on profitability. And I think we've got a couple of plans in the works to get there. Whether we do or don't, we'll see. But I think... That's definitely the goal internally. I'm, I'm trying to run the business, assuming I don't raise any more money. What happens in a world where, you know, real estate crashes and no one ever wants to write any checks and anything looking remotely adjacent to homes or, or FinTech or anything like that. Right. Um, so, uh, you know, I think, I think seasoned founder mentality expect. the worst and prepare for that and be surprised pleasantly if it doesn't go that way. But you know you're ready for whatever can go wrong. Jason Kirby (26:07.774) Yeah, no, I would agree with that. And then, you know, when it comes to your business, like we kind of mentioned this earlier, like there are other players in the space that have gone on and raised venture capital, you know, some notable ones that, you know, unicorn status, this type of thing, but I feel like your business is a little bit different. What was like, you know, given that, given your adjacent, you know, focus to real estate and how, you know, what Paul Kromidas (26:17.963) Yeah. Paul Kromidas (26:31.521) to. Jason Kirby (26:32.942) How did you decide who to go to raise capital and how did you get introduced to them? And you're kind of like, how are you differentiating yourself from those other players, as well as being able to kind of get more of a venture backed outcome. Paul Kromidas (26:48.044) Yeah, that's a good question. Um, I'll tackle the latter part first, and then I'll talk about who I went out to and why. Um, I think our differentiator here and what I've really tried to lean into is like, look, are there, is there a component of our business? Like you can point to various pieces of our business and say, that looks like this company. That looks like this company. I think something that, you know, I can, I had to contend with in the fundraising process was that to some extent, like. A lot of investors that have, or founders that have gone through the process will hear investors talk about what's your comp, right? How do you comp to this company? How do you comp to that company? And a lot of people don't get that before they go through the process. Investors are looking to take a look at you and your company and say to themselves, okay, it's pattern recognition, pattern matching. This thing looks like that thing. That thing trades at this on public markets. And they did that within this amount of time with this amount of capital. Okay. So here's how this thing is going to go. They want to try to create the guaranteed outcome in their head, or at least extrapolate it so they can say to themselves, well, I did the work and that's what it looked like. Unfortunately, I think the best companies out there are the ones who don't have an exact comp. By nature, it's somewhat of a fallacy to just say that I'm going to invest in this thing that looks like that thing because you want to be investing in the things that are new and differentiated in some way. and inherently don't look like the thing that's already out there, right? Or they look a little bit different. And that takes a level of sophistication, I think, from a venture capitalist that, you know, again, not naming names, but isn't at every firm and isn't with every VC. Some of them want something that's just more simple, divide this by this and go off that and that's that. I think other folks, uh, you know, try to do something a little bit differentiated and try to create the differentiated returns. And I think those are typically the investor you should try to seek out as a founder. earlier rather than later, because whether they invest or not, they're going to give you good feedback on your business because they're going to be thoughtful about it and they're going to be inherently want to do the work. So that was a quick aside that I think is relevant for a lot of founders to understand. But we try to differentiate ourselves mainly around a few areas. One is brand. I think when you look at the space in the prop tech, this community, this area, fintech, Paul Kromidas (29:11.956) anything, you know, there's a lot of like deep blues and sea greens and like, there's like psychology in that, right? They're like trusted colors, like banking colors, right? There's a reason that JP Morgan Chase and all these companies have like dark blues, their color, right? Like it is psychology behind that. There aren't really great consumer facing brands in this space. And you look around other than Airbnb maybe. And I think that's part of my DNA that I brought to the table. I was like, look, I saw Airbnb was able to do like, why are they different than booking or VRDO? Like they, they lean into the brand and lean into the story and Brian's a master storyteller. He is a master at that, at getting people to believe in the broader vision of this platform. At the end of the day, like you strip away the story and everything, it's a home sharing platform, right? Like, but Brian's been able to build a brand around that. And that's not meant to be derogatory in any way. Like it's masterful and how he's thinking about growing it and these product launches he's doing, right? But it's something I always took away from my experience there about how important a consumer facing brand is. And I think there's a lack of that in the space. So when you think about I thought about leaning into my differentiators as a way to target investors. So I have a consumer facing brand I'm trying to build here. I should go talk to investors who value consumer facing brands, right? But they like PropTech or not is somewhat irrelevant. Some of them did, some of them didn't, right? They're like, hey, I like consumer facing brands, but I don't like things that are in real estate or real estate adjacent. Love what you guys are doing. Give me some more proof points. We'll go from there. Some did invest in it. They were just like, I love the consumer facing brand. Let's go. Separately from that, I think there's obviously a fintech component to what we do. There's this, we're buying some of these assets, we're holding them, you're renting to own them. That is a financing mechanism that I think appeals to fintech investors and folks who very much understand cost of capital, debt capital, all of that, and being able to differentiate ourselves from other players in the property management space or anything like that who aren't doing anything like that. was important for those investors, right? So then you're kind of going out and targeting those folks and saying, look, I've got something very differentiated where not this, where this. And then lastly, I think the technology piece, like top of funnel, like, hey, we're doing this thing around like underwriting technology, et cetera. And you've got folks who are interested in that. So I think I always try to take that approach when I went out to my list of folks to fundraise and said, look, who are the people who are subject matter experts and investors in these pockets and go off and attack. Paul Kromidas (31:35.16) them and tack is probably too strong of a word, but go after them and try to get the intros and try to get in front of them and show them what we're doing. And they will work backwards and understand how I'm different than everything else out there by combining these things together versus some of the more generalist funds. I think that the generalist funds probably are a little bit more risk averse in the sense that they don't necessarily have an expertise in one thing. So therefore they are looking for the thing that is easy to underwrite and easy to understand and just say like, okay, this makes sense. I get it. Um, the subject matter experts I found because they have conviction, they know their space very well can spot the thing that looks different in a good way. A little easier. Paul Kromidas (32:27.998) Jason, I think you might be on mute. Paul Kromidas (32:33.488) There we go. I wasn't sure if it was my audio or I saw the mute button there. Jason Kirby (32:34.866) I will cut that part out. Uh, my editors gave her that part. Uh, what I was saying was, I think it's really important that you identified how you had to take your, your business. You didn't change your business. You just told a different narrative to the different investors that had different thesis, and I think that's so important for founders to think about they come in and they're like, they work on that 92nd elevator pitch and the same pitch over and over and over. Paul Kromidas (32:53.36) Exactly. Mm-hmm. Paul Kromidas (33:02.15) Yeah. Jason Kirby (33:04.154) They don't realize that on the other side, investors are trying to put you into a box that they understand. And if you don't give them the information that they need to put you in their little box that helps them compute the opportunity, then they just be like, you're too early or you're not a fit. And they give you these generic rejections. Paul Kromidas (33:21.83) Exactly. Paul Kromidas (33:26.368) It's it's so important, Jason. There's one thing I also have to say off of that because you're spot on. Um, someone, I can't take credit for this. Someone told me this. They're like, the one of the things I stepped back and did last year before I went out in January and, and really pushed my fundraise, uh, was I actually wrote, I wrote an investor memo. I put my product hat on and I tried to have empathy for my customer. In this case, my customer was venture capital, right? What do they want? If I were sitting in their shoes, what would I want? I'd want someone, if I think this thing looks different, and it's hard, and inherently I'm a person who, like most people, don't want to do the hard thing and put the hard work in, they want to do the easy thing, right? I should try to make their lives easy and basically do their job for them, because it's that important to me to get this capital. So I'm going to write my own investor memo, answering all of their questions. that they would be thinking through and putting together on their end for their investment committees, knowing their process, knowing what they're looking for, just like you said. And I got a template from one of my inside investors of, like, hey, how have you structured these? I'm not a VC. I've never written one. It was a great exercise. Honestly, like separate, I'd encourage everyone who's thinking about funders and go out there and do that because you will look at your business through a new lens and be able to go out and say, look, oh, they're thinking about this way, this way, this way. And here's how here's what they're looking for. If I can just serve this to them very easily, it makes it so much better. of a process and they'll want to dig in with you more. Jason Kirby (34:52.354) And that's essentially, you're running a sales process. You know, you're selling to a customer in your case, you're trying to get someone to give you their money and you're giving them the opportunity, the deal, that money will be kept more over time. It's still a transaction that I think a lot of founders, you know, founders that run a process successfully ultimately look back and say, I ran a sales process. Yeah. Exactly. So. Paul Kromidas (35:03.504) Mm-hmm. Paul Kromidas (35:13.956) Yep, 100%. You're a salesperson for yourself and your business. Jason Kirby (35:20.586) Yeah, it's one thing to kind of, you talked about the VC side, you know, and how you approach them, but when it came to deciding on how, you know, raising that $50 million debt facility, you know, what type of, you know, who did you go to, how did you structure that? It's a world that a lot of founders don't really have a lot of exposure to. They think, oh, I only can raise VC, but in your case, you know, it's a little bit different because it's asset backed opportunity, but how did you approach that? Who did you go to and kind of how did you structure it? Paul Kromidas (35:37.328) Thanks for watching! Paul Kromidas (35:41.389) Yeah. Paul Kromidas (35:49.548) That is a great question. I think your first point that you made is very true. Most founders don't have an experience in that. A lot of founders, maybe they have funders experience from VCs, maybe they don't, which is still a big thing. But definitely not debt capital unless you're coming from that world, unless you've worked in structured finance, you've worked in traditional finance. It's a very hard world to wrap your head around. And even, you know, Jason, I know you've got a bit of a background in it as well. Um, even the little things of just knowing what it's like to be in a bank, literally working in a bank, being in a bank, engaging with those people, how they dress, how they talk, what they're looking for, right? Like that, that was much easier for me to sort of like, almost like wear that skin when you're walking into that place. Like they're expecting you to be a founder, right? They know that you're not a banker. Um, but you know, like a good salesperson. you want to speak the language of your customer. And in this case, these people talk differently and act differently and have different objectives and mindsets than VCs do. And, you know, PropCo equity does or family offices do, right? Like, so I think for me early on, it was a recognition of, hey, look, I can speak that language. And I know enough to be dangerous, but I'm certainly not the 20 year, you know, sort of subject matter expert at that capital and raising that. I've got enough of that in my background that I can speak the language that I know what I'm talking about. But I know enough that I would say when you look back at this, a lot of companies that raised bigger debt facilities, whether it's in PropTech or FinTech or other types of spaces out there, what I thought of founders don't realize is actually there's a lot of hidden terms and hidden things. Hidden is maybe too insidious, but they're just terms that you don't understand as a founder because you're not coming from that world. Right? What are the covenants that you're signing up for? What's the level of liquidity that you need to maintain in your business to continue to have that facility before they're gonna call time and just take everything from you, right? You can run yourself out of business by signing up for the wrong things and not knowing what you're signing up for very quickly and very easily. And that didn't happen five years ago because money was abundant and free flowing, but you've seen a couple of businesses the last few years learn that the hard way. And I never wanted to be that business. So one of the things I did early on. Paul Kromidas (38:09.152) was find a capital markets advisor, someone who had significant experience in the space. In this case, this person, you know, is a managing director for 20 some odd years at JP Morgan. So he had left and was looking to advise early stage founders and was connected to him through one of my investors and had a great relationship. He helped advise me, helped me see around the corner, redo these agreements. We'd step through them, walk through them. What does this mean? You're trying to learn effectively capital markets. You know, two months, three months process. Uh, and he ended up coming on full time and he's now my CFO. So, um, no shout out to Jim. He's been great. Uh, but you know, I, I joke with people a lot of times. I'm like, you have to assess yourself. Uh, if you don't have that thing, it's like hiring in your own business. If you're not an engineer, then you should go out and find. A rock star head of engineering. If you have a business that deals in debt facilities and you. don't have that background to the level of depth that I think a lot of people really need to sign up for those and have high degree of convictions. And you should go find someone who does, right? In this case I did. Um, and I think that was, uh, it's advice I've given other founders who have done this and they've also have the same thing. You absolutely need someone like that who can tell you what you're getting involved in and help you see around some of those corners, because you could sell. You can talk about your business. You can, you're, you know, a lot of founders are smart. They're charismatic. They're confident. Uh, they know enough to be dangerous. Like I said, but, uh, they don't know every nitty gritty detail. And I think when you're raising debt, there's a lot of things that can go wrong. Jason Kirby (39:41.034) No, and I think it's, that's something, you know, when I write checks and invest and stuff like that in their companies and, or choose to work with companies, I think it's something, what you just kind of said there was like, no, when to bring in the expert, no, when to bring in the right people to solve very big problems. And in this case, you know, it sounds like you followed that to the T and I think that's something that's really important as a leader and a founder to recognize and execute on. And, you know, cause I, at least I fall in this tendency sometimes to run businesses where I was like, Oh, I got to figure it out myself, you know, but sometimes it's, you know, sometimes it's, you know, like if you got, if you've raised money and you're, you're growing, you're scaling, you have resources, you get those resources to deploy them on better people and smarter people that have the experience. So, you know, kind of. Paul Kromidas (40:13.793) Yeah. Paul Kromidas (40:26.864) Thanks for watching! Jason Kirby (40:29.862) skip the learning curve if you can, when you can. And so, you know, as we kind of, you know, come to a conclusion on the show here, what's some advice that you have for founders that are out there that are either considering raising capital or planning to raise capital? Paul Kromidas (40:47.948) Yeah. Well, I mentioned one, you know, start earlier than you think. And certain, especially in this market, it's, it's going to be longer, probably than you think it will if it happens at all. Um, you know, second, I think have empathy. We talked a little bit about that. Like, you know, some, something from writing my own investment memo, try to think about, you know, what are the objectives you're trying to accomplish and what are their objectives? Again, you're running a sales process. Um, you want to make this thing as the wrist as possible. for your venture folks that you're talking to and what are they looking for? How are they viewing this? I think another one is, you know, move fast, cast a wide net. I think a lot of people that I've talked to are very methodical with it. And I think there's nothing wrong with having a methodology. It doesn't mean you're disorganized, but you know, they'll go one by one by one by one. I started doing that at one point. And then I realized like, what am I really? doing, I should be having multiple conversations and parallel pathing things at the same time. And you know, there's no harm in having multiple conversations open with multiple players at once. And you can sort of, I took it from going through waves almost, you can't have 50 open conversations certainly, but like, you know, maybe you push out 10 and you know, five get back to you and then you're digging in with three of them. And then like two weeks later, you're pushing out 10 more, right? Like you're kind of moving on this rolling push of outbounds that you're trying to get out there. Don't be afraid to move aggressively and quickly, but run a structured process. And I think two more quick ones I'd say are one, don't take it personally. I think if founders are deeply driven people inherently, that's what attracts you to doing this job. There's little gratification in it, at least early on. If it goes the right way, maybe there's some down the line, but you're kind of slaving away. this thing and it's your life and you see it for all the roses that it's going to be one day. It can be deeply personal and feel rejecting to get rejections and have people say no. There are a lot of things and I've had people tell me this after I've run processes with them or even other investors who invested or didn't invest and say, look, there's so many reasons why founders can get rejected. Maybe we just did a deal in the space that was unannounced. Paul Kromidas (43:07.544) month ago before we met that person, we might like their company, but we're not going to invest in a company that's adjacent to that other one. But we haven't announced yet. So we have to say no. Maybe we don't have the dry powder people think we have out there right now. So we don't want the market to know that we don't have more dry powder to invest. So we're going to say no, right? You know, there are so many reasons that are out of your control. Someone, a partner could have woken up on the wrong side of the bed that day and, you know, squash something, even though a couple more junior folks really like it, right? Like there's, there's internal politics, they're their own beast, they run their own processes. Uh, the best thing you can do is just ask for feedback if, if they're able to provide it. And if not, you know, thank you very much for your time. Don't have the reactions, the crazy things like, you know, this is a long game. You never know when things are going to come back around. And I think the last thing I found extremely, extremely valuable, um, Sam Altman has a great talk on this. That one of the things he looks for in founders is tenacity. Um, and just like, you will get. beat down, you will have your face shoved in the dirt. You'll feel like everything's just raining down on you at various intervals in this journey, especially in fundraising processes, especially in this environment. I just kept telling myself, like, I'm not going to, I'm gonna get it done. I'm gonna keep talking to people until we get it done. I'm gonna get out there. I'm gonna keep recalibrating things. I'm gonna keep getting it right and we will get it done. There's no other option. We're gonna get it done. And... Almost like you have to have this mantra and this confidence around it. And you have to almost prop yourself up in a lot of ways because it's lonely and it can feel rejecting. But if you have that grit and that tenacity, you will find a way to figure out how to fund your business, whether it's through venture money or something else, and you'll know when maybe it's not the right time to do it and maybe you have to recalibrate and step back. So there's my parting thoughts for folks. Jason Kirby (45:00.43) I appreciate it, but also you gave me a little bit of PTSD on some iPad. Like, oh man, I remember these moments. I don't want to remember that. Yeah, but no, I appreciate you sharing those insights. For the founders that have enjoyed your chat with me, what's the best way for them to learn more about you and Summer? Paul Kromidas (45:05.134) I still have it. Paul Kromidas (45:11.168) Nope. Paul Kromidas (45:22.404) Yeah, I'm on most large social media. I'm not on TikTok, so you can't find me doing any dances there, but you can find me, Paul Kermitas on LinkedIn, X, et cetera. And then you can check out Summer if you're interested in either owning a vacation home or getting more out of your current home or just staying in a great home as well. We got a lot of great homes throughout the country. We'd love to host you. So check us out at www.gosummer.com and across all of our social media handles at Start Summering. Jason Kirby (45:31.822) Thank you. Jason Kirby (45:53.366) I love that. I want a summer. Especially now. As I look at rain outside my door, I'm like, mmm, summer sounds nice, right? Paul Kromidas (45:56.116) Yeah. Summer is a state of mind. Summer is a state of mind. Right? Yeah. Jason Kirby (46:03.198) I do love winter sports. So it's like, you know, it can be totally fine going up in the mountain, but rain, rain and cold, it's got to be snow and cold. That's my thing. Well, appreciate you being on the show, Paul, and you know, your insights have been super valuable and I hope founders are able to walk away with some nuggets of information here. Paul Kromidas (46:10.884) Mm-hmm. Paul Kromidas (46:20.88) Thank you very much for having me, Jason. Thank you, you too. Jason Kirby (46:22.839) Have a good one.