Brad Hargreaves is the cofounder and CEO of Common Living which is a community-driven residential company that brings community, convenience, and flexibility to housing. The company has raised over $113 million from top tier investors such as 8 VC, Maveron, Norwest Venture Partners, and Grand Central Tech to name a few.
In this episode you will learn:
- How Common is bringing a new approach to housing
- Using operations and technology as an advantage
- Brad’s top advice for new entrepreneurs
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About Brad Hargreaves:
Brad Hargreaves, founder/CEO of Common, is a two-time entrepreneur addressing the growing housing crisis in major U.S. cities by providing cost and space-efficient homes for a major segment of the market: roommates. Under Brad Hargreaves leadership, Common has rapidly expanded to 15 homes in 5 major cities across the U.S in just two years.
Brad Hargreaves previously co-founded General Assembly, leading the growth of the company’s education business from its launch in 2011 into a global institution with over a dozen campuses. Named to Vanity Fair’s “The Next Establishment”, Inc Magazine’s “30 Under 30”, Crain’s “40 Under 40”, and Business Insider’s “Silicon Alley 100,” Brad Hargreaves uses his tech and real estate expertise to inform his opinions on topics ranging from the future of cities to the sharing economy and the future of work.
An experienced speaker, Brad Hargreaves has shared his insights and learnings at some of the industry’s largest conferences and events, including Fortune Brainstorm Tech and TechCrunch Disrupt.
Connect with Brad Hargreaves:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have another full-cycle entrepreneur that has done it multiple times, so I think that we’re going to learn quite a bit – many, many lessons learned along the way and many lessons that I think are going to inspire us all that are listening here. So without further ado, let me welcome our guest today. Brad Hargreaves, welcome to the show.
Brad Hargreaves: Thank you, Alejandro. Thank you so much for having me here. I’m excited to be here.
Alejandro: How was life growing up in rural Arkansas?
Brad Hargreaves: It was boring. I wanted out. [Laughter] No better reason. I mean, boredom is the fuel of creativity, and there are not many places to be boring. I think we pack our kids’ lives with too much stuff today – too many activities, too many things to do. But when you’re in the middle of nowhere, it’s about 90 miles south of Little Rock – nothing. There was one red light in the entire county. There was nothing to do, and I think that is a real inspiration for creativity and made me more entrepreneurial. Fortunately, I had parents that were really supportive and supported my education and supported me getting out of there. Boring, and that’s not a bad thing.
Alejandro: How did you get that influence in the entrepreneurial bug and that mindset of really putting a solution into whatever problem you have in front of you? Was there anyone in your family, or how did that develop?
Brad Hargreaves: My grandfather, my mother’s father, is an entrepreneur, not like a tech or venture entrepreneur. He runs a chain of auto parts stores and auto parts distributors. So I do have that in my blood. I do have that influence and that inspiration. Then, I went to Yale. I got there, and I knew I wanted to do something different. You have a lot of kids there, particularly when I was there, back in 2004, that they want to be bankers; they want to be consultants. These were worlds, the worlds of banking, consulting, private equity were completely foreign to me as a kid from rural Arkansas, but I knew startups; I knew entrepreneurship; I knew that was something I wanted to do.
Alejandro: And how did you know that you wanted to study molecular biology and economics? What a combination .
Brad Hargreaves: Well, you know, the economics came later. The way you get out of a place like rural Arkansas is you enter a lot of science competitions and academic competitions, in general. I’m 6’1” and 145 lbs., so I definitely wasn’t playing football. The only pass-out of a place like that, you either play football, or you get into the academic competition circuit. So I traveled all over the place. I went to Australia; I went to a bunch of different places in the U.S. on these competitions and entering every contest I could find. It definitely gave me a lot of exposure and really introduced me to worlds outside the fairly narrow one I grew up in. Because a lot of those were science-related, I got into science, and that was my initial major in college. I think as I spent some summers working in the lab counting microscopic worms and culturing bacteria and doing the things people do in the labs, I realized that is not how I wanted to spend my life.
Alejandro: Right.
Brad Hargreaves: I was way more interested in the lab materials and the reagents, and I was like, “Somebody makes this stuff. That’s a business. That’s interesting.
Alejandro: So, let’s talk about making stuff because, obviously, this led you into doing your own business, your first business, the Game Studio.
Brad Hargreaves: Yeah. I’ve always been into games. I’ve built games. Part of being bored and in the middle of nowhere is you do things like that. My very first venture was a game that took a concept out of the college campus, which is this competitive online game, and tried to bring it broader to tap into rivalries and use that as a driver for game planning engagement. So it was super casual games, things that you might play on your mobile phone, but were tapped into a network of rivalries, who you’re playing against a group of people, say, from a rival school. It got a huge amount of play. We ran an annual competition between all the Ivy League Schools, for instance. I think at one point I think we got like 25% of the whole Ivy League, like every student playing simultaneously. This was back in 2006. I never figured out how to make money from it. It wasn’t the kind of game you charged money for, and back then, this was pre-micropayments, pre-endgame items. It was even not just pre-Apple App Store; it was also pre-Facebook games. Facebook was still literally a Facebook for college kids back then. So you didn’t quite have the same platforms and optimization channels. As fun and crazy as that was building game development studio in college, we ended up raising some venture money. Unfortunately, we got crushed in the downturn in 2008 and had to wind that down.
Alejandro: What was that process like because on those types of events are where you learn the most?
Brad Hargreaves: Yeah. It was an experience I never ever want to repeat, and it was really seared into me, the pain of having to wind that down, let people go. I know I did this when I was 22 when we wound the company down. It was extraordinarily painful, and you know, some lessons, and a lot of lessons you learn as an entrepreneur aren’t necessarily, do this; don’t do that, but rather experiences that inform the decisions you make in the future. I think on the spectrum of entrepreneurs, I’m relatively conservative today because I had that early experience of having the crazy college startup, having it blow up, and saying, “Never again.” That’s not an experience I want to relive.
Alejandro: Was there was one specific lesson that you knew that for whatever company you would start next, you would definitely take that with you?
Brad Hargreaves: It has to make money is the first thing. The problem with that company is, we set out, and we said, “Oh, we’re going to do x, which is, build popular games.” Then it’s like the old name; it’s like I’m going to do something, and then there are question marks, and then the last step is profit. That was our business model. That was also a business model or lack thereof de jour back then. This was in the days of Facebook, which, at the time, had no business model on growing and never ever higher valuation. I just looked at that and said, “That is not the kind of business I want to build. That’s not a match with who I am. The next business, I’m going to go out, and I’m going to build, we’re going to do A) make money. It’s not A turns to B, and B turns to C, and then maybe that makes money. The unit economics are fundamental. They’re really fundamental, and it was very hard to maintain that discipline through the last ten years. We went through 11 years of uninterrupted bull market from 2009 to the second quarter of 2020. And I can get more into that, but it was tough to maintain good unit economic discipline through that, but I’m glad I have done that, and I have through the businesses I’ve built.
Alejandro: So, this was a major lesson. Then you happened to find yourself in New York City meeting a lot of people, and that was the segue to your next business, so tell us about it.
Brad Hargreaves: I found myself without a job, without any money, living in New York with roommates in 2009, and started getting into the tech scene. I did some contract work; I did some consulting, did some analyst work at a venture fund for a little while, and it was clear that there was something percolating in the New York tech scene. People were starting interesting companies. There was a real demand for technical talent, demand for creative talent. We got together with a couple of friends, one of whom I believe, Adam Pritzker has been on your show before.
Alejandro: Yeah.
Brad Hargreaves: And we decided to start what was initially conceived of as a hub for New York City Tech. There would be a co-working component. I would say at the time, a very high-end co-working component, which co-working back in 2010 pretty much meant either cubicles or IKEA desks on a floor. This was pre-rework, pre-industrious. Co-working was in a nascent phase. So we have some of that for startups. We would have some event space, and we would host hackathons, and we would host big job fairs for tech and things like that, and we’d have a classroom. So we started doing these classes, and they would vary. Every night, we would try something new. One night we would have an introduction to JavaScript and talk about JavaScript technology, not so someone could build in it, but just so they could talk about it. We joke cocktail party level knowledge of JavaScript. The next night, we would have a discussion about accounting for startups. Some of it was startup-oriented. Some of it was just more pure technical knowledge. We would run a digital marketing course, which appealed to people who weren’t even in the startup world. We would get people from digital agencies that would come and say, “We need to think about how we upscale for the new world of social media marketing, which was very nascent at the time back in 2011. So, over time, and by time, I mean like a matter of months, the educational piece became the business. We went from one class a night to two classes a night. We introduced weekend courses. We introduced daytime workshops where people would get their employers to pay. Before we knew it, this 400-square-foot classroom was generating more revenue than the rest of the 16,000-square-foot space combined. It went from zero to over a million in revenue in like four months. That’s when we said, “Wait. We’re onto something here.
Alejandro: Quite onto something because literally in four months, you went from zero to a million in revenues without raising any money. That’s pretty unbelievable!
Brad Hargreaves: Yeah. I would say we got the timing perfect. We really had developed this model of tailoring education to a practical outcome. We started thinking about this concept of outcomes very early. It wasn’t whatever the instructor wanted to teach; it wasn’t what got the most clicks; it was like, “What’s actually going to generate a meaningful outcome for the student.” Thinking ontologically about it, like, “What does this student want from this, and how do we fulfill that objective in 90 minutes, in 4 hours, in eventually 12 weeks?” We realized that the real goal that the Holy Grail was to get people jobs was to take someone who had never coded before and say, “You are going to get a junior-level job in web development, UX design, digital marketing, data science.” We started rolling out these 12-week courses, and that became the core of the business. As we grew over the next eight years, we became the largest trade school in the U.S. teaching tech business and design, but also built a significant enterprise business where companies – I mentioned earlier about digital marketing. We had people from agencies coming to us saying, “We need to upscale here. We need to learn and understand the latest technology, the latest trends.” That became a really big part of the business. That was the first part of the business to move online. Consumer stayed brick and mortar for quite a while. Eventually, that was, I think, the single largest piece of enterprise value that we built was our enterprise training and certifications business.
Alejandro: What was the process of scaling this because scaling this, I’m sure, was a beast. So what was that like?
Brad Hargreaves: Between General Assembly and Common, which I’ll talk about in a bit, I’ve definitely shown myself to have a bit of schlep blindness. I think that’s a Paul Graham term of just doing the hard thing. These are not easy businesses to scale. With General Assembly, obviously, it is a brick and mortar business at the core. You do have physical classrooms with physical seats. It’s a tricky business in some ways because a lot of your costs are fixed. The space is fixed. Once you decide to launch a course, you have to hire the instructors. The product development is pretty fixed. Then, obviously, you try to get as many butts in seats as possible, and every incremental one is just pure contribution, pure margin. So you have to clear a certain threshold to break even on the course, and then you have targets you have to hit. You have to hit those targets every single quarter. So it’s a tough business in that way. It’s very unforgiving. The enterprise business, which we shifted to over time, it’s more forgiving – not that the clients are more forgiving. The clients, if anything, are more demanding. But it’s more forgiving in that you have longer-term contracts. You have subscription revenue. You have more predictability. It’s not like every quarter you have to hit a very specific sales goal. You still have sales goals; you still have to hit them, but the vast majority of your revenue in any given quarter was signed several quarters ago – it’s recurring in that way. So the enterprise business, as we shifted over time, is tougher. It takes longer to grow in some ways, but it’s also more forgiving, and it’s a bit less of a schlep.
Alejandro: And the rest is history. For this, the company raised a little bit around 100 million, and then it was acquired by Adecco Group for about 400 million, so pretty good outcome. So, Brad, what happened next for you?
Read More: Daniel Hegarty On Raising $80 Million To Create The Easiest Mortgage Solution
Brad Hargreaves: It was a great outcome. It was acquired by Adecco Group for a bit north of 400 million, and for the past five-and-a-half years, I’ve been working on my next venture, which is Common. It seems like a crazy pivot. It’s actually a housing company, and we are focused on innovative forms of housing, things like coliving, micro-apartments, and also the question: how do you apply technology to residential design and management? It seems like a crazy pivot, as I said, going from education to real estate. And, in some ways, it is, but in other ways, it’s not. When you think about what do people spend a lot of money on? A young person moving to a city. What are their biggest areas of consumer spend? It’s education and housing. They’re also both areas that for that level of consumer spend, or the level of importance that we give them, I have not seen a lot of innovation with respect to new products, new brands, technology. They tend to be two areas that ignore best practice from user experience design. So there’s an opportunity to take not kind of totally novel hard technology, but take fairly proven technology, proven strategies, and apply it, and get a meaningful operating lift and create a better consumer experience. And that’s what we did in both companies in General Assembly, creating a brand in basically trade education. And Common, bringing a brand to, or now a family of brands. We have three brands – to residential management. But it’s always backed by the same core principles: community, convenience, and also our residential technology platform. That’s been my focus for the past five years. Today, we have about 4,000 apartment units under management, about 20,000 currently under construction in 30ish cities worldwide.
Alejandro: So how do you guys make money with Common?
Brad Hargreaves: It’s really simple. We’re a management business, so we partner with owners and developers, and we do two things. We do design, which is effectively we’re an architecture firm with a little bit more templatization, and we do management. The management is really where the technology and the brands come into play. So when someone hires Common, it’s not like hiring a typical third-party property manager who is going to come in and do the leasing, do the repairs and maintenance. You’re bringing an entire platform. You’re bringing the brand; you’re bringing the marketing technology. We have a centralized operating model where we’re taking a lot of best practices from other industries, and then we’re bringing them into residential in a way that lifts performance in buildings and creates more standardized and consistent customer experience. A lot of this stuff, it’s pretty incredible that hasn’t been brought into residential. When we started this business in 2015, a lot of management companies were still doing pen and paper lease signing. A lot of them were still not taking electronic rent payments. A lot of that has changed over the past five years, but now, you look at the next set of things. Management companies are not doing virtual touring, that are not letting people apply remotely, that are not adding automations to those processes. So, we’re really thinking about how do we apply best-in-class technology to residential management?
Alejandro: I know that in the early days, you were told “No” quite a bit, Brad. Obviously, this was your third venture, so you were used to the world no, but how did you go about it?
Brad Hargreaves: Yeah. You’ve got to get used to the no. This was interesting because at Common, we’re obviously working with developers and owners, so we have to get them on board with doing things differently. Residential, I would say even more so than education, there’s a lot of resistance to change. There’s a lot of resistance to doing things differently, particularly on the operations side. There’s a big bias, which was way stronger five years ago than it is today, that you can’t add any value through operations, that the only way you can create value as a residential developer is through being better on the acquisitions side, innovative tax and finance strategies like that’s how you create value. The operations, it’s a commodity. We really believe that’s not true. It’s actually an insane thing to believe. You look at the other industry, and obviously, good operations are not just value add; they’re definitive. They determine the winners and losers. In residential, in real estate, in general, particularly in residential, that was just not a thing. So we got told no a lot. One of my favorite stories is walking into one developer’s office talking about some of the things we were doing, coliving micro-apartments, ways to add value to ground-up buildings. This developer looked at me, and he said, “Brad, I don’t build what the tenant wants. I build what the bank wants.” That runs deep.
Alejandro: Yeah.
Brad Hargreaves: It took us a while to understand that how we start scaling and how we start winning is to get the banks on board. And to get them to understand, like, “Wow. You’re actually adding a lot of value with what you’re doing. You’re differentiating these assets.” So, that was quite a journey, and it’s taken five years, but we’ve seen a ton of growth over the past 18 months.
Alejandro: Talking about supporting that growth and scaling, for that, you need money. How much capital have you guys raised to date?
Brad Hargreaves: We’ve raised around 100 million. We have some great investors on board. We raised our first round from a group called Maveron. They’re a Seattle-based venture firm started by Dan Levitan and Howard Schultz. They were actually the first money into General Assembly, so I’ve known them for about a decade – a really founder-friendly group. For Common, we raised back of the envelope, like, “Hey, this is generally what we want to do.” We had no prototype. We had, basically, a deck of like, “This is what we want to go after.” At that stage, the kind of investor – in general, I don’t think you want VCs on your board unless you know them, you have a personal relationship, and you’re aligned, and you know that they’re going to be supportive through the inevitable ups and downs of the journey. Fortunately, I had that faith in Maveron, particularly in Jason Stoffer, who is a partner there. That really got me comfortable with taking that money in those early days, and obviously, they’ve now seen it through three additional financing rounds, including our latest one, which we just announced a couple of months ago led by Sandvik, which is a Stockholm-based growth equity investor.
Alejandro: Very nice. Now, how many employees do you guys have?
Brad Hargreaves: We’re at about 250 employees. That’s split about 50/50 between our corporate team: our real estate team, our designers and architects, our software engineers, our corporate staff on one side. On the other side is our field staff, our maintenance techs, our porters, our leasing agents, all of whom are full-time employees.
Alejandro: One thing that is interesting here is like where things are heading. I’d love to hear where do you see the space and where do you think that Common is heading?
Brad Hargreaves: It’s a really interesting inflection point right now because, obviously, COVID has done all sorts of crazy things to the real estate market. People have left cities in large numbers. I think for some of those cities, such as San Francisco, to a lesser extent, New York, it’s unclear how quickly those cities are going to recover. On the other hand, it’s put a huge premium on quality management, on technology in management. Thank God we had virtual touring as a core capability back in March when COVID hit. About 30% of our tenants were converting through a virtual loan. Then, we just flipped a switch, and it was 100% because we stopped doing in-person tours. For other management companies, that took them months to figure out how to do virtual tours. So we already had that muscle memory, and now, what I said five minutes ago about the real estate industry not believing you could add value through operations, that myth went out the window in March. Suddenly, operations were everything. Operations were the difference between are you going to keep your building, or is the bank going to take it? Suddenly, all this changed, and we’ve seen a huge amount of interest from the market and what we’re doing on the management side and feeling really good about where we’re headed.
Alejandro: For you, Brad, it’s been a remarkable entrepreneurial journey, I would say. There’s one of the questions that I typically ask the guests that come on the show that I’d like to ask you here, and it’s given what you’ve gone through with your Studio game company, with General Assembly, and now with Common, you’ve seen the good, the bad, and the ugly of building, scaling, and everything above when it comes to startups. So if you had the opportunity to go back in time and have a chat with your younger self, maybe it was that younger Brad that realized that it was more interesting – the making of the machines rather than using them back in Yale. What would be that one piece of business advice that you would give to your younger self before you launched a company and why given what you know now?
Brad Hargreaves: Oh, wow. That’s tough. I wish, in many cases, I had trusted my gut. I think there were a lot of things that I knew to be the case, and probably either took too long to make a decision or doubted where that just burnt a lot of time and burnt a lot of money. Changes we knew back in the game development studio that we needed to come up with a way to make money, but obviously, it was more acceptable back then to not make money. I remember once, we had a couple of angel investors, and they once said, “Don’t try to make money unless you know you’re going to make a lot of money because it’s better to make no money than to make a little bit of money. That kind of struck me as crazy at the time, and now, it still strikes me as crazy. We should have probably just gone ahead and done whatever experiments we were going to do. So, I wish I had trusted my gut in a few more of those instances.
Alejandro: Very profound, Brad. Absolutely. I’m right there with you. For the folks that are listening, what is the best way for them to reach out and say hi?
Brad Hargreaves: Just email me:
br**@co****.com
or follow me on Twitter @bhargreaves.
Alejandro: Amazing. Brad, thank you so much for being on the DealMakers show today.
Brad Hargreaves: Great. Thanks so much for having me.
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