Case Study: Fintor Learned How To Make The Most Out Of Every Dollar They Have Raised
High capital efficiency becomes critical as you raise more capital as a startup; it's easy to get tempted with frivolous, inefficient spending.
Introduction:
Farshad Yousefi is a co-founder and the CEO of Fintor. An Iranian-American immigrant, Farshad earned his bachelor's in finance from the University of San Diego. He worked at a venture capital fund in Silicon Valley, investing in early-stage consumer startups. Soon he realized that money was not the only motivation in his life; he wanted to truly get out and build products that improved people’s lives. He co-founded Visionful, an AI-based startup that automated parking and transportation using computer vision. After exiting his last startup, he recognized that the barrier to entry for real estate was far too high. Not only for himself but for his entire generation. Fintor was started with that mission – to democratize real estate investing for all. Since moving to the United States, Farshad's one goal has been to create positive change for the next generation.
Background: (Read For Necessary Context!)
Startup Spotlight #114: Fintor - Fintor is a platform for buying and selling fractional equity shares in real estate properties for as little as $5 with zero commission fees.
Case Study: Fintor's Relies Daily User Feedback For Quicker Product Iteration - Fintor's Farshad Yousefi says, "You need to iterate on your product quickly while engaging with your first set of users daily to understand their pain from every aspect."
What’s the most important thing you’ve learned since your last fundraising round or critical milestone?
Since our last fundraising round (pre-seed), it’s become quite apparent that we can go and grow much faster with additional capital. With that in mind, we remain relentless in operating our company with high capital efficiency because time is never on your side during the early stages of building a company. It’s easy for companies at our stage to fall into the trap of thinking that once you pass the first phase of fundraising/growth, challenges will get easier - this is far from reality. Capital raises and user growth, as positive as they are, invariably usher in their own challenges.
Over the years, while working in and with startups, I’ve observed that many companies often die from bad hiring decisions, irresponsible spending, and poorly executed strategies rather than extraneous environmental factors. I can’t stress enough how important it is to invest heavily into recruiting the best talent. My co-founder and I have been fortunate enough to build a top-tier early team that is just as passionate about Fintor’s mission and product as we are, which has fortified the emerging product and enhanced the user experience in amazingly unexpected ways.
What are the main levers you pull from an operational perspective to ensure Fintor stays disciplined with its capital expenditure?
The idea of discipline raises the notion that some line items in the budget might not be as mission-critical to have or buy as others. Two core values that help us work through budget allocation and expenditure justifications are resourcefulness and impact. For example, if we’re evaluating a new app, we ask ourselves, “Do we currently have another app that can be utilized to accomplish maybe not all, but most of what we’re wanting out of the new app?” If the answer is yes, we flex our current resources, accommodate the new need, and forego the additional spending. Regarding forecasting the possible impact of a purchase, it can be difficult at this stage since so much is still unknown, so to the best of our ability, we try to assess the associated value with the expenditure over time. Can we delay the purchase for 3-6 months and not have a meaningful negative impact on our projects? If so, then we’ll often opt for delaying the purchase.
How do you enable Fintor to take risks while still maintaining this discipline?
Taking a risk doesn’t just have to be an isolated decision. Rather, it can be a well-reasoned outcome from a series of questions and candid dialogue. When possible, we try to apply a structured approach to taking risks, which can involve having premortem conversations to assist with overall risk reduction, determining if the potential upside is worth pursuing, and figuring out which internal resources would be required to understand the potential opportunity cost. Since we are creating a new category, our team knows that we must continually take risks. The goal now is for us to place our bets accordingly and proceed with conviction. As a startup, it is inescapable that you will constantly take risks. The question is whether or not you are ready to overcome the challenges that the risks may bring.
What are some of the general and specific challenges Fintor is facing after passing through that first stage of growth?
Challenges are never ending when you’re building a new asset class category in the fintech space. As we are creating a new asset class and trying to help people think differently about real estate investing, one of our most complex challenges will be crafting our message to convey what we are building clearly. Since our team at Fintor is fully distributed, we are constantly asking ourselves how we can improve our communication and ensure that we stay fully aligned as we roll out new initiatives and bring on new members. Another challenge, which is not unique to us, is recruiting top talent in this hyper-competitive environment.
Fortunately, our Head of Operations, David Berens, has been doing a fantastic job sourcing some great talent to date; one key hire is Marc Nguyen, our VP of Investments. Marc, who has been a stellar addition to the team, is focused on acquiring properties during one of the most aggressive real estate markets we’ve ever seen.
What are the challenges of amassing capital (via fundraising) and handling user growth? How should startups prepare for this in advance?
When people say that 99% of startups cannot fundraise, that is 100% true. A difficult question is how many of those founders who closed up shop gave it their all. When we were first building Fintor, Masoud Jalali and I got rejected by the first 80 or so investors. They were not just telling us no; instead, they were telling us that the younger generations, and the majority of the market, wouldn’t want to invest in real estate in the way that we were envisioning. A key for startups is never to give up and keep going with ruthless tenacity. During the early days, everyone wants you to fail; everyone will tell you that you will fail. Remember that all you need is one yes, literally just one yes, then all the doors will begin to open. There is truly a snowball effect when you land that first “yes.” If you are raising your first round and you happen to be a capital-intensive company, I would encourage you to scour your operational plans to see if there is any way to reduce early cash burn, evaluating if your budgeted items are truly mission critical or just a nice to have. If it’s just nice, then kill it. If you don’t have a capital-intensive company, then be sure to give yourself a six-month timeline for fundraising. Fundraising almost always takes longer than you think and much longer than you’d want.
How have you instituted best management practices within your executive team to avoid the internal pitfalls you attribute to why startups routinely fail?
We realized early on that for our company to survive, we needed to foster a culture of humility. This starts with our rigorous candidate interview process, where we do our best to understand the individual’s motives, goals, and drivers. Of course, we want highly talented individuals to join us, but not at the expense of compromising our company culture. On a day-to-day basis, this practice can show up as someone who vulnerably expresses a dissenting opinion when the group has already expressed momentum in one direction. We encourage each team member to share their thoughts, concerns, and convictions with the greater team, especially in a contrarian position. Additionally, we regularly provide and receive feedback to and from the team. When thoughtfully prepared and shared, we believe that feedback is a gift for the recipient.
How have you crafted your hiring process over time to better select high-quality candidates who may go on to be productive, passionate Fintor team members? Would you say your process has changed as Fintor has grown over time?
Before hiring, a critical step that can often be overlooked or prematurely passed on is clearly defining the role that a team is hiring for, including the responsibilities, objectives, key problems that will be worked on, perceived skill sets, and experience that will set the future individual up for success. When we take the time to understand better what we need in a role, it becomes easier to source more qualified and relevant talent. Additionally, the candidate is more likely to succeed when they clearly understand the expectations and have the opportunity to genuinely self-assess if they think they have the chops to rise to the occasion. To help broaden our understanding of a candidate’s capabilities, perspectives, and hard wiring, we structure a few separate interview rounds with various team members that cover the company & product overview, role overview, and take-home skill set assessment when appropriate. A helpful question that has helped us more effectively sift through candidates has been: “what skills or value do you see yourself bringing to the team right now?” When we’ve taken the time as a team to distill down what we’re looking for, alignment or misalignment can become almost immediately apparent.
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Martin Haiek, Founder of Around: Around turns unused office space into a network of dedicated workspaces on a monthly subscription.
Click Here for Fintor’s Founder File:
Fintor’s Founder File Description:
Yousefi: “I built Fintor so that every person, no matter your age or net worth, can take advantage of building wealth through this asset class. Right now, real estate is acting as its own exclusive club that only the rich can access. There is absolutely nothing available in the market that removes the friction in investing in real estate.”
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