Russ: This is the Businessmakers Show, heard on the radio and seen online at thebusinessmakers.com. My guest now is Aron Susman, co-founder of the Square Foot. Aron, welcome to the Businessmakers Show.
Aron: Thanks, Russ, thank you for having me.
Russ: You bet. Well, tell us about The Square Foot.
Aron: The Square Foot is a one-stop shop for perspective tenants. We wanted to give people who are looking for office, retail or industrial space access to availability and pricing in the same way they would look for a house or a car or an apartment in today's age.
Russ: Now, as you know, I have some experience of online residential real estate, which is vastly different, but I do know that there have been several companies, some large even, that are really trying to fill this space of online commercial space.
Aron: Yeah, there are, but most of them are really geared toward the brokerage community. So the way the industry has generally worked is landlords market spaces to brokers, and those brokers go out and source the tenants. What we're trying to do is give the ability for consumers, like myself, the ability to go online and easily find pricing and availability when looking for office retail or industrial space.
Russ: Okay, now I know of a couple of those that are focused on brokers. I think there's one Co-Star, one called Loop Net, there's a ComGate. Those are all in the category of really trying to just appeal to brokers, right?
Aron: They do have an online presence though, so currently if someone is looking for space and they search for a property online, a lot of those sites will come up. But when I was looking for space, I didn't find them to be a satisfactory user experience in the same way that a Zillow or a Troya allowed me to look for a house, which was what I expected. So then we went off and started to figure out why that didn't exist in this world.
Russ: Okay, now I'm also aware that in commercial real estate, you can have people that are small businesses looking for 2,000 square feet, and you can have major Fortune 100s that are looking for over a million. Do you care? Are you targeted at one more than the other?
Aron: Yeah, we do care. So it turns out that 75 percent of the volume is under 5,000 square feet, so that's generally 25 employees or under, which you could expect because most businesses are under that size. Most brokers are generally looking for the bigger deals. We knew that Exon Mobil was not out there Googling for office space. They have a team doing that all the time.
Aron: But generally a four or five person CPA shop looking for a small space, they may not find the best broker who wants to help them find that deal, because it just turns out it's all about commissions, and the commissions aren't big enough where it really scales for a human being to help 2,000 square foot tenants every day find space.
Russ: Seems to make sense. So if you are sort of really trying to fulfill that part of the market, how do you find those properties that have that size of space available and persuade them to be on The Square Foot?
Aron: So it turns out that all landlords have spaces that size, from the biggest landlords to the smallest ones, the class A space, the class E space. And it turns out that marketing those spaces is somewhat of a challenge for them because they are smaller spaces. The traditional means of advertising them don't make sense. So broker lunches are expensive, advertising in The Chronicle is expensive. So they were looking for ways to market those smaller spaces directly to perspective tenants.
Russ: Now, as you well know, our audience is real savvy in the start-up world and early stage, would you say that The Square Foot is still early stage?
Aron: It is, although we do have a product, we have traction, we've signed up 15 of the biggest landlords in Houston. So we feel like we are early stage but really starting to hit that kind of rocket fuel stage. We're starting to really grow pretty quickly.
Russ: Cool. So when people say that to me, my question is, have you actually deposited checks in the bank that came in from revenue?
Aron: We have. It's really exciting. We actually had our highest revenue month as October closes, so we're really excited about that.
Russ: Okay, now, when you talk about "we" - and I introduced you as a co-founder - tell me about the team.
Aron: So the team is two other guys, and then our CTO. There are two other co-founders. One of them is Jonathan Wasserstrum. He was one of my best friends starting when we were 14 years old, so we've known each other for quite a long time. He worked at Jones Lang LaSalle, so he has commercial experience, and he just recently graduated from Columbia Business School. So he helps us from that aspect. And then our other co-founder is Justin Lee. We went to the University of Texas together. He has commercial real estate experience as well. And the three of us were the ones who really started to tackle this problem. Then recently over the summer we hired our first employee, which was exciting. He was our chief technology officer. He's from Austin. He worked for a Y Combinator company for people who know the start up world, and he's the one helping build the product and help us iterate it faster to make sure that it's giving the users the best experience possible.
Russ: Okay, so it sounds like a pretty close friendship of three of you and then one new employee, wow. How has the pressures of a start up, has it stressed the friendship at all?
Aron: It actually hasn't, which is interesting. For the three of us, we have a great ability to when we have decisions to make, we're not shy about our opinions and we definitely get into our arguments and we get data points. We all have difficult skill sets, so it actually works out really well. Where there's someone who wants to jump off the deep end for something and someone else doesn't want to dip their toe in the water, a lot of times that tension helps compromise. But, you know, at nine o'clock at night, which is generally when we leave work if we want to go grab dinner, we actually decompress and talk about sports, and we really kind of leave business to the side for a little bit. So we have a great ability to kind of compartmentalize the different aspects of our lives and it's worked out really well.
Russ: Okay, cool. Now let's say I'm a landlord and I had four properties that all had available space in your range and then below 5,000 square feet. Why would I want to go with The Square Foot? And how would you sell me, and how much would it cost me?
Aron: Sure, so generally how it goes is that most landlords have space from zero to 50,000 square feet. Generally where we go is we talk about the challenges in marketing smaller spaces and we generally talk about 10,000 and below. They acknowledge that, and it's really easy, they give us a spreadsheet of their vacancies and we get them up on The Square Foot. And they do it because they understand that we're sort of an aggregator, if you will. So they understand that a perspective tenant is going to want to go somewhere where they can see almost all of the product, and that's why they come to The Square Foot. We're charging landlords right now $200.00 a month to list their space and then as tenants come through, they go directly to their leasing agents.
Some landlords want things to work differently than others because their shops are set up differently. So for larger landlords with class A space, expensive space, a lot of times they actually want us to use a broker in that transaction. So we form relationships with different brokerages in town, and for those types of spaces, a lot of times we'll refer them on to a broker, and that broker will then take them to tour that space.
For other smaller shops that have what we call "move in ready space" where it's literally four walls, carpeted and painted and ready to move in today, they want those leads to go directly to their leasing agents, in which case we send them directly. And then there's some in the middle who actually want us to qualify that tenant. So they'll want us to pick up the phone and call that lead, make sure that they're legit, they're not looking to spend $100.00 on 10,000 square feet in the Galleria with no financials. So we really work with the landlords to figure out what they're looking for. But our real goal is to get tenants that they wouldn't have otherwise found touring their space, in which case they're very happy.
Russ: Sounds to me like you've got to get those guys all on the same path and say, "This is how you need to do business," but I understand, the real world can be kind of challenging. So in all of those different kinds of prospects that would be listing properties, do you make that same listing fee on all of them, or do you ever get into the referral fee side of the process?
Aron: With landlords we do not, so generally it's by market. So if you want to put your properties up in Houston, it's 200 bucks a month. If you want to add Houston, Dallas and Austin, it would be $600.00 a month. Dallas is a market we're just moving into starting November 1, we're starting those meetings, so I thought I'd mention that.
Aron: But on the referral fee side we do collect referral fees in certain cases. So because I said we wanted to beat out One Stop Shop, we're working with a lot of vendors. So if you're a furniture guy or a space planner or a mover, you're looking for the same lead as a landlord, and we are sort of the top of that flow. So those guys will pay us a fairly sizable referral fee on a closed deal. So when someone does find space and they let us know, we say, "Hey, want to talk to our furniture guys, our space planners, our movers?" And they trust us, and so they generally do. So we do get to sometimes collect referral fees on closed deals.
Russ: Okay, now, in this area of being sort of the guy that would do business with you with this space, do you ever get in business actually with building owners?
Aron: Generally, but most of the time the building owners want us to work with their third parties. So obviously there are landlords who own their property, there are some that only do third party management. So generally it might happen that in certain cases where we recently received a little bit of press, a building owner saw that and wanted to make sure their properties were up on The Square Foot. So they actually called the third party manager and they actually then said, "We want to get our properties listed on your website."
Russ: You hate it when that happens, right?
Aron: Push versus pull marketing.
Russ: There you go, absolutely. Okay, so now let's say - and I think I understand this side a little bit better - I'm a perspective tenant and I'm looking for space, why would I go to The Square Foot?
Aron: I think there's a couple of reasons. One, there's really nothing like us. If you want to look at properties easily on a Google map, see buildings as pins, sort and filter dynamically with a great user experience, we're the only shop in town. So we think that that is a great differentiator.
And then two, our goal is really to educate the perspective tenant, and it helps from both avenues. Most people looking for space don't know a ton about commercial real estate. When I was looking for space I certainly did not. So our real goal is to, one, we have live chat on the website, we have a lot of educational materials as our Leasopedia, people call us to ask us questions. So we think that we provide what we call kind of almost a concierge service to these tenants that allows them to feel like they're not going at this alone and they're getting as much information as they can possible.
Their other real option today is to drive around and call signs, so we think that we're a great alternative to the way that they currently look for space.
Russ: Do you think that I would worry maybe that the space I'm looking for isn't on your site, or do you have an idea of what percentage of the market in this lower end category that you do cover today?
Aron: We cover I'd say over 60 percent of that market. And the other thing is, we know our data is true and accurate because we work directly with the landlords or the third party managers. Some of the sites out there that exist today do what we call crowd sourcing. I could put up a building tomorrow that doesn't exist and they wouldn't know, so the data is not that accurate. We're getting the data directly from the landlords every month so we know it's accurate, which I think is a big deal knowing that what you're looking at actually does exist and is probably available.
Russ: Okay, now I know you're headquartered right here in Houston, but you've mentioned Austin and you mentioned Dallas and I know one of your partners actually lives in New York, right?
Aron: That's correct.
Russ: So where all might I be able to search for a space right now on The Square Foot?
Aron: So currently we cover most of Houston. We do cover what we call the low-hanging fruit in Dallas, which would be - and Austin for that matter - which are what are called executive suites and co-working facilities. So people who don't know, an executive suite essentially is a floor that a big landlord will rent out. They'll create individual offices, they'll furnish it, hook up the electricity, and it's a month-to-month deal. So it's a very simple transaction. And then obviously co-working spaces.
We actually just started having meetings in Dallas with the landlords that we have in Houston that are happy and with some new potential customers in Dallas. So our goal is to get decent coverage in Dallas and Austin towards the end of this year and in Q1 of next year.
Russ: Now usually in an early stage company you're so focused on today it's hard to have a vision for the future, but I know from doing a little bit of homework that you guys do sort've have an expanding product set. Give us a little overview of that.
Aron: Sure. So what we've learned through this entire process is that the online digital world is changing and it's very new to commercial real estate. As you might know, people will say that commercial is about eight years behind residential, and although you were one of the first movers, that world really picked up about ten years ago. So we think now is really the time. And what we've found is that most of the landlords on their own websites don't have their own properties listed appropriately, they don't have a great user experience, and they're updating seven or eight different avenues of their properties to different people to different places. So we really want to create what we call a single platform for the landlords to syndicate all of their digital content, which essentially is their inventory, to their own website, but also all the appropriate distribution channels that are out there.
Right now it's a super manual task. Our little pitch line is instead of collating information why don't you act on data. So the idea is instead of working with 15 spreadsheets updating 15 different things, you update one time. Everything else gets syndicated appropriately, and then you can spend your time doing other things.
And then as we see building on top of that, we're learning a lot of information about what people are searching for. So we know, for example, that lawyers might be searching for 2,000 square feet downtown right now, or that, for instance, Korean oil and gas firms are moving into Houston right now because of the way 4X is trading. Well, those are insights we get online that you're not going to feel until you actually get into town. So that marketing data information is really, really important. And as smaller spaces become more of the norm, the ROI on marketing becomes very important. So the more information you can act on, the more powerful you can be, and that's where we see ourselves going from a long term perspective.
Russ: Really cool. Sounds exciting. One last question. You mentioned awhile ago live chat, and I know how it is in the early days, sometimes we were always watching 24 hours a day. Is live chat available around the clock?
Aron: It is. So between the four of us, one person is on I would say pretty much from - our only hours off are probably 1:00 AM to 5:00 AM when not a lot of people are looking for space. So we think we have pretty good coverage there. But we do have live chat and it's been great because not only are we dealing with perspective tenants but we're learning a lot every day about what people are looking for, what they're confused about, how we can help them, and it's providing us constant feedback on how we can iterate the product to make it better for the actual consumer.
Russ: Okay. Aron, I really appreciate you sharing the story of The Square Foot with us, and just to be clear, people can go there - what's the domain?
Aron: The URL is just www.thesquarefoot.com. So www.thesquarefoot.com.
Russ: All right. Well, good luck in the future too for sure.
Aron: Thanks again, Russ.
Russ: You bet. That's Aron Susman, co-founder of The Square Foot. This is the Businessmaker Show heard on the radio and seen online at thebusinessmakers.com.