April 28, 2023

#027 – Jefferson Sanchez – Transcript

Bricks and Bytes
Bricks and Bytes
#027 - Jefferson Sanchez - Transcript
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Show Notes

Jefferson Sanchez

And now I come out of entrepreneurship with more of a patience and like 1% improvements every day at a overtime rather than trying to only grow, only scale. And I don’t think that’s a healthy mindset for entrepreneurship, even for VCs to try force on their founders. That’s kind of like one takeaway about failure. Entrepreneurially is that you have to be very set in your own mindset and focused on continual, iterative improvement rather than overnight success and like 10x hype in a single way. So it’s kind of like learning how to be reasonable, learning how to be balanced, learning how to be stable.

Hello everybody and welcome to the Bricks and Bites podcast, your go-to for all things construction and property technology. On today’s show we have Jefferson Sanchez, COO and co-founder at Renovate. In this episode we talk about revenue acceleration for house remodellers, Web3, artificial intelligence and platform revolution in construction. If you’re enjoying our podcast, wherever you listen to your podcast and if you enjoyed, please leave us a review. This helps us get more amazing guests to give you guys the best and most informative content on technology in the build world. Before we dive in, shout out to our sponsor Beta. If you want to connect with some of the biggest players in the construction tech world, including tier one building contractors, some of the biggest construction tech companies, investors and advisors, check them out by visiting www.d-beta.com and this is www.d-beta.com www.the-beta.com

Jefferson, so we are excited to have you today. Can you give us a quick overview of how you got to creating Renovate? Yeah, I’d love to. I guess I’ll start with a short quote that I kind of lived my life by that’s relevant to this, is you can’t always connect the dots of what you’re going to do looking forward. It only makes sense when you look backwards. Steve Jobs. Yeah, Steve Jobs, right. And you kind of just gotta trust something that it’s always going to work out. And for me, I’m a first-generation immigrant to the US from Nicaragua. What that actually meant practically was that I grew up in construction. And if anyone else is from Miami or a first-gen immigrant, and your parents or your uncles or yourself actually grew up in construction, that’s something I did myself. So, post-hurricanes, replacing roofs, or just tiling because one of my uncles had a tile job. It didn’t really make sense until now, which is building a construction tech company. And in between, there was a journey to I worked for General Motors for a while doing energy systems modelling for their operations. 

I worked for one of the largest EPC firms in the world, Tecnica Sroninas in Spain, building out one of the world’s largest renewable energy power plants. So it was like this gap between, I grew up in construction because I was a first-generation immigrant and that’s just what you did. So now I run a construction tech company and in between I learned the tech and I learned a little bit more about the construction. Cool. Very good. Just briefly on that, as a migrant, does it give you a certain edge, compared to native people living in the country? Yeah, I think being a first-generation immigrant by default makes you hungry. If you weren’t in this new country trying to make things happen from nothing, you would end up with nothing. It’s this paradox of if you have a lot, you forget what it takes to build something from scratch. And if you have nothing, you’re just so hungry to just build something that you have nothing to lose because you already don’t come from anything. So you’re willing to go 10x the risk that everyone else would normally sanely do just to be successful. So it’s more of a mindset. And part of that mindset is like grit, positivity, optimism and willingness to fail because you have nothing to lose. And it’s like, if you don’t have that mindset, then you’re not going to succeed. And I think that translates very well to startups because at its core, it’s always about grit. It’s always about positivity.  

It’s always about learning how to get punched in the face, cry, and then wake back up and be really excited to do it again. Yeah, I can 100% resonate also being a migrant to the UK. Yeah, I guess what I also say is like it also has amazing parallels to the construction industry, because typically construction is built by immigrants or non-native individuals that are the ones that are typically doing the work. And so in the UK, I’ve seen builders that are from like Poland, from India, from Northern Africa. And it’s like you have Eastern Europe plus Northern Africa and has like this demographic of the quote builders in markets in like the UK. And then you look at the US, you have folks like Asian American immigrants or Mexican American immigrants, who are the ones that are actually the builders or the ones doing the work. And it’s always a story of struggle and grit of like, I’m using my hands to figure out how I can make money and do this thing, which is tough, but it makes sense. Okay, so we touched on this a little earlier when we started off-camera.  

So you co-founded a company called Refresh Construction, which used technology to enhance the home renovation process. So unfortunately, the business didn’t end up too well, but failure is obviously a key part of growing and learning as an entrepreneur. What key lessons did you take from this venture and how are you applying these to your current ventures? Well, again, for many failures, it’s always about figuring out what worked and what didn’t work. What can I do more of? What can I do less of? And I think there are two buckets: personal growth and business growth. And one of the things about failure is like, why did I fail personally? What was limiting myself and my mindset? And so there was one big bucket of takeaways there, which was like, I needed to focus on my mental health. I needed to have a better personal routine. And these are the things that you don’t typically hear on other podcasts or entrepreneurial guidebooks. It’s like, you have to be disciplined, cut the nonsense, you’re not going clubbing. You have to pick out a handful of things that you can do well and it’s like sleep, getting good quality food, having a good way to reset because entrepreneurship is a marathon, not a sprint. And so one of the key learnings was like, I burnt myself out over two years of hustling to the point where I had to reset and get my mind ready for round two. And now I come out of entrepreneurship with more of a patience and focus on 1% improvements every day at a time rather than trying to only grow and scale. And I don’t think that’s a healthy mindset for entrepreneurship, even for VCs to have and try to force onto their founders. So that’s kind of like one takeaway about failure. 

Entrepreneurially, it’s crucial to be set in your own mindset and focus on continual iterative improvement rather than seeking overnight success and 10x hype in a single year. It’s about learning how to be reasonable, balanced, and stable. From a business perspective, there’s a newfound appreciation for bootstrap businesses and scrappiness, which can go against the VC nature of growing and scaling fast. In the early stages, it’s better to optimise for factors like revenue and having a solid fundamental business operating system. Once these are in place, you can then start thinking about 2x and 5x growth. It’s more productive to be a patient gardener while the systems are being put in place than trying to be overly optimistic and scale too quickly. 

These key lessons involve both personal and business patience, which ultimately lead to compounding levels of success over time. By focusing on 1% improvements every day in the business and looking at the integrations needed next, you can amplify your time even by 20 or 30 minutes per day. Doing this consistently for several weeks and months will result in substantial growth when you look back a year later. 

It seems that Owen, who is a bit unwell today, is a firm believer in this approach – being persistent and strict about habits and work ethic. In terms of the second takeaway in business, it’s important to recognise that construction is a complex industry, and it’s challenging to achieve a 5x or 10x increase in customers or revenue from scratch. This highlights the importance of patience and gradual growth in the construction sector. 

So, by its nature, construction has to progress slowly, unfortunately, until it becomes more automated. Speaking of automation, let me tell you about Revanate. It’s a platform for contractors that combines sales, marketing, and customer service into one technology offering that any business wanting to grow can plug and play. Practically speaking, there are two pillars: revenue growth and revenue operations. 

Revenue growth and revenue operations involve increasing the top of the funnel leads for a business, increasing conversion rates, and decreasing the time to close for a construction business. This entails improving the company’s brand and its ability to be found online and generate trust. On the revenue operations side, it’s about quoting quickly, ensuring estimates align with business fundamentals, tracking job costs, and setting goals for projects to ensure their success. These are the two core pillars of revenue growth and revenue operations that we aim to assist businesses with, partnering with them and hopefully scaling together. 

A few days ago on LinkedIn, I saw your post about the first AI-powered construction contract. OpenAI released their beta a few weeks ago, and many people are excited about it, much like the enthusiasm around Web 3 and crypto. I tried to approach it from a different perspective, looking at technology as a product or feature that helps you achieve one thing. In our case, it’s helping close deals and make more money for our GCs. 

I aimed to be practical in demonstrating how to use OpenAI, not just for writing blog posts or generating social media content, but for bringing it into a real-world operating system. The idea was to use text-based AI and image-based AI to help a contractor close a deal. The first step is generating trust with the client by showing that the contractor understands their requirements and can provide a price accordingly. 

In this case, it involved replacing a window with an exterior door, a landing pad, and a small overhang. This would usually require partnering with a designer to create a rendering, which can be time-consuming and expensive. However, using AI, it was easy to provide an image of the current state and the desired state, making sure they align with the customer’s expectations and providing a price. We sent this to our client, demonstrating a practical application of AI in construction. 

We connected Dolly’s outputs to HubSpot, which is our current CRM, and then used it to push the data in-house, tying it to PandaDoc, a contract generation software. As a result, a customer was able to receive an actionable contract for replacing their window with an exterior door, a landing pad, and a roof overhang, complete with a rendering and an accurate price. This process, which would typically be unfathomable to a general contractor, amazed our contractor partner. All we had to do was take a picture, provide an accurate scope of work, and make some iterations to ensure it matched the client’s expectations. 

These small steps are revolutionary in very practical ways. We’re not trying to claim that AI generates contracts for the entire business. Instead, we test it out once, see if it’s practical and adds value, and whether it speeds up the contract process. If it does, we consider how to improve it next time. 

As for my high-level take on machine learning and AI and their impact on the future of construction, I see AI potentially having a B2C role in the next 10-15 years. AI could generate fully compliant designs while the customer interacts with it in real-time, tweaking 3D models without needing the professional touch of an architect or engineer, especially for smaller projects. 

However, none of this will matter if general contracting businesses don’t become digitised. Machine learning and AI are toolsets, but the most significant barrier to using these tools across all construction sectors is digitisation and overcoming the industry’s resistant culture. Construction businesses need to embrace digitisation to utilise these new technologies. 

Once that barrier is crossed and small to large general contractors have the necessary underlying database structure for these models to query data and build insights, we can start discussing the practical applications of machine learning and AI in construction. The first level of machine learning and AI applications in construction is general knowledge, which may not be as relevant for the industry. Instead, hyper-local or targeted AI and machine learning models specific to a company or a subset of the business would be more practical. For example, generative models could focus on flooring prices in a particular geographic area, making the data more accurate and actionable for a general contractor (GC). This would help build trust in the AI-generated data and ensure that it serves the margins and business practices of the GC. 

Trust is a significant factor in construction, as it involves reducing risk. Machine learning and AI will gain wider adoption once they focus on generating hyper-local models specific to certain businesses or local trades in particular areas. One way to achieve this could be by feeding old cost books into the models, parsing the data and creating more localised, actionable data sets. 

Dealing with the trust issue may involve blockchain technology, which can be used to verify trust for contracts. However, for a general contractor to trust an AI or machine learning-generated contract, they must see the end-to-end lifecycle of the technology, from the scope of work to the final customer review. This verification process should involve human input, with the machine learning model analysing patterns and data from multiple experiences to build trust. 

Blockchain could then be layered in to provide trustless, easily replicable verification for AI-generated contracts. This would require a combination of human verification and machine learning analysis to create a system that is both reliable and efficient in the construction industry. 

Okay, so let’s move on to ArchiDAO. You are a council member of ArchiDAO. Can you explain what ArchiDAO is? 

ArchiDAO is essentially the world’s first DAO (Decentralised Autonomous Organisation) by architects for architects. If anyone wants to connect with some of the world’s leading thinkers in blockchain, construction, architecture, and design, it’s arguably the best community to find, both in person and online. The core mission of ArchiDAO is to use technology, particularly blockchain, and implement it in architecture and construction. This involves exploring blockchain-powered contracts, crypto twins, and architectural models that align with design. 

However, there is a question of whether some people are using the hype of blockchain or the crypto world rather than focusing on real use cases that work. While hype can generate interest, it is essential to turn that interest into action. Blockchain has applications for the architecture and construction industries, but it may be more relevant in the next five to ten years. 

To illustrate a potential application of blockchain in architecture and construction, imagine building a new structure on Mars using 3D printing technologies and a decentralised, distributed architectural design competition. Blockchain could help establish trust and maintain a standard ledger of the design process. In this scenario, designers could have their own tokens, representing their ability to solve design problems. When they submit a successful solution, they would generate trust online and capture some of the value they created through the design challenge. This is one example of how blockchain could be relevant in connecting architecture and construction with new technology. 

How do we know that multiple individuals can then collaborate on the same design in distributed ways? You need to have one model that is trusted. So it needs to say like this is the core block on which you are building because everyone submitted their designs. These were the ones that were accepted, and it generated the new block of trusted information on which everyone else can build. The blockchain application is trying to verify that there’s a single model that is the one model with all the most verifiable up-to-date information. So let’s say you have block A, which includes all the model with all the design challenges that have been approved for block A. You issue a new design challenge; block B now needs to resolve all these designers submitting their possible design solutions, and that block needs to accept that solution on which new designers can then collaborate to build. And so you can’t really do that without having a trustable, verifiable source of truth for this design model. There’s some practical ways in which you can do that right now, like leveraging software to integrate different types of 3D files into one core file. And then as everyone submits updates, that update is verified, put on the block, and includes the file that is downloadable for the new designers to start working on. And if a designer submits their design solution, they’re logging in with a token that says, “Hi, I’m a designer with blockchain address XYZ. Here’s my design. It is approved. Now it is added to the block.” And then I get that little bit of reputation, and the whole process moves forward. And then the space station on the moon can accept, “Hey, I got this new submission of this verified block. Let me put it into the queue to actually 3D print it because this is the best solution as determined by the system.” Right? Now you have multiple designers working on Planet Earth to send blockchain-verified files to the moon to get 3D printing. Yeah, it sounds like a future for us. Not there yet. 

Okay, let me ask a few more questions about Revolnaite, maybe more general questions. So how did the journey start? Did you get any outside investments to start the business or at some point during the creation of the business? The business had an early-stage investment from angels. It’s called Pre-Seed. So we had friends, family, and angel investors on the existence base in the content space. That was not the journey that I was a part of taking on from the beginning. So, it’s like I came on as a co-founder in the later stages of revenue. So my early co-founders raised a little bit of angel capital to start powering the business. And then through some networking, we actually realised that we were in line and started building together on the revenue. So when I came in, the company had a little bit of capital and focused on actually generating our own capital from closing deals and hopefully bootstrapping for a bit until we go back out to the market to raise funding. Would you say there are pros and cons of taking outside investments, or is it better to bootstrap like you did with your first venture? Given the current economic conditions, I’d say bootstrapping is an attractive way to start a business in today’s market. So focus on getting to £25k monthly or £50k monthly, and then have the optionality to go to the venture market and say, “Look, we have verifiable operations and a scalable business process. We can take your £100k investment and turn it into £1 million in like a year.” 

The opposite is that you’re telling a really good story, probably based on some fundamentals that someone can align on and agree on joining your vision and the story, and then they will give you money, but then you’re forced to go build a product far away from generating capital. So raising capital, I think it’s still a good way to build a business. But I’d say you want to have inklings that there is a business model already there that you can scale. So if you’re taking on venture capital without actually having a viable business model, it puts you in a catch-22 where you’re trying to accelerate growth from nothing. And that’s a very big paradox. It’s like, how can I take your venture capital and give you an exponential return? It’s a single dollar; it’s kind of all ideas and it’s all stories. The opposite way is bootstrapping, scaling little by little, getting the proof points and the traction that you need to then go to venture capitalists and say, £1 in means £10 out. Great, I’m down. Here’s the story, here’s how we’re getting there, here’s how we’re using your money to 10x. It’s very clear. 

Okay. So speaking about money and investments or the economy, how do you see construction amid this gloomy landscape of rising interest rates and not great economic environment? I think all construction businesses are going to get squeezed on margin. So you need to figure out ways to innovate, either to increase your top line or to decrease your operating expenses in some way. If you’re a business, you need to move to digitising your expenses and your income to see, you know, it’s really fundamental to think how can I decrease my expenses. And so once you have your line items in your QuickBooks, you can say, well, I can either cut costs, I can get more efficient, I can introduce new tech to do one of those two. Or you look at your top-line revenue metrics, like how can I increase line item A, B, C, or D? Do I need to focus on bathrooms or kitchens? Do I need to focus on drywall or paint? And so I think with the economy just getting harder to build a business in, you need to be more scrappy and very targeted in like, how do I increase my top line or reduce my operating expenses? And I think as a close is shoring up your business for the next three to six months. So if I were a general contractor or a construction company and I’m a business operator, I’m looking at increasing top line, reducing my expenses, and getting a backlog ASAP. Those are really the only three things that you can focus on. And if you’re not, then you’re going to be caught in this gloomy doominess of like, is the market going to fail? Is my company going to fail? What am I going to do? And fundamentally, you can only do those three things: make more sales, reduce your expenses and get yourself a backlog. So I think that’s what companies are going to do: try to close more deals, reduce their operating expenses, like innovating in some way or reducing costs to the people or the processes, and look to get a backlog. I’d rather close my funnel and see like, who is in my funnel already? How can I close them and make sure that they’re on board for the next three to six months? That gives me the breathing room to survive those six months to a year or more. Okay, sounds good. 

Yeah, so like in my business a few months ago, we were increasing cover fees, and it sounds like we might be going back to the past scenario later. The opposite is that you’re telling a really good story, probably based on some fundamentals that someone can align on and agree on joining your vision and the story, and then they will give you money, but then you’re forced to go build a product far away from generating capital. So raising capital, I think it’s still a good way to build a business. But I’d say you want to have inklings that there is a business model already there that you can scale. So if you’re taking on venture capital without actually having a viable business model, it puts you in a catch-22 where you’re trying to accelerate growth from nothing. And that’s a very big paradox. It’s like, how can I take your venture capital and give you an exponential return? It’s a single dollar; it’s kind of all ideas and it’s all stories. The opposite way is bootstrapping, scaling little by little, getting the proof points and the traction that you need to then go to venture capitalists and say, £1 in means £10 out. Great, I’m down. Here’s the story, here’s how we’re getting there, here’s how we’re using your money to 10x. It’s very clear. 

Okay. So speaking about money and investments or the economy, how do you see construction amid this gloomy landscape of rising interest rates and not great economic environment? I think all construction businesses are going to get squeezed on margin. So you need to figure out ways to innovate, either to increase your top line or to decrease your operating expenses in some way. If you’re a business, you need to move to digitising your expenses and your income to see, you know, it’s really fundamental to think how can I decrease my expenses. And so once you have your line items in your QuickBooks, you can say, well, I can either cut costs, I can get more efficient, I can introduce new tech to do one of those two. Or you look at your top-line revenue metrics, like how can I increase line item A, B, C, or D? Do I need to focus on bathrooms or kitchens? Do I need to focus on drywall or paint? And so I think with the economy just getting harder to build a business in, you need to be more scrappy and very targeted in like, how do I increase my top line or reduce my operating expenses? And I think as a close is shoring up your business for the next three to six months. So if I were a general contractor or a construction company and I’m a business operator, I’m looking at increasing top line, reducing my expenses, and getting a backlog ASAP. Those are really the only three things that you can focus on. And if you’re not, then you’re going to be caught in this gloomy doominess of like, is the market going to fail? Is my company going to fail? What am I going to do? And fundamentally, you can only do those three things: make more sales, reduce your expenses and get yourself a backlog. So I think that’s what companies are going to do: try to close more deals, reduce their operating expenses, like innovating in some way or reducing costs to the people or the processes, and look to get a backlog. I’d rather close my funnel and see like, who is in my funnel already? How can I close them and make sure that they’re on board for the next three to six months? That gives me the breathing room to survive those six months to a year or more. Okay, sounds good. 

Yeah, so like in my business a few months ago, we were increasing cover fees, and it sounds like we might be going back to the past scenario later. Okay, let’s move to off-topic questions. So, I wanted to touch on being a nomad, which is what you are doing at the moment in Nicaragua. What’s your take on work-life balance and working within the tech construction business remotely? 

Yeah, work-life balance is honestly really, really tough. And work-life balance is going to be tough no matter whether you’re based in Europe or in some hustling, bustling economy. You always have to have trade-offs. The trade-off that I make is that I’m in my office eight to 10 hours a day, and then after that, I try and check out. And I either go to the gym, have dinner with my girlfriend, or look for some way of actually being active. 

But the work-life balance of being a remote worker is that you’re going to be working eight to 10 hours. It doesn’t matter where you are in the world; you just need to accept that if you’re an entrepreneur trying to build a serious business, you need to be logging in every day, five, six, seven times a week and putting in eight to 10 hours. Maybe on a Saturday or Sunday, you put in four focused hours. But the core of it is, you’re still going to be on your computer talking to clients, managing product, managing tech. And so this idea of a remote worker taking their laptop, putting it on their beach chair and like snapping a picture on IG, like hashtag remote work Bali, that’s not real. And those aren’t real tech entrepreneurs. Those are likely lifestyle businesses that have been very successful and are trying to have you buy into their hype. 

Well, let’s be just totally practical that being a nomadic tech entrepreneur means you are still working every day for eight to 10 hours every single day. The highlight that you do get, though, is that when you check out of work, you can walk to a café in Medellin, you can go for coffee in King’s Cross somewhere, you know, you can go have a day in Central Park. But the reality is, you’re still grinding eight to 10 hours a day, and you need to have your laptop and your keyboard, mouse, and multi-screen setup. Just the highlight of it is that when you do take your coffee breaks, when you do try to have dinner with friends, when you do network with folks, it’s going to be with entrepreneurs and business owners in just different locations. 

I think that’s the highlight of it, like am I networking with builders and entrepreneurs in other locations? That’s the biggest highlight because San Francisco was known for that; you can go out of your eight to 10-hour grind, go have a coffee and think about mind-blowing ideas. So go find those places around the world where they still have entrepreneurs and builders. Bustling, right? The tech hubs, the places like companies like Revonate or even in construction tech like LaHouse. LaHouse is big in Latin America. And so if you’re a nomadic entrepreneur, just go where people are building and make sure you’re going to be plugged in for eight to 10 hours a day. 

Yeah, I completely agree. And I like what you said about talking with builders or other professionals within the industry when you are away during these trips because I found like travelling this year quite a lot and then to Europe a few times and to Asia a few times also, I found that talking to people in the industry is very, very refreshing. Although I can’t do as much as I could do in terms of work if I was home, but the insights are absolutely mind-blowing. And it kind of gives you a different edge to the insight. So that’s very interesting. 

100%. Okay, Jefferson, can you give us a book or two that you like to read or something maybe about business books? One that I think particularly stood out to me was a book I read in 2019 or 2020. It was called The Platform Revolution. It looked at how all businesses or some of the major business models that have been successful have all been platform-based, from Google to Shopify to even some of the emerging construction platforms like Houzz. It’s all about a platform and how that’s the next business model. So that’s one, and I was really, really influenced by that. I take a lot into how I build my company today. 

And then I’d also suggest one on just psychology and the psychology of entrepreneurship. It’s created by Carol Dweck, I believe. It’s filled with stories of what it means to be gritty and what it means to be stubbornly optimistic and how you can work through failures to continue to improve. And so if you’re an entrepreneur, you’ve got to learn about platforms and how those business models work, and you’ve got to learn about how to have a positive mindset and always constantly stay focused. 

Okay, thanks, Jefferson. It’s been a pleasure talking to you. For our listeners, where can people find out more about you and what your business does? 

Yeah, the best way to be in touch would be to follow me on LinkedIn. So find me on LinkedIn, where I’ll be trying to post pretty actively about all things construction and how to leverage new technologies for increasing revenue. Or check out Revonate.co. We’re a revenue acceleration platform for contractors. So, REVONATE.co. 

Okay, thank you very much, Jefferson. Thanks so much for tuning in to this episode of the Bricks and Bytes podcast. If you are enjoying the show, please feel free to rate, subscribe, and leave a review wherever you listen to your podcasts. We really appreciate it, and we’ll catch you in the next episode. 

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