Reichen Kuhl is an entrepreneur who seems to have a knack for turning challenges into big wins. He has already raised tens of millions of dollars to solve a problem facing millions of US households, that was born out of him being told “no.” His company, LeaseLock has acquired funding from top-tier investors like Westerly Winds, Vertex US, Moderne Ventures, and Liberty Mutual Strategic Ventures.
In this episode, you will learn:
- Creating insurance products for big industries
- Raising capital
- Building revenue with technology
- Don’t ask, don’t tell
- Reichen’s approach to interviewing recruits
- The importance of authentic relationships
- His top advice before starting a business
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About Reichen Kuhl:
Reichen is a lawyer and a veteran, a graduate of the U.S. Air Force Academy (BS, Engineering), and served as a 2nd Lieutenant in Defense Contracting at the Satellite and Launch Control Sys Program Office, L.A. Air Force Base, CA. As 1st Lieutenant and Captain, Reichen served as USAF faculty at University of Virginia’s Air Science Dept.
Reichen holds FAA Commercial Pilot and Flight Instructor ratings. After 9 years Active, and 3 years of Reserve service–Reichen separated from the Air Force in 2001, founding Tribe Airways, a charter jet service brokerage based in Beverly Hills, CA operating at Van Nuys and Hawthorne airports.
In 2003, Reichen ran and won The Amazing Race-a CBS show/adventure race around the world, taking its $1M prize
Reichen is the author of the ‘Don’t Ask Don’t Tell’ subject book, “Here’s What We’ll Say” (Carroll&Graf 2006). He earned a J.D. from Loyola Law School alongside a clerkship in Aviation/Insurance Law and Personal Injury Law at the law firm of Girardi & Keese in Los Angeles, CA.
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Connect with Reichen Kuhl:
Read the Full Transcription of the Interview:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. What an incredible guest that we have today. The journey is remarkable. I think that you’re going to find it quite inspiring. But without further ado, let’s welcome our Reichen Kuhl today.
Reichen Kuhl: Thank you. It’s an honor to be here.
Alejandro: Reichen, I know that your upbringing was a bit shaky, to say the least, especially with the moving and ending up in a trailer park. Tell us about being born in Cincinnati, and then how was that shift and that transition into Northern Massachusetts?
Reichen Kuhl: Yeah, I was born in Cincinnati to a policeman and a nurse. They divorced when I was five. My mother remarried, and we moved up to the Boston, Massachusetts area when I was eight into a town called Norton, a smaller, maybe upper-middle-class town from my perspective because we lived in a trailer park. We didn’t have any money, so I saw a lot of things in that trailer park that really shaped my life and the way that I see the world. I think a lot of the people in the families who were in that trailer park were there for a reason because of personal choices, is what I mean. I saw a lot of drug addiction, alcohol abuse, family abuse, and physical abuse. One thing I knew is that I wanted to get out of there. I wasn’t a very popular kid because of the trailer park and because of my financial status, which seemed to be really important at this school. But I had a lot of time to study then, and I got great grades. I got myself into the U.S. Air Force Academy. I got the Congressional nomination from my senators, and I got in, and that’s where I went for four years. That was my escape from that trailer park, was getting into the Air Force Academy and joining the service.
Alejandro: Obviously, the trailer park has been and is a big driver for your success, something that keeps you moving always forward. So, for you, how has that experience shaped who you are today? How do you look at it, and how has it influenced you and fueled that ambition of looking ahead and putting a gap into whatever you’re seeing in the future?
Reichen Kuhl: When I got to the Air Force Academy and actually graduated from there, all I ever wanted was to live in a real house because I moved from a trailer park to a dorm, and I just wanted to live in a real house. That was my biggest dream. I rented my first house as a Second Lieutenant in the Air Force, and that was a big goal for me. But as I’ve gone on with my life, I’ve realized that I continue to run from that trailer park, and I continue to fear that I’m going to go back into that financial situation. It really drives me to do anything I can to succeed, and a lot of times, that means being smart, being entrepreneurial, finding ways to be self-sufficient and make money. I think at this point, I can safely say I’m not going to end up in a trailer park, but I swear I still think of life in those terms. It has driven me through school. It’s driven me through college, through law school, and definitely in my entrepreneurial life and all the activities I have done. I’ve failed a few times entrepreneurially. Now, I believe I have a hit here with LeaseLock.
Alejandro: Good stuff. In your case, you became an officer. That was nine years of your life that you spent serving. I understand that definitely one of the drivers that prompted the transition out of the army was what they call the Don’t Ask; Don’t Tell. What is this about?
Reichen Kuhl: Yes. I did get out of the military voluntarily when I was allowed to in 2001. I had spent nine years in the service. I got out as a conscientious objector to Don’t Ask; Don’t Tell because I realized while I was in the service, in the Air Force, that I was gay. I didn’t want to be gay. For many years, I think if I could have taken a pill to be straight, I would have paid any amount of money for that pill and taken it because I didn’t want that to be my life. It’s been a journey just to accept myself for who I am. One of the things in the Air Force that I realized is that I didn’t have the comradery that everyone else had because I couldn’t bring whoever I was dating to the Air Force picnic or the company picnic or to any outside events. I couldn’t talk about my private life, and I realized everybody is talking about their private life. They say your private life and your work life are separate. It’s not true. Your private life is very much a part of who you are, and I had to always be silent or lie about it, and it didn’t sit well with me, so I got out. I was one of many airmen and soldiers and sailors who left the military to escape that kind of thing. So I got out.
Alejandro: Got it. So getting out was part of that sequence of events that ended up incubating LeaseLock, but before we get into LeaseLock, when you were at a bar, there was an event that changed the course of everything, and that got you into TV, so what happened there?
Reichen Kuhl: Yeah. After I got out of the Air Force, I was teaching AP Physics at a high school, and I had taken a job as a flight instructor teaching people how to fly at a local airport in Hawthorne in Los Angeles. I was at a restaurant bar, and a guy walked up to me and said, “We’re casting for this show called The Amazing Race. You look athletic. Do you have a friend or a brother or father or someone that looks like you?” I said, “Yeah.” The guy that I was married to at the time, not a legal marriage, but we had ceremoniously married. We went and did the show together. This was in 2003, 18 years ago now. We ended up winning the whole race around the world and the million-dollar prize, which was exciting, and it set my life in a new direction because I started getting asked to do hosting and television shows. I ended up doing Frazier and The Drew Cary show. I went on soap operas. I took acting classes. I hosted a lot of shows. For nine years of my life, that’s what I did until I moved to New York in 2010. I moved there to do a play and another TV show. Thank God I did because that’s where I got denied for an apartment in New York City, and I got a chip on my shoulder about it. I got into the apartment with a cosigner, a friend of mine, but I got denied the apartment because I didn’t make 80 times the monthly rent the year before my tax return. That definitely changed my whole, as you know.
Alejandro: Why 80 times? Eighty times sounds ridiculous.
Reichen Kuhl: Yeah, and the leasing office said, “The building next door requires 120 times the monthly rent. So, we’re lenient.” But, no. This was like a $3,000 a month apartment, and I had to make $240,000 on my tax return the year before. I hadn’t made it.
Alejandro: Wow! Then, as they say, ideas are like busses. They pass, and then you’ve got to also get in, but as they say, too, they take time to incubate. So once you got that idea, one thing that you did as well is that you called your agent, and you told your agent that was it for you on TV. Then, you get this idea, and it seems more like a business-type of a path that you’re going to go after, but you went into law school. So why law school out of all things?
Reichen Kuhl: Yes. Getting denied for this apartment changed everything. I started researching all the risk instruments that were being used in multifamily to protect themselves from renters who might default on their rent or cause damage, which was what they were trying to protect themselves from with the 80x rent. I started using my brain again. I decided that I really wanted to use my brain. I always wanted to be a lawyer. I decided that the time was then. I was going to go back to law school, and I was going to get this business idea going. So to test my hypothesis that there was really good risk out there with renters that didn’t need to pay 80x monthly rent in New York, I put up a little website, and I called it LeaseLock because I had seen a LifeLock commercial, and I wanted a Lease name. I put on this website, “I’m a complete stranger, but I will cosign on your lease for you using my good credit if you pay me.” I got hundreds and hundreds of applications from people. I mostly helped people from foreign nations who had moved to the U.S. with great jobs or great prospects, and they didn’t have U.S. credit. They couldn’t get an apartment, so I said, “I’m a citizen here. Let me use my credit. I’m going to help you, a person from a foreign nation, get into your apartment. You have a great degree. You have savings. You have a family, and I know you’re going to be okay.” They would pay me upfront. I was charging 10% of the full lease value for the year, but they had to pay me upfront. I picked 12 people in my first run. I cosigned on $400,000 in leases in about a week, which was super scary because I didn’t have $400,000. I collected $40,000, 10%. It was the most money I’ve ever made in a week in my life, obviously. I would wait every month, and I would shift less of a brick every month that nobody defaulted. At the end of the 12 months, none of the 12 people I picked defaulted. They all were great.
Reichen Kuhl: I got to keep the money, and I decided to do it again. The next time, I doubled the number to 24 people, and it worked. Again, nobody defaulted. My point was proven. There are really good risks out there. So I decided to take my idea to Mucker Capital out in Los Angeles because I had moved out there for law school. Mucker was the incubator that took me in. They liked my idea of no longer Reichen cosigning on apartments, but let’s turn this into an insurance company that can ensure the likes of big multifamily leasing corporations and makes it so they would no longer have to charge security deposits to people. What we’ll do is, we’ll charge a small premium to the property, and if a renter defaults on rent or causes damage, we’ll pay the bill. If the property wants to pass that cost onto the renter, they can through fees or whatever. We’re a B2B company, and we’re going to insure the landlord so that they stop harassing the renters like I was harassed. So there are no more cosigners, no more guarantors, no more shady bond companies. That’s how it went. Mucker introduced me to my now co-founder, Derek Merrill, who was already working in the insurance space and had a startup of his own that he was working on. He loved the idea. We met a couple of times, and we knew that we were going to be partners. It was great. We were a formidable duo. He knew everything about stuff I didn’t and vice versa. He knew about marketing and raising money. He taught me everything I knew about raising money in the capital markets. He was very attuned to engineering and operations. I was very attuned to the foundational parts of starting a company that he wasn’t: the legal work, the compliance work, how do we set up an insurance-type company, and what type of insurance company should it be? We built this while I was going through law school. Then after I graduated from law school, I was practicing law and moonlighting with LeaseLock and building it every day with Derek. Now, that’s the company we have today.
Alejandro: One thing that was a pivotal moment for you guys was the decision that you made to stop billing the renters. Why did you decide to do that, and what was the impact of doing so?
Reichen Kuhl: In LeaseLock 1.0, what we were doing was having the renters pay for the fee that would create the premium for the property. We got really smart and realized that all of these big properties that we were working with were using the same software systems to manage their rent and their occupancy. Those were Yardi, RealPage, MRI, and we realized that we could go ahead and charge the renters this deposit waiver fee using charge code billing. That’s when we no longer had to have leasing agents at leasing offices selling our product or even explaining what it was. Properties were so excited about it. They just made it automatic. They said, “We’re not going to even offer security deposits as a choice anymore. If a renter really wants to pay one, they can, but the default will be LeaseLock, where a renter fills out their application online, and as soon as they’re approved, whether they’re approved or conditionally approved, automatically charge code billing would kick in, and the renter would get charged the small fee every month on top of their rent. Then that fee would go to the property. The property would pay their premiums to us. We also did that with electronic billing. It was like a flywheel. Suddenly, we had an amazing product that was selling itself on its own. As soon as we signed up a property and flooded them into our API, that’s when we started going from tens of thousands of dollars to hundreds of thousands of dollars on a monthly basis.
Alejandro: For the listeners to really get it because there were multiple iterations, what ended up being the business model that we know as LeaseLock today?
Reichen Kuhl: Today, we’re on our fourth iteration. We call it LeaseLock 4.0. What that means is that in the past, the way that insurance has worked is that the policy itself—and this is even like your car insurance policy—the policy itself and the language inside that policy, meaning the restrictions and the conditions and the exclusions. Those carve-outs are driving what the loss ratio is going to be for the insurer. There are certain things you can claim and certain things you can’t and reasons you can claim them, and reasons that you can’t. Those are keeping losses down for the insurer so that they don’t have to pay out so many claims. What we’ve done at LeaseLock is we’ve taken our old policy, and we’ve completely wiped out all of those exclusions, all of those conditions, all of the deadlines for filing claims, basically, everything that was holding back the claims process in order to try to drive loss ratios down. We’ve gotten rid of all that, and now, the way that we’re controlling loss ratios is through artificial intelligence, AI. I know everyone is throwing around the word AI right now, and there’s not a lot of real AI out there, but I promise what we’ve built is a real AI risk engine that goes through 10,000 scenarios per night on every single account that we have learning and figuring out what the losses are going to be based on the losses of that day for that particular property and using that information, that data to change insurance rates and change what the coverage limits are going to be on the next run for that particular customer or property. We are a non-admitted insurance product. There’s an admitted and a non-admitted. Neither is more or less regulated than the other. It doesn’t mean a lot on the regulatory side. We’re a very highly regulated product and company. But non-admitted means you pay a separate surplus line tax on every LeaseLock we sell in order to have the freedom to change our rates and change our coverage and change our policy language without having to have that approved like a state regulator who has no idea what our business is. So we are by choice a non-admitted surplus lines product that pays big surplus lines taxes on everything we do but like that freedom. So what we are able to do with that freedom is use that AI risk engine to change rates and coverage, and that is what keeps our loss ratios down and low and keeps our reinsurance groups that reinsure our product happy.
Alejandro: Got it. I assume that building this and scaling up requires money, so how much capital have you guys raised to date?
Reichen Kuhl: We just closed a $52 million Series B. On top of that, another $10 million Series A, and then about $2 million before that. Together my partner and I have raised about $68 million.
Alejandro: In terms of size, to give an idea to the people that are listening, is there anything that you can disclose, like the number of employees or anything else?
Reichen Kuhl: We’re rapidly approaching probably about 85 employees right now, so we’re getting bigger. All of the teams are expanding, especially right now. Claims are expanding in a big way, claims operations, and claims handling, and a lot more engineers. When I talk about this AI risk engine that we’re continuing to build and optimize, that takes a lot of engineers, data scientists, actuaries, and people with that kind of expertise. The marketing department is growing, obviously, and then client success. That department is growing rapidly as well. Every department has to. Our legal team—we’re just a growing company that needs more and more people. But we’re getting to that sweet spot. I don’t think Derek and I want to have many more than 100 employees or 100 team members because we want to solve our problems with technology, solve our problems with data and be that kind of a company. Not that it just keeps growing with the number of employees but grows with better technology.
Alejandro: Absolutely. Right now, people talk about their success in terms of the number of employees or the amount of raise, but, ultimately, the ultimate metric is revenue per employee. I think the way that you’re thinking about optimizing and implementing technology is just fantastic. Imagine, Reichen, that you go to sleep tonight, and you wake up in a world where the vision of LeaseLock is fully realized. What does that world look like?
Reichen Kuhl: A world where LeaseLock is fully realized is where LeaseLock has fulfilled its mission to fundamentally change the way leasing is handled in multifamily rental units, where properties have the choice of using a security deposit if they want, but also have the choice of using this new lease insurance. Leas insurance is a name that we made up at LeaseLock and that we coined. To be able to use this lease insurance model in order to drive their bad debt down, increase their lease conversions on a day-by-day basis. Ultimately, because of all that, every property that uses LeaseLock has increased its NOI, Net Operating Income on an annual basis. That’s what rings true about our program. LeaseLock, if a property, any property, take what they’re doing now, gets rid of security deposits and plugins our AI risk engine, they’re guaranteed to increase their NOI on an annual basis. That’s meaningful, and that’s what our AI risk engine is geared to do. When you talk about what our product actually offers, it offers that value to a property operator. It increases the NOI at the end of the day, and that’s what everybody wants, and that’s what we’re trying to do for them. That’s the product we sell.
Alejandro: Very cool. One of the questions that I typically ask the guests that come on the show is if I gave you the opportunity to get into a time machine and we bring you back to that time where you were thinking about building something to address that issue that you had seen of being asked for 80x the amount of rent, and you had the opportunity of giving yourself one piece of business advice before launching the business, what would that be and why based on what you know now, Reichen.
Reichen Kuhl: It would be to think bigger earlier. I started this thinking I just wanted to start a little side hustle that would put an extra $15,000 in my pocket a year, but it was such a bigger idea than what I thought it was. I think a lot of entrepreneurs get an idea in their head, and they don’t give it enough credit or don’t give themselves enough credit to understand how big it could actually be. There’s a lot of money out there that’s ready to be invested in really good ideas and maybe even mediocre ideas that are being brought forth by very motivated people and motivated teams. I realized that I had realized that earlier and knew how big this was going to get and could have gotten probably even earlier if I had understood and had been thinking that big about the product.
Alejandro: And this is going to be the first time that I do it, and that is going to be two more bonus opportunities to be able to speak with your younger self. The one before building the business was the time where you were leaving the army, the military, and you were dealing with Don’t Ask; Don’t Tell. What would you tell that younger self that is looking to accept yourself the way that you are?
Reichen Kuhl: I was super scared when I got out because of Don’t Ask; Don’t Tell. I remember the last time I took my uniform off and knew that I didn’t have to put it back on ever to go back to work. I definitely broke down that night. I was super scared about where my life was going, but because I made a decision to honor myself and honor who I really am, things have worked out. It hasn’t always been easy, and it hasn’t been fast, but you’ve got to have authentic relationships. I didn’t have authentic relationships with my comrades in arms, so I wasn’t happy. I didn’t have authentic relationships in my Hollywood life. I feel like Hollywood intrinsically is a place where you always fake it till you make it, so the things you say and talk about, I don’t think, are authentic. But when I went to law school, and I had friends in law school, and I was happy to be back in class in my mid-to-late 30s and developing all these friends, those were authentic relationships. I was being me. I was doing what I wanted to be doing. And in LeaseLock, from meeting investors to building LeaseLock with my team, I’m always authentic with my team. They know who I am; they know where I come from; they know my insecurities. I am the kind of leader and founder that’s always worn everything on my sleeve. They know what my weaknesses are because I tell them, and I know what they are. So it’s all about authentic relationships, and that’s what I would tell my younger self to do and go to places where you have those kinds of relationships.
Alejandro: What about if we pull you earlier in time to that time where you were in the trailer park, and you were dealing with everything that was around you and perhaps with all the kids in school that were looking at you differently, for living in that trailer park. What would you tell that younger Reichen?
Reichen Kuhl: I thought I was one of them, but I had a little voice in the back of my head and maybe in my gut telling me this isn’t who I am. I can break out of this. I can get away from this. This isn’t what I’m supposed to be. I don’t know if I trusted that gut back then, but now I would tell my younger self, “Trust your gut; you’re right. Don’t fall into what these people are. Don’t make this your identity. Don’t think that you’ll never break out of it. Just trust your gut. Wow, do I use that at LeaseLock? I use it in hiring. I’m the last person that every hire at LeaseLock has an interview with. Everyone sends them to me because they want Reichen’s gut check. Even if I have no idea what it is that they do. If they’re a controller or an engineer or something and I don’t know the technical problem that they’re coming on to solve exactly or how they’re going to solve it. I know what they’re going to solve, but not how. I’m not as smart as they are in their particular category, but I always get a gut feeling about somebody just by interviewing them or by talking to them, even on Zoom. So I trust my gut, and I think everyone else at LeaseLock does too.
Alejandro: Just out of curiosity to expand on that, what is that process of listening and trusting your gut to make the right decision?
Reichen Kuhl: Be natural. When you’re in an interview process with someone, if you have a question that pops up in your head, or in your gut, or in your soul about what you want to know about them, just ask it because it’s better than asking a lot of interview questions that you find off the internet. Just let it flow. Ask them a few things about themselves, and then keep asking them questions that are interesting to you or that are interesting about them to you. Through that interaction, that’s where you’re going to get the real authentic feel for who somebody is.
Alejandro: That’s amazing. Reichen, for our listeners, what is the best way for them to reach out and say hi?
Reichen Kuhl: They can reach out and say hi by email. I’m available at firstname.lastname@example.org. I get a lot of emails, but I’ll get to it eventually.
Alejandro: Amazing. Reichen, thank you so much for being on the DealMakers show today.
Reichen Kuhl: Thank you. Like I said, it’s an honor to be on here, and I’m happy to come back someday if you’ll have me.
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