#127. Zeus is a platform reimagining the corporate housing market. We talk with the founder and CEO Kulveer Taggar about how Zeus fills the gap between Airbnb and legacy players within the space. The Loose Threads Podcast features in-depth discussions with leaders across the rapidly changing consumer economy.

Check out the full transcript below. 

Kulveer: [00:00:02] We don’t want every home to look the same. But we want a customer to have that feeling of, “When I walk in, yes, this a Zeus home. I know they’ve been thoughtful about it.” But then also hit the standard of experience that we’re going for.

Richie: [00:00:15] That’s Kulveer Tagger, co-founder and CEO of Zeus, which offers elevated medium-term homes for business travelers. Kulveer started the company after watching his co-founder struggle to find accommodations in a new city for more than 30 days, but less than the year required to sign a real lease. Zeus fills this void, solving the lodging challenge with consistent service, reliable locations and curated products that enable a guest to start living at home on day one.

Richie: [00:00:39] I’m Richie Siegel, the founder of Loose Threads, which analyzes and advises next-generation consumer companies, and FaceLift by Loose Threads, a retail incubator and accelerator for leading brands and retailers. For our latest analysis and insights, check out our free weekly newsletter at LooseThreads.com. We also announced Loose Threads Live, our invite-only and entirely off-the-record gathering for founders, executives and investors on October 3rd in New York City. Learn more at LooseThreads.com/Live.

Richie: [00:01:10] I started the Loose Threads Podcast to spark engaging discussions with leaders across the consumer economy. That’s why I was excited to talk with Kulveer about how Zeus exists at the intersection of hospitality, technology, logistics and consumer products, and how it’s pushing the envelope for what a home away from home can really be. Here’s how it all began.

Kulveer: [00:01:32] So it was late 2015. I was working with my two co-founders, Srini and Joe. We were building some apps. And Joe had a move from San Francisco to Palo Alto. And it wasn’t a big move but, despite that, it was incredibly frustrating for him, this process of trying to rent out his home and finding a place to live in Palo Alto. And I remember getting frustrated at how frustrated he was getting, his process was taking weeks and we were trying to work really hard.

Kulveer: [00:02:02] And one night I was basically lying in bed, and I had one of these sort of light bulb idea moments which I didn’t think existed. But I asked the question. I was like, what would the quantum-leap improvement in user experience look like for this process of renting out a home? What if you could go to a website, type in the address of this property, it gives you a price, and you just click “rent.” And that’s it. The home is rented out for you there and then for that amount, guaranteed.

Richie: [00:02:27] And these are longer-term, right? This is not a business trip for two nights or something.

Kulveer: [00:02:31] Yeah, yeah. So he was looking to rent out his home, long-term. And I realized, I was like, hold on. I actually think we could do that now, because there’s a lot more rental data out there. The way I would do this is I would offer to sign a lease with a homeowner to take away a lot of the uncertainty. And then I realized, well, we’d have some captive inventory, and we could create experience like buying something on Amazon, on the other side. So that was the initial spark.

Kulveer: [00:02:57] And I remember sending this email around midnight. And we were excited, and the next day we decided to like, dig in. I was also reflecting on my experiences when I moved to the U.S. from England. So, in 2007 I moved to San Francisco. I didn’t have credit in America. I didn’t know the city particularly well. I was forced to sign a 12-month lease on an unfurnished place, then ended up going to Ikea and like, half-moving in. And so, I realized we could make this process of moving a lot easier on both ends, and then we started basically researching the idea.

Richie: [00:03:30] Why hadn’t anyone done this before?

Kulveer: [00:03:32] So I think in, you know, say, the first generation of the Internet, a lot of what entrepreneurs were doing was basically bringing information online. It was much more like, sort of informational versus transactional. And I think, at least on the west coast, Craigslist is the sort of dominant listening platform. I think entrepreneurs, when they looked at Craigslist, and they were like, well, this experience could be improved, the approach was, let me build a better website, let me build a better mobile app, let me have more structured data or a better search experience. And they weren’t really fixing the transaction piece, which is actually where a lot of the pain is. Where you’re speaking to all these potential renters for your place, or when you’re looking for a place you’re trying to suss out if the photos are real, what the landlord’s actually like, what’s that building like or that block like. And so, we realized that, actually, if we focus on that sort of exchange, that transaction piece, that’s actually how you could change the user experience.

Richie: [00:04:26] Where is like, Airbnb? And, I guess, talk to some of the other options out there, because I assume they’re the elephant in the room in this category, but also not really, at the same time.

Kulveer: [00:04:35] So our average stay is about two months. So, obviously, Airbnb is huge, but I think their platform is mostly geared towards short-term travel. You know, the way the calendars work, people book it for a week, for a couple of days, for a weekend. So when you’re trying to book for a longer period of time there’s not as much selection, I think.

Richie: [00:04:53] It’s also real expensive.

Kulveer: [00:04:54] Yeah. I think the other thing that stood out for us was, you know, if you’re going somewhere for a weekend, you can maybe just risk it and, if it doesn’t work out, it’s not the end of the world. But if you’re relocating or you’re traveling for an extended project and you’re staying there for months, the sort of bar that you want around certainty and experience just increases a lot. So that was where we found an opportunity for ourself. We were like, well, we want to deliver magical moments, we want to be vertically-integrated, we want to control the end-to-end experience, and that’s how we differentiate. So, when you book a Zeus home, you know exactly what you’re gonna get, what’s outfitted in there. If something goes wrong, you know, you’re gonna speak to a human.

Kulveer: [00:05:32] And there is also, perhaps, the world of traditional corporate housing. What we found there was, these companies haven’t necessarily focused on the user experience as much. They started in, you know, the 60s/70s. They’re not necessarily in the areas you’d like to live in or the types of homes you would like to live in. And so, we saw this opening where we would come in and make a difference.

Richie: [00:05:54] So, I guess, for the next, call it six months into kind of 2016, like, where did you start to spend your time? Like, how do you go create inventory and so forth?

Kulveer: [00:06:02] After that sort of research period, we gave ourselves six weeks to close ten homes to test the idea. We wanted to test, hey, is there even a market for this? Would a homeowner trust, you know, a new property management company? How scalable was the idea? What was the sort of margin structure like, and how would customers find us? So we decided to look for our homeowners first. So we put up a landing page, we bought some Google AdWords. And then I was just getting on the phone, and I was talking to these homeowners and I would go visit them in the home and start building the relationship. And I remember that period, ’cause every home was so valuable to us. And I was trying to understand, what is the homeowner’s motivations? We didn’t simply want to work with anyone. You know, what’s the sort of profile of the home itself? Is this a place where people would like to live?

Kulveer: [00:06:56] And then, you know, we found that homeowners were really intrigued by a value proposition of, hey, there’s this guaranteed income, it’s gonna be turnkey experience and then we’re going to fill it with high quality residents. And it worked. And then we closed our first home—I remember it was a three-bedroom townhome in Sunnyvale. And I remember when we signed the lease and I walked into this home and I was like, oh my god, what have I done? And we then went to furnish these homes. And, you know, again, when we were thinking about how do we position ourselves as a brand, one thing we cared a lot about was this idea of comfort and convenience. So we’re like, what could be more comfortable or convenient than renting a home that’s ready to be lived in?

Kulveer: [00:07:35] And so, I went with my then-girlfriend who’s now my wife to a few shops over Thanksgiving weekend and we just like, furnished the whole home in a few days. And then at the end of it, I remember looking around that home and I was like, wow, we’ve like, transformed this place and this is a place I would like to live. And then we listed it online, we found a customer that was willing to move in in January, and then that process just repeated. There was a lot of shopping, driving, talking to customers, understanding how the legal part of it was going to work and the payments and everything. But, in short, I really love that constraint that we gave ourselves of like, six weeks, because it really forced us to focus. And then we did it, we got those ten homes, we rented them out and we were off to the races.

Richie: [00:08:22] Were the homeowners people that had done this before? Were a lot of them first-time renter-outers or whatever the term is?

Kulveer: [00:08:28] There was a mix, but we generally noticed a lot of our homeowners are becoming sort of first-time landlords or property managers. So, you know, perhaps they bought their first home or condo, and they’ve done well, or they need to move somewhere else, they’re moving to the suburbs. They want to hold onto it, because it’s an investment, they want to preserve their savings, but they don’t necessarily want the job description of being a landlord, the risk—or of a property manager. So our positioning was, hey, we’ll take care of everything, we’ll give you the home back in the same condition if not better, and you guys can focus on what you need to do.

Richie: [00:09:03] Right. And because they’re, I guess, shorter leases, untraditional, if they say, “Hey, we want to move back,” maybe they only wait a month or two. It’s not like they have to wait a year, or they have to break a year or two-year lease.

Kulveer: [00:09:13] So, actually on, with the homeowners, how we get our supply, we sign two year leases, right now.

Richie: [00:09:17] Oh so you actually are. Interesting. But you’re guaranteeing them an income on it.

Kulveer: [00:09:20] Yeah. And when we started off it was one year. But yeah, that’s where we sort of like qualified, you know, what is the intention. And we’re mostly looking for people who are motivated by this sort of peace-of-mind solution, where it’s like, okay, you guys have got it. I can focus on my stuff.

Richie: [00:09:36] Where did the first customers come from? Just like word-of-mouth, hand-to-hand combat finding them?

Kulveer: [00:09:41] You mean the residents?

Richie: [00:09:42] Yes. Sorry, residents. There are a lot of people in the marketplace.

Kulveer: [00:09:45] We listed them on what you could call the traditional channels. Like, we put it up on, I think Craigslist and Airbnb, we created our own website. And actually I tapped into the Y Combinator network. So we knew there was quite a few companies moving out to the Bay Area, and this was a perfect solution for them. And I remembered back when I moved, this is exactly what I would have wanted. People are finding us when they’re undergoing some moment of transition in their life. It might be a new job, a new city, a new country; just a big move. And that period is pretty stressful and there’s lots of things that are changing. And so, what we thought—and, you know, I could remember back to my own experience—we were like, well, if we take care of home, if we just take this one sort of bundle of stress away, then you can settle in, you can find a gym, your coffee shop, you can get ready to kick ass at work.

Kulveer: [00:10:34] And so, we were like, well, what do you really want? You need a great first night’s sleep. So we really focused on what goes in the bedroom, the mattress, the bedding. And we decided to work with Helix and Parachute Linens there. And we were like, well, okay, you might not have all the amenities or toiletries that you might need. So we built this sort of drop kit, and there we partnered with Public Goods. So that first night when you come in, you don’t have to scramble to find the toothpaste or whatever, we’ve just got you, if you wanna have a shower and go to bed. In the kitchen we’ve stocked with some basic snacks.

Kulveer: [00:11:09] For that first 24 hours, everything that you might need, it’s going to be in the home. And actually, we think, beyond that as well. But we realized, let’s let people come in, take a breath, take another breath, and then get ready for what’s ahead of them. You know, we realized where people spent time in the home. Obviously, a large chunk of time is spent sleeping. So we really thought about what else should go in the bedroom. You know, people care about storage, they care about blackout blinds. If you’re in a city, unfortunately, sometimes, it can be noisy, so when we inspect these homes we might set it up with a white noise machine ahead of time if we think that might be a challenge. And then, you know, the couch. We work with Article, it’s a place you could sit for quite a while. And we were looking for these partners where we thought their brand values would align with ours, and we were really driven by this idea of, okay, well these are upcoming brands, they’re delivering great value and a great story, and why don’t we sort of share that experience with our residents who are moving here?

Richie: [00:12:11] Where did you start in terms of price point? Or like, what does someone expect to pay for this versus other comps?

Kulveer: [00:12:17] Our pricing philosophy was—I’m going to call it “cost-plus.” So, you know, we sort of understood what it cost to rent the home, what we paid for all the furniture, and then we just found a sort of target margin. And then, we didn’t know any better, that was the price we charged. Later on, when we started researching the sort of substitutes and alternatives, we realized that we were way more affordable. So, I don’t necessarily love talking about numbers but…one example. In San Francisco, which is a very expensive market, in the summer, a one bedroom from Oakwood—which is the sort of traditional corporate housing company—can cost about ten thousand dollars per month.

Richie: [00:12:55] That’s crazy.

Kulveer: [00:12:56] And a one bedroom on Zeus—for a better product, a better experience and everything—is about $5,000. Five to six thousand. So, about 40% more affordable. And, just the DNA of who we are, as entrepreneurs, we’re not a sort of like, revenue-maximizing kind of function in our brain, it’s much more like, how do we make our customers incredibly happy and have them coming back? So, yes, we need to make some money, but the idea is, after that, we can pass on all of the savings to the residence.

Richie: [00:13:24] So you do the six-week pilot, it has some successes. Where do you start to go from there, I guess, into 2016?

Kulveer: [00:13:32] So, after we found a bit of success, I actually focused on raising our first round of funding. We realized that the business was somewhat capital-intensive. We had big ambitions, we knew there was a big opportunity. So I actually came out here to New York, and I ended up raising a $2.5 million dollar seed round from a fund out here called Bowery Capital. And there was kind of a happy coincidence: Mike Brown, who led the deal, he was quite familiar with this world of corporate housing, he was a consultant, he traveled a lot. He’d also seen how the options on Airbnb weren’t necessarily a great fit. So, we raised that funding, and then we were like, okay, the next proof point is, can we grow this 10x? Get into the low single-digit hundreds of homes and, again, prove that it was scalable, that we know how to do the operations, that we can start thinking about how to build our own brand and build out the team. And so, just prove out a few more things.

Kulveer: [00:14:24] So, I did that in the summer of 2016. The team size then grew to about 15 of us. And we then sort of 5xed the number of homes that we had on the platform, and we started improving the experience for the resident and once they moved in, and we started having a few more resources.

Richie: [00:14:41] You mentioned with the first home that you and your then-girlfriend just went shopping and kind of cobbled all the stuff together. At what point did you start to realize like, we can go find different partners who are best-in-class, etc, and like, we should build a program there? Like, how long did that take to figure out?

Kulveer: [00:14:56] It was when we started getting more homes. So, what would happen was, you know, the first ten homes, it was me and Megan who would just go. And then we had, I think, 20 homes to sort of get ready, and she has a full-time job. And so it’d be after work, I’d nag her before going to bed. I was like, “Hey, I need you to create like, a shopping list for these homes. Here’s the photos, here’s the videos.” We experimented with this idea of kind of designing based off like, a floor plan. And then we realized that didn’t actually work. You actually need to get a really good sense of the home’s characteristics to make it feel more integrated.

Kulveer: [00:15:32] So, we tried a few things. And then, actually, there was a stroke of luck. We hired Alex Burrows into the company, and she had a desire to help us solve this problem. And so, she was the first, I’d say, in-house designer that we brought in. And she started thinking about, okay, what’s the real aesthetic we’re going for, who are the partners we want to work with? And there was this mix of, you know, we need a partner who could be somewhat flexible—we’re a startup, we’re growing, we didn’t necessarily have everything worked out—and she had a much better sense for design than I did and she could dedicate much more time to it.

Kulveer: [00:16:06] And then we got our first warehouse. And, actually, it was just the garage next to our office in San Francisco, and we started bringing the stuff in and building some efficiencies. The first sort of larger building we onboarded, it was a six-unit building in San Francisco. I actually ran an experiment where we hired, I think it was six different interior designers. These units were all roughly the same. And we gave them flexibility and freedom to go and design these homes themselves. And we thought, hey, this is an experiment. Well let’s see what our residents want, what their price points look like, how does it feel. And then we realized that, at least our initial customer base, they weren’t going for a sort of super trendy or a super sort of boutique hotel kind of a vibe, because once you’re actually in there and you’re living there, the focus is a little bit more on comfort.

Kulveer: [00:16:50] And so we did a few experiments like this, and then Alex just ended up building out her team, and I think the team’s about ten people, spread out across the country. They do a lot of work in terms of sourcing from local partners, sourcing internationally and finding these brand partners that really sort of jive with what we’re going for.

Richie: [00:17:08] The more we talk about this, the more it sounds like this very interesting combination of a customer-facing brand with a logistics company on the back end, with a tech piece. It’s a very interesting relationship.

Kulveer: [00:17:19] Yeah. Sometimes I like to describe it as the surface area of inputs that we have to get right to create this great output, it’s very large. And I had done every part of the business myself—you know, talking to the homeowners, furnishing, designing, renting them out. The one part of the business that took off, you know, sort of when I stepped away from some of that day-to-day was the warehouse. I remember in Seattle we walked into this 6,000-square-foot warehouse that we got in, and I had one of these moments where I was like, oh my god, this is huge. This, is this all us? I am not really that familiar with the ins and outs on how you operate one but it is a key part of our operations. It’s like the hub in each metro, where, you know, for our sort of cleaning partners, our other vendors, obviously where we store the stuff to outfit the homes, it’s all based there.

Richie: [00:18:07] So you you have one in each—

Kulveer: [00:18:09] In each metro, yeah.

Richie: [00:18:10] Did you expect you’d have to do that?

Kulveer: [00:18:11] To be honest, no. It’s an ever sort of evolving process, but we actually realized that if we have a well-organized, a well-run warehouse, and we’re sourcing all of these things, actually a lot of the operations become very smooth, much smoother. I remember back in the early days we even experimented with, I think, buying stuff off Amazon. We just wanted to see what that might look like. We’re like, oh, maybe that solves on the shipping side, because this stuff come straight to the house.

Richie: [00:18:39] Right.

Kulveer: [00:18:39] I remember, when I was doing that home, having this moment of like, I never want to buy something from Amazon ever again, because the amount of boxes, the amount of packaging…it was just immense. And I was like, okay, this one’s not going to work for us.

Richie: [00:18:54] And someone has to receive it all, too.

Kulveer: [00:18:55] Yeah. And so that was complicated. I think, you know, Amazon can be great for a few things, but for outfitting a full home, it didn’t work. We are this logistics company behind the scenes, there’s a lot of complex moving parts. It is property management with sort of tech underpinning how we do a lot of this stuff.

Richie: [00:19:10] In terms of, I guess, GOs in cities, what did that expansion look like in the first kind of two years? It obviously started in San Francisco.

Kulveer: [00:19:17] Yeah. We went from San Francisco to the peninsula and sort of South Bay in San Jose, in the sort of first year or two. You know, we sort of realized, hey, this is a somewhat tough market. You know, landlords have a lot of options, and we’re like, if we can make this work here—it’s obviously geographically quite spread out as well, into the peninsula—if we can make it work here, we can make it work anywhere. So we almost set it up to be quite tough for ourselves. After that, talking to our customers and understanding where are the travel patterns, where do people actually want us to expand.

Kulveer: [00:19:51] And the first market we picked was LA. Now, the thinking was, it’s an hour away on the plane, it’s the same time zone, it’s California, the regulations are all the same, and it’d be maybe the simplest to set up. And I remember with LA we sort of called it a light launch. We didn’t go too big too early. Part of our strategy has been to really go for depth in a market, rather than, you know, launching ten markets at once with only say, 50 homes. And then we learned a lot from that.

Richie: [00:20:18] What were some of those lessons?

Kulveer: [00:20:20] Back then we learned, actually, the light launch doesn’t quite work, because there’s a data component to this as well. Understanding where are the places that people actually want to live, where isn’t there any corporate housing supply, where are the newer companies basing themselves and growing? And we just needed, I think, some more resources to go into it. After that we picked D.C., and with D.C. it was like, okay, this is gonna be a different time zone. It’s probably gonna be a different demand base, you know, much more sort of government-focused. We’re like, let’s see if we can do that, let’s understand what sort of operational DNA we need for that.

Kulveer: [00:20:54] And then we launched into the D.C. winter, and that was kind of a bit of a moment as well, and there’s different sort of seasonality in these different markets. And we actually took down this 47-unit building called Madison House just by Dupont Circle, so we added this other level of complication to that expansion. And then after that it was Seattle. I would say Seattle was our most effective market launch. We had lessons now from two markets going into that one.

Kulveer: [00:21:20] And then we’re currently in the process of launching New York right now. And, again, I’d say New York is the most unique real estate market in America. There’s much more sort of concentration of ownership here, compared to these other markets, and so we’ve had to adapt. But yeah, we now understand what sort of warehouse we need, where should it be based, how many people do we need on the ground, the sort of real estate partners, the general manager and so on. And the goal is to be in the top 60 metros worldwide. And so we look at different factors when we’re launching these cities. You know, where do our customers want us to be and so on. But, ultimately, there is a market for this in all of the large metros.

Richie: [00:21:58] Airbnb [has], I think for a few years, been trying to build their own housing which is, I’m guessing, the first step they’ve gone from being kind of more of a platform aggregator into actually owning some of the inventory. What do you think about that, and is that a place you see yourself going, or is there enough out there that you don’t need to go kind of that vertical?

Kulveer: [00:22:15] First of all, we view Airbnb as a partner. Like, it’s a channel that we distract from. It’s a pretty efficient channel and growing, so we like it a lot. These are available on Airbnb? Yeah. So we’ll list our homes under a sort of Airbnb for work, the sort of vertical that they’re pushing for this. I think they’re being quite smart, in that they also understand everything starts with the user experience, and there’s different segments where the threshold for what they’re expecting is different. And so they’re experimenting with that. I also know they are very supply-constrained, and so they’re thinking of how do we get more high-quality supply onto the platform.

Kulveer: [00:22:49] You know, when I started the business through the Y Combinator network—I actually knew Brian Chesky, I tried to invest in the company when it was ten people—and so, when I started Zeus, I basically just emailed him, and I was like, hey, this is what I’m thinking of doing. I’d keep him updated on progress. And I think Airbnb had this own shift internally towards more professional hosts, where they realized that, actually, hey we can create an amazing user experience for their customers. So I think, you know, in that sense, we also view ourselves as supply-constrained, I think.

Kulveer: [00:23:20] Generally, the world is becoming a lot more mobile. One data point I have is in the first decade out of school, people now have four jobs, and it’s trending to five, and that number used to be two. And I just think, you know, mobility in terms of where these opportunities are arising, what the future of work is starting to look like, people are just going to be a lot more transient. And so, we think there’s a huge opportunity to go get more homes in these cities, and I’d almost kind of create like a network of homes where, if you’re moving somewhere, maybe you want to try out a few neighborhoods before you really settle down. Or you’re thinking, I’m moving here, but I’m only going to be here for a couple of years. I don’t want to have to buy all the furniture and think of all of that sort of stuff.

Kulveer: [00:24:02] So, to answer your question, I’m not, at this moment 100% sure how fully vertical we’re going to go, if we’d ever consider buying real estate for ourselves, but we’re open to it. But we are very much thinking that there’s so much value and benefit to having these economies of scale that it makes sense to keep growing.

Richie: [00:24:19] We spend a lot of time talking about the back end of it, I’m curious to talk about the front end. In terms of, you said initial customers came through kind of the YC network. How did you market, build the brand, find more customers, etc.? I’m curious to talk more about some of those channels you mentioned as well, but where is the demand coming from?

Kulveer: [00:24:36] I was actually quite surprised when I realized that, you know, 75-80% of our revenue essentially comes direct to Zeus. One-quarter-ish is from these external platforms, of which Airbnb is the predominant one. And, at the moment, no one had necessarily done a great job of aggregating demand for, you know, sort of corporate housing or furnished housing. So, one-third of our business comes from search, the people will like, google furnished housing, furnished apartments in the neighborhoods, and then we’ll just pop up.

Kulveer: [00:25:06] And, you know, sometimes I reflect. I’m like, we didn’t invest a ton into that sort of front end experience early on, because we were so focused on getting the operational piece correct that maybe this was such a large problem that we didn’t need to and customers still found us. Now, you know, on the website, we try and communicate our values, the aesthetic we’re going for, making it easy to actually find these homes, ’cause sometimes that’s half the problem. Where, when you’re moving it’s like, okay, how do I even find a place to live? We invested in improving the photography and giving our residents a better idea of the homes when they move in. We’ve spent a lot now on the website, so you can actually book online, end-to-end—because we’re 30-day-plus, you know, we do background checks and credit checks and so on, so there was some infrastructure that we had to build.

Richie: [00:25:52] On the residence.

Kulveer: [00:25:53] Yeah, each residence. Yeah. But we’re very focused on like, improving that experience and the efficiency. We sort of view our businesses as an optimization problem, we look at where these bottlenecks are for our customers, or even internally, and then we’ll try and solve them with technology and processes. But I would still say, compared to where we want to be, we’ve got a long way to go. We are building a resident app at the moment, it’s still sort of being tested internally, but the vision is very much, you know, we want everything to just work from the phone.

Richie: [00:26:22] Early on, did you think the demand or the supply side would be harder? And, I guess, what turned out to be harder?

Kulveer: [00:26:28] Earlier on I guess I thought both would be hard, but we actually thought, you know, supply was where we had to focus. So, really understanding what is a high quality home and what’s the right price to pay for it. So I can share one story of something maybe we got wrong. There was this beautiful five-bedroom home in Atherton, one of the neighborhoods in the peninsula, and it had a pool, it had a lot of sort of character and charm. And we signed it up and we thought we got an amazing deal on it. This was probably in the first 30 or 50 homes. After we sort of on-boarded it and furnished it, I remember, in the first week, the roof started leaking, and then in the second week the electrics broke. And then in the third week the sewage backed up.

Richie: [00:27:10] Is someone staying there at this point?

Kulveer: [00:27:12] No, thankfully. And then we were like, well, damn. Like, we need to get this fixed. And we were speaking to the homeowner and he had no interest in improving it. He’s like, “Hey I just wanted to rent this out for a year or two, and then I was gonna tear it down and like, build a mansion on it.” And so, we were completely misaligned. And then we ended up walking away from that home amicably. I think it probably cost us $50,000 all-in.

Richie: [00:27:35] To break the lease and everything.

Kulveer: [00:27:37] Yeah. And he was okay with it, but it was a painful lesson on that sort of quality bit. And that was where we really sort of started focusing on our inspection process. So we have a 250 point inspection plan, and now we have all this data of like, what might be some of the tells of how well this home has been maintained. And so, that was challenging, because, you know, if you go to, I don’t know, let’s call it like a multi-family type of a building or one of these large property managers, you can kind of guess the quality pretty quickly. Like, you know, they’re vertically integrated, they sort of maintain it. But a lot of these single-family residences, you actually have to do some investigating.

Richie: [00:28:14] There’s huge variance.

Kulveer: [00:28:15] Yeah. And so there was a lot of work in that. And then, the sort of supply chain, the outfitting, sometimes even improving the homes. We tried to be focused on quality, so we didn’t try and take on homes that needed a lot of work, but actually there’s a huge opportunity there, because there’s a whole set of homeowners who are like, “I do want to improve my home, but I actually just don’t know where to do it and I don’t really have the time.” My thinking around the strategy was, once we got to a certain level of liquidity, we had decent number of homes, then it would make sense to focus on the demand side. And so, I’d say over the last six months to a year we’ve built our own sort of corporate sales team. We’re investing in marketing a bit more. And now what we think, you know, let’s really focus on that demand side, and we’ve got that supply machine working and it’s growing. And now let’s do more on the demand side.

Richie: [00:29:04] What was the hypothesis in terms of, you know, are we gonna find a group of residents that are going to rent in different cities, is it going to be kind of a one-and-done thing? Was it habitual, of these people, keep coming back, or you expect them to somewhat pop up from LA to New York and so forth?

Kulveer: [00:29:19] Stepping back a bit, when I talked about the sort of original vision that we had, it was a very sort of consumer-looking vision. I was like, oh, I wanna solve the problem of renting. When I looked at the data six months into the business, that’s when I realized that actually we were getting a lot of traction in this sort of B2B space.

Richie: [00:29:37] Right. So the business is your customer, not them.

Kulveer: [00:29:39] Yeah. And they were doing a lot of travel. And so, it may not be the same individual resident, but if that company is growing, they’re continuously relocating people or they’re sending people for these projects continuously. And so, on the business level, we have a lot of retention, and those cohorts are growing over time. On the individual resident level, it’s a mix. There are some people that come and go, and sometimes it’s just, they’ll relocate one off. One interesting data point, recently we were looking at the numbers and we saw that about 20% of our revenue is coming from people that live with Zeus, and our definition for that is they’ve been with us for over six months.

Kulveer: [00:30:17] And what I found interesting about that was, we haven’t really done anything in the product to encourage that. There aren’t any discounts for sort of staying with us for a longer term. What I’ve taken away from that is, there is a cohort of people who maybe want to be [an] asset, like, or have this flexibility. And we’ve seen people relocate, they’ll stay in a Zeus that the company pays for. Then it comes time to find like, their own place for a longer period, and then they just don’t want to deal with the uncertainty of going onto Craigslist or finding a new landlord, and they’ll just end up staying with us for much longer.

Richie: [00:30:49] Do you like that?

Kulveer: [00:30:50] Yeah. You know, again, when I think about the future, I think that’s the adjacent market that we sort of expand into. Right now there is this focus again on who are the customers that have the most sort of mobility needs? It’s often these businesses. And, you know, they’re deriving a lot of value from what we’re providing. But then, over time we could expand to people who might not have as many mobility needs, but still want this sort of high quality branded experience where they don’t have to think about the home.

Richie: [00:31:15] In terms of, you know, the amenities, the experience, there are companies like Hello Alfred out there that provide high-class amenities to existing kind of rental residents. You talked about kind of that first 24 hours. How did you continue to evolve like, what someone should expect, and get beyond, you know, their first night in the place? Because I think that’s also one of the things with Airbnb is there’s generally nothing on the amenities front. And then you go to a hotel and you pay for a lot of stuff. There’s a lot, but you don’t really use a lot of it, sometimes, depending on who you are. And it’s like, trying to find that balance between nothing and everything.

Kulveer: [00:31:51] As a company I’d say we’re very big on research, essentially. Early on we would invite every resident to come to the office for lunch, and often there’d be a couple of groups each week, and I would just talk to them and just learn more about, you know, what they were looking for. One interesting thing I learned early on was this idea of community, and just getting to know the city a bit better. I sometimes like to think of it as Zeus is their friend when they’re moving to a city. They feel supported, whatever that may be.

Kulveer: [00:32:21] Often we’ve had families relocate, and they will say, “Hey, we’re moving from England to the US. I’ve got two small kids. This feels very big and very stressful.” So then we’ll try and go the extra mile and we’ll be like, okay, well, do we need to set anything out for the kids? We’ve done stuff like buying tickets to the Academy of Sciences in Golden Gate Park for a family that’s new, just come in. We try and be thoughtful about how can we integrate them into this new life and this new place. But I still say we’ve barely scratched the surface.

Richie: [00:32:51] In terms of concierge and a lot of that?

Kulveer: [00:32:54] Yeah.

Richie: [00:32:54] Between families, individuals, couples, etc., like, how did that start to play out, in terms of like, who is actually using these things?

Kulveer: [00:33:03] Yeah. We noticed a lot of families. We also noticed a lot of co-workers traveling together. And maybe again, this is where we’re different from a hotel. So we would take on these two-bedroom homes or three bedrooms and, on the demand side, they’ve got a group that’s traveling together and they wanted that shared sort of accommodation. That was a bit of a surprise. There are of course individuals that travel. But we’ve seen that often, like, if sometimes people are coming from Japan, there’ll be two or three folks together, and they want to live together, and they find that more efficient for their traveling and the communication, and the cost itself.

Richie: [00:33:39] You mentioned before that New York’s been a bit of a unique situation. I’m curious, are there any specific lessons or learnings in that?

Kulveer: [00:33:44] In my research I found that 30% of the rental inventory in, say, Manhattan, is concentrated into the ten to 15 largest landlords. And in a typical American city it’s usually only 10% is concentrated in, say, the ten largest. I feel like nobody sells real estate in New York, so over time it just sort of consolidates and aggregates and then you’ve got these large players here. That said, the market is so large that there are still lots of sort of condos and places where we can get the supply. The broker market out here is something that’s different to the west coast. And also just the level of demand. I think New York is the largest corporate housing market in America. Obviously, the proximity to Europe, variety of industries here, and then also understanding, again, the difference between people may have to work in a certain area, but where they actually want to live can be quite different.

Kulveer: [00:34:41] And, I’ll tell you, the transit here is so good, it opens up different neighborhoods for folks. In San Francisco I don’t think the transit’s that great, and so, actually, proximity to where you work is a big deal. But here, you’ve got the subway and these other things. And so, we’re thinking about the type of real estate we want to acquire quite differently. We’ve got this whole data science team that looks at all of these factors and they will tell us, like, hey, here are the neighborhoods where we think residents will want to live. It’s close enough that it’s not inconvenient to get to work but it’s a nicer experience than, say, maybe traditionally you’ll be put in like Midtown or by Times Square or something.

Richie: [00:35:16] Do you remember like, the first customer experience that didn’t go well, or didn’t go how you wanted?

Kulveer: [00:35:21] Yes. There’s been a few. What we think is really important is, if something does go wrong, like, we’re really quick to jump on it. And I actually think a lot of our customers, they understand we’re a growing start up and they’re willing to be flexible with us. One experience—so, actually, that first home that we on-boarded in Sunnyvale, a startup moved in, they’re now called Cover, it’s this insurance app. And I remember they also had a few problems with the electrics. I think it was an older home, and I think they had like, their computers plugged in, maybe fans—like, not a lot of the inventory in the Bay Area has air conditioning. I think they turned on the microwave and something else and then the electrics just blew out. And it was a simple fix, it was just the breaker that happened, but it was kind of a recurring problem, and then we just went in and upgraded the electrics on that, and the homeowner was very accommodating.

Kulveer: [00:36:11] You know, San Francisco itself as a city has some challenges at the moment, so we’re very mindful about the safety aspect of it, but sometimes there can be a bit of a shock. We’ve had people coming from Europe and they’re sort of like, what is this place? And so we try and, again, keep people informed. We have a section on the listings on our website called Hard Truths, where we will just share like, hey, you know this is a block away from the train station, maybe you can hear the trains. And the idea is, if we can at least build that trust and people know what they’re getting into, it goes much better.

Richie: [00:36:42] Right. Because I think one of the biggest complaints about Airbnb is, they work for the seller or for the landlord in that scenario. And, generally, when stuff comes up, they don’t like to take a lot of responsibility to remedy situations that much. It sounds like you have to have a much higher degree of experience and trust and so forth. Do you feel like you’re more even between demand and supply? Or, like, how do you balance out, given the level of trust and the level of experience you have to provide is probably two to three times, if not more, than what they do?

Kulveer: [00:37:13] That’s a great question. And, actually, I think it highlights some of the original thinking in the business. When we were doing our research and we realized when you look at, say, a traditional property manager, they’re kind of like a middleman, essentially. If the resident that they pick doesn’t treat the home well, it’s no sort of cost or consequence to them. They don’t really have skin in the game for the homeowner. So what we realized was this model of us signing a lease directly, we’re basically becoming the landlord. And, actually, we’re now in the business, because we’re gaining scale of building our own sort of brand and reputation, so we have to treat the resident well. If not, our units are just going to sit vacant and we’d go out of business.

Richie: [00:37:47] Right. ‘Cause you have fixed costs.

Kulveer: [00:37:49] Yeah, we have these like, fixed liabilities. But I think it’s also just who we are as entrepreneurs, where we know if you build a great product and you’re very customer-centric, then you’ll be successful, no matter how hard it is. And that is actually one of the company values that we talk about. So your point is right. We have this huge incentive to keep our customers happy and go the extra mile. And we sit in this interesting position where we can advocate like, hey, improving this in the home is going to make the experience that much better. And then, actually, ’cause we have that trust or that relationship with the homeowner, they’re much more willing to do it.

Kulveer: [00:38:23] Early on we found a bunch of homeowners kind of just didn’t trust property managers that much, ’cause they were like, “Oh, you know, sometimes if work comes up they pick vendors that they’re friendly with, and there might be kickbacks or like mark-ups.” And we’re like, “Hey, that’s not our business model, we don’t make money on maintenance. We just have this huge drive to have a home that’s—”

Richie: [00:38:41] Maintained.

Kulveer: [00:38:42] Yeah, well maintained and ready to be lived in. And so, once we built that trust, then there was this understanding. But yeah, to your point, in the corporate housing world when you’re working with business customers, if something goes wrong, they want to be able to pick up the phone and talk to someone. And realize or understand that it’s going to get fixed. So that, again, in our position, that was something that was different. Where, yeah, if there’s anything wrong, you can call us. We actually have a guarantee on our places, where we say, if in the first seven days the home is not to your liking, just let us know and we will relocate you at no cost. I think that gives people a lot of peace of mind. Now, this transaction? Like, renting a home for a few months? It’s a big one. You know, they do want to have that sense of, there’s actual people at the end of this. It doesn’t happen too much, but, when it does happen, for whatever reason, we’ll do it. And then it’s a data point for us on either maybe something that we got wrong in the experience or something in like, the location or the home that wasn’t perfect. I think that’s been one of the ways that we’ve gained traction, is just having this relentless customer focus.

Richie: [00:39:43] On those lines, when you think about scale—and, given how big Airbnb has gotten, and obviously there are trade offs that come with scale. You’ve also grown many times, and even in the last year, as you said. How do you, I guess, dial the speed at which you can do that without sacrificing and getting too big, that the entire value prop starts to fall apart?

Kulveer: [00:40:01] Internally, we’ve just communicated that we’re not a growth-at-all-costs kind of a company. And we have, you know, our internal metrics where we’re measuring the experience, and if that ever starts trending down too much, then we do put the brakes on growth and we like, okay, let’s fix what’s broken. So it comes from the culture we’re trying to bring, having the right sort of measurements in place to see how it’s going, and then reacting to it when things do go wrong. But we’re very clear that, hey, we are building a brand. It takes time and a lot of investment to build a brand. And the only way you can do that is if you deliver this awesome experience, and then your customers talk about you. And, thankfully, we do measure our referral rates, and how much business is repeat, or residents repeat with us, and we’re on the right track.

Kulveer: [00:40:49] And, just coming back to that point, like, we’re dealing with these million, sometimes multimillion, dollar assets. You can’t be too blasé in your approach with how you’re dealing with that, because they’re just very valuable assets. So, we are cautious in that sense. But within the sort of guardrails that we build for ourselves we do want to be as quick and as efficient as possible. So there is a trade off, but we’ve sort of communicated internally what we’re willing to allow to happen as we grow.

Richie: [00:41:18] What’s been the cheapest and most expensive lesson you’ve learned, building the business?

Kulveer: [00:41:22] The most expensive lesson is probably that home that cost us about $50,000 to get out of. Maybe, in hindsight, that was actually quite a cheap lesson, because we avoided many other problematic properties! Another lesson that we’ve learned is, we sometimes break into these internal debates about what should go into the home. Like, some people are really into cooking, and so, we want to have a well-outfitted kitchen. But then, to what degree? And actually there was this example of a blender, where we had quite a few residents just ask for a blender, and then we’re like, well, should we put them in all of our homes or not? Then we just realized that we want to be very thoughtful in what we put in the kitchen, but we don’t need to do absolutely every single thing, ’cause not everyone wants it. We don’t want the homes to feel cluttered. A simple lesson was, hey, if a resident asks you for something, if you just satisfy them ASAP—we’ll order it on Amazon, we’ll get it to the house the same day or the next day—it goes a long way to building trust and customer satisfaction, and that allows us to be more nimble and flexible in like, our own supply chain.

Richie: [00:42:22] If someone asked for a Vitamix would you just ship them a Vitamix?

Kulveer: [00:42:24] I think so, yeah.

Richie: [00:42:25] But it’s your property, though.

Kulveer: [00:42:27] Yeah. The idea is, we’ll amortize the cost of that over all the residents that will live in that home, so it makes sense. And if somebody wants it, let’s delight them. We want people to have that peace of mind. I’d say that’s a really good question. We’ve also had this debate on standardization and versus, say, unique design. At the moment we have a designer look at every single property and design it. We have our own inventory. We have our artwork and so on.

Kulveer: [00:42:51] What we’ve done is customize based on the city. So LA has a different feel to San Francisco. We’ve customized on the neighborhood and the type of property. So if it’s like a, a brownstone versus a more modern place like, there’ll be a slightly different spin on it. With that said, there are some things that we don’t want to vary too much, where we just know, this mattress, for example, is the best one, and we’ll just put that in all of our homes. So we are treading this sort of fine line of, we don’t want every home to look the same, but we want a customer to have that feeling of, when I walk in, yes, this is a Zeus home. I know they’ve been thoughtful about it, will always source the coffee from a local vendor. And so we’re playing into what are the local businesses in the area and how can we support them, but then also hit this standard of experience that we’re going for.

Richie: [00:43:39] WeWork filed to go public, Common is out there, some of those other co-living… I guess, what is your kind of high-level opinion on those, and what solution, if any, they provide?

Kulveer: [00:43:50] I feel like there’s skepticism around WeWork. When I’ve spoken to some of these commercial landlords, they’re like, well, actually, they are the most efficient operator of this space, in terms of maximizing its utilization and getting people in there. I think they actually did quite well on the community side of things. So, everyone comes to this office every day, and then they did some events and programming and they created that. So I think there are some lessons to be learned from them. I’m curious about how the IPO goes.

Kulveer: [00:44:17] With Common, again, you know, in my early 20s I probably would have loved to do a co-living type of a setup after graduating, and maybe you want to extend that sort of college-type experience, and where you have dorms and maybe people are cooking less, now, you don’t need your own individual kitchen, and so on. So I think there’s definitely room for a few sort of co-living concepts to exist.

Richie: [00:44:38] But maybe it’s solving a different problem.

Kulveer: [00:44:41] Yeah. I think it’s a different sort of customer to who we have and how we think about it. I’m still sort of shocked that even in like, hot markets like New York and San Francisco, sometimes it can take six to eight weeks to get a property rented out. There’s still so much inefficiency. I’m very bullish, I would say, on the real estate sector overall for innovations to happen. And, you know, it’s one of the largest sectors in the whole economy. Like, rent or shelter is such a large part of like, household spending. There’s tons of improvements yet to be done. We think about, you know, in the future, when you’re picking a place to live, say, on Zeus, do you want it to be cleaned, weekly, biweekly? Do you want groceries delivered? Do you want Netflix, HBO set up? Like, how do you even want it sort of furnished, maybe more as for a family or perhaps as a bachelor pad.

Kulveer: [00:45:27] I think there’s a lot to be done still. And so, I’d say I’m overall very bullish on it.

Richie: [00:45:32] How many different Zeus apartments have you stayed in?

Kulveer: [00:45:35] I’ve stayed in, at this point, I’d say probably about 15. Often when I’m traveling to different cities, I’ll try and stay in one, you know, check in again on that experience, making sure the standards are being met.

Richie: [00:45:48] Have you thought of living in one full-time at home?

Kulveer: [00:45:51] Yes, definitely. I’m now married, and my mother was a travel agent so, growing up, I actually got to travel quite a bit. We’d get these like $150 standby tickets and, you know, I could go places. When I invested in real estate I had this dream of owning real estate in the major cities around the world, not because I wanted like, a real estate empire, but just this idea of, oh, if I want to go to Europe for the summer, or if I want to go to Asia, like, just having the flexibility to do that. And now I realized I’ve been on this long journey, but that’s basically what I’m building with Zeus. But the irony is, I am now pretty locked down to San Francisco because we have this growing company and my exec team is out there. But as much as is possible, when we do expand to Europe, I’d love to go to London for six months. In November I’m in New York for pretty much the whole month, I’ll stay in one of our Zeus places here.

Kulveer: [00:46:39] So, yeah. I would love to be a lot more flexible in my location than I am right now, but I’m glad that other people are getting to experience this. And internally at the company we sort of said to anyone, you can work from any office, and we’ve had people relocate to the east coast and to the west coast. And I think that’s basically the future.

Kulveer: [00:46:57] Where’s the name from?

Richie: [00:46:58] So, my co-founder Jo picked it. He was into Greek mythology, and he wanted something short and memorable. There was a happy coincidence where I was actually, I think, a year into the company, we realized that Zeus, amongst other things, was the Greek god of travelers. And so, in ancient Greek, hospitality was a big thing, and there’s a story being written where Zeus disguised himself as a traveler who would show up at people’s houses, and if they treated him well he would like, shower them with gifts. And so, yeah it was a coincidence that we picked this name. But the fact is, yeah, he’s the god of travelers. So we think that’s pretty cool.

Richie: [00:47:35] Awesome. Thanks so much for talking.

Kulveer: [00:47:36] Thank you.

Richie: [00:47:42] Thanks for listening to the Loose Threads Podcast. You can read full transcripts of the podcast and join the newsletter at LooseThreads.com. Feel free to leave review on iTunes, we always appreciate it, and thanks to George Drake, Jr. for editing this episode. We have a great roster of upcoming guests and we hope you tune in next week.