#155 - Laks Srini

**Craig Cannon** (0:00)
Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinator's podcast. Today's episode is with Laks Srini. Laks is the co-founder and CTO of ZeroDown. Before that, he was the co-founder and CTO of Zenefits. You can find him on Twitter at laks-underscore-srini.
All right, here we go.
Laks Srini, welcome to the podcast.

**Laks Srini** (0:22)
Thanks, thanks for having me here.

**Craig Cannon** (0:24)
So you are the CTO and the co-founder of ZeroDown. What does ZeroDown do?

**Laks Srini** (0:30)
So we help people buy houses.
We think even in a place like Bay Area, people with good jobs and healthy finances should be able to buy a home. It all started with my co-founder Abhijit.
He was the COO at Zenefits. He was making a decent chunk of change, had a great job, healthy finances, but he'd moved to the Bay Area about five years ago. He had twins and he wanted to buy a house. Only to find out that you need to have $300,000, $400,000 to spare, not all of your savings to spare, to be able to buy a house.
And this felt pretty shitty. Even if you have a great job in making a lot of money and what in any other place in the world would be considered rich, you can't even think about buying a house here. Turns out a lot more people were in the same boat. A lot of our early tenured engineers were just getting married, looking to settle down, and man, we can't buy a house. It's gonna take us like four or five years to save. And we thought there has to be some way else to be able to have a path to home ownership.

**Craig Cannon** (1:36)
And so this company is super interesting. The structure's really interesting, but associated with it are massive costs. So this is not just prototyping an app and showing someone to Starbucks.
How do you even start testing this idea?

**Laks Srini** (1:51)
Well, we spoke about this for close to 18 months. We even did a side hobby project, which was like help Abhijit buy a house.
And we tried to figure out like, okay, what would be the mechanics of it? What is the history of modgages? What is the history of ZeroDown modgages? Why can't we do ZeroDown modgages to people in Facebook, Google, Apple, Airbnb? Cannot seems to make sense. Like these people are good risks. And we spoke to a whole bunch of companies that have started to be a mortgage providers in the last few years, but died. Because we wanted to learn lessons from not the survival bias, but like people who actually did not succeed.
And we spoke to a whole bunch of real estate investors. Like we learned about an entire class of assets called single-family rentals that started from post-financial crisis. Blackstone and Citibank and all these other funds, people who came out of these funds, like started companies where they just went and bought massive amounts of single-family homes and rented it out.
Their thesis was close to 11 million millennials are going to reach household formation age over the next decade. They're gonna move from these small, tiny apartments to single-family homes. They're shit out of luck. They're not gonna be able to buy it. Mainly, so many other factors, like student debt, real wage stagnation and all these other things.
So they're gonna have to rent it. And the thesis was like they're gonna rent it, so might as well rent it from us. And we'll just raise rents every year and have a really good fund doing this. There's a company called Invitation Homes, which is public, which owns close to 100,000 homes. There are a few other big funds that just do this. And it turns out this is a real asset class that people are investing in. So it just turned out to be a confluence of things that kind of came together that made ZeroDown possible today.

**Craig Cannon** (3:44)
Yeah, and I think that's a really interesting point about survivorship bias. What did you learn from the companies that failed?

**Laks Srini** (3:50)
So we actually learned a lot about mortgages themselves by actually talking to these companies. So mortgage, you can't really differentiate that much if you're selling a mortgage. Because Fannie Mae and Freddie Mac are these government agencies which define a box which are mortgages that are valid that can be sold in a securitization secondary market. If they're not a valid mortgage, you have to hold them on your books or you have to figure out some other way of private label securitization and all this other fun stuff. So all the companies that started doing mortgages, most of their thesis was like, hey, if we have a better UX on top of mortgages, it would be great. Turns out people didn't care that much about UX because it was a once in a lifetime transaction. In fact, they wanted it to take longer. And turns out people cared more about a 50 basis points difference rather than like, hey, I have an app to do this stuff. It's okay, I'll go to my bank, get a printout of my statement if I can save some money.