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And later that night I get a call and it’s from a producer and he says, Hey, my friend sent me this website. I’m looking for a film location shoots in two days. Can you help me again being me, I’m like, of course we had tons of locations. I have no problem. I hang up the phone and I spent all night on Google satellite view looking. He was looking for a house with a pool. I spent all night trying to find pools in the city.
Jay Clouse: 00:00:29
The startup investment landscape is changing and world class companies are being built outside of Silicon Valley. We find them, talk with them and discuss the upside of investing in them. Welcome to upside.
Eric Hornung: 00:00:57
Hello. Hello. Hello. Welcome upside podcast, the first podcast finding upside outside of Silicon Valley. I’m Eric Hornung and I’m accompanied by my cohost, Mr. Cheese-head himself, Jay Clouse. Jay, how’s it going man? Whats going on?
Jay Clouse: 00:01:12
I am ready for football season and green bay packers football. They crushed the steelers in the preseason, which means absolutely nothing. Just like the points and whose lining anyway, but I’m excited for the season to get underway.
Eric Hornung: 00:01:24
Yeah, and by the time this episode airs, I think we will be at kickoff, which is pretty exciting. Pretty exciting. Yeah. Big season for the packers ahead. I hope. I’ll be honest. I mostly stick to the nfl these days so I can do something with my dad, but I do enjoy it. I think Aaron Rodgers is the best quarterback in football. I’m a little worried about their defense and their offensive tackles per usual, but I’m excited about it. You’re a packers fan?
Eric Hornung: 00:01:48
I am a packers fan after a browns fan. So when the browns went away in the nineties, I had to pick a team and I was a big Bret Far fan. So the packers were the logical next choice for me. My Dad’s from Buffalo, so 13 is the bills. That’s my one, two, three.
Jay Clouse: 00:02:02
Do you know anything more about the packer season this year than I do?
Eric Hornung: 00:02:06
I know that Devonte Adams is going to have a monster year, so there’s my inside scoop if you play fantasy like Jay does in my league, so
Jay Clouse: 00:02:13
I know that our top one or two linebackers is out for the season already because he hurt himself. Stretching.
Eric Hornung: 00:02:19
Fun Fact Jake Ryan went to my, wait, he hurt himself stretching?
Jay Clouse: 00:02:23
I thought that’s what somebody told me. I have not fact check this, but somebody told me he tore his acl like during warmups.
Eric Hornung: 00:02:29
Oh, I didn’t know that, but I did know he tore his acl. He went to my grade school and I went to school with his older brother.
Jay Clouse: 00:02:36
Well, you should just text him and let him know that we wish him the best.
Eric Hornung: 00:02:38
will do correct or get well soon from the upside podcasts. Wow. Starting off with acl tears. That is a way to start the podcast off. On a high note, speaking of the podcast, let’s get back to it. If you are new to the podcast, we’re going to run through in the next 60 to 90 seconds what the podcast is and how it’s kind of laid out. If you a avid listener and you listen to every week and you don’t need to know what that is, go ahead and fast forward 90 seconds. So Jay, what are we doing here?
Jay Clouse: 00:03:07
You’re at upside. We talked to founders outside of Silicon Valley. We think it’s a great time for entrepreneurship outside of Silicon Valley and we talked to those entrepreneurs every week. People from states like Ohio and Minneapolis and Indiana, Kansas St. Nope. St Louis is a city that is in Missouri, but we think it’s a great time for entrepreneurship outside of the valley and every week we’re here trying to prove just that with founders that we believe are extremely intelligent opportunity seeking capital efficient, resilient. And so today we are talking to a founder outside of the United States. Even currently, Alex Kolodkin, the founder and CEO of SetScouter. Previous to SetScouter, Alex earned a master in arts and media production and a bachelor of arts in radio and television arts from Ryerson University. SetScouter is a marketplace connecting brands with residential spaces. Think airbnb for connecting producers who are shooting video to location scouting. So Eric, what is the format of our podcast?
Eric Hornung: 00:04:05
Well, our podcasts is broken down into three segments. The first is an upfront where Jay and I kind of talk about our independent research that we’ve done on the founder, the company, and the opportunity. Then we dive into an interview where we answer questions about those same three things and then the really exciting part of this for Jay and I is when we get to take all that information we’ve done in the upfront and all of the information we learned in the interview and we get to put those together in what we call our verbal hypothetical deal memo. Jay, You like to say that deal memo is your favorite part of the podcast. Do you want to elaborate a little bit on that?
Jay Clouse: 00:04:42
100 percent. This podcast largely is an effort for Eric and I to get better at thinking like early stage angel investors. That deal memo is where the magic happens. So if you’re like us and you’re trying to learn more about the angel investing process, we think that’s going to be one of your favorite segments of the show. Where we kind of break down what we learned from the founder and how we would approach that information as a potential investor
Eric Hornung: 00:05:02
and we hope that if you are like us, you don’t treat that section as passive, but rather you actively participate with us. Jay, how can people do that?
Jay Clouse: 00:05:11
Totally, and if you guys do enjoy that and you have thoughts both about what we say and what we don’t say, we’d love to hear from you on twitter @upsidefm or on our preferred podcasting platform breaker where you can comment directly on the episode in real time, the point you’re listening to and we can communicate with you directly there. So that’s the plug. Eric, I’m excited to talk about SetScouter here today. Before we get in and talk with Alex, a couple of things that he provided with us, like I said, based in Toronto, Ontario, founded in 2012, has gone through a few accelerators, one of which being the 500 startups dash 15 in which we’ve talked to both rap, chat and laundry. We’re already same batch and right now they’re operating in. I couldn’t get an exact number of cities, but I know they have six sort of top cities that they bill, Toronto, Miami, Austin, Chicago, New York City, and Los Angeles. Anything else from the research that you’re excited to touch on and talk about?
Eric Hornung: 00:06:06
They have one listing in Cincinnati, so none in Columbus. They have some. None in Columbus. None in Cleveland. I didn’t do much searching outside of those. The one thing that kind of jumps out to me and the Information Alex submitted is founded in 2012. That’s six years ago. That’s. There’s been a lot of probably development in those six years. This is probably one of the older companies we’ve interviewed here on upside.
Jay Clouse: 00:06:31
A lot of presumed development team of 12 people, so still a relatively small team for that period of time. Outside of what we know to be a check from 500 startups or assume they got a check for 500 startups as most companies do. We have no data. I have no data about their fundraising today. Do you have anything?
Eric Hornung: 00:06:50
I do not
Jay Clouse: 00:06:50
so it may stand to reason that they probably have fairly significant cashflow in at least no idea what their cash expenses are other than overhead and support and you know, the cost of development. But yeah, I would imagine that the cash dynamics of this business are pretty interesting, especially from I assume an insurance perspective.
Eric Hornung: 00:07:13
Right so either this is economically attractive where it’s throwing off a lot of cash or they have a supplementary income where this is something that they’re developing and they’re using their own personal income to fund the development of this platform. Maybe why it’s taken so long, but either way we need to have a better understanding of what the market opportunity is here. Did you find anything on market sizing?
Jay Clouse: 00:07:35
The Best I could find was some data from Alex’s own 2015, 500 startups demo day pitch, where he talked about 10 million commercials being shot annually, which I would assume was just a segment of what they’re available to do. So that’s not even a great market size metric for me. You talked about in 2015 they had a $250,000 gross merchandising value going through the platform, 110,000 of that being in the last three months. So one would assume that growth rate has increased or remained over the last three years. Yeah, it’s. It seems like there’s a lot of data here we just don’t have available at our fingertips. Did you find anything in the way of market sizing?
Eric Hornung: 00:08:16
I didn’t. So what I tried to find was things related to location scouting and what the size of the location scouting Margaret was. I saw one number that’s placed the market at $350 million. I don’t know if that is for location scouts globally, if that is now my guests on what it is, but the number didn’t seem to have a lot of support so it’s the only number I could find.
Jay Clouse: 00:08:40
I think part of the commercials being shot as an attractive or closer metric is, you know, location scouting, maybe a small number, but we’re looking at the full number of things that would need locations to scout for if the process is really as gross and terrible as SetScouter claims that it is. There’s probably a lot of media and production happening that could be happening on site somewhere if they had tools to do that. As part of my role with linkedin learning as a course producer, I talked to my producer about this last time I was out there shooting and he did say that it’s kind of a nightmare to do onsite location shooting because they have to find that. He talked about how terrible that process was and when I told him, well, I think we. We are talking to the founder who has a company that helps do that. His first reaction was, oh, that’d be great. We do that all the time and the second reaction was well, but then again, right now they use. They talk to the homeowners directly through things like airbnb or Vrbo and they ask if they can bring a small production crew to come out and shoot in the home with the explicit expectation that there’s going to be production happening in the home. His thought was it may be more expensive for the production crew because the homeowner would be more educated on what is happening and what may be on the table for them as a homeowner providing that location.
Eric Hornung: 00:10:01
That’s interesting because I’ve read a lot of articles in preparation for this about being a location scout and it just seems like such a gravy train job. I don’t know what the margins they get are the fees they get, but I got to assume that they are very high, but all you do is travel the world and find places that people are looking for and I’m like and that is pretty cool and they seem to be pretty well off from the people who are writing the articles.
Jay Clouse: 00:10:27
Yeah. My assumption is these production teams, at least the major production teams, which are the companies that SetScouter seems to work with universal studios, Mcdonald’s, Google, youtube, lever, these people who do a lot of production and have experienced teams with presumably large budgets, they presumably have that large budget that they are just mostly looking for the right place and once they have that they can kind of sign off and check that off their line item to say, okay, this is booked and here is the price that we had for that and as a location scout that’d probably be pretty nice to play matchmaker in that way.
Eric Hornung: 00:10:55
So location scouts as a location scout agencies seem to be one type of competitor. The other type of competitor that you mentioned is a little more indirect. It’s companies not using location scout or just using someone on their team to go onto airbnb and message hosts and say, Hey, we like your spot. Can we use it? We’ll pay you more than the $200 a night. You’re asking, we’ll pay you thousand dollars a day for the next, you know, four days or whatever. And then one other potential competitor that I found was locations hub.com.
Jay Clouse: 00:11:29
I also found that, it seems very young.
Eric Hornung: 00:11:32
It seems very young, especially in comparison to SetScouter. But I’m curious if there is any difference or what they’re doing that is unique.
Jay Clouse: 00:11:43
Yeah. Seemed young. Seemed like they didn’t have nearly the technology built, but it is a recent entrant into the market. It would seem. I think the biggest competitors here would be airbnb, Vrvo, where those companies have tons of inventory of just, we’ll call them locations, not necessarily production locations, but presumably any location could be a production location with the right conversation in the right agreement. So we’ll be interested to hear from Alex what that competition means to him and how SetScouter postures themselves differently positions themselves differently in that market. All right. You ready to talk to Alex? Let’s do it
Eric Hornung: 00:12:19
well. Well here we are. One more thing, Jay, Is there something you want to tell the people?
Jay Clouse: 00:12:25
I have good news and I have bad news. The good news is I’ve started to invest more into the podcast in the form of a new laptop. The bad news is because of this investment, I did not reset my audio settings and so this interview may sound a little different because, uh, I screwed up, I messed up some, the audio settings and we had to do some extra editing to fix it and you’ll still hear some artifacts of key clicking in the background, which I apologize for it, but here in a couple of weeks. Once we get rolling recording again, that will no longer be an issue. So thank you for bearing with us and we apologize for any inconvenience. Okay. Onto the interview,
Eric Hornung: 00:13:08
Alex, welcome to the show.
Alex Kolodkin: 00:13:09
Thanks for having me.
Eric Hornung: 00:13:11
Great to have you here. We like to start with the founder and kind of some of your background. So can you tell us about the history of Alex?
Alex Kolodkin: 00:13:19
Sure. I’ll keep it pretty short. I used to produce commercials, that’s what I was doing. I was a corporate commercial producer and it wasn’t until I actually worked as a broadcaster and got to see all the expenses of production then I went “hmm There’s something we can do here”. So like the history of Mi is essentially I’m overly optimistic and some would say I’m a little bit cocky and I thought I could build a company and sell it for a million dollars a year later to try to get into Grad school and do an Mba program at the Hartford. It’s been five years and I don’t think I want to do my mba anymore.
Eric Hornung: 00:13:58
Well, take us back a little bit before that. How did you get into producing commercials and being a broadcaster? What did, what was that like way before set? Scouter even started.
Alex Kolodkin: 00:14:08
Yeah. So like every immigrant family, my mom wanted me to be one of one thing which is a doctor and I just never really thought that I could do that. So I started really getting into film and production and it wasn’t until high school that I beat out these university students to get this internship and that was Kinda the start. So I got this internship, I went to an amazing university in Toronto and I just started working in the industry and I fell in love with it. Quite frankly. There’s so much happening and you can be so creative and so technical. I just love the fact that I could do that. So that’s how I just joined the industry.
Eric Hornung: 00:14:49
And you mentioned immigrant family. Did you immigrate to Canada or did your parents or how did that all work?
Alex Kolodkin: 00:14:56
Yeah, so I am actually an immigrant, which I get reminded of every time I say something funny. I moved here when I was one, so I like to say that I made the truck myself with a little backpack, but in all honesty, my mother and my father and my uncle, we actually have immigrated here in 1990. And uh, yeah, I grew up in, in, in Edmonton and then moved to Toronto.
Jay Clouse: 00:15:21
So you went through high school in Toronto where you got into film, it sounds like. Talk to me about which university you went to or did you go the university route?
Alex Kolodkin: 00:15:29
I did. So the great thing about being at this internship when I was in high school was that I got to see the different people at the office and where they went to school and I noticed that the people that were working really hard doing the amazing creative stuff all went to colleges and college and Canada’s a little bit different than it is in the US. It’s more like a trade school. It’s a shorter program and I noticed that all the people that were doing the strategy that we’re owning the companies, they actually all went to one program which was a Ryerson University’s radio intelligent arts program. So I knew from right there that I would want to go to that school. I had applied to other places, but luckily I got in and so I did four years of Undergrad there. That’s actually where I met my cofounder Lydia Bitunit. And then part of being in an immigrant family is everybody in my family have graduate degrees. So it was kind of expected that I had to go to Grad school. And luckily Ryerson offered me a position in the master’s program. So right after school I just went from my bachelor’s to my to my masters
Jay Clouse: 00:16:33
and that was a masters in media production, right?
Alex Kolodkin: 00:16:36
It’s a masters in media production and actually my thesis focused on the content consumption behaviors of 18 to 25 year olds and how that came about was really I was sitting there thinking like, what am I going to write my thesis on while I was eating cereal in my underwear, watching pirated tv and I went, holy smokes, if I’m doing this, there’s something there. And that was awesome. So I got to present that to the board at Rogers communication, which is where actually worked as well and got to blow their minds with how piracy works and how 18 to 25 liberal arts at the time were consuming content. It was an incredible opportunity and actually Grad school was amazing because it, it taught me, I feel like I knew how to write in Undergrad, but Grad school taught me how to think and so that experience was.
Jay Clouse: 00:17:26
So. Forgive my ignorance here, Ryerson, is that in Toronto?
Alex Kolodkin: 00:17:29
Ryerson is in downtown Toronto, the hardest city, and so it’s not as well known to Americans. I think you guys told me. No, University of Toronto and Miguel, but Ryerson is probably the best broadcasting school in the country.
Jay Clouse: 00:17:42
Okay, so help me clear or understand this jump then into broadcasting. I am guessing That was after Grad School?
Alex Kolodkin: 00:17:51
Yeah. Broadcasting was actually in my last year of Undergrad going into Grad school. What that meant was essentially I worked for the department that is a VC, so we would look at multiple productions. We would. People would pitch us their shows and we would decide whether we’re going to find it. Some are not. Whether it fit into our mandate into our thesis and whether we could actually get a return on it. Being in Canada meant that we had to have a certain portion of our broadcasts being Canadians, so we had to look at these Canadian producers and these Canadian creators and see who could fund and so my job was to evaluate it and it was a really great opportunity because I got to be on the other side of things. So where my friends were coming up with show ideas and try to pitch it, I had the incredible opportunity to actually sit on the other side and say, okay, this is what we would be looking for. This is the holes in your argument, this is what you should say, this is what you should think about. And that was invaluable.
Jay Clouse: 00:18:45
So because I’m American and I and I need to put this in terms, I understand,
Alex Kolodkin: 00:18:49
Jay Clouse: 00:18:49
you are working for the equivalent of like an NBC or CBS determining television broadcasting schedules?
Alex Kolodkin: 00:18:58
not the schedules themselves, but the actual creation and development of the show. So look at it this way. If you’re an American, you pretty much have tons of money that you’re going out there and creating your content in Canada works a little bit differently. I have a really great show idea. I don’t have deep pockets from a studio, so I have to get a broadcaster to essentially licensed my content and pay for it. And so you pitch them and say, Hey, if you commit 30 percent of our, our budgets will give you the rights to show it in this capacity. And producers use that to budget their shows. So they’ll say, okay, we know we can get money from Rogers to film this to do season one. We can also get this tax incentive to fill the hole there. We can raise this amount of private money to kind of get there. So my job was, I was essentially the large vc in a deal.
Eric Hornung: 00:19:46
So how did you develop the finance chops to do all that? Because it sounds like you went to broadcast school for Undergrad and then your master’s. Did you just kind of pick it up naturally or what was that process like?
Alex Kolodkin: 00:19:59
I’d say Anything Finance to me does not come natural. I’m definitely a creator at heart. So in school we learned a lot about it. A lot of. There’s an amazing professor, James Adler who taught business of production of producing. And so a lot of that courses, if you were to create a show, how would you finance it? And so you had to look at, you know, all of the available tax credits and all of the available opportunities and try to finance it. And so that was just an extension of that course I’d say.
Eric Hornung: 00:20:29
So you mentioned you’re a creator. Do you still create things? What do you create? What’s natural to you?
Alex Kolodkin: 00:20:35
Yeah, that’s a great question. I think over the years it’s really evolved and at this point I’m very content with the fact that what I get to create enables other creators to do amazing work. And so I focus all my energy on SetScouter and building out the product and getting it to a point that I’m proud to be part of thousands of productions.
Jay Clouse: 00:20:56
And so if I’m filling in the gaps here, it sounds like you as the quote unquote vc with this broadcast network, you were seeing the financial side of things and saying, okay, there are a lot of expenses involved with just booking the locations. Do the production for the show that you’re getting pitched.
Alex Kolodkin: 00:21:13
That was part of it, but in general it was. There’s a lot of expenses in general for any type of production and coming from somebody that was producing things with school projects for $5,000 or even as a corporate commercial producer that I was doing as well where I was shooting content for, you know, 15/20,000 dollars for an ad campaign. I was surprised that there was hundreds of thousands of dollars even close to millions of dollars being spent on television shows and short films and movies. And so that was always interesting. I want to say that my, my internal passion isn’t really working with TV and film, although it’s incredible to see that that come about. I’ve always been more infatuated with the commercial and advertising side of things. I’d love working with brands and, and with product and trying to get their stories across and see how they can connect with their audiences. And so just seeing how we can simplify or how really I could build technology to simplify that process was really exciting.
Eric Hornung: 00:22:14
So let’s talk a little bit about that initial idea. That initial, okay, I’m going to try to build this. It’s five years ago, so we’re looking at 2013. You had just come out of your master’s, I’m guessing, so you come out and you see a couple of these things through internships and through your job and you have a co founder. Walk me through like what that decision was like to say, you know what, I’m going to try to build this. Did you do it full time? Did you do it part time? What did that all look like?
Alex Kolodkin: 00:22:46
Well SetScouter itself, but especially the journey is the embodiment of the lean startup model. One because we screwed up and didn’t follow up and then two, we then realized that we weren’t doing the right prices. Start again, and so I had to deal with my mom, which was again like I want to go to Grad school, I’m going to go to Harvard on a do my Mba. I need a story to get there, and so how do I get there? Oh, I’ll build a company startup. That sounds really cool. Like I’ll sell it for a million dollars in a year and that’ll be amazing. And so I had to deal with her mom, hey, I’m going to take the same amount of money that we spend on tuition, which in Canada is about 10 to $15,000 and keep in mind I had been working all throughout university and I lived at home. I didn’t have that many expenses. So I said, okay, I’m going to give it a year in one year. Let’s see how far we can get with $15,000. If we get somewhere great, we’ll sell it for a million. If we don’t get anywhere, they want to shut it down and go get a job. I have, I have a master’s degree. It’s fine. I did probably everything that you shouldn’t do as a founder. I immediately started building a website. I started building a website and the product. I didn’t talk to any customers. I kind of had this inkling. I knew what I was doing because I had this experience in it. But I started overbuilding everything I want in multiple currencies. Multiple this. I wanted technology to do ABC everything. Oh yeah. So it kind of built up this product. And then one day I sent it out to my friends and family and I said, hey guys, this is the bay, can you just take a look at it and let me know what you think, but please don’t send it to anybody else. And later at night I get a call and it’s from a producer and he says, Hey, my friend sent me this website. I’m looking for a film location shoots in two days. Can you help me? Again being me, I’m like, of course we had tons of locations but no problem. I hang up the phone and I spent all night on Google satellite view looking. He was looking for a house with a pool. I spent all night trying to find pools in the city and luckily two days later he ended up in a location and that was actually for a Canadian rock band. We got national press attention for doing this. And it was an amazing way to start. Our first client really blew the doors open. And from there it was just managing clients and starting again, like from what our clients wanted, building out SetScouter the way that it should have been built out from the get go.
Jay Clouse: 00:25:24
I have a lot of questions, but I’m going to start with a couple clarifying questions. So one from earlier on in this interview, you said you were kind of overly optimistic and thought you can build a company and sell it for a million dollars, which you just kind of reiterated when you thought that. Was that just because you thought I have it within me to build a company and when you build a company you sell it for a million dollars or was that from the standpoint of I see this problem and I know exactly what type of company I’m going to build?
Alex Kolodkin: 00:25:46
I genuinely thought I was a mix of both, but definitely the first part which was I thought I could start a company and sell it for a million dollars and had that as an awesome story to apply to Grad schools.
Jay Clouse: 00:25:56
Okay. And so you said you had to deal with your mom. Was your mom paying for your first year of university? Is that what you’re saying? So you convinced her instead of paying for the first year of university, we’re going to take that same money and basically build our own Mba by starting this company.
Alex Kolodkin: 00:26:10
So my mom definitely helped me out throughout unit university for sure. Like I did take student loans. I’m not to say that my mom paid for everything, but she was incredibly supportive, but the deal was essentially let’s just take the equivalent of what I had saved, which was the equivalent of one year. Let’s see if we can spend that. Yeah, that was definitely a pretty cool opportunity because now I look back in $15,000 to start a company. It sounds incredible like who, who can do that anymore. But uh, I guess as technology evolves and I talked to people and they say like, you know, we had to do this huge capital expenditure build our company. When you’re talking about a marketplace in particular, you don’t necessarily need a capital expenditure. You just need a website and you really great people. Yeah. Like you can build that for 15 grand, you could build it for like $200 now by, by using these marketplace companies on online.
Jay Clouse: 00:26:59
So your, Your v one that you sent out and had shared and brought in this first customer. Did you have a team member that was building that or did you outsource that? Who, who built the first product?
Alex Kolodkin: 00:27:11
So it’s definitely a combination of me outsourcing and me also designing the whole thing. So luckily because I was more creative, I was able to put together, you know, what we call now that the user experience. So I was able to put together the front end and I needed somebody to really get the backend going, but sets gathering itself was started with a sales first mentality which was how can we sell what we do before and then try to build it after. So we still have that mentality to this day, which is guys, if we have a great idea, let’s sell it now, see if customers will pay for it and if they’ll pay for it then we’ll build it into the product. And so I guess like after the first sale, after our first experience with, with Headley, which was the band, like doing their music video, it was hey, what do customers actually want and sell it on the phone and then after that we’ll build it into product.
Eric Hornung: 00:28:06
And how did you make that kind of shift? Because it sounds like your first product, you just said, I’m going to build it, I’m going to build it the way I envision it. And then if people want it, that’ll be great. And you got one and then all of a sudden it was like a click that was. Or how did that transition happen that okay, now we’re going to go hardcore lean startup model.
Alex Kolodkin: 00:28:26
You know, it was just, it was empowering at that point because I didn’t think we could sell it until we hit some sort of version of our product. And the exact opposite happened. It seemed like the product was irrelevant. It was just, you know, could you deliver on my service? Like could you do what I needed you to do? And it all became about efficiency after that. So yeah, I can definitely find you a location and it might take me the first time, you know, at that point it might take me a week to find the right location until I get the right supply, but then how can I make my process more efficient and then from there, how do I make, how do I expand that out to the customers themselves can be efficient without having me involved. And so that’s, that’s kind of been the shift. And so after the first client I got another few and then I just was always talking to friends of mine that I had throughout Undergrad and some mentors. And so one of them was my cofounder and at that point I had a few customers I was really stretched. I felt like I couldn’t manage the product and the development and I couldn’t also do sales and the customer, like a customer success and experience. And so I remember chatting with Lydia who I would talk to him all the time. I’d be like, Lydia, I need your help with this. I need help with that. And at one point I just said, man, Lids, I need your help, can you just do this with me? And luckily she was itching do something like this as well, and she took the plunge and she’s been my cofounder ever since. And it’s, it’s incredible working with her. And so I remember a very clear conversation with her where she said, listen, I know I want to start my own business. I know I want to work on a business, but I just don’t know if location scouting is what I want to work on. I asked her, I was like, why? She’s like, well, it just sounds boring. It sounds like tedious. Like it’s not something that people want to do. I remember looking at him like, exactly. Imagine if we can win this, imagine if we can make it so that no producer ever dreads location scouting anymore. And she was all hands on deck at that point.
Eric Hornung: 00:30:26
What timeframe was that that you and Lydia started working together as cofounders?
Alex Kolodkin: 00:30:30
It was probably a year after I started the company.
Jay Clouse: 00:30:33
What experience did you have with direct location scouting before that? And how has the process done without SetScouter?
Alex Kolodkin: 00:30:41
I actually didn’t have any location scouting experience out. I knew of it because I was trained as a producer and producers can basically do a lot of things. They’re trying to put out fires, so I knew the theory behind location scouting, but I definitely was not a location scout. Location scouts are really professional experts. They have catalogs of location relationships with people that they’ve worked with and they had this. I have found these really cool families. My whole thought was how do we come out of that process, how can we make it so that location scouts and producers don’t necessarily have to drive out and spend weeks and weeks trying to find the right location. How do we just give them a database or a catalog that they can get access to? And so the real powerful part about SetScouter is that if you only have two weeks to turn around a location for a commercial tire that you’re shooting, well you’re going to hire somebody or you’re going to do it yourself and you’re gonna be driving around all daTrying to find that slot on Tesco or you can do that in less than a day, so in less than a day you can find options for your production. That will fit and the best part is because we specialize in residential homes and finding to find a restaurant. I could probably Google 10 restaurants and see what the inside looks like, but if I have to find a residential home short of like peering through their window and potentially getting the cops called on you, there’s is not a really good way of seeing the inside of people’s houses and so that’s what we specialize in and that’s what we do really, really well.
Eric Hornung: 00:32:13
What is the margin for a location scout? Like how do they get paid in the traditional location? Scouting industry?
Alex Kolodkin: 00:32:21
So there’s two. The really professional season location scouts will get paid a per day rate, so if they are on your production team, they’ll make it clean $500 to $700 per day and they’ll work probably about a week, two weeks to try and both of them really light, unionized ones. The ones that are great. Then there’s, there’s some location scouts that will actually mark up locations, so they’ll say, hey, let’s revise your budget is 5,000 great, I have a location, and then they’ll say it’s cost $5,000. They’ll go to the location. The owners say we have a $2,000 budget and they’ll keep three grand. Not all of them are like that, but there definitely was a growing trend of people that we’re trying to operate in that capacity.
Jay Clouse: 00:33:05
Can you talk to me about what the rise of home sharing technology like airbnb and Vrbo. I’m trying to think back when airbnb and Vrbo started and how that correlates to when you were starting to SetScouter. I would assume both of those websites were very helpful for the traditional location scouts. Can you talk to me about anything you know in that context?
Alex Kolodkin: 00:33:26
Absolutely. So when I was starting out, definitely I was looking at Airbnb as you know, what an awesome idea and it’s crazy that its working, but the look of the traction that they’re getting. The difference that I think affects filmmakers and producers the most is that they’re mostly in cities and they’re mostly going to be smaller types of spaces, so condos are good examples of like the most ideal airbnb or Vrbo, you know, a space that you can necessarily just come and sleep in and stay in and go explore the city. They have a lot of density of that, but when you’re looking at it from a production side, I don’t necessarily need a place that’s right down town. I need a place that fits my look and my vision and that might not be five locations that all have the same style of kitchen and the same kind of shoe box layout. I need a location that has maybe dark counters are white counters or or I need the sun to hit hit it this way or I need the living room or this type of decor. And so having that variety of locations is really important. At least on SetScouter. And so that’s where I see producers are kind of shying away from airbnb and Vrbo and going either with a professional location scout or with a platform like us.
Eric Hornung: 00:34:41
So I think this might be a good time to just define what SetScouter is in your own words and how it’s changed in the last five years. What was it, when it was founded and what is it today?
Alex Kolodkin: 00:34:52
So SetScouter simplifies productions. We just start by supply locations kind of process. What that means is that there’s a marketplace that connects agency in commercial producers with residential spaces for commercial production. Uh, we specialize in getting producers into locations in less than one day and 60 percent cheaper than traditional methods. And we get to work with amazing brands like Google and Amazon and Coca Cola and he’s a. and the list goes on and on. When it started, it was essentially focused on how can we just fix location scouting and how can we make that easier? And as we’ve grown, we’ve realized that there’s, there’s a lot in production that can be simplified and we can absolutely be the ones that win and take that over because we have the expertise, we’re a team of producers, we have the technology chops, and that’s validated by the fact that we are able to build an incredible platform that does work with projections every single day and two or three, I don’t even know what number I’m on, but, but, but really where the team to win because we just really understand this industry, we’re in love with this industry and we want to make it better and we want content to roll. We know that content is king. Let’s, let’s let it free.
Eric Hornung: 00:36:16
So you mentioned your team a lot in that response and we talked a little bit about Lydia earlier. What is your guys’ role now that you’ve been kind of co founders for about four years? How has that co founder, dynamic worked? What do each of you do and then what does your team look like now?
Alex Kolodkin: 00:36:33
When we started the company, people would look at Lydia and I and say, you guys doubled up on skills. Neither of you are technical, so you guys have the same background as well as the video was that it was a television producer, so she produced like TV shows and she had a production company as well, so she had experience in, in, in all of the budgeting and financing and digital production as well. But people will look at us and say, look, okay, you guys are the same thing. Like go, go get a technical cofounder. Go bring somebody on that can handle the attack. And we just kind of. There was this inherent trust between us, like we have the same cultural upbringing, the same background and we went to the same program and we gravitate it towards you towards each other throughout Undergrad. Because we were always really in love with the business of production as opposed to going out there and creating, you know, a film. And so we always looked at each other and we knew that we could trust each other’s judgment and get advice from each other. And then it was when we started working together, we were almost found our natural spots like Lydia is incredible at empathizing with our customers and understanding where we need to go to really service them. And I think what I do really well is I look for efficiencies and how we can make the process easier on ourselves. So the way that we naturally divided was lydia took over the sales and the customer support and experience and I took over naturally what a CEO do, which is the financing and uh, and the team, but also the product. And so it’s a really cool divide because she trusts me to take her learnings and apply them and I trust her to gather that insight from our customers.
Jay Clouse: 00:38:16
And you’ve told us before that you have about 12 people on your team now, what’s the rest of the team makeup look like?
Alex Kolodkin: 00:38:22
So we have a women’s product team, which is great. So that’s a couple of developers and designer. And then we have a supply team that helps with onboarding locations to our, to our platform as well as sales team that helps our customers find the right locations and walk them through that process.
Eric Hornung: 00:38:38
Can you just talk to me quickly about personnel costs in Toronto? I’m familiar with them in New York and Silicon Valley and the midwest of the United States, but I don’t really understand the Canadian market for talent.
Alex Kolodkin: 00:38:53
The Canadian market for talent is definitely easier to swallow then when we were in the valley for 500 startups, we were in a valley 500 startup. I was so shocked at how much people cost and for a marketplace like where your expenses are, 90 percent people being in the valley just wasn’t reasonable for us. So when we went through the 500 startups program, we brought our team down. At that point we were myself, Lydia and three others and so we lived in a, in a house like silicon valley style. We lived in a house with five people and one bathroom and it was a nightmare, but we loved it. And then we moved back to Toronto because, well one, we pay everybody in Canadian, we get paid in American. So right there it’s about a 25 to 30 percent boost in revenue and salaries are reasonable and not spending 100 grand for an office manager like you are in the valley.
Jay Clouse: 00:39:46
I’m interested to hear more about your experience during that time that you were in silicon valley. In what advantages or disadvantages outside of the cost of living that you experienced as SetScouter in that location?
Alex Kolodkin: 00:39:59
Silicon Valley was incredibly eyeopening, especially for a founder from Toronto because Toronto is an amazing city for tech and it’s getting a lot of press these these days for its incredible diversity and the amount of companies that are here. But when I was trying to raise a seed round, everyone in Toronto wanted one of a few things which was our you health tech or you Fintech, you know, are you patentable hardcore technology and if you’re not, what are you doing here? And so I was really hitting a wall when I was trying to raise a small seed round at that time. And I just felt really discouraged and then miraculously, and I’d love to talk about this, about how we got into 500 startups, but the first day in the valley I remember being at 500 and around me was a product manager, facebook product manager at Airbnb and a growth manager at lyft. And I remember just looking at them saying like little shyly. I was like, hey, we have a marketplace. And they were like, oh my God, marketplaces, we love marketplaces. Tell us about it. Tell us about your supply or demand, like tell us all these things. And that was so reassuring because I’ve finally felt as though I could talk to people that had experience, has seen companies scale and had been on the ground with them. So I loved it there. My team would be back there in 500 at the drop of a hat. We would do the whole program again and have that experience again. And for my own sanity, I like to fly out to the valley every once in awhile just to get reinvigorated that spirit and by feeling like, you know, there’s so much opportunity as well. Then you just have to think bigger.
Eric Hornung: 00:41:39
So why are you in Toronto?
Alex Kolodkin: 00:41:41
Toronto’s a great place to be. It’s east coast. A lot of her customers on the east coast is great tax advantages to being in Toronto. So we get a large percentage of our, of our expenditures back and on top of that, there’s a lot of talent here. I mean you have the University of Waterloo, which is probably one of the best engineering and computer science schools in, in North America. You Have University of Toronto, Iverson. There’s a lot of talent here and it’s Toronto, which is the capital of Canada.
Jay Clouse: 00:42:14
So tell me about the story of getting into 500 startups. It sounds like it’s a unique different story than your typical application and entry. And I’m interested in hearing about it.
Alex Kolodkin: 00:42:23
Getting into 500 startups was quite possibly the very definition of imposter syndrome because to give you kind of a sense, I didn’t let my team unpack their bags for two weeks after we arrived. They were not allowed to because I was convinced that 100 percent they are going to realize that they made a mistake and they’re going to send us home and the story comes that we were part of Communitech, which is a, which is an incubator in kitchener waterloo. Part of that program was that you would get a government convertible note, so if you finish the program and the government, in this case it’s called the Business Development Bank of Canada, the BDC, if BDC, like your company. Then they will invest $150,000, which to us is huge. At the time it was, it was a monster and part of that relationship was an Nicole LeBlanca wasn’t investor there who actually took the chance on us. Said we’re happy to give you the a hundred 50,000, but there’s one condition you need to raise another $200,000 and this is when I kind of went out and talked to every angel in the city, talked to every fund and nobody was cutting me a check. Nicole made an introduction that 500 startups and at that point I thought it was to learn about the program to give more context like Lydia and I and we flew down to sf like a little bit earlier with some friends of ours that just gone on the most recent batch. We met with $500 at that time. We kind of saw that hey, these guys aren’t really production focused or not really, you know, advertising focus, maybe it’s not the right fit for us. So during my first skype call, which I thought was me trying to get more information about how the program evolved, Chris who’s interviewed me at the time turned around and said, hey, we don’t have time to go over the program. Like, this is your first interview. Are you ready? Are you not? I went, oh my God, okay, let’s do this, and the from the moment we got in, we had three days to be in mountain view, so it was surreal. Like first day flights, second day AIRBNB, they’re getting all of her insurance and moving the company down to the valley.
Jay Clouse: 00:44:32
I’ve heard this mad dash to just move there. Four or 500 startups before. I have to think this is just a systemic thing they do to see how you handle it. Like were there any companies that were given like three weeks notice like okay, you guys need to be here a month from now to start the accelerator? Or was everybody just like they find out three days before.
Alex Kolodkin: 00:44:50
So there is one, one company that did get three weeks and I was incredibly jealous and they’re doing amazingly well. I have heard that people do get in early, but this is. I think part of the reason why I didn’t let my team unpack their bags is because they only had three days. Like realistically we had been talking for a month and we will be updating them with traction and answering your questions for a month, but from decision to program time we didn’t really sleep. We were just there and it was scary. I definitely looking back like we definitely belonged or traction numbers were good. There are in line with where the other companies were, whether it was rap chat or whether it was long guru or law trays, but at the time those companies look like they were doing incredibly well. They had their shit together and it was just us at the time. Just trying to figure this out.
Eric Hornung: 00:45:39
So talk to me about what kind of numbers you look at when you’re thinking about your traction. What are the kind of key Kpis, just kpis?
Alex Kolodkin: 00:45:50
For a marketplace. Our Kpi right now is our gross merchandise volume, so how much money I’ve transacting through the platform and how is that growing month over month, quarter over quarter. We actually look as well at our usage rate and so how is that? Is that consistent? Is that same? Same. Is that going down or or is it growing? And so the real thing that we have that we think is super, super cool is that, you know, we have over 50 percent repeat rates for productions every single month and that number grows and then on top of that when it comes to onboarding new users and it comes to user growth, we’re seeing that a large percentage of new users are coming from direct word of mouth referrals. And so that’s a blessing and a curse. It’s a blessing because people love our product and they’re using us and then recommending us. It’s a curse because it’s really hard to track. And so how do you scale word of mouth referrals and that’s, that’s really interesting as to like a challenge that we’re facing now as we go into where the company’s going to be the next 12 to 18 months.
Eric Hornung: 00:46:54
So what does your GMV number look like right now?
Alex Kolodkin: 00:46:57
So we don’t publicly disclose our GMP number, but when we went through the 500 startups program, we were in a slow season and we were doing about 30,000. Give or take $30,000 gmp a month, without publicly disclosing it, that number now is as practically a joke for us.
Eric Hornung: 00:47:16
So you mentioned earlier that your costs are low, 90 percent people, but that you have a good amount of people staffed on the sales side of things. So I was wondering what your costs of getting a new person on the demand side is or on the supply side. We can go through both I guess,
Alex Kolodkin: 00:47:32
Well what excited 500 startups really about us was the fact that we were able to onboard supply super cheaply and on top of that our supplies and the interesting use case because unlike airbnb or, or any of these other kind of money making websites, we have a low touch supply so people aren’t joining our website anticipating to be booked out every single day or every single week. They’re looking at as a cool opportunity like, hey my, my, uh, home gets shot and then that’s cool experience. I get to tell my friends and I don’t need that every single week. I, if it happens once a year or once a quarter and that’s great. And so that low low touch supply really helped 500 get excited about what we were doing and then from the demand side when it comes to like user cost and acquisition, we’ve been so overwhelmed with just the amount of producers that are coming to us requesting spaces and spaces through our platform and getting that process down, that walking through costumer acquisition side of things is really experimentation that we’re taking care of now and we’re really lucky to be able to say that, that, you know, we’ve been able to get to profitability with 12 employees. I’m just inbound growth. And now the question is like, realistically how do we scale beyond word of mouth and how do we get to the next stage and how do we actually deploy capital in a smart and efficient way?
Eric Hornung: 00:49:00
And how does SetScouter make money?
Alex Kolodkin: 00:49:04
We make money by charging a 20 percent service fee on top of a rental. So if a producer is going out there and spending or booking a vacation for thousands of dollars for all the services and fees or all the services that SetScouter provides, we charge a 20 percent service fee on top of that thousand dollars, so the producer will end up spending $1,200 and we get to keep 200 of it.
Eric Hornung: 00:49:27
and nothing on the supply side?
Alex Kolodkin: 00:49:29
We don’t charge supplies for anything.
Jay Clouse: 00:49:31
In Your Demo Day deck, for 500, you talked about the number of commercials that are booked each year. Something Eric and I kind of struggled to make tangible in our research was the market size and what you’re viewing as your market opportunity. Can you talk to us about that?
Alex Kolodkin: 00:49:48
That’s a great question and something that we’ve definitely had pushback, especially in the early days with investors when we reached out at that time. Now this is such a challenge for us to figure it out because we always had two things that were really important to us, which we’re trying to communicate that yes, there are traditional video and agency production companies out there, but a large or a growing percentage of users on our platform are people that are like, like you two, like you two decide that you won’t want to put together some sort of content. You end up, let’s say you guys started a production company, you get an awesome client, you start producing for them and then you roll that out and you create your own production company after that. And like that’s not tracked anywhere. So to be able to say that there is x amount here, x amount there, it was really difficult to, to get that out. So here’s what we do now, you know, according to the research that we found, we know that the industry for film intelligence spends about $67, billion dollars on expenses. If we can take out the key players in those and we just look at companies that have under 100 employees and again these are companies that are registered as production agencies or ad agencies were looking that if we remove it, there’s about $20,000,000,000 of expenditures in there, so that’s 20 billion dollars being spent on producing video content and if you even break down the budgets based on what I’ve seen and what our customers are telling us, about 30 percent of that is being spent on location and equipment, wardrobe and all of these, these other costs that are there to make their production tap. Theres about 6 billion dollars being spent and an immediate addressable market that we can go after in North America alone. That’s sizable for us. Like there’s. There’s meat on that bone
Jay Clouse: 00:51:41
And if you look at that from just the number of players, you guys aren’t a pure. This is an assumption so let me know if I’m wrong here, this isn’t just a pure volume game because this isn’t the mass market of the traveler the way Airbnb is booking their demand side of things. So you guys have a set number of content creators, agencies, etc. And is that why you look at repeat business so much?
Alex Kolodkin: 00:52:04
Absolutely. We look At repeat business because a, it’s a good kpi in terms of how healthy were doing as a company in terms of can we actually do they like us enough to use this account, but also because we know that in order to grow this into 100 million dollar, billion dollar business, we have to dive deep and we can’t dive deep if customers are turning left right and center. So right now you know, we’re working on, on production film locations, you know, tomorrow it might be, you know, the insurance and the crew and all this other stuff. So for us we know we have to dive deep and we have to own the entire production workflow and signify productive.
Eric Hornung: 00:52:46
Do you have a, I think we just started to go down to depth channel, but I want to go breadth first and then we can dive back into that. Do you have a understanding of how that $6,000,000,000 is kind of spread amongst cities? Because as my understanding is right now you kind of have six target cities, are you going to expand into new cities or are those is 80 percent of the spend happening in those six cities and those wherever you want to focus?
Alex Kolodkin: 00:53:11
The majority of spent in north America is actually a within seven cities, so that’s toronto, vancouver from the kitchen side of things, toronto, vancouver, montreal, and then there’s LA our biggest followed by New York city, chicago and miami. And so when we look at commercial productions, those are the main cities that we have to charge by winning those cities. We went so although like we would love to work in columbus, if we’re not in columbus, it doesn’t mean that we can’t lead them to the market. And on top of that, like we have locations everywhere in the world, which is pretty cool. Like the fact that I can almost travel anywhere and see a see a location that’s listed on set scatter. But as a sales focus right now are our markets are Toronto, Miami, Chicago and New York city. Those are our key, our key cities. But we do service productions in la and vancouver and kind of all over the place all over the place within north America should say we don’t do anything internationally and so just focusing on those main cities that us is going to be a huge win.
Jay Clouse: 00:54:15
So you started talking about insurance and production and things. I’m guessing that’s because some of those expenses are baked into that $6,000,000,000 market you’re talking about and so you’re trying to go wider than just location. You’re trying to grab more of what that $6,000,000,000 expenditure is going towards. Can you. Can you talk about that in the future of SetScouter?
Alex Kolodkin: 00:54:37
We knew thAt when we started the company, easiest way to win would be through locations because it was so tedious and so cumbersome and it was early enough in the production process that when I’m producing something I need to kind of lock in my location and get my client to approve it and then I can kind of cost out the rest of how much this is gonna. This is gonna be so depending on the location, I knoW how many lights I need, how many crew members, any need and so on and so forth, and so if we could win our customer’s trust by getting locations, which is super cumbersome, we thought that we could also win their trust when it comes to working down the line of what they need for their production. That is slowly but surely showing up as a positive indicator towards the next steps for our company, which is clients are coming to us saying, hey, great, by any chance do you also do this? Do you also do that? And right now the answer is no, but soon it will be. Absolutely. And here’s how we can help out. so realistically the vision that Lydia and I have for this company is that we will sit beside a producer who has sat in in a, in an agency or a brand, and we will enable them to be as efficient and as powerful as they can be without having to hire or five people just to help with their production. That they’ll be able to do everything that they needed to do from the SetScouter platform to create amazing, awesome content.
Jay Clouse: 00:56:02
What’s the biggest threat at SetScouter? What could happen that this kind of upward momentum doesn’t want to continue?
Alex Kolodkin: 00:56:09
It’s a great question. This definitely keeps me up at night, which is two things. It’s like can we win the trust of our customers so that they’re able to look at us as their go to resource instead of doing things themselves, which is traditionally going out and finding locations or hiring traditional location scouts, which by the way traditional location scouts love our platform and we work with them all the time, but definitely we actually look to them as well for, for, for help on certain things. And the second thing is I can we penetrate markets fast enough so that we can actually provide value. A lot of our effort now is how do we grow within our new cities? How do we continue that growth?
Jay Clouse: 00:56:48
Alex, something I told eric about in our intro, I do courses for linkedin learning and lynda.com and I was talking to my producer about SetScouter because I was asking him, hey, is this a problem that you guys face? Is this something that you deal with? And his first response was, that’s awesome. We struggle with this all the time and finding locations and a second thought was, but also I feel like if we are going through a service that is giving us explicit connection to homeowners to know we’re coming in to film, it might be more expensive. Is that something that you hear from producers and what’s your feedback to that?
Alex Kolodkin: 00:57:23
Definitely when we look at that market segment of people who aren’t creating content regularly and who are maybe doing lower budgeted productions, that’s. That’s definitely an issue and it’s something we’re gonna be focusing on over the next, I’d say three to six months to really address as to how do we get producers to get over The mental barrier of this may be more expensive, but if we look at our target market right now, the customers that we currently have, our agency producers, production houses that are shooting content and they have about 10 to 15 people cruise, they have thousands of dollars that they can spend on a, on a location and so just by winning them, that’s the immediate immediate win for us. And then we can move down market to the lower budget.
Jay Clouse: 00:58:07
So that’s the segment you’re tackling first and you said you save 60 percent on average for those folks. Where does that 60 percent come from? Is that because the talent scout isn’t a marketing it and you’re just taking out the middleman?
Alex Kolodkin: 00:58:19
the 60 percent really is the time that they would have spent either themselves finding the location or hiring a location scout to do that. Keep in mind in production, you’re paying everybody day rates until the production stuff. So if I’m a producer and I get my day rate and I don’t have to go out there and find a location or if I can’t afford a location scout, which is a huge segment of our customers, they have a budget, they just don’t have a budget big enough to get somebody else involved to help them find the location so they often have to get their production manager or their production assistance to try to find a space. So we help them become more efficient and that’s where the sates are from because we have such a large variety of locations. You’re also saving money on the space themselves. So because a traditional catalog will have a location that’s maybe rented out 10 or 15 times, you know, they have that experience and they’re like, oh well you know, this big film came and spent $20,000 for one day. Like I that in our platform, that isn’t the case. So you can negotiate with the homeowners directly. You could say know our budget is, you know, $2000 or $1,000 or $500, can you accommodate us? And a lot of the times you’ll see that homeowners will.
Jay Clouse: 00:59:36
you talked about word of mouth being such a big driver for customer acquisition. What’s the velocity of producers that work for google than moving and working for a different company and bringing SetScouter with them?
Alex Kolodkin: 00:59:48
That is such a great question and that’s something that we’re so excited about, which is if you are a producer, we kind of watch you grow. So we watch you start as maybe a production assistant or a production manager and then you become an associate producer, producer and as you move agencies and the sin nature with freelance as well as is that you know, you’re working for multiple companies at one time. You have the opportunity to expose, SetScouter to everybody on your production crews at all your agencies and we’ll see it where you have the clients actually hear about us from the production companies and then for their next project they’re searching for locations and then they get their production company or agency to start looking at us because of it. And so there’s. There’s cool, I wouldn’t call it vitality because it’s not like explosive growth that everybody in your uncle is on, but definitely industry wise it’s really cool to see that organic growth.
Eric Hornung: 01:00:45
So on the topic of growth, you’ve mentioned a couple times about expansion, whether it’s geographic or its services based or it’s new client offering, you’re also profitable. So I’m curious if you are looking at fundraising and what you think that that is going to look like or if you’re going to continue to operationally leverage your profit going forward.
Alex Kolodkin: 01:01:11
so before getting into 500 startups, the fact that fundraising was so difficult for us, lydia and I actually had a conversation of what the hell do we do? We don’t want to be that company that ends up raising a seed round and then can never raise money again and just dies out into oblivion. So for us the focus was always how do we get as much optionality into the company as possible? And so we rallied the team around it and said like, hey guys, like we want the best possible outcome for this company and for everybody on here. So let’s see how close we can and how responsibly we can get to to become profitable and still grow, like still have that there. And so you know, the team being behind that really helped. Definitely there will be another fundraising event in the future. We just have the flexibility now to go after somebody that’s really right for us that can help put dollars towards growth and that expansion as opposed to kind of taking money because we need to. So if we don’t fundraise, we know says guy is going to be here for the next five, 10, 20 years. We know that we can operate this business and continue to make it more efficient and continue to grow. But really the next step for us is, you know, how the hell do we explode the roof off this thing without burning down the house?
Jay Clouse: 01:02:27
Are there any questions that we should be asking that we’re not asking?
Alex Kolodkin: 01:02:29
That is possibly my favorite question I’ve ever heard. Yeah. So one of the things that I’d love to talk a little bit more about was this idea of why toronto is home for us and 500 startups are batch was incredible because we had companies from from everywhere and a lot of them ended up coming back to toronto with us. and the reason is because, you know, it’s no secret that your political climate is, is it’s harder for people to get status in America and Canada has been a really good refuge for that. But there’s a lot of government programs and incentives here that make it very capital efficient for companies to operate. So there’s, you know, the national research council that will fund certain applications if you can show that there is experimental, you know, industrial design or, or something patentable in the future. Companies in Canada particularly rely on shred, which is the scientific. Let me get this right in scientific research and experimental development tax incentive where you get a portion of your r and d research back from the government. So a lot of boundaries and companies look at fundraising as I need to get this investor in. But you know, government grants and government tax incentives are non dilutive fundraising. It’s another avenue for companies and, and really that’s, that’s helped us in almost every other toronto tech startup.
Jay Clouse: 01:03:57
Well alex, I appreciate you being on the show with us today. I also appreciate some of the resources you send us ahead of time. The one commercial you sent for playstation four, I click that. It’s like, okay, let’s see One of these commercials that used SetScouter and in that commercial is a guy I went to college with and did improv and was a writer for a satirical magazine. His name is Nate Nerone he lives in chicago. He’s on the touring group with IO, I believe, just so such a small world where audience, he was the dude with the mustache and the parted hair that was a weirdo.
Alex Kolodkin: 01:04:31
That’s awesome. What’s incredible for me, and I think not a lot of people recognize, is that when they think of the stuff that we do, they always think of these big commercial instead of being shot with movie stars. But there’s, if people just take a moment to just really see all the content that they’re being pushed in, all of the facebook ads and the instagram ads and the youtube pre rolls and all this random stuff that agencies are our billing and creating, you’ll see that a lot of them require spaces, a lot of them require houses and that’s really what we’re trying to go after and target and that’s what’s exciting to me. It’s like you watch a superbowl commercial and like 70 percent of all the commercials feature house, that’s great. But then you also like trying to watch your favorite clip on youtube and you’re getting pretty rolled by advil and tylenol commercials and those are also in homes and those had to be shot somewhere. So it’s really cool to see that what we do subliminally affects everybody
Jay Clouse: 01:05:28
after the show if people want to learn more about your SetScouter, where should they go?
Alex Kolodkin: 01:05:32
If people want to learn more about SetScouter, if they want to join the squad or if they want to list their home or, or look at locations for their next next production, please visit SetScouter.com and if you want to reach out to me, um, you can go to linkedin or AlexKolodkin.com, which actually redirects right to my linkedin and I love talking to other founders. I love learning from other founders and you know, that helps me grow as an individual and I’d love to share my experiences as well with them.
Jay Clouse: 01:06:00
Great. Alex, thanks for being on the show.
Alex Kolodkin: 01:06:02
Thank you for having me. I appreciate it as great talking with you guys.
Jay Clouse: 01:06:08
All right, Eric we just spoke with Alex Kolodkin, the co founder and ceo of SetScouter and now onto one of our favorite parts of the show. Talking about the opportunity. Let us now talk about our feelings and thoughts about SetScouter and the opportunity to present here.
Eric Hornung: 01:06:25
I like that you brought our feelings into it. Like we got to get really emotional here on the deal memo section of the upside, but to get emotional, but it’s good to be in touch with our feelings.
Eric Hornung: 01:06:34
Have you been in touch with your feelings a lot lately Jay?
Jay Clouse: 01:06:36
I have an unfortunate amount.
Eric Hornung: 01:06:38
Well that’s what happens when you get a little bit stressed out. Those emotions. You know what? I just want to jump in and say off the bat SetScouter reminds me a lot of lawn guru from a business model and just general like vibe, which is weird because they’re both in the same cohort, but even if they weren’t
Jay Clouse: 01:06:57
in the same pod even
Eric Hornung: 01:06:58
in the same pod. Exactly. They just so much feels similar between the two of them. To me, for the listeners who are new, we interviewed long guru on episode three. Yeah. Nailed it. So we interviewed longer on episode three and I see a lot of similar structures, meaning they’re both profitable. They are businesses that appear to really focus on one half of the marketplace providing excessive amounts of value and lawn gurus case it was for outdoor companies providing them the backend support they need to run a more efficient shop. In SetScouters’ case it’s the same thing, but it’s for producers and broadcasters
Jay Clouse: 01:07:43
and the technology in both cases is seemingly a national natural progression of the solution for the people involved. Right. The set scouting process to this point sounds like has been very analog and manual. the actual scouters having literal catalogs of locations and it just makes sense that that can be brought online in, searched and parsed and planned much more easily. Hot. Take my biggest question on this opportunity, eric, is the market size and we talked about it in the intro being hard to define. We asked alex, he said, that’s a good question. We had a hard time defining this. We kind of did a top down or he. He talked us through a top down approach of there’s a $67,000,000,000 expenditure in this industry, but broke that all the way down to $6,000,000,000. that’s actually used on locations, equipment and wardrobe. I don’t think that included insurance, but he talked about insurance as well, so you’re talking about potentially a $6,000,000,000 market for the location scouting product, which it has to play. Just a small segment of that $6,000,000,000 market too because that’s locations, equipment and wardrobe. So what were your thoughts on the market size here?
Eric Hornung: 01:09:00
I agree. I think the $6,000,000,000 might be a little bit too large because it does take in locations, equipment and wardrobe and I don’t know what the breakdown between those is, but I would assume equipment is probably the biggest session of those. Maybe a bad assumption on my head regardless. Even if it’s 33, 33, 33, that’s still only a $2,000,000,000 market as opposed to a $6,000,000,000 market, which is what the number we’re playing with right now.
Jay Clouse: 01:09:28
Right and something that may be related to the market size, our competitive analysis here. Usually you would think that something that’s a large opportunity has more competition in it. Right. We found that one was, that seems relatively new. The tech is way less sophisticated. The other competitors in the space are those traditional routes of scouts with catalogs and then you have platforms that you could use for a similar service, but you kind of have to do a workaround. Airbnb and vrbo for example, so it seems like SetScouter is kind of playing in a league of its own here and that either means that they’re early to market in early to identify an opportunity that other people haven’t caught onto, which would be a great thing or it means that it’s a small market and people just aren’t chasing it.
Eric Hornung: 01:10:02
I feel like it’s also one of those markets that so relationship based, so it’s just hard to break in with a tech product. He talks about the virality of it with. Okay. One team used it and then people move around all the time and their fluids, so then they go to another team and they use it and then everyone gets exposure there and I think that’s just something that takes time is okay, I’m a lighting guy for movies and I see someone use SetScouter for our location. I see. Another person use SetScouter, then see another person who uses SetScouter and I say, well, maybe this thing has some legs, but it might take a few years before I really decide, okay, this is something I’m willing to try it versus using mary who we’ve used for 40 years.
Jay Clouse: 01:10:42
That’s a great point. In breaking in, it would be difficult to find the very specific buyer within the very specific type of companies looking for this. I’m gonna keep going down the shadow route because I think this is a good thing to talk about. The other shadow to me was some of the feedback that we got from my contact that I spoke with. I’ve seen this in reviews relating to the price of this service, so for the companies that is good for, it’s great for, right? The companies that have a larger budget and they’re already putting it aside. The 60 percent cheaper statistic that alex shared with us, he said was derived from the time savings that people generally spend finding locations, not necessarily the pricing itself and so I wonder if that limits the market more or presents an opportunity for expanding the market because you talked about general content creators or youtube ers who who could use this service. I would just imagine they have a smaller budget and if this is cost prohibitive, they wouldn’t be able to really play in that space.
Eric Hornung: 01:11:38
Right. To grow outside of the big names, the unilevers and mcdonald’s, the ones that they have right now, maybe there is a different type of business model. Maybe it’s just an exPansion of their business model and that gets to expansion, which is something that I think is really interesting because they can capture 80 percent of the market by being in six cities. That is unique I think to a few Different industries, but it is pretty awesome. They don’t have to expand geographically because expanding geographically is very expensive. We saw it with tiller on episode one. When they raIse the raise was essentially, well, we need to raise money so we can expand. We’ve heard it before as well, and he spoke to that about 500 startups. Being stoked about that aspect of their business was that their supply side was sort of low touch and I think that speaks both tovIt seemed like people were interested to join the platform and it wasn’t that they were renting out their location every week, but also is the fact to what you’re saying. It’s a limited market play as a number of markets. It also seems like it probably gives them an opportunity to expand in a more reactionary way than proactively necessarily because if you have one of your clients say it’s mcdonalds saying we’re going to be in minneapolis and we want to shoot one of these shots SetScouter can kind of just go in and handpick what they’re looking for. Building their own catalog based off of things like airbnb and vrbo.
Eric Hornung: 01:12:58
Right. Which was his initial business model, which was everything is reactionary. Well, not as initial business model as initial business model is I’m going to build this product completely and then as soon as he realized he can do things reactionary. Yeah, so I agree with you there. I think it also gives them the flexibility to expand their service offerings because they don’t have to expand geographically, so any money that they raise and he either hinted at this or set it can be expanded into equipment and wardrobe and Insurance and I’m sure that there’s a ton of other spaces that they can expand into and still have 80 percent of the market available in those six cities.
Jay Clouse: 01:13:32
which is great if they have a 50 percent rebooking rate, I think that month he said for a lot of their customers it sounds like it’s a sticky product for the people that are using it, which is great and that would lend itself to say they would be able to vertically integrate?
Eric Hornung: 01:13:48
You know, I’m not really sure if it’s one or the other. I think those terms might be a little bit more industrial era, but they definitely are complimentary services.
Jay Clouse: 01:13:56
Yeah. Either way, if if, if this is a sticky product and people are already handling some of these other problems and services outside of SetScouter, it would make sense that south scatter kid bring those in house and reduce the number of vendors and services and interfaces that people are dealing with.
Eric Hornung: 01:14:11
Jay, we’ve done something a little weird here in this deal memo that we don’t usually do.
Jay Clouse: 01:14:14
We haven’t talked about the founder
Eric Hornung: 01:14:16
at all. Very, very odd. Usually we spend so much time talking about the founder and I’m curious to you if that because this is a foregone conclusion that alex is great or there’s a lot of issues and we want to save it till the end that you put in.
Jay Clouse: 01:14:30
Are you putting me on the spot?
Eric Hornung: 01:14:31
Oh, I’m putting you on the spot.
Jay Clouse: 01:14:33
No I like alex. I like his openness to talking about the challenges that they haD and his learning and going from a non lean startup method to figuring out, okay, instead of trying to build it all up front, let’s do this. He was also really honest about his assumption that, well, I can just build a business and sell that for a million dollars to help pay for an mba. I love that audacity and I, I love, uh, that mindset and I wish I could bottle that and retain that mindset and myself so I could just barrel into things and not to mention his experience in the production space beforehand. I think that gives them a leg up in this space where, like you said, it’s probably very relationship driven.
Eric Hornung: 01:15:14
Yeah, I completely agree. I think he’s got a fantastic background for this. He said it himself, he’s overly optimistic and a little bit cocky and I don’t. Maybe that’s what you need to succeed in the film industry. Just looking around it. Maybe it’s not. Maybe it’s what you need to succeed in the startup industry. Maybe it’s not. Maybe it just works for him either way I think that they’re doing a really nice job and you can tell that he’s committed because they’ve been doing this for five, six years
Jay Clouse: 01:15:40
and it shouldn’t be glossed over that this is a profitable company with 12 employees. That’s been in business for a handful of years already. We sought out alex to come on the show. He’s not doing a road show trying to raise capital right now. I think there’s something to be said about that too. So you know, you have to be a pretty good leader to stick with something for a number of years and also stick with something for a number of years while being profitable while having employees and entering into a new market. So, you know, I don’t have any red flags.
Eric Hornung: 01:16:13
I don’t have any red flags either. I think that one thing that was kind of telling and just something to think about and maybe when you’re international you think about this more but was something he mentioned that they were making money in american and paying people in canadian. So they had a arbitrage profit on currency and that got to is that was part of his question or part of his answer for why toronto. And I just thought that that was something that, you know, maybe it came up in the course of business, but as a founder, just being able to think through that and being like, okay, this is something that we should stick with right now. It’s kind of like that second level thinking.
Jay Clouse: 01:16:49
Yeah. And something that I wish we had spent more time talking about his, his cofounder, lydia, because as much as we would want to talk about alex as a founder, we would want to know about lydia as a founder and alex had nothing but positive things to say about lydia. We just didn’t get a whole lot of context. One thing you didn’t say was that they had a duplicative skillset as opposed to necessarily a complimentary skillset or I should say background, maybe same, similar background and where they had worked and what they learned and what they came into this with. It did sound like they had figured out a division of labor that worked for them very well. We didn’t dig a whole lot into their technical team. The benefit of this is it’s kind of a b to b platform, right? Which means that the tech and the interface just has to Be functional in pretty good. It’s not as demanding in that world for the tech to be beautiful and perfect and flawless and completely intuitive as it is in b to c, like a seth from rap chat, so that’s good news, but you know, poking around the site, it looks like it’s very functional. It works well. I think they understand their customer as well because the information they show about a location is different than the information you would see on an airbnb profile. For instance. You’re not necessarily looking for kitchen amenities, you’re looking for markers about the home that you know you want in your shots, so it’s clear that they understand their customers in that way.
Eric Hornung: 01:18:13
Yeah, I agree. I also think they have a benefit that alex has kind of an eye for design and airbnb has kind of taken off so aggressively and so hard and so focused on design that they can make the. And I don’t know if you’ve got this feeling as well, poking around SetScouter, but they can kind of take some elements of the airbnb experience and make it really intuitive for someone who wants to list their property. Like to me it felt like, oh, this feels like airbnb a little bit.
Jay Clouse: 01:18:41
Totally smart for two reasons. One, because it’s familiar to people use. That feels like just about everyone you’ve talked to has used airbnb at this point, so it’s intuitive just because you’ve used it before and as you said, airbnb put such a focus in design and user experience that they’ve done a lot of research I would assume. I would hope to show what users respond well to.
Eric Hornung: 01:19:02
So how big can this opportunity be? He said that they might raise to expand. I’m guessing that means expand services. The market. 6 billion kind of maybe. He said that they were doing 30,000 a month in gross merchandise value when they were at 500 startups. They take a percentage of that. How do you even come to an idea of the size of an exit or the size of a recurring profit stream here?
Jay Clouse: 01:19:30
That’s hard and honestly that’s why I started this, this deal memo with that point. Is that such an important point for me if I’m in, if I’m looking at this as an investor to have more insight into both the market and how the company is doing, whether it’s gmv or some other measure, and alex was purposefully a little vague on both of those, which is his decision and that’s fine, but for me, if I don’t know those things, it’s. It’s hard for me to make a strong decision. One thing we do know is in 2015 at the 500 startups demo day, they were boasting $30,000 per month in gross merchandising volume and he said that his quote a joke at this point, so it’s higher than that, but how much higher? I don’t know, right?
Eric Hornung: 01:20:13
It’s a joke. Double is it 10 x? Is it 20? Is it? Who knows? But if we back into it a little bit and we start with the $6,000,000,000 of spend, that’s effectively $6, million of gross merchandise value that could pass through the platform. Let’s assume that the $6,000,000,000 is all four locations at this point. I know it’s not. Let’s not make that assumption. Let’s change. Let’s go to 2 billion. Let’s do our 33, 33, 33, and let’s say that it’s $2,000,000,000 of gross merchandise value that exists in north America that SetScouter could capture. Now 80 percent of that is the markets that they’re in and it doesn’t sound like they’re looking at actively expanding. so we’ll call it one point $5 billion. One point six. But we’ll, we’ll round.
Jay Clouse: 01:20:59
I like it makes it simple for me. Thank you.
Eric Hornung: 01:21:04
No problem. Then he mentioned that they take 20 percent on every transaction. So if there is one point 5 billion that goes through the platform, 20 percent of that, you’re looking at $300,000,000 of revenue every single year. So if we think about multiples one to 2x revenue multiple, you’re looking at 300 to 600 million as kind of a. We dominated the market in our six cities, got 100 percent of all of that. That’s kind of the maybe top end of what I’m seeing for locations only not. It’s not. Not expecting that they expand to equipment or wardrobe or insurance.
Jay Clouse: 01:21:44
so that number was $600 Million dollars in revenue potential?
Eric Hornung: 01:21:45
its $300 million in revenue potential and a exit multiple of 300 to $600 million.
Jay Clouse: 01:21:53
Yeah. Got it. Yeah. Which has nothing to bat an eye at for sure. And we get to the age old question of well what are our fund mechanics? What do we care about? Because even at this point, you know, SetScouter could continue on with 12 employees and the markets they’re in and if they have the cash flow mechanisms grow slowly into those different areas and they wouldn’t necessarily need to raise again and they could just continue being a profitable company and grow slowly or quickly, whatever. Whatever happens that size of a market sounds big enough to invest in for most funds. If you had a $250,000,000 fund, you’re looking for a billion dollar exit, so sub that size of a fund, it would make sense as a returnable opportunity. I think. Good math, my dear watson.
Eric Hornung: 01:22:36
Jay Clouse: 01:22:38
Maybe. Well you know, I can tell you that I know cover my meds was doing close to 200 million in revenue when they were purchased for one point $3,000,000,000, which is a high multiple from what I understand as well.
Eric Hornung: 01:22:53
I Think that’s something that we need to get better at on the show is understanding industry multiples. I just bought a book on it, so as we go forward I think we’ll be able to utilize those a little bit more because they do differ by type of company type of industry of space and if to the extent we can get those down, I think it’ll make us a lot stronger.
Jay Clouse: 01:23:10
I’m just excited that we’re getting to multiples at all. This is really our first time talking about on the show. So progress baby. So eric, one last question, what are you looking for from SetScouter? Call it 12 months from now.
Eric Hornung: 01:23:22
I want to see if they do raise because if they do raise, the whole idea is going to be that they’re going to expand, which means they feel comfortable that they’re going to coNtinue to grow at a significant clip in their locAtion service. But it’s more important to me to understand if they raise because if they raise then I know that they’re going to expand beyond location. They feel comfortable with location. So it really is to me it’s hard they’re going to raise or not. That is the thing I’m I’m looking at. I don’t think they’re going to have any problems raising. I think it’s more the decision to do it and that tells me so much more about the business than any maybe metric at this point could.
Jay Clouse: 01:23:58
I think I’m first and foremost looking for the two figures that we don’t know all that well still, which is one, the actual market opportunity and to gross merchandising volume going through the platform and how that has grown over time and after that I’m with you. I want to see what services they’ve expanded into and what that outlook looks like for the future as well. All right guys, thanks for listening. If we missed anything, we’d love to hear from you. Tweet at us @upsidefm or send us a message on bigger. You can comment on breaker right on the episode. We’d love to hear from you. I’d love to hear what we missed. We love to hear the things you agree with the things you disagree with. We’re hanging out there all the time, so tweet at us email us Hello@upside.fm. If you have ideas or guest suggestions and otherwise we’ll talk to you next week.
Eric Hornung: 01:23:58
Jay Clouse: 01:24:44
That’s all for This week. Thanks for listening. We’d love to hear your thoughts on today’s guest, so shoot us an email at firstname.lastname@example.org, or find us on twitter @upsideFm. We’ll be back here next week at the same time talking to another founder and our quest to find upside outside of silicon Valley. If you or someone you know would make a good guest for our show, please email us or find us on twitter and let us know and if you love our show, please leave us a review on itunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Eric and I decided there were a couple of things we wanted to share with you at the end of the podcast and so here we go. Eric hornung and Jay Clouse are the founding parties of the episode podcast. At the time of this recording, we do not own equity or other financial interest in the companies which appear on this show. All opinions expressed by podcast participants are solely their own opinion and do not reflect the opinions of deaf and phelps llc. and its affiliates, Unreal Collective llc and its affiliates, or any entity which employ us. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation nor provided any investment advice on the show. Thanks for listening and we’ll talk to you next week.
Set Scouter simplifies film production, starting with location scouting. Set Scouter is a 500 Startups alum based in Toronto, ON.
learn more about Set Scouter: https://setscouter.com