- ZeroDown is a company that helps people buy houses in the Bay Area
- The idea for ZeroDown came from the co-founder's struggle to buy a house despite having a good job and healthy finances
- The company studied the mortgage industry and learned from failed mortgage startups
- ZeroDown offers a unique home buying process where they buy the house for the customer and give them ownership over time through monthly payments
- The company also offers services such as hyperlocalized home search and partnerships with expert real estate agents
- ZeroDown aims to make home buying more accessible and affordable for individuals in the Bay Area.

- The company helps people buy homes by providing knowledge about neighborhoods, 0 down payment financing, and assistance with deal execution
- Their customers include designers, engineers, product managers, and investors
- They evaluate customers based on their healthy income and savings, betting on their future success
- The qualification process involves connecting bank accounts, assessing assets and income
- Customers are given the power of all cash offers, allowing them to close on a home quickly
- The company plans to expand to other markets such as Austin and Seattle
- Education and communication are key to explaining the benefits of 0 down payment to potential customers
- The company is a long-term holder of homes and believes in the long-term growth of real estate in desirable areas
- They have a small team of 17 employees but plan to expand to 25
- Hiring is focused on finding people who can play multiple roles and have specific expertise, with distributed offices in Vancouver and India
- The company faces technical challenges in creating a seamless and user-friendly experience for customers.

- The company, 0 down, aims to deliver the right homes to the right people at the right time using technology.
- They focus on asset management and automation to provide a seamless experience for customers.
- They offer a concierge app for home maintenance and provide a rewards program for discounts on furniture and other home-related purchases.
- The company follows a hub and spoke model, similar to their previous company Zenefits, to offer a range of services and make money from various sources.
- The goal is to provide an amazing experience for customers throughout the entire home buying process.
- They gather constant feedback from customers through interviews and recordings to improve their services.
- The company's long-term vision is to make home ownership accessible to everyone and create a flexible and liquid market for home ownership.

- People in the Bay Area have long commutes to work due to factors like larger living spaces and proximity to schools.
- The speaker believes that these factors are important and fundamental to human life, and may not be replaced by autonomous cars.
- Home ownership is seen as important for the ability to customize and reshape a space, have stable costs, and profit from the value of the home.
- The speaker believes that it is important for founders to build something they truly believe should exist in the world, rather than just doing a startup for the sake of it.
- The founders of the company discussed in the video were drawn to the idea of solving the problem of high housing costs in the Bay Area and wanted to bring back home ownership as part of the American dream.
- The speaker emphasizes the importance of working with co-founders who you enjoy being around and shares that the idea for the company came from a problem one of the co-founders was facing personally.
- The goal of the company is to help people in the Bay Area who have good jobs and healthy finances but are stuck in a loop of trying to save for a down payment on a home.

- ZeroDown is a company that helps people buy houses in the Bay Area by offering a unique home buying process.
- They aim to make home buying more accessible and affordable for individuals in the Bay Area.
- ZeroDown evaluates customers based on their income and savings, providing them with all-cash offers to close on a home quickly.
- The company plans to expand to other markets such as Austin and Seattle.
- They focus on asset management and automation to provide a seamless experience for customers.
- ZeroDown offers additional services such as a concierge app for home maintenance and a rewards program for home-related purchases.
- The company follows a hub and spoke model to offer a range of services and make money from various sources.
- They gather constant feedback from customers to improve their services.
- The company's long-term vision is to make home ownership accessible to everyone and create a flexible and liquid market for home ownership.

Topics
00:10 - What is ZeroDown?
1:30 - How did they test the idea?
3:30 - What did they learn from companies that failed in the space?
7:40 - Breaking down the product
11:05 - ZeroDown's customers
13:15 - Expanding to other markets
15:30 - What if a downturn happens?
16:50 - ZeroDown's hiring strategy
19:50 - What are their hardest technical challenges?
21:45 - ZeroDown's breadth and product strategy
26:20 - Customer interviews
28:15 - Should everyone own a house?
29:30 - Home ownership in the future
32:25 - Build something you really want to see in the world
34:20 - Working with his cofounders was the most important consideration

So you are the CTO and the co-founder of ZeroDown.

We think even in a place like Bay area, people with good jobs and healthy finances should be able to buy a home.

It all started with my co-founder, Abhijit.

He was making a decent chunk of change, had a great job, healthy finances, But he'd moved to the Bay Area about 5 years ago.

He had twins, and he wanted to buy a house only to find out that you need to have $300,000, $400,000 to spare, not all of your savings to spare, to be able to buy a house.

Even if you have a great job and making a lot of money, and like what in any other place in the world would be considered rich, like you can't even think about buying a house here.

Turns out, a lot more people were in the same boat.

A lot of our early tenured engineers, like we're just getting married, looking to settle down.

It's going to take us like 4 or 5 years to save.

And we thought there has to be some way else to be able to have a path to home ownership.

And so this company is super interesting.

The structure's really interesting, but associated with it are massive costs.

So, you know, this is not just prototyping an app and showing someone at Starbucks.

Well, we spoke about this for close to 18 months.

We even did a side hobby project, which was like help Abhijit buy a house.

And we tried to figure out, okay, what would be the mechanics of it?

Why can't we do 0 down mortgages to people in Facebook, Google, Apple, Airbnb?

And we spoke to a whole bunch of companies that have started to be a mortgage providers in the last few years, but died.

Because we wanted to learn lessons from not the survival bias, but people who actually did not succeed.

And we spoke to a whole bunch of real estate investors.

We learned about an entire class of assets called single family rentals That started from post-financial crisis.

Blackstone and Citibank and all these other funds, people who came out of these funds like started companies where they just went and bought massive amounts of single-family homes and rented it out.

Their thesis was close to 11 million millennials are going to reach household formation age over the next decade.

They're gonna move from these small tiny apartments to single family homes.

They're shit out of luck, they're not going to be able to buy it.

Mainly so many other factors like student debt, real wage stagnation, and all these other things.

The thesis was they're going to rent it, so might as well rent it from us.

We'll just raise rents every year and have a really good fund doing this.

There's a company called Invitation Homes, which is public, which owns close to 100,000 homes.

There are a few other big funds that just do this.

And it turns out, this is a real asset class that people are investing in.

So it just turned out to be a confluence of things that kind of came together that made 0 down possible.

Yeah, and I think that's a really interesting point about survivorship bias.

What did you learn from the companies that failed?

So we actually learned a lot about mortgages themselves by actually talking to these companies.

So mortgage, you can't really differentiate that much if you're selling a mortgage.

Because Fannie Mae and Freddie Mac are these government agencies which define a box which are mortgages that are valid that can be sold in a securitization secondary market.

If they're not a valid mortgage, you have to hold them on your books or you have to figure out some other way of private label securitization and all this other fun stuff.

So all the companies that started doing mortgages, most of their thesis was like, hey, if we have a better UX on top of mortgages, it'll be great.

Turns out people didn't care that much about UX because it was a once-in-a-lifetime transaction.

And turns out, people cared more about a 50 basis points difference rather than, hey, I have an app to do this stuff.

It's okay, I'll go to my bank, get a printout of my statement if I can save some money.

Customer acquisition just became more and more expensive.

When the rates were lower, people were doing a lot of refinancing of their homes, So they were able to survive.

But once the rates started going up, refinances stopped.

And suddenly, all of these companies were struggling to acquire customers.

That was the biggest lesson that we learned.

And so The entire trillions of dollars of the mortgage industry is controlled by this small box where you can't really differentiate that much.

Which is also for the good because it's also consumer protection.

If you're allowed to do all sorts of things.

People don't really understand how mortgage works.

We've spoken to close to thousands of people, like at least 1,000 to 3,000 people.

And not everybody understands how mortgage works.

And these are really smart people who work in tech.

And they have no idea how much principal they've paid down over 5 years.

Everybody's really surprised when I say, even with a 20% down, a 4% interest mortgage, you would have paid off only close to 8% of principal in 5 years.

And people are like, wow, I did not think that would be the case.

So it is complicated, and not everybody understands it, and people just use it because that's their score.

So that was a lot of learning, just by talking to people who have started mortgage startups over the last

And how did you go about testing buying your house, your co-founder's house?

Like you helped him buy a house, what does that mean?

No, I mean, the idea was to help him buy a house.

Like we started 0 down because we kind of like came upon.

So essentially what we tell our customers is we'll buy the house that you want.

You say I want that house, we'll buy it for you and give you the keys in 7 days, like with a bottle of champagne and, yeah, and like no, no bank, no escrow, no hundred page documents and all that stuff.

You move in, and as you make monthly payments, you start like getting a portion of like the home every month in terms of like purchase credits.

You can think of it almost as like vesting and cliff and stock options, like how it happens at work.

So you get 0.25% of the home every month.

And over a 5 year period, you get 15% of the home.

So it becomes easier to buy the home from us at any time you want after a 2 year period.

So anytime between 2 and 5 years, you can buy the home from 0 down.

So let's say You're 3, you have 9% of the home, your company exited, you came into some money, you can just buy the home from us at that point.

And then just create similar terms, similar mortgage terms, then you hit a

We are actually actively working on partnerships that we can easily transition people over to a mortgage when the time comes.

And so break down the product from a founder perspective.

So we think of it as this vertical, full stack home buying company, which is what ZeroDown is.

So we want to help people right from search.

Search mostly feels like a solved problem with Zillow and Redfin and everybody is looking at it.

But everybody searches for price, bed, bath, and maybe neighborhoods.

But what we've found out that people are really looking for is show me places 30 minutes commute from work that has a lot of natural light, that has a big backyard.

And People often tend to collect all this data from different sources.

I want a home that's about 30 minutes driving distance from San Francisco that's close to good schools.

Let's say I have a family, and good schools are important to me.

Now if I talk to a lot of friends and arrive at this conclusion that I should be looking for a home in the Millbrae, South San Francisco, San Bruno area, because they tend to have good schools, then I'm going to search for only those places in Redfin and Zillow.

But 0 down, If you actually said, show me all the places that's 30 minutes driving distance from the YCHQ, where we are, you would actually see Albany and Melbury light up.

Turns out Albany, prices of homes in Albany are half of that in Melbury, and the school ratings according to grade schools are actually better.

So there is some loss of information when you transfer this external research into these different tools, which can be avoided if you actually use that 1 tool which does all of these things for you.

Now, we want to build a hyper localized search that like show me homes near farmers market.

We just actually did a tag where like, show me homes that are great for dogs.

So we look at like close to dog parks, big outdoor space, and stuff like that, and we try and collate all these things.

And then the next big thing is like, okay, I wanna buy a home.

And so we work with a lot of partner agents who are experts.

We have agents who are experts in San Francisco.

We know agents who are experts in Oakland.

We have agents who are experts in Peninsula and South Bay and so on.

Because again, like homes are like hyperlocal and you need to know the neighborhood really well to be able to help out.

And then the financing itself, it's 0 down payment, and that's the biggest value proposition.

Like $200,000 in the bank today is way more valuable than $200,000 in the bank 5 years from now.

So being able to do that today is a huge, huge value.

And then we actually do the deal execution.

So we take care of inspection, appraisals, like the walkthroughs, because We are buying 100% of the house up front.

We want to make sure it's a really good house.

And because it's your house, you want to make sure it's a really good house.

That's where the search also comes in, like to be able to, eventually we want to add tags like hey, show me neighborhoods that performed well during the 2001 crisis, 2008 crisis.

It's almost like we are actually launching our ultimate home buying guide for engineers where we crunch like 50 different data sets and try to figure out like, okay, what are the things you should take into account as you consider where to buy a home.

So speaking of engineers, so what kind of customers do you have right now and how do you go about evaluating customers that would be a good fit?

Yeah, so we have customers that are designers, product managers, engineers, like directors of, emerging market directors, like investors, storage engineers, so we have a fair variety of customers in the Bay Area.

The biggest thing that we evaluate is like, is their income like healthy, right?

Because like we help them build the rest of the savings to be able to buy the house from us 5 years from now.

So we are basically making a bet on 5 years from now customer.

We are saying the future you is going to be way more successful.

The future you is going to have way more money.

The future you is going to be way more all-around awesome.

It's a pretty fast 3 to 5 minute qualification flow.

You just connect your bank account using Plaid.

And we say, like, Craig, you can go and buy a $1.4 million house.

And once you say, I want that house, the next thing you know is you get the keys in 7 days and a bottle of champagne.

Now, how does this work in a market that, I don't know what the temperature of the market is right now in the Bay, but you hear about like, all these all cash offers that happen immediately, like, how does 0 Down work in that?

Yeah, we actually give our customers the power of an all cash offer.

So we basically arm our customers with all cash offers so that they have way more probability that they close the home of their dreams fast.

When we started the company, I thought 1 of the things that's going to take longest is people to go find homes and us actually closing on it.

But probably 75% of our customers so far have bought homes in 2 to 3 weeks.

And they're in the home in a month, month and a half.

From the time they heard about ZeroDollar, a month and a half, they're in a home.

I mean, I can't even believe that, but it's amazing.

Yeah, okay, now how, like I understand this in the context of like high-paid engineer or you know, Bay Area folks.

How does this go about expanding to other markets?

So I think 1 of the things that has become a characteristics of the unaffordability crisis in

is the most desirable places where people want to live.

The places where the most desirable jobs are, are the places where people have been priced out of the market, right?

Seattle, Denver, Austin, Salt Lake, DC, New York, Boston.

And all of these cities like are viable markets for us.

And we are planning to be in Austin and Seattle in the next couple of months.

And largely it's about education and like how do we how do we explain this to people?

And If you actually look at the math at 0 down against rent, even though the monthly payment is higher than rent, but at the end you get purchase credits that's worth like 15% of the home.

And if you take that into account, it actually ends up being cheaper than renting.

So being able to explain that really well

I heard about 0 Down when you guys were in the batch.

I imagine a lot of people who are not in the tech industry, and especially those not exposed to early startups all the time, hear this stuff and they're like, I don't know about this.

I think part of it is just enough people having done it.

Yeah, so we are doing about a dozen homes a month right now.

And I was actually on Saturday with customers like doing video shoots of like how do they think about 0 Down?

How would they explain 0 down to a friend?

Now, in terms of where the market's going, if there were to be a downturn in the housing market, How would you guys evaluate that?

So, 0 Dawn is actually a long-term holder of homes.

So, like, our, the fund that we run is a 5 to 7 year fund.

Can you talk about the fund really quick?

So we have a tech company and what is called a prop core, a property company.

So the property company is actually a fund that actually goes and buys houses and holds them.

And the fund has a lot of infrastructure.

It has legal, audit, external fund administrator.

So that's also part of the safety net, because these are people's houses, and we don't want to be blase about it.

So we want to have protections, even in case anything happens to us, that the contract can be honored.

So the fund actually has a lot of infrastructure around it.

And we actually believe we are bullish on real estate in Bay Area, Seattle, and all these different places over the long term.

And the reason we are is also this is where the jobs are.

If you look at the job growth in these markets, the wage growth in this market, and we believe that these jobs are probably gonna be the most evergreen jobs in the next few decades.

Okay 17 okay so yeah man okay not as big as I thought given yeah how things are going.

I was gonna say yeah I was gonna say how do you go about hiring for all these diverse roles when essentially you have these like 2 structures in your company?

Yeah, so we have a director of capital markets who used to work at Fortress Investment group.

Our marketing person used to be from YC as well.

So we are also looking at people who can straddle and play multiple roles, from being an IC to being a manager and building out an entire team.

So we are trying to be selective about hiring those kind of people who can straddle that entire range.

And we have our engineering team in Vancouver.

We're going to be building our data science team in India because we're doing hyperlocal search for every city.

So how do Google bus routes affect home prices?

How do Facebook bus routes affect home prices?

We just, we're doing a blog post soon like about how does greenery and tree cover affect home prices.

So these things kind of like help and matter.

And to be able to do some of these things like fast and like for many cities, We want to build the right team to be able to do that.

We're not fully remotely distributed, but we

We have 1 person in India right now, and we'll maybe have an office there.

I think at Zenefits, I had built an engineering team that was like Vancouver, Bangalore, SF.

Like Vancouver is in the same time zone, 2 hours away, and you find some amazing talent there.

We were also heavily influenced by the PG article about like 95% of talent is outside the US.

So 1 of the ways we grew really quickly at Zenefis in terms of hiring was we were able to tap talent all over the world.

It was just easier to bring them to Vancouver in terms of immigration than like the US.

But now, like we just know great people there.

And so it's kind of in network at this point.

Like we're not like trying out like completely new people.

You're not like optimizing for like lowest costs.

Like we want to build, like I said, the right team, the right person who can straddle all the way from being an IC, actually do the work, to be able to switch gears, build out a team, to be able to do that.

And so all the remote folks are not, well, sort of kind of remote are on the tech side?

And for now, I think like our design is remote, mostly on the tech side.

And on the tech side, what do you foresee being the hardest technical challenge?

It's the entirety of the experience, right?

Like, I mean, like I use tech, I think about tech as a great enabler.

So when you're looking at homes, how do we deliver the right homes to the right person at the right time?

And just being able to do that itself is not super easy.

And then there are aspects of the asset management, like deal execution, and a whole bunch of stuff there.

That's where a lot of our Zenefits automation and those kind of capabilities come into play.

On the asset management side, a bunch of us from the team have experience.

Shaw, which was my first job out of college.

And a couple of our folks on the engineering team, were all people I hired out of college at D.E.

They followed me to Zenefits, they followed me to Zerodon.

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Laks Srini on Making Homeownership in Reach with ZeroDown