After TAP-NY’s recent data science professional events, we decided to chat with Lee Lin, co-founder and CEO of real estate listing startup RentHop. Lee, a Taiwanese American, is a data geek from MIT who spent years at quantitative hedge funds before founding RentHop and entering startup accelerator Y Combinator. RentHop is a real estate listing platform which uses quantitative analysis and a proprietary HopScore to sift through available inventory and sort by quality; saving time for both renters, landlords, and real estate brokers.
We visited the RentHop office in Midtown to learn about Lee’s background and how the company has grown to where it is today.
Can you tell us how it all got started?
I first moved to NYC in 2007, and thought that real estate was such a broken market. At the time I assumed all brokers were these evil slimeballs that didn’t need to exist. Turns out, I was very wrong. The engineer in me thought, why can’t we make this more efficient by putting data directly onto the web, and then we wouldn’t need brokers. That was our original idea and I’m glad we were so naive then, because if we knew what we knew now there’s no way we would have even tried.
I worked at a hedge fund at the time, and my cofounder Lawrence was a very close friend socially. We worked nights and weekends at his apartment 3x a week or more. I’d go after work at 9pm or so and leave at 1am or so – his doorman probably thought we were dating.
And that’s how we got started – nights and weekends – while we both had jobs we enjoyed. When we first launched RentHop we were just growing purely from word of mouth. The real game changer was in February of 2009 when the New York Times did an article on us. Back then, it was a really lucky time when startups could get press more easily because not many people were doing startups.
Of course that changed things. My manager saw it right away, and then we got a call from Y Combinator. That was back when Paul Graham would call each person personally and ask them more about their application and their startup. He wanted us to go out to Mountain View for 4 months for the program and the condition was we had to quit our jobs.
That was probably the hardest part, as a Taiwanese American, where my parents were like you already have safe, good jobs and finances; why would you take this risk on this thing that’s not making any money? The parents were not the most explicitly supportive, but looking back they were reasonable. They never forbade us to do this, and rather they always asked questions like how does this work out, whats your thought process, etc.
How has the business model evolved since the initial idea?
After going to Y Combinator, the best piece of advice we got was that our current model wasn’t going to work. They told us: if you think brokers are useless, try being one for a while. So I did. I got my license through an online real estate class, took the certification exam, and then I was showing apartments all day long, walking the streets of Manhattan while Lawrence kept writing a lot of the code.
At that time we didn’t want to burn too much of our savings. After the financial crisis, raising money was really hard, so Lawrence and I lived together for a couple of months. I’d come home disgruntled from showing apartments to clients who hate you, and he’d still be coding away non-stop. It was a really tough time, and we learned that brokering is a really hard job. Brokers are looking at a dozen or two apartments each week and they’re only going to show the best ones to clients because otherwise it’s a waste of time. As a group, brokers are always pounding the pavement and searching for deals while quickly figuring out if clients are going to go with them, which saves landlords and clients a lot of time.
We had to pivot our business around that learning, and around a year and a half in full time, we were close to giving up. One of our investors actually emailed us and asked if they could take a tax writeoff yet.
Can you talk about your thoughts on bootstrapping a startup vs. raising significant capital?
The path we took is such a different path than others today. What I can talk about is our bootstrapped approach where we really never raised a big round of funding. We did raise a seed round and some angel investors along the way, but they were all strategic investments. We got ramen profitable really early on, and even being a broker early on was crucial in helping fund us, and I even took a job for a while to get by and pay my own expenses.
It was a lot of using our own savings and methods of grinding along to stay alive. And the important part of grinding is we kept working at it. I look back at 2011-2013 and wonder, how in the world did we keep on going? Most founders now would have gave up and did another startup.
Today, we’ve turned RentHop into a healthy, profitable, growing business, but it’s not the type of business a VC would want to dump piles of money onto to grow exponentially into a unicorn.
I want to make people aware there is another path besides raising venture funding. One of the most influential talks I’ve seen is by David Heinemeier Hansson who gave a mind blowing talk at Startup School. He said that entrepreneurs are focused on how to get viral and take over the world and become the next billion dollar company. But for thousands of years, entrepreneurs have had another path to success: to make a product, charge a price and sell it to people. The press loves to focus on these glorious stories of people turning into billionaires, but the odds of succeeding are so low that I’d encourage people to consider the bootstrap route. If there’s a way to take less venture money and get profitable, even though you may not be considered a unicorn and be on TechCrunch and all that, you have a much better chance of succeeding at something that grows as a sustainable business.
Can you talk about your work before RentHop?
I went to MIT and studied Computer Science and Math, and worked at a big software company for 2.5 years where it really was not a good fit. And that’s when I was reading Paul Graham’s essays online. My favorite was “How to Make Wealth”. It talks about how really smart engineers at big companies are smarter than their job description requires them to be. You go to school and learn all these cutting edge theories about how to design systems, but once you get to the real world as a junior developer you realize you don’t get to do any of that. Someone else has already decided on the system architecture and algorithms. My first few years at Microsoft was on the Windows Phone team, and my first project was around fixing the UI to handle multiple text languages. It really didn’t stretch the things you learn from school, and by a year or two in I knew I was not going to be a long term fit there because of the mismatch of enthusiasm between what I was doing and what I wanted to do.
How has your mentality and perception changed from the early days to the present day?
The biggest difference of starting a company is that early on, you don’t even have any confidence that you’re going to survive. In the early days you’re always afraid of failure. People ask why is doing a startup is so stressful when you have nothing to lose and you can just start another one and raise more money. But it really is stressful – every little meeting can be that one meeting that makes or breaks the startup. Like all I need is that one partnership or that one piece of press and it’ll pave the way to greatness. Today, the biggest difference is after seeing so much I know that every mess up is recoverable.
If anyone wants a book recommendation – one that really resonated is The Hard Thing About Hard Things. There’s a chapter that talks about how nothing is ever as bad as it seems. When you’re running a startup you feel responsible for everything, and it’s true that you are responsible for a lot, but there will be things that happen that are completely out of your control, and don’t let those get you down.
And I have some advice if you’re ever feeling depressed about things that are going on. Like how low morale can kill a startup; it’s a negative feedback cycle, and when you’re demoralized you stop working and that will actually kill your startup. If you’re an engineer, I always have a list of small fixes, features and projects, and if I’m having a really bad week I work on this somewhat easy yet useful list of features and so at least I’ll start feeling productive. And when I make something that I’m proud of, that takes me out of my demoralized state. Or if you’re in business or sales, think about what you can build or any old contacts or threads you can follow up on. No one can control the outcome but you can at least control the steps you take.
What was your upbringing like?
I grew up in a boutique motel which was basically a motor inn on the Jersey Shore. Growing up, our family dinners would be interrupted by customers trying to check in or the front desk bell or a reservation call coming in. Growing up it seemed normal, but by the time I got to high school I realized I had a different upbringing than most – even other Asian Americans.
Watching my parents accumulate real estate growing up, I also became a landlord early in my life. As a software engineer at Microsoft, housing in Redmond was really cheap back then, and with one year’s salary you could save up enough to make a down payment on a small place. It carried over when I came to New York, and I guess I was lucky that all the dots connected and what I do now is related to the field I grew up in.
How did you meet your cofounder?
Lawrence was a mutual friend I met in New York. I didn’t meet him until I got here, but we became really close friends very quickly. It was actually through video games – we bonded over World of Warcraft. While playing we intentionally made things extra hard for ourselves and bonded over our struggles. I’d say bonding over some hobby where you face a lot of adversity is a fairly good indicator of a good cofounder. When you do a startup you know you’re going to have a lot of rocky times, and the way people handle these rocky moments says a lot about their character.
One thing I’ve noticed over the years is that siblings also make pretty good cofounders. I might be overfitting to a few anecdotes but the thing with siblings is that you’ve been fighting all your lives so you’ve fought about all the things you could possibly fight about. So by the time you do a startup together, you’ll probably be able to tough out all the hard times.
The importance of a cofounder is someone who you know is going to stick with you during tough times, even more so than anything else. I’d rather start a startup with someone who perhaps is less skilled or has less relevant abilities, but I know will be able to get through mutual differences and tough times together.
Photos by Kevin Wong for TAP-NY.