3 Reasons Why NFX Is Investing In Setter
by Pete Flint (@PeteFlint). Pete is a General Partner at NFX, a seed and series A venture firm based in San Francisco.
“3 Reasons Why” is a new approach to VC funding announcements. We’re making what happens behind the scenes of VC decisions public so the Founder community can benefit. As Founders ourselves, we always wanted to get an inside view of the process. Now as VCs, we are committed to bringing this transparency to Founders everywhere.
NFX investor: Pete Flint
Industry: Real estate tech / home services
What they do: Setter is your personal home manager: a one-stop home maintenance and repair service that allows homeowners to focus on living.
Round & Size: $10 million Series A
Co-Investors: Jess Lee (Partner – Sequoia Capital), Hustle Fund
1. What excited you about Setter?
I first met the founders of Setter at Sequoia Base Camp over 18 months ago. I was there because Sequoia had invested in Trulia back in 2007 when I was Founder/CEO, allowing me to meet the Setter team long before we invested.
NFX had looked at similar companies in the past, and the space seemed to be approaching a technological inflection point. While consumers want the confidence and security of home ownership, in today’s tech-forward world they are frustrated by the expense and hassle of maintaining their home. As we outlined in our recent article on PropTech, this is one reason why we see massive opportunities in real estate.
But the fact that Setter was addressing a promising market wasn’t enough. In all early-stage companies, founder:market fit is just as important. With Setter, David Steckel brings 10+ years of experience in the contracting world. He deeply understands the nuances of how it functions that could easily trip up someone without that experience. In addition, co-founder Guillaume Laliberte is a world-class engineer. That’s a powerful combination.
2. What are the risks you had to get over?
There were 3 core questions I worked through:
- How compelling is the opportunity?
There have been numerous failures in the broader home services space, but Setter’s metrics were strong compared to what we have seen in other businesses. The average homeowner spends 1-2% of home value annually on maintenance and repairs, and since Setter has the potential to capture the whole budget of home repairs, the total addressable market is quite sizable. We believe that the software they’ve built, which puts the homeowner experience first, gives Setter a unique advantage and the opportunity to build an important company in this industry.
- How compelling is the opportunity?
- Is this really a tech business? While Setter happens to be in the home maintenance space, it’s a software company at its core. Consumers get a simple, intuitive experience via their smartphones and contractors are managed through the software. The thoughtfully curated product on the back end also brings a lot of opportunity to add additional software solutions over time.
- What are the opportunities to build defensibilities? At NFX, we have a deep focus on network effects and defensibility in general. In Setter’s case, we can see numerous pathways toward building the kind of defensibilities that will help them become a category-defining business. As the company scales, their defensibility roadmap should give them a meaningful advantage.
3. Why did you say “yes” to the first meeting? The second meeting?
Using the Ladder of Proof, a guide we published so Founders know how VCs weigh investment decisions, I’d say we met with Setter initially because they identified a 1) customer need, in 2) a big market, while building 3) a great team. What moved us up to the top of the Ladder of Proof were: 4) Defensibilities, 5) High LTV, and 6) Strong ability to build product.
We said yes to the first meeting because we were already intrigued by the company after our initial connection through Jess Lee at Sequoia. We were persuaded to take a second meeting after that not only because they answered the main three questions above, but also was because we loved the team, we were fascinated by the market, and we thought the product had the potential to be truly exceptional.