Genius of Using Commercial Real Estate as a Platform [Podcast #93]

Ozan Dağdeviren

Hello and welcome to the Startups of London Podcast, I’m your host Ozan and the founder of Startups of London. Today, I’m joined by Steve Coulson, founder and CEO of Kitt. Kitt is a full-service platform that finds, designs and fits out, manages and sees through the office space for companies. I’m very curious to understand more about it. Welcome, Steve. 

Steve Coulson

Yeah, thanks so much for being here. Pleasure.

So let’s start with what Kitt is. I do have a few interesting questions that I curiously want to get into. But I would like to get an understanding of what it is, what the basic business model and the value proposition are, and get everybody on the same page before we dive into those.

Yeah, sure. We set Kitts up to solve a problem that we had when we were scaling a business previously, which is, if you’re a team of 50 to, maybe, 500 people, you’re left with two really bad choices. Choice number one is to go to a co-working space. And it’s all very easy, but it’s very cookie-cutter. And it can feel a bit bland and inappropriate for the state that you’re in. Or go to a traditional lease and pick up 111 different suppliers, you have to engage with pay and manage and all the rest of it over the course of your three or four years there. So we just felt like, we want to create a product for teams of that size, where you can find the space, you can design it with an interior designer and then absolutely everything about the management is done through an app, and the price is all-inclusive. So we said if we can aggregate the market and deliver that experience anywhere, then we would have had a product that we would have bought to ultimately enable companies to have space that empowers them to buy.

Just one thing I would like to understand better, is this a temporary solution for companies? Or is it kind of like a more permanent solution? What’s the timeframe there?

Sure. So we are typically working with companies for an initial period of two or three years. So it’s very much a permanent headquarters. And the model that we’ve adopted is asset light to be clear. So we don’t take on the lease ourselves. The lease is taken on between the landlord and the tenant. And we’re just wrapping up the whole remaining part of the experience into a single package to make it as easy as possible, whilst getting the ability to customise it around what it is you want to do.

Amazing. There is this trend, we’ve been talking with a few other guests as well, in the co-working space, etc, people now have kind of realised it’s just not as good as it sounds to work from home all the time. And this is less of a practical thing, rather than a psychological or a mental thing. It’s about managing the motivation, and the dopamine levels and just having the structure within the day and the week. So what are your observations? What are What’s the word on the street that you’re hearing with the people that you’re working with? On that trend? What do people want out of office space? And what are their needs?

Yeah, I think it’s interesting that I think there are, there are two or three camps of people. And they all don’t have the same opinion on this. And I really, when we thought about it a lot, as you can imagine, during COVID. So we started in 2019, just before everything really kicked off. I think for those for whom, you know, feel a sense of meaning and purpose from their work, which is derived from, you know, the relationship they have with individuals and a kind of connection to the broader purpose of the company. For those for whom that’s important, we generally find that they find space to be more important. And in the same way that you probably wouldn’t love to go to a wedding on Zoom, because you would feel like you would miss out on the kind of realness of the experience. And we find that there’s one kind of people who think in that kind of way about work, they don’t want this detach, to do this relationship, they want to feel like they are a part of something and it’s the unintentional moments of connection you get with people is what they really value as well as the ability to collaborate properly, intentionally on so there. So you’ve got kind of come number one and you can imagine we work with those types of companies a lot. 

And you then got another type of people for whom you know, remote work has opened up a really a much more balanced and flexible approach for them. So particularly, you know, I’ve got two young kids myself, and being able to work at home one or two days or for many working full remotely frees them up to organise their life in such a way where they can spend more time with a family where they can spend more time exercising were really their mental health and their lifestyle is something they can really focus on much more. And then you’ve got some people for whom they love the routine and it’s like, “I really want a separation between home and work and it really helps me.” 

And really, there are lots of different ways of thinking about this. And in reality, there are people who are staunchly in these camps. But I think all of us are somewhere in the middle somewhere. And I think what we have found is that when business leaders have been clear on what their strategy to work is, and why they back that strategy – we are in two days, three days in the week in the office, and we all come in together, and then you can be flexible on the others – if they take a strategy, and they’re strong, and they have a kind of the point of view. And they’ve been much much more successful than those who don’t make a decision. 

And then, you know, it’s a bit like an unlimited holiday policy, which was famously unsuccessful, because you say, hey, it’s all down to you, you make the choice when you’re adults, and we give you the responsibility to decide what you want on a holiday. The net result of it was people took less holiday and felt more guilty when they were away. And so providing a boundary from a company to help people enjoy their holidays more. And I really think the same is true of work big companies that have an opinion, and they’re strong, and why they want that work and pattern, generally, we found that they are much more successful and engaging people.

I think there’s like a very, very interesting, fascinating, human behavioural dynamic here that I have been exposed to when I was first studying sociology and psychology. So I would like to share that here to be part of this conversation, which is when there is a rule, a hard and fast rule – so imagine, we are schoolmates and the school has some rules that apply to all of us. So they create a certain structure which people are okay with it, it’s almost like a glass that we choose to fill. When there is no glass, when there is no structure, then simply, it is not a system without structure, is just a different structure that takes its place. And in this case, it might be, yes, the company says unlimited holiday hours all days. But then another structure takes its place, which is there is now a social dynamic, in which people judge each other based on who is hardworking, who is not working with slacking off, based on the holiday time there is. And I think this kind of dynamic is also in place for the office space. When companies make coming to the office compulsory and mandated for a few days, then it works in a different way than it is then when it is totally optional. So when it is totally optional, it’s kind of this weird thing where you go to the office, but then you don’t have your mates there. Right? Then you say to yourself, why why did I go to the office, I can just work from home. So it kind of needs to be a necessary, evil or like a power, like a hand of God type of a power that is outside of the social dynamics, that kind of shapes how we interact in the office space. So this is what you said, made me think and I wanted to share that. What are your thoughts on that?

Yeah, I think this is like the higher level of debate that’s kind of raging in different areas, right? It feels like we’ve got a bit of an argument, on one hand, ultimate choice and complete freedom are the paths to fulfilment and happiness. And then you’ve got this thing on the other one, which is you need boundaries, and a framework and a kind of top-down vision or, or something like this, that kind of restricts freedom, to then provide more fulfilment. And I think another, as you were saying, kind of example that came to mind was a study that I read a few years back around fences between properties. And what they found is when properties have fences between them, the neighbours had closer relationships. And when they didn’t have fences, they were more upset with each other. 

A perfect example actually. 

It’s like a sense of boundaries that are hosed but are logical and that people can choose to buy into, I do think, have power. And I think there’s a risk that we throw the baby out with the bathwater a little bit. And it’s not going to be to our benefit. Because to your point around, you know, mandated office days, the mechanism that’s powerful, is you need a critical mass of people in order for the magic of the office to make sense. 

Exactly.

And if you say “Come in when you want,” people will be like “Well if I come in and do the commute and there’s no one there then it wasn’t worth it.” It’s a bit going back to the wedding analogy. It’s a bit like saying there’s a five-day wedding, people can choose the parameter which of the days they want to be at. It’s going to be a completely different experience to you know, the ceremony is at 1 pm on a Friday, and you get the idea. So I think we are in a little bit of we’ve had a trend for probably at least 15-20 years of kind of all about the individual’s choice, but I don’t think it’s necessarily– I think it’s gone so far that it’s now not really making us happier. 

Yeah, this is a fascinating topic. I could speak for hours and days about it, but I would like to switch gears and jump to another topic, which I think is also fascinating. Your previous experiences in JustPark and I think, although it looks like a different business, which actually it is, of course, I think there’s a common thread there, which is our relationship to space, and how we populate the space within the city, in our daily activities. So I think there’s that kind of familiarity in I’m guessing from your aspects. I would like to hear more about that, as well as how you think our relationship with the city is changing. 

And before you answer the question, let me just drop one insight into that conversation, which is, this is something that I read about six months ago, just after the end of the lockdowns and the pandemics, London’s population and the property market has actually seen increased demand, compared to the previous months. So doing compared to the time of COVID, when everybody was going out of the city. So people started coming back to the city. But this time, and I thought this was very interesting, the reason people came to the city was different. It was less about work, but it was more about being part of the city, feeling close to the people and more about social reasons.

Yeah, I mean, it’s interesting. And actually, I think, during the beginning of COVID we thought long and hard about urbanisation because clearly, it had a big impact on the bearing of our business. And I think, I think the social side of work is also really important in that the number one place you’re likely to meet your life partner, for example, is the workplace. Now that’s clearly not the only reason that people are going to offices, but it is to say that there is social utility, both at the workplace, but also the after-work events. And you know, when we were just part, we were friends and we worked together at the same time. There wasn’t this divide that’s become more common since COVID. But I think, you know, the move back to London surprised me. And I didn’t know that the rationale that’s super interesting today.

But on JustPark I think the reason– So I met my co-founder for JustPark. Lucy was their kind of first non-founding employee and I joined pretty early. We were both captivated by the idea that you could repurpose dormant assets, and create a digital experience on top of them that made the customer’s life easier. And that’s what excites us about the business. And when we became part of the leadership team and started really driving it through to scale it was “how do we transform a car park under a hotel, or a piece of land that was attached to a building,” and so on into space that can be utilised more efficiently and can ultimately enable people to move around cities more easily. And what we had to build with JustPark, which is the link to Kitt really, was quite a sophisticated platform that handled payments, security and operations across 50,000 or so different locations from an office in Kentish Town. 

When we thought about Kitt, we felt we had a similar feeling in some respects, which is we think commercial real estate is archaic, it’s backwards, it’s hard. But it’s also really, really important, we want to build a digital experience that makes it easier for the customer. But in order to do so at scale, you’re going to have to deliver digital operations and hospitality and security and so on and so forth, across a fragmented network of buildings. And that’s going to be a combination of hardware, software and supply chain. And if you can pull those three things together, in the same way, that Amazon transformed e-commerce by providing a fulfilment layer and then a marketplace on top, perhaps we could do the same in commercial real estate, which is to provide a fulfilment layer and then build a marketplace that sits on top of that. That was really the kind of business model insight for us really was taken from our experience of doing exactly the same in a different property category.

It’s also I would say a very risky domain, perhaps given the commercial property market is on a decline. Maybe it’s not but my basic, rudimentary understanding of that is there are a lot of issues with long-term leases and so on. It actually takes up a huge part of the economy as a whole, doesn’t it, the commercial property market?

Prior to COVID, it was 3 trillion a year was spent on space and services in the office. It’s a lot. I think what we’ve observed, it’s been interesting, is two things. One is landlords and tenants are now offering and asking for flexibility in a way that’s unprecedented. But it was a trend that was already in motion. And what that has meant for us as a business has actually been incredibly positive, we’re almost 10 times the size in terms of revenues versus two years ago, off the back of larger and larger companies wanting shorter and shorter lease terms. And actually, the value of our fulfilment engine is more and more valuable as the lease terms get shorter. Because if you’re a footsie 100, you want 100 deskspace, we can turn the whole thing around in a couple of months, and it’s perfect from day one, it’s actually very, very, very hard to sell to live that and then to justify all of the work that’s required. And so I think larger and larger companies went more and more flexible, but they were still taking space. I think the second part is interesting. It’s that the amount of space they’re taking is lower, but the quality that they’re asking for both from the building, but also the service level has gone up. So actually, if you look, if you look at rents within London, we are now seeing record rents in every sub-market, but they’re all being achieved in the top 20% of spaces. And so you have a kind of a two-end of the market. You’ve got people trying to compete on price and are in a crisis mode at this point. And then you’ve got people who are competing on the quality of the buildings and are actually having it pretty good. And they’re achieving all sorts of things they weren’t able to do before. So I think our ethos around this is, you need a space that’s worth leaving home for.

Exactly. That’s an incredible insight. And I think that’s just a very clear way of putting it needs to be better than the setup that you have at home. And one of the things that happened is because people had to work from home, we have actually improved our working environment at home. Right. So the bar is now higher.

Yeah, exactly. Exactly that. And I think what’s cool about that is, I think, mediocrity was pretty much the norm in commercial real estate, even when we entered it because now there’s no doubt that if you’re a landlord, you thought you were someone who owned an asset and you now you own a business. And I think that’s become very apparent to people. And that’s why they now see their buildings as products in a way they didn’t do even three or four years ago.

Almost a platform perhaps here.

Oh, well required. And this is what we’re building, right? And I think the other side of it is that if you’re going to take a space, you now have much more intentionality as to why you need it. So think before COVID, it’s like I’m a business, I need space because people need desks to work on. Whereas now you have a really, really good alternative, the supply of desks is now infinitely larger than it was before COVID because everyone’s got a kitchen table, or hopefully a kind of good setup at home. So actually it’s not about the desk space. It’s about the collaboration areas. It’s about the client meeting zone. It’s about big breakout spaces where your whole team can have lunch together. Those are the things that people are prioritising, but we’re looking at the designs we were doing for spaces before COVID versus after. There are far fewer desks and there are far more spaces to meet people.

So what was the first break for the business? I think this is something we don’t always hear founders talk about. And I would like to ask yours. There are these make-or-break points for every business. What was the saying? I don’t think it’s true, but I think it resonates with most people, which was most startups are one or two deals away from being a success or failure type of a thing.

One or two pivots, yeah.

Or sometimes in some B2B deals as well. So there’s no there’s always a time when you start a business, and you’re unsure whether that’s going to work, whether it was just a stupid decision to build that business. So you’re either a genius or the other end of the spectrum. Sometimes it’s how it feels like to be a founder, unfortunately. And then you get a big affirmation. So what was that first big affirmation for you?

Yeah, sure. Other than raising money before we started, which for us was what kind of made all of this possible–

I would say that that’s kind of the first big break, perhaps if you raise a decent amount of money.

Yeah. And it was super fortuitous. It was quite, you know, I’d already handed my notice in so we were committed to doing this and figuring it out. And then, you know, we through an old relationship that got going again, and Matt, one of our founding investors really for whom they backed the business that every round pretty much ever since, and that they shared the vision with us of what we’re trying to achieve. But I have to tell you that a week or I think 10 days into launching, we realised that we were we had the wrong product. And so we actually initially were a platform for office managers to self-deliver a service experience. And after 10 days of speaking to 55 office managers, and realising quite quickly, this wasn’t going to work. You know, we said we’re gonna have to deal with it. It just felt like we have to transform the end-to-end experience like it has to be a vertically integrated digital experience for the customer that ultimately makes it easy for them. And so within, you know, within 10 days of starting with, we were going back to our founding investor and saying, “Well, look, we, we’ve got the same vision, we want to deliver the product.” And he was like, that seemed great. Like, go for it. And I think within six months of that, we won one of the world’s largest companies a sick deal. He’s still with us now. And I sat in the room of that, at that space that was stunning. I was like, “Wow, thank goodness, we didn’t carry on with the office manager platform thing,” in the same way to be one of the world’s largest companies has trusted us with one of the most important spaces, and I’m sat here and they’re moving in tomorrow. And I think for me, it was two things. One was, for a company that young winning that kind of scale of a client means there is a gap in the market, and B) the product was compelling enough, to excite them to turn down all of the other alternatives. So at that time, we work with one of the darlings of the tech world at that point. And then they turned all of those guys down. So that was a really big moment for us. And it felt like we made the right choice to pivot and we even paid back the faith investors paid in us. And then we had an amazing year off the back of that we were just winning deal after deal after deal with these much larger customers than we ever imagined working with.

Amazing. Does it change as a founder, how you think and how you approach the business having those kinds of big win moments?

Yeah, I would say that. I used to be a banker, a consultant type, where the model was for me to spend six to eight weeks thinking about a decision, and then think about making it. I think I had to learn to trust my gut a lot more. With my first startup experience, but I think, you know, pivoting within 10 days, it was– put this way, I think the first probably three months of the business, every day, I was so stressed out my mind, my co-founder actually loved it. Because she’s like, someone who loves solving puzzles. I was just like, “This is so hard. We have no revenue, pivoting our product isn’t going to work, isn’t going to work.” And there’s this kind of ongoing anxiety narrative. And I think part of it was, you know if I was to think back “How would I want to redo it?” and kind of realising that A) that is the norm, and that is normal, which I’ve never been told. I didn’t realise it was gonna be as hard as it was. And B) also that kind of nervous energy is the reason you can become a successful founder. And so rather than trying to just chill out and relax, it’s kind of how you harness that energy in a positive way to ultimately drive through important changes. And I think there was that shift at the early stages, you’re probably going to make 50 to 60% correct decisions, and you need to make quite a lot of them quite quickly. And it’s kind of accepting that you’re not going to get perfect, through that initial patch. But I found it a lot harder, kind of emotionally than my co-founder did.

Thank you for your honesty, though. I agree a lot of founders have that experience is more difficult than we sometimes think it would be. How would this journey be different, would you say, if you have the same intelligence, same skills, same business acumen, but perhaps a very migrant entrepreneur coming to London?

Yeah, great question. It is the question of how would I do it again. 

In a way. Yeah. And also kind of to put perhaps, almost splice and understand what is it, what are the different factors that play in that success, right? There are different types of capital that we rely on, like diligence but some of it is time capital. And it kind of makes a difference at what age you’re in because of that time capital thing. There’s also the network capital. There’s also the capital that comes from being a native speaker and the buddies and the friends you have, sometimes the work experience and problem-solving ability. I think it’s important to understand all those dimensions and how they come together. So that’s kind of the purpose of the question. 

Yeah, that makes a lot of sense. So I think the way in which you understand competition, or how I understand it now is very different from how I understood it back then. I think when I thought of what I thought was a great idea, and then I saw someone else to whom I thought they were doing it, I was really disappointed. So I was thinking, “Oh, man, I thought I’d come up with something that was gonna, you know, be the first mover and all that good stuff.” And we probably disregard it and then want to find something that hasn’t been done before. But looking at it now, I could not take a more opposite view: Competition is so good because it proves evidence for demand.

Exactly. That’s such an insight. And that’s kind of how my thinking around being a founder changed as well. When I see competition I see “Okay, there is a market demand, that’s good news.”

Exactly. And I think you know that none of the biggest names in tech had in their minds to be the first mover, there was always someone else who was proving demand first. And actually, even in crowded spaces where it’s quite mature, there’s always a segment that is underserved, and there’s always a customer that it could be built around differently. And I think, for me, it was the thing that I would focus more on is trying to find a problem where there is such a bad customer experience, and the solution would require you to deal with so much complexity, that if you were to get it right, it could become enormous and very hard to beat. And so I think, by accident, when our vision for what our business was going to become real and we realised we were building a vertically integrated business. We were adding in layers and layers and layers of complexity. But actually, it’s meant that we’ve been able to create an experience that is unique within what would otherwise look like quite a crowded space. And so I think, again, I would probably say where there’s a bad customer experience where there is demand and where there’s lots of complexity is where I think particularly now, hundreds of the opportunities live since the days of building a marketplace for X, Y and Z. There are not many of them left.

I think that’s an important point, then there’s always a delay, right? What was this idea that kind of resonates a bit with what you said here? Buy the rumour, sell the news. You having a background in finance would appreciate that, I think. But I think that that kind of dynamic is playing out with a lot of startups and so on. So some business models really make a big noise with the success. And then people hear about it. And then it becomes a norm that it is the go-to strategy or the go-to hot thing in the market until it isn’t, but there’s always a delay. So a lot of people end up being late. And you think marketplaces are kind of like that or do you think they’re still big opportunities?

I think I definitely think there’s still clearly there are still marketplace opportunities. But I think, you know, e-commerce created all of a sudden so many new marketplaces that were able to be creative as the internet became mainstream. I think marketplaces that succeed now tend to have a kind of supply-side solution that creates the marketplace in some way. And I think might be the second thing, which I think I’ve been to that point is, the second thing that I learned is in the fundraising process, you’re going to get all of the nodes straightaway. And then you’ll, you’ll then get to the essence at the end. And again, what you don’t want is to try and convince someone who’s not excited about what you’re building to get excited. It’s never going to happen. And if it did give you the money, you’d have such an odd relationship with them that you wouldn’t feel like it was worth it. And actually, the people who we’ve raised money from, we have a similar mindset. And I think they take Hoxton, for example, who were who lead our last round, and as of yesterday proposed another round. They back new categories. And they did Deliveroo, for example, which was, you know, a fulfilment-enabled marketplace, they backed Babylon, which was a digital GP. And I think, that type of mindset, whereas this is complicated, it requires work on the supply side to get the demand side going. And that kind of mindset is getting specific to some investors. And we just have to find the right ones.

Because we’re running out of time, I do have one more question for you. What’s the team like? What is the conversation happening within the company in terms of what type of a place to work Kitt is and what are your thoughts on it? And with that, are you hiring?

Going in reverse order, yeah, we are hiring. We’re a team of 65 now. We need to add more people. We’re growing quickly and all that good stuff. I think one of the big paradigm shifts for us is, me and Lucy are both generalists. And up until maybe 50 or so people, we ran the business like Lucy, you’ll deal with that side, I’ll deal with this side. And then we’ll check in every week and see how we’re getting on. Which, when you’re trying to get to product-market fit makes a lot of sense because you can move super quick. I think we got to post-product-market fit and we had a board meeting and the message from Hoxton was, “Look, we’ve got product-market fit, you have to go and build a world-class organisation. And that’s not just hiring great leaders. It’s also completely reversing the decision-making model. And so for us as people who’ve been hands-on, you know, scrapping this business to a point where we can get product-market fit. It’s now we have to hand outcomes over to leaders and build a framework and enable them to succeed and then empower them and get out of the way a little bit. I think that’s a big cultural shift we’re going through, which I think is super important. 

But when I think about what’s it like for someone to work at it, I would say the thing that hasn’t changed is people generally accelerate their careers and build relationships with the people they work with. And I think that’s not just a nice thing, it’s actually important to our strategy because we haven’t tried to automate the whole experience for the customer. So I don’t know what they want. They need to interact with different types of people at different stages. And what we’ve had a lot of success with – and customers have come to me and said, “I did a deal with you guys, because I met so and so from your team and I just felt like they’re on my side.” And I’m like, that deal worth 5-6-7-100k for the business. And they bought because the person they spoke to felt like they’re empathetic, and they were on it and all these kinds of things. So we have to build an environment where people are empathetic, they’re on top of things, and they’re supported and they love coming to work. And that actually makes our business better. And so we really tried to prioritize empowering the best people to develop quicker than they would anywhere else. And to now tried to get them out onto they can run it without us getting in the way.

Steve, a lot of topics were discussed – perhaps we’ll have you as a guest again in a year and talk about how it’s going and get to my other questions. Thank you for spending the time. I do appreciate the genuine responses you shared with us.

It’s been fun. Thanks so much for your time.