Sept. 30, 2020

#97 Secret Sauce or Snake Oil?

#97 Secret Sauce or Snake Oil?

Today's founder had everything going for him: a huge market, loads of experience, and $70k in monthly revenue. But then, everything went wrong. Christopher Hussain's startup, RealKey, is supposed to make the complicated mortgage lending process simpler, but his pitch left our investors scratching their heads.

The investors on today’s show are Jillian Manus, Phil Nadel, Sarah Downey, Michael Hyatt and Charles Hudson.


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In theory, Christopher Hussain has the perfect business for investors, a large lucrative market: real-estate, loads of industry experience, and a product that’s already live and bringing in $70,000 in monthly revenue.  And bonus, one of the investors, Phil is already in his corner. It was Phil’s idea to bring Christopher on the show. Seems like this founder has everything that investors are looking for. 

Except, this pitch. Devolves into … I don't even know how to describe what happens in this pitch. You're just gonna have to listen. 

From Gimlet, I’m Josh Muccio and you’re listening to The Pitch.

Let’s meet our investors.

I’m Sarah Downey

Sarah’s a partner at Accomplice and they’ve invested $600 million in over 200 startups, one example, a company called Draftkings.

I’m Charles Hudson

Charles started Precursor Ventures, where he’s invested $50 million in over 170 startups.

I’m Jillian Manus

Jillian is a partner at Structure Capital, where they’ve invested 98 million in high-profile startups like Uber.

I’m Michael Hyatt

Michael built and sold two software companies for over $500 million dollars and now he invests for himself.

I’m Phil Nadel

Phil built companies that have sold for hundreds of millions of dollars. Now he manages Forefront Venture Partners, one of the largest syndicates on AngelList.

The pitch for the perfect business, gone so wrong, is coming up in just a moment.


Jillian: Hi.

Sarah: Hi, I’m Sarah, how are you?

Christopher: Hi, nice to meet you. 

Phil: Hey Christopher. 

Charles: Charles...nice to meet you. 

Christopher confidently strides into the room and shakes the investors hands, remember when that was a thing people did? Yeah, by the way, this was recorded last year.

Christopher:  All right. Um, well, so my name’s Christopher Hussain, I’m the CEO and Founder of RealKey. And so home ownership:  We all can agree that that is supposed to be the American dream, right. Except for once you find that dream house and you make that first offer, you guys it’s a total freaking nightmare. There is so much documentation and so much information needed by all these different parties involved. Now, you think you’re making progress and then all of a sudden you need an updated tax return. Or a bank statement has a deposit that needs a letter of explanation. Now, you think it’s bad for you, imagine the lender and the broker on the other side who do this for a living.  They spend their entire day calling, emailing, updating all the parties involved. Where is this? Where is that? This wasn’t done right. You’re talking about title, escrow, real estate agents, the home buyer, insurance agents. So many of these different parties. Now, I was one of these loan officers. In fact, I was actually the top loan originator in the US for two straight years. I can tell you...

Sarah: Well done. Holy Crap.

Christopher: Thank you.  And I'm in front of you right now with a solution to that problem. With RealKey, we've filled the gaps to make the most efficient, enjoyable, and effortless experience possible for all of the parties involved. In fact, our MVP, within only four months, reached 70,000 MRR. And we're raising a million dollars right now to go through and to grow our sales and support team -  to grow ah our current market. 

Christopher’s first bare-bones product, is a communication tool for mortgage lenders to work with home buyers. And he’s got 70K in monthly revenue. That’s exactly the kind of thing investors want to hear.

Michael:Tell us about your MMR, what’s in that 70,000 - what’s your gross margin? How did that work?

Christopher: Absolutely. So we're software-as-a-service. We charge $99 per month per user. A user for us is on the lender side. So everybody else is free. 

Michael: Typically how many licenses do you sell per brokerage?

Christopher: Ah, per office, the offices we focus in are 50 and up, typically sized about 100 per office. Um, so yeah.

Michael: So you've got 100 times $99 per office?

Christopher: Yes. Ah offices.

Michael: Has anybody shut you off yet?

Christopher: Shut us off? As far as churn - so we had less than 1% churn over the last year. 

Sarah: Do you get any resistance from people about jumping on this platform? I mean, cos it is another workflow. Does anybody kind of just say, like, I’ve been doing this forever and I’m doing this my way? 

Christopher: What's great about our industry is that typically ah lenders and brokers, once they have a product, they actually don't change it. Ah the industry being stagnant as it is, it's also a very low bar. 

Michael: Can you walk us through your funding rounds? And where you're at in valuation?

Christopher: Ah so as far as the valuation right now, it's at 7 million. We initially raised 300k at 3 million. We did 500k at 5 million and 700k at 7. So we closed that out last August. 

Christopher has already proven that he can raise money for his startup. But he does have some direct competitors… ones who’ve raised even more. Like hundreds of millions more.

Charles: How does this compare with something like a Roostify or a Blend for the really, the biggest of the big.

Christopher: I actually like that you asked that um, so I mentioned our MVP. Our MVP was competing with directly with them. Now they've raised substantial amounts of money. 300 million from Blend Labs, just for example. So we need to have something that's different. We took an open-minded approach and looked at what are the gaps that they have? So we actually pivoted last year. 

Michael: What is it? Is it a workflow engine? And like, once I, once I log on as my $99 a month, I'm a user, what am I experiencing? Take us through…

Jillian: Well, Michael, can he just finish that…

Phil: But besides, wait, one second. Because what you're referring to is the current MVP. And he's pivoting now to a new product. 

Jillian: Yes. So I just want to hear that.

Phil: Chris, just for disclosure, I referred Christopher, so I'm familiar with, you know, we've talked a lot.  So, so, Christopher, why don't you talk about where you're pivoting to? What the new product will be and what, and how it's different. 

Christopher: So When it comes to a mortgage it’s a little bit of a black box. Everybody understands getting a mortgage, but nobody understands what the parts are that completes it. There is typically three systems. A loan origination system that ah you use to take in a loan application, run credit, enter fees and send legal documents…. 

If you are thinking this pitch is getting kinda confusing, you are not alone. Long story short, the new post-pivot realkey takes care of even more annoying real-estate paperwork AND he's adding in the special sauce that investors all seem to be clamoring for these days… AI. 

Christopher: There's an AI machine learning aspect to it as well to make sure that it's getting better, more efficient over time, we know what documents to get - we also invite in the other parties who need access to it -  they can chat, communicate in there. It's more efficient --  and that's what RealKey actually does, is we simplify all of that.

Phil: And is the new product live and in the market yet?

Christopher: Ah new product is not live in the market. It's going out in Q1. Ah, so currently we actually have every all of our current users are on the old platform 

Phil: So the MVP though, ah, are you currently still acquiring customers? Or are you on...

Christopher: No.

Still confused? Michael is going to try and put it back on track, with one of his favorite things. He wants to know if Christopher’s new product is just going to help loan officers keep track of their paperwork, or if it’s going to use machine learning to build a whole system that’s smarter. 

Michael: Is it just a workflow engine? Or does it have specific AI?

Christopher: Ah, it's got both workflow engine and AI onto it. So it's more of a machine learning. AI's a very…

Michael: What's the machine learning? What is it learning?

Christopher: Ah…

Michael: What's the new data you're creating?

Christopher: The new data it's learning is so as you do more transactions, ah, we're going to be seeing, okay, is there a new condition? So you can add conditions or document requirements to a loan. And so if we didn't identify those, that's a miss.  What cost...

Michael: So I, these are dumb questions I want to ask here, but I still don't quite get it. Like what are, you're a sophisticated workflow engine to bring everything together to make the deal happen. Is that what you're doing?

Christopher: I think that the more sophisticated parts of it will come later. 

Michael: Phil, do you, have you invested?

Phil: No. Ah, to be completely transparent, ah, I really like what Christopher is doing here.  So I told Christopher I want to wait and see how the new product launch goes, what the existing customers think of it when they convert them over, and will they be able to successfully sell the new product. And what churn. You know, I want to see a little bit of traction, a little bit of history on the new product, because it, it's, it's sort of like a relaunch.

Jillian: Agreed. It is. It is.

Phil: And it especially concerned me that they're not acquiring customers now. They have that on hold. It just seems...

Jillian: They should be converting as... I’m concerned about…

Phil: But I think Jillian brings up a question which is, you know, if the new product is finished, why not, why haven't you already started converting the old users to the new product?

Christopher: So we did, have already begun doing that. So we do know that they are going to be converting because again they've been included in the research. When we built our initial...

Phil: They will be converting, or they have? Are they using it currently?

Christopher: Ah, they're using a... MVP version. Some of em are using it, some of em are waiting for additional features. So what we did was we built ah a very simplified dumbed down MMVP, minimal, minimal viable product. And with that  we found that they wanted things like we didn't have white labeling on there. Ah they wanted to customize the emails and the letters that went out, so we added that feature. 

Phil: So, so that's done now.

Christopher: Yes.

Phil: And the product is now in a, in a more finalized state?

Christopher: Yes, 

Phil: And so are the existing users all converted over?

Christopher: Ah, it's not ready for them to convert over to it.

Phil: Why? Why isn't it ready?

Christopher: Ah, because we have a few additional features and designs that we're adding to it.

Phil: Okay, so it's not a final stage. You are still adding to it.

Christopher: Yes. 

Michael: Can you just give us, I'm struggling because you're a subject matter expert and I love the reason you started this business, because you had the problem. Like, so everything's checking out. And, and you're a decent honest guy, I get all that. But I'm struggling that you can't... Phil continuously in this pitch kind of articulates your situation almost better than you. And number two, what I'm looking from you is what is it and what have you done? Have you built some AI? And you struggle with answering those questions. So I got a subject matter expert and I need to know a bit more of like the why, why this product? Like what is the thing? 

Sarah: Actually to go off of that, before you answer, I, I had this reaction, I don’t know if any of you did, when you were talking about like AI and ML. I think that those are the buzzwords today that like blockchain was a year ago. And that big data was a year ago.

Michael: No, no, I’m not talking, I’m talking about ___ a prediction machine.

Jillian: Hold on and let her finish.

Sarah: I’m saying that if, I agree with you, if, if they really had that, that would be something. But my intuitive sense when you said that, because I’ve just been steeled against this from so many pitches is that you don’t have true AI, it’s not built, it’s just a logic engine. Which is fine. But it’s kind of snake oil, I hear. 

Christopher: I think that what it comes down to -  AI - it has to start somewhere. It has to start with somebody going through and building in rules and logic.

Michael: Right. Do you have any data scientists on staff?

Christopher: No. Not at the moment.

Phil: So, I think, I think Sarah's right. I mean, it sounds like more of a logic engine.

Christopher: That's the beginning steps of it is, it's a logic engine -  we are identifying real time as you upload stuff, as you answer questions, as you give us more data and documentation, we're able to identify on the fly what's going to be needed to avoid those.

Phil:  It sounds like what he's saying is, it is going to do that because it's learning...

Michael: But why are you doing this pitch? You keep answering the questions for him. You’re so much better at doing this pitch. That's what's bothering me with this thing. Like, I want to know from this leader, like, what are you doing that's exceptional. Actually, I'm trying to tell you that I do want to invest. I'm struggling because I've got the subject matter expert and I don't have the thing. 

Charles: So, can I jump in here for a second?

Christopher: Yeah.

Charles: So I invested in a company that was started by two people who came from Redfin, knew this market inside and out. And so my working theory is, and something I think we haven't really addressed here is the reason that I personally think Blend and Roostify have had to raise so much money, it's not bec-, part of it is product complexity, part of it is customer willingness and ability to implement technology.

Jillian: Yeah.

Charles: And the thing I think we haven't really discussed here is I think a million dollars is way too little money. And the thing I've been struggling with is, you're very smart, you're very in the market. But it doesn't feel to me that every time Phil asks where is the product, it doesn't feel to me like you're as close to product market fit as I think I thought coming into this. It feels like you've got the thesis about what the product needs to do, you don't have enough data from people using it to know that it's actually hit. And these customers, their desire to digitize, at least what I've seen, is much greater than their ability to digest new technology. Particularly on the workflow side. 

Christopher: Right. And so that's, so the reason that we're raising a million dollars right now is to get the feature product sets out as quickly as possible, and we're immediately going into our A round next year. We're raising about 10 to 25 million dollars at that point. Substantially grow the sales support team. And also, based off of the new users, additional feature sets to go through and to, honestly, delight the shit out of them. 

Phil: But you've, you're not acquiring any users now. If the new product is ready, essentially, why aren't you investing in acquiring users for the new product?

Christopher: We do have users coming in right now, so because the product's not ready specifically yet and we're also been trying to go through and to keep this under wraps as much as possible before going through and explaining out to the world, here is the product. 

Phil: Wait, I don't understand. I mean, you want to keep it under wraps. I mean, that doesn't make you any money.

Christopher: As far as going through and taking new users on right now and the product is missing features that, ah, the one that is completely ready, production ready, that one we don't want to go through and add a whole bunch of new users that don't…

Phil: No. Not the MVP. Right. The one you, I'm referring to the new product now.

Christopher: The new product now...

Phil: You said it's basically ready.

Christopher: It's not... we still have, Q1 means, you know, basically March.

Phil: Okay. So it's not ready yet.

Christopher: Not fully ready.  

Charles: I feel like we've had this circular conversation which is...

Jillian: I agree.

Charles: ...the users are on the new product, but the new product's not live. Then we're like, oh so they're using it? And you're like, well, they're not using it cos it's not ready.

Jillian: Right.

Charles: To me that means they're not on it.

Jillian: Right.

Charles: So and then it undermines your credibility.

Jillian: Yes.

Charles: And so I'm either like, I don't understand it, I'm missing something, it's not being clearly communicated. Or the worst assumption that I'm making is that you are trying to convince me of something that's actually not true. And you strike me as an honest person so I am giving you the benefit of the doubt that that's not the intention.  So I think by being clear here, that they've committed to use it when you make it available to them, would solve a big chunk of this thing that I keep struggling with.

Jillian: Right. And you hope it will be March.  Listen, you have a lot of what we look for in a founder, but,  I don't see that wow yet.  I would really, really need to see and have you prove this for me to invest at a 7 million dollar valuation. At this point.  Um I also just for future reference, never say you're going to raise an A with, you're going to raise 10 million to 25 million in a year when you haven't even launched your product. For now, it's a pass.

Sarah: So for me, it, it’s not going to be a fit. And the reason is it’s the communication style that we’ve been talking about here. I think as a CEO and a leader, you need to push yourself to be more big picture. Um, like, everyone here has been struggling with the messaging that you’ve put forward this whole time. And I think you’re an expert and that is absolutely clear, and I would love to have somebody like you on my team if I were building something in this, in this space, but as a leader, like you have to sell that and paint that big vision and hold people’s hands to get there. And we’re struggling with that which makes me worried about, you know, how future customers will, will react to that. So for me, I’m out.

Christopher: Hm.

Phil: And, you know, I think I’ve made my feelings clear. It’s just, it concerns me that the product isn’t ready yet and that all customer acquisition is on hold for now. So, I want to wait until, until the new product is live and we see some numbers. 

Jillian: How about you, Michael?

Michael: Well, look, I want to invest, but I’m gonna pass. Um, it’s really frustrating. You kind of, in this pitch, you kind of started at a nine and it dipped down. And I kind of, I really am frustrated because you have a big market, it, it’s great, you’re a subject matter expert. I was just expecting more around the product and your answers around data science and where you’re going to go. Um, so, for that reason, I’m out. But you know,  I think you got something here, but I’m entirely leaving this pitch frustrated.

Christopher: Apologies for that.

Jillian: It’s okay. Thank you for coming. We appreciate it.

Well that pitch went sideways, in a big way. But after Christopher leaves the room, even the investors aren’t exactly sure what happened. 

Michael: I wanted to invest. But I couldn't because I just didn't feel he could articulate the whole plan, the strategy, the product, the why he's there. I kept asking what it is. I guess I'm not smart enough to understand what it is. Like, do you know what I mean?

Sarah: I just...

Michael: Like I’m not sure I understand what it is.

Sarah: Well that's why I said my reason was communication. I, I can't...

Michael: This episode should be called 'What is it'? The Faith No More song. 1990s.

Charles: Why did it take us 40 minutes to realize the product, not only is not live, it won't be live until Q1. Which really means Q2.

Phil: He was going in circles.

Jillian: That really kind of...

Charles: I was, I was, this is like the most frustrating pitch I've ever had.

Sarah: Yeah.

Sarah: Like he didn't chronologically tell the story and hold our hand. He said in the beginning that the launch was happening in Q1 2020, but then it was the MMVP, and then it was...

Jillian: WE don't have the customers...

Sarah: ... previous product and…

The investors are frustrated. When we come back from break, let’s find out how Christopher feels.


Welcome back. Christopher Hussain pitched our investors right when his company, RealKey, was in the middle of a pivot. It had been a product for a home buyer to work with a mortgage lender… but his new product was to organize EVERYONE involved in a home loan.  - lender, buyer, underwriter, agents and help them communicate. And to help them handle the reams of paperwork involved in buying a house. 

It’s a complicated process - and his pitch didn’t help clarify it. 

Josh: I feel like the investors were never really clear, even at the end of The Pitch. I don't think they were ever really clear on what your product actually did.

Christopher: Obviously I could have done a better job explaining it. I got to tell you, I came out of that so depressed, really down in the dumps. I ended up calling my wife. Called our investors. Got them to cheer me up. Bucker up. Get back on the horse. You're doing okay. Don't worry about it. You know.  I think it had to do with it was just a different pitch. The pitch that I gave was more about the story of getting there and really that's something that I know and I knew and have learned to focus on more, is that as much as I would love to think that the investors want to invest in me because they love me and I'm their favorite, and they like my personality. Being honest, they don't give a shit about my personality, about who I am. They give a shit about my numbers and whether I'm a good investment at the end of the day. 

Josh: You mentioned after you left there it was really hard.  What was so hard about it?

Christopher: I think what was hard about it is that I've typically got a fairly tough skin. You have to have a lot of grit to be in this. I've been doing this a long time. But I had been coming off of a bunch of wins, winning all of these different pitch competitions, you know, and so I had a little bit of cockiness going into it, thinking that everything's been great, and then to see that it wasn't kinda caught me off guard. At the same time, I listen to the show religiously, I've listened to every single episode. These are celebrities. Imagine you play basketball and you know LeBron James is your hero and you finally go to play ball with him and he tells you, "Hey, uhh yeah don't quit your day job. You suck." Not necessarily that you suck, but, "Hey, no offense, I wouldn't have you on the Lakers.” 

But since then, Christopher has stepped up his game. And he had to make a pretty big change to his pitch. Because our investors weren’t the only ones who were confused.

Christopher: The pivot definitely has tripped up a lot of investors.  And that's why we tried to just focus on the current product because at the end of the day, that's what we're moving forward with, and that's what's creating traction right now.

Josh: Oh so you don't even talk about the original pre-pivot?

Christopher: We don't talk about the original product. And so instead of using the word pivot, as soon as you use the word pivot, it's like a record stopping. It's like nails on a chalkboard because a lot of companies have not done very well with pivots. 

Josh: That's so strange. I feel like what I've heard on the show is the opposite, and that they're like own the pivots, tell the narrative of how... where you've come from, because it shows you can learn and respond to the markets.

Christopher: I don't think that they're necessarily truly pivoting though. They're talking about business models versus an entirely new product. 

Josh: So then how do you communicate it now so that there isn't that confusion?

Christopher: So how we usually to do it is we usually don't bring that up until after we're done. I want to make sure that you're focused on the current product and not the old product, because the old product at the end of the day doesn't matter that much. It really doesn't. It had traction, it's cool, it did a lot of things, it got us to where we are today, but at the end of the day, that's not our future. And so you're not investing in our past, you're investing in our future 

And... he found investors to buy into that future. Christopher says they’ve raised $700K since his pitch on our show. And that the product launch he’s been talking about this whole time, is finally happening! Christopher is super psyched about it.

The Pitch is hosted by me, Josh Muccio. Produced by Chris Neary, Heather Rogers and Max Gibson. We are edited by Sara Sarasohn.

Original music in today’s episode from So Wylie, Breakmaster Cylinder, and The Muse Maker. We are mixed by Enoch Kim with help from Sam Bair. 

Lisa Muccio coordinated this recording.

The Pitch is a Spotify original podcast. You can follow The Pitch on Spotify, we’re also on Twitter and Instagram @thepitchshow.

Thank you so much for listening. Tell your friends about the show. And we’ll be back with a new episode in two weeks.

Jillian Manus // Structure CapitalProfile Photo

Jillian Manus // Structure Capital

Investor on The Pitch Seasons 1–10

Jillian Manus is Managing Partner of an early-stage Silicon Valley venture fund, Structure Capital. Branded “Architects of the Zero Waste Economy," they invest in underutilized assets and excess capacity. She was named one of the top 25 early-stage Female Investors by Business Insider in 2021. Jillian serves on numerous corporate and non-profit boards, these include: Stanford University School of Medicine Board of Fellows, NASDAQ Entrepreneurial Center Board of Directors, Fuqua School of Business at Duke University.

Phil NadelProfile Photo

Phil Nadel

Investor on The Pitch

Phil Nadel is the Founder and Managing Director of Forefront Venture Fund and of Forefront Venture Partners, one of the largest syndicates on AngelList. He has started and sold several companies and has invested in more than 200 startups with several exits.

Sarah DowneyProfile Photo

Sarah Downey

Investor on The Pitch

Sarah Downey is Operating Partner at Accomplice VC, and a Co-Founder of Yubari Angel Fund. She likes to invest in things that feel like they’re out of sci-fi and video games, like augmented/virtual reality and AI.

Michael HyattProfile Photo

Michael Hyatt

Investor on The Pitch

Michael Hyatt is a serial entrepreneur and active investor. He is the co-founder of BlueCat, (acquired by Madison Dearborn Partners), and previously co-founded Dyadem (acquired by IHS). He currently serves as a Director of BlueCat and is also a weekly business commentator on CBC, is the Host of “Business Unplanned”, a podcast to help small businesses.

Charles Hudson // Precursor VenturesProfile Photo

Charles Hudson // Precursor Ventures

Investor on The Pitch Seasons 2–10

Charles Hudson is the Managing Partner and Founder of Precursor Ventures, an early-stage venture capital firm focused on investing in the first institutional round of investment for the most promising software and hardware companies. Prior to founding Precursor Ventures, Charles was a Partner at SoftTech VC. In this role, he focused on identifying investment opportunities in mobile infrastructure.