Scaling a Real Estate Startup From $0 to $20 Million in 3 Years with Alex Day – EP 175

Interview with Alex Day

Scaling a Real Estate Startup From $0 to $20 Million in 3 Years with Alex Day

Featured on This Episode: Alex Day

✅ What he does: Alex Day’s entrepreneurial career boasts several noteworthy highlights. From 2014 to 2018, he was a pivotal figure at Peach, a pioneering venture in SMS-based lunch delivery that operated from 2014 to 2018, predating the mainstream emergence of industry giants like Doordash and Uber Eats. Alex served as Peach’s first employee and, alongside the founders (ex-Amazon professionals), played a crucial role in building the entire business from the ground up. His remarkable execution from the earliest days helped the company secure over $10 million in venture capital, encompassing both Seed and Series A rounds, with support from investors like Madrona, Maveron, and Vulcan. Within a mere four years, Peach expanded to Seattle, Dallas, San Diego, and Boston, generating ~ $17 million in annual revenue with a peak workforce of over 80 employees.

In 2018, Alex’s entrepreneurial journey continued with a colleague from Peach to pursue building Modus, a tech-enabled title and escrow business specializing in residential real estate transactions. After bringing the idea to a startup hackathon (and winning 1st place), he and his two co-founders decided to go all-in. He served as the Co-Founder and CEO of Modus, leading it to raise more than $12.5 million in venture capital, comprising Seed and Series A rounds with support from investors such as Mucker, NFX, and Felicis. In a remarkable span of three years, Modus experienced rapid growth from $0 – ~$20 million in annual revenue and expanded its operations to Washington, Florida, and Texas, employing a dedicated team of more than 150 full-time employees at its peak.

In October 2020, a significant milestone in Alex’s career was the acquisition of Modus by Compass (NYSE: COMP), in a notable high 8-figure deal. He continued to contribute to the business transition until September 2022, showcasing his commitment to the organization and the real estate industry.

In recent years, Alex has been deeply involved with the Seattle-based Alchemy team, acquainting himself with its highly investable business model and its strong mission to create more desirable housing in Seattle’s best neighborhoods. Alex started as an Investor and then decided to join them full-time as its newest General Partner in May 2023.

💬 Words of wisdom: “Most people don’t realize the pain they’ll go through. And that’s the naivete that actually allows you to get into being an entrepreneur. You don’t realize how tough it is or you won’t do it.” – Alex Day

🔎 Where to find Alex Day:  LinkedIn

Key Takeaways with Alex Day

• 00:55 Entrepreneurs come in all shapes and sizes
• 07:30 Great things wait on the other side of your comfort zone
• 10:40 Creating the original DoorDash
• 13:55 There are no failures, only lessons
• 17:40 Burn the boats
• 18:30 Scaling from zero to $20 million in three years
• 30:50 The investor vs. the entrepreneur mindset
• 39:25 The Lifestyle Investor Mastermind experience

Scaling From Zero to $20 Million in Three Years | Alex Day

Alex Day Tweetables

Resources

• AlexDay.co
• Alex Day on LinkedIn
• Colorado College
• Cutco
• Cool Dog
• Amazon
• Google
• Uber Eats
• DoorDash
• Peach
• Compass
• Alchemy Real Estate

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Read the Full Transcript with Alex Day

Justin Donald: Hey, Alex, so good to have you on the show.

Alex Day: Hey, thank you for having me, Justin.

Justin Donald: Well, I’m really excited because off air, we were talking, and I just learned, this is officially your first podcast. And I know you’ve been asked many times because you’ve got an incredible background to be on shows and you’ve just never done it. And so, number one, I’m honored to have you on the show. But number two, I’m excited for people to learn all the cool stuff I’ve learned about you.

Alex Day: Yeah. No, absolutely, I appreciate it. It’s about time. And I feel like a lot of people have been having fun doing this, and I’m excited to take a shot at sharing what I’ve learned and see if I can add some value to people’s lives here.

Justin Donald: It’s going to be so great. And I’ve just had so much fun getting to know you through the Lifestyle Investor Mastermind. And we can certainly talk about that today. But what I’m most excited about is talk about you, your story, kind of how you got to where you are. You and I met in a group called Post Exit Founders, and it’s a bunch of people that have started a company and had an exit. And there are some brilliant, brilliant people in this group. It’s a huge group and very active. It’s so fun. And you and I connected on there. I think maybe I said something that resonated and you reached out, and we just grabbed a phone call and started talking. And I remember thinking, “Man, this guy is really cool. I want to pick his brain some more.” So, let’s talk about you and how you got to where you are.

Alex Day: Yeah, absolutely. So, first of all, it’s great and serendipitous that we met in that group. And I think we’ll circle back to why we ended up connecting and where we’ve gone from there with our friendship. But a little bit about my background, I grew up outside of Boston, went to high school out there, and then moved west to Colorado to go to a small school called Colorado College, studied economics. And really growing up in high school and even younger junior high through my college experience, I found myself interested in selling things and building small little businesses, usually with people I liked and friends and figuring out ways where we could all benefit together, especially with people that maybe didn’t have as much money as those around them. And it was always exciting to figure out ways to add value and make money.

And I think the biggest thing in the beginning was finding any sort of product at all that happens to have a shred of exceptional quality to it, and it’s hard to sell, like everyone says, when you’re faking it. But I had various sales experiences from Cutco, which I know you and I used to share to some degree, and all the way to selling novelty ice cream hotdogs, which we can get into as part of a summer job, going door to door to people that own ice cream shops and still to this day, talking about any of those, even Cutco, which I own a full Homemaker Set, still love it. I find myself pitching to people all the time the things that I’ve done because I really cared about them. And so, that’s been the common thread through everything is finding value and building teams with people that I enjoy spending time with. So, I came in here, worked at Amazon, did some VC-backed startups, started my own tech-enabled real estate venture. And now, I’m running a real estate fund to help development in Seattle.

Justin Donald: I love it. So, it’s fun that we both got our roots from a sales standpoint in Cutco. I, too, have Cutco, I have the Ultimate Set. The set that you mentioned, the Homemaker is the most popular set. So, more of those sets sold every year than any other set. I remember that from my selling days.

Alex Day: Yep.

Justin Donald: But I learned a lot about sales and about interacting with people and soft skills at that company. And even before that, when I sold door to door, and I love hearing that you sold door to door, too, because you’ve developed this other skill set. I sold a product that no one wanted, newspaper subscriptions. They already had one, and I was trying to sell some other one that wasn’t as good. And so, I experienced all this rejection, which at the time was tough, but it actually became one of the best things that ever happened to me. And I’d love to talk about your experience being in door-to-door sales. I mean, it doesn’t sound like it’s necessarily an easy product to sell. Maybe not hard either, but maybe somewhere in the middle having, like, gourmet hotdogs and gourmet food.

Alex Day: Yeah, absolutely. So, funnily enough, these were ice cream novelties shaped like hotdogs. So, they were called Cool Dogs. I think there’s still a website out there today for them. They were called Cool Dogs, and it was basically an entrepreneur in Boston who’s a restaurateur, actually owned some of the best French restaurants in the city, found himself in front of an opportunity to buy a, I think it was essentially a sausage manufacturing plant. So, this was a place that cased sausages, meat sausages. And he found a way with his experience and as a restaurateur to basically extrude ice cream ingredients through these machines instead to deliver a hotdog-shaped ice cream that went into a Twinkie like bun and was then chocolate drizzle packaged. And you could hock them at Fenway Park or at Gillette Stadium. Different sports games was the theory.

And then what he also realized is the most profitable part of ice cream store is the toppings. And I don’t know if that’s still true today. But the point was, you sell them to ice cream shops and they’re willing to pay a decent margin on them because they can sell more toppings and kids will come in. You can sell it as a cheaper version of a sundae. It’s not as many scoops, but you can load it with toppings and that’s where they make their margin. That was really the pitch. And I thought, that’s pretty interesting. They tastes great, even though they sound super weird. And every day…

Justin Donald: Assuming they don’t actually taste like hotdogs.

Alex Day: No, there’s no pieces of hotdogs, there’s no hotdog ingredients. Purely ice cream. Kind of like a choco taco, but it’s a hotdog. And I thought, this tastes great. And the pitch from an economic point of view makes a ton of sense, these ice cream store owners. And so, I traveled up and down the coast and into various towns throughout Rhode Island, New Hampshire, and Massachusetts and sold Cool Dogs. Every single day, I’d pick up dry ice and I’d go pick up a sample case, and I would go to this door to door.

Justin Donald: Oh, my goodness, I love it. What were some key lessons or takeaways from your door-to-door experience?

Alex Day: I think this is probably so cliche, but you really cannot judge the intelligence of a small business owner by their business’ appearance or their physical, like personal appearance. Some of the people that show up, they’re shirtless, smoking a cigarette in the back of their shop, end up being so business savvy. And you see, 30 minutes later, when they actually open the store, it’s one of the busiest, most successful stores, run super well, and they just happen to do what they want to do, and they’re a business owner. And ultimately, that’s their call. And you can’t be judgmental about that. And so, I met some really cool people from all different walks of life with all different stories about their small business. And it was really, really inspiring and ended up leading into what I loved the most about some of the tech startups that I did, too. There was that thread of sort of working with small business owners and communities.

Justin Donald: I love it. Well, let’s talk a little bit about getting started in corporate America, because you started at Amazon, and I think most people would say, “Hey, you made it. You started at Amazon. That’s awesome.” And I’d love to hear about that experience. And then why it probably didn’t take you too long to leave and say, “You know what? I need to do something on my own.”

Alex Day: Yeah, definitely. So, I had two dream jobs that I wanted to get really out of college. So, I wanted to work in tech. So, I really wanted to figure out a way to work at Google or Amazon. Those were really the cool companies at the time. And then my other one, I really wanted to be an ad sales for, I think, just creative application of being involved in a fast-paced advertising where there’s something really attractive there, some of the toughest starting salaries and some of the most expensive cities. So, it was actually, really tricky. I found to make that happen.

And I actually got rejected first round from a major advertising company in Chicago. Me and one of my best friends who now lives in Seattle, we were super bummed. And so, that didn’t happen. That route didn’t happen. Then I ended up getting Amazon. So excited. A bunch of my friends wanted to work there, too, and end up coming out here right after college to work at Amazon. Dream job. Super cool. Worked for Sony Consumer Electronics, managing a bunch of their different personal speaker products and so on. And I just wasn’t good at it and I struggled. And I tell all my friends this too, because they’re like, that was the best, essentially firing you could have experienced, because it really pushed me to thinking about what I want to do, what I was good at.

But I went there. I had a few different managers. There were some things in my control that I didn’t do well, some of the things out of my control. It just kind of happened to me and didn’t work out. And so, I remember vividly, Q4 comes around at Amazon if you work on dot-com, if you work on the retail side of things, and it’s chaos. It’s hard core. Everyone’s ordering everything, as you can imagine, thinking about Christmas, Black Friday with what you do with Amazon as consumer.

And right before Christmas, my managers, my multiple managers basically said, “Hey, you’re going to come back in performance improvement plan in Q1.” And I was like, “Ahhh.” As much as I want to push myself because I don’t like giving up and I felt like that was quitting, I ended up walking away and saying, “You know what? It’s okay. I’m going to actually move on from this.” Turns out, I wish I had a mentor that told me always better to get fired when it comes to post-employment plans, but I didn’t. I left, I said, “You know what? I will walk away. I don’t want to make this difficult and trot out. I just don’t think this is the right fit.”

And that was one of the most challenging things. And it led me down a path of a lot of searching as to what I wanted to do. And I realized I loved building. And so, I sold my room to another Amazon friend. I slept on the floor of my living room on a mattress behind my couch. Luckily, my roommates were cool with me doing that, to lower my rent so that I could go to hackathons and start doing startup stuff. And that’s essentially what I did for a couple years.

Justin Donald: Wow. That’s incredible. So, it’s interesting because most people would give an arm and a leg to be able to work at Amazon and you recognized, “Hey, it’s prestigious to work here. This is cool, but it’s not for me and I need to do something else.” And so, I think you got into the startup space as an early, I mean, I think you were like employee number one at one of your companies with a couple of co-founders that had worked, if memory serves me correctly, a couple of co-founders from some of the big tech companies, right?

Alex Day: Yeah, exactly. So, yeah, basically, I started doing a lot of startup competitions and meeting a lot of engineers and engineering people from Amazon that I crossed paths with. We worked on building things. And so, I developed this reputation of like, hey, this crazy ex-Amazon guy left and kind of flamed out, is obsessed with startups. Like, if you have an idea and you want to build something, he’s always doing this stuff. And so, I ended up saying all I wanted was to be employed at a big company when I graduated college and I became this mercenary for hire for startups. And it turns out that a few people in my friend group at Amazon, their managers were picking the lunch of the day, and they were texting people the lunch of the day from a restaurant. Restaurant would deliver the food. Even if they didn’t deliver it, it would give them a better price on the lunch. And I was like, that’s pretty cool. So, you guys are ordering 40 pad thai from this awesome Thai restaurant that doesn’t deliver them, getting a dollar off, like that seems like something that can scale and is pretty cool. And this was before you could essentially do that with Uber Eats.

Justin Donald: The original DoorDash.

Alex Day: Yeah. DoorDash was getting going actually the same year. I think we actually launched Peach, and there were a bunch of lunch delivery companies in between that have sold or failed, but I mean, huge space now. But back then, it seemed super novel and crazy. So, I’d meet them during their lunch breaks at Amazon while they were still employed there. I’d pull up to campus and I’d see people and be like, “Yeah, hey, everything’s going well.” And they’re like, “Oh, how are you doing with startups?” I’m like, “Yeah,” it’s like, all right, I’m kind of figuring it out. And I go back on campus and I’d have my coat on and go sit at the table.

And yeah, the three founders would come down and we do everything. We basically make sure the restaurant, all the orders got to the restaurants, make sure the restaurants were cooking the food. We do versions of all of us delivering or not, or like hiring other people to do deliveries and then doing the customer service after, then working with different companies to make sure we could scale this out. So, yeah, it started like that. Then we hired one of my best friends here in Seattle as a second employee. And we were off to the races and that was Peach. And Peach ended up being a four-year journey. We raised millions of venture capital, grew to multiple states, doing thousands of thousands of lunches and 90-minute window every day for people that work and connecting local restaurants to them and bringing them a ton of business.

Justin Donald: Wow. It’s incredible. And so, as an early employee, generally, in the startups, you get some sort of equity early on if you can catch the wave before there’s a C-suite, there’s this allocation, an employee pool, right? So, what did that look like? Was that something that you got? I’m guessing invested over a period of time if you did, and that way, you didn’t have to stay the whole time to be able to earn some sort of a payout on it.

Alex Day: Yeah. No, that’s typically how it works. And what’s usually difficult with startups is you have to have a successful exit ultimately for your equity to become something new. There are times when you can sell it off along the way in secondary markets and things like that, especially if you’re an executive or a founder. But I was 24 years old, I was essentially an unemployed mercenary for startups. And so, I joined. I was just psyched to have a salary. And so, I ended up getting some equity. But ultimately, the company, it’s still running today, but it’s not on a path to exit. And like any awesome employee, I said, “You know what? Don’t worry about giving me more base. I want more equity. I want more equity.” And I do that for years because I ultimately didn’t care about the difference in price. I was all in and growing this company, and I wanted them to feel that. And I was just so grateful for that opportunity.

And so, when we ultimately ended up leaving, me and my co-founder for the company I started called Modus, yeah, my equity was essentially worth nothing. I still have the printed certificate of the equity just to remind myself how exciting and how much fun that was to build that. It’s an amazing alumni group of employees, have gone on to do amazing things from their company. And so, regardless of that financial outcome for people and the fact that the company didn’t exit successfully, there’s so much learning and so many good friends that were made there, which was…

Justin Donald: That’s awesome. Yeah, it’s a great story. And there are so many cool findings and learnings from that. I think, for most people, you probably realize that the majority of companies don’t make it. The majority of companies don’t make it beyond a year. It’s a very small percentage that even make it beyond five years. And so, the likelihood of that happening is not good. But on the flip side of the coin, if they do, that can be life-changing money, right? I actually just met with someone this morning in our mastermind. And it was really cool because that was exactly what happened to them. They had life-changing money because they were an early employee, and that company ended up getting bought by a Fortune 50 company. And so, what a really cool experience for that. You don’t know. And it’s good, in my estimation, to have a little bit of both, to have some salary so that you’re being compensated today. You get today’s utility, but you’ve got some upside, some house money. And if it plays great and if it doesn’t, that’s okay. You don’t expect that it will. But you sure are motivated to do all that you can to make it mean something and be something.

Alex Day: Yeah, totally. And this is a cliche thing in the startup world, but if you want to make money, don’t do startups. Like, typically startups, like you said, they don’t work out as a founder, as an employee. But when they do, it’s amazing. And what you learn doing it just improves your chances over and over again. So, once I realized after Amazon, “Hey, I’m going to do startups,” in my mind, I said, “I’m not going to stop doing this.” And if I can do it actually at higher stakes in more meaningful positions and take my learnings to go bigger and bigger, the odds get significantly better. And so, that’s ultimately when I got to that moment at Peach, I just said, “I can’t, I’m not employable. I know I’m a bad employee. I’m not going to go and get a job at a big company and try to sit in that seat. I just know it’s not for me.” And so, I said, “This is my time to really think about starting my own company.” And I met someone at Peach that I really wanted to do it with. And so, that became the real next chapter. So, don’t do startups. But if you’re going to do it, do it for a long period of time to…

Justin Donald: That’s right. Make sure your idea is really good if you’re going to do it, right?

Alex Day: Yeah, and fail fast. And that’s another cliche in the space. But like just go, go, go, try hard. But you have to know when to pull the ripcord, but you really have to burn the boats. And I had a few investors use that line and it matters so much. Don’t give yourself an out because it’s really hard. And yeah, most people don’t realize the pain they’ll go through. And that’s the naivete that actually allows you to get into being an entrepreneur. You don’t realize how tough it is or you won’t do it.

Justin Donald: Well, I’m glad that you found the one. After a little bit of trial and error, you found the one that was a true home run, right? Let’s call it a grand slam. Modus, based on how quickly it ramped up, based on how quickly it became a big player in the space in terms of revenue, in terms of employees, exit size, like everything, this was a grand slam for you. And I’d love for you to talk us through what it was like starting and how you grew it to what it is and whatever you’re comfortable sharing on the exit.

Alex Day: Yeah, totally. So, while we’re at Peach, I was interested in flipping homes, and it was just something I thought was fun. I wanted to get into real estate. I saw a few ads back in the day before Instagram was a huge thing, but just people talking about flipping homes, like, oh, this is cool. And there’s probably a bunch of technology players in here, like, I’d like to learn about real estate. So, I got into doing that. Did not go well. I was not good at it. It takes a lot of detail orientation and focus on aspects of real estate that I particularly wasn’t interested in and good at. But I learned a very valuable lesson in that the home closing experience is super antiquated. There’s a lot of fraud. And experientially, it’s kind of a brutal last mile for homeowners and real estate agents to go through or want to be homeowners to go through, and it should be a magical experience at the end. It should be modernized, and there’s a lot of money that flows through to these title insurance companies when the claim rate is really low.

Justin Donald: Totally.

Alex Day: As you know, and probably many people listening now, title and escrow is an amazing business. For those who have an attorney state, they would use an attorney, but essentially the same thing, someone helps you close your home, collects your earnest money, that sort of thing. So, went through that experience a couple times and thought, wow, this is amazing. I started talking to a lot of these title and escrow companies and just asked, like, is there a way for me to wire my earnest money digitally? And they’re like, no, it’s check or these physical options. This was before. Now, that’s ubiquitous to be able to wire your money digitally.

And so, I ended up talking to a few different engineers and friends of mine about different ideas that we could do, particularly in the blockchain space. This was back in 2017 when people are super excited about blockchain, super excited about crypto and that was starting to become a thing. And we just wanted to play around with it. We were like, we don’t really know why we’d use blockchain instead of regular database but, like, hey, let’s try to build something with blockchain. So, we went to a blockchain hackathon and we wanted to build an escrow company that, in theory, used smart contracts, which is an Ethereum-based system, and just make this instant, secure, ubiquitous in nature, like anyone could use it. It’s fast.

And in theory, that sounds super cool. But like banks and local registrar’s office, like, even your title is not online, let alone hosting a node on the blockchain and doing that whole thing. So, we end up winning first place at the hackathon. There were five of us. Myself and one of my colleagues at Peach, we were like, this is probably the end of the road for us with Peach. We need to figure out what’s next. So, we were kind of like, yeah, we don’t really have any options. Like, yeah, we’ll go all in on this. Who else is in? And our third co-founder said he was in. The other two had great jobs, and they were like, “I don’t know, we need to stick it out a little longer.” And I was like, “Honestly, good for you.” That’s the right call to make probabilistically. And so, the three of us ended up quitting our jobs, January 2018. It was actually on Martin Luther King Day, because our Wi-Fi for all of Modus’ history was Dr. King, which is really cool.

Justin Donald: That’s awesome.

Alex Day: So, Martin Luther King Day 2018 and yeah, we got a tiny little office, a one-person office, but there were three of us in there. We went and did like the classic Amazon thing and cut some plywood and made three desks out of, like, doors or of plywood or something like that. We thought it was cool. And yeah, we bootstrapped the company for six months. One of our co-founders actually made a little bit of money at another tech company in town. And so, we gave him a little of our equity, which was, again, worth absolutely nothing. It was the three of us and an idea. And that equity we gave him to bootstrap us became– he like 10 or 20x’d that money when we exited. So, that little charity he gave us ended up being quite an investment. But he was just a great guy and wanted to see this happening. We couldn’t have honestly done it without him, giving us a lot of that safety net. So, that was hugely helpful.

And so, we bootstrapped. We ended up raising a little seed round once we cobbled together some interest from customers, which were real estate agents, and started building our operation team with two amazing women who ran their own title insurance company, a small title insurance company in Seattle. And we’re off to the races. We raised a few hundred thousand dollars. We started doing sales. We brought in an exceptional sales leader from a major tech company that everyone knows where you go and look up homes and home prices and ended up working with a lot of excellent talent from that company that came to join us. And yeah, we basically went from zero to about $17 to $20 million in three years, which was wild. So, we can talk about that.

Justin Donald: That was just unbelievable.

Alex Day: Yeah. At the beginning of that.

Justin Donald: Yeah, that had to be a wild ride. And over 100 employees, maybe over 150 employees, like a ton of people.

Alex Day: Yeah, we were at the peak. We were somewhere around the 150-employee range. We sold the company within three years. So, we sold the company a little after two years. And yeah, we continue to grow. We were doing record revenue months through COVID as real estate was booming, interest rates were going down, building a world-class culture. People were helping us build, but we were so excited to be an industry-changing company. And so, we brought a lot of people to our company from these large incumbents in the industry and really gave them the platform to shape the company how they wanted. So, as a CEO and as a founder of group, we were very open, very vulnerable. We talked about things that in the industry, no one ever discussed. And so, it became a really trusting, collaborative environment that was really a ton of fun.

Justin Donald: And you had a monster company by you in the real estate and a residential real estate space, Compass, right?

Alex Day: Yep.

Justin Donald: And generally, for those of you that have been with us a while, we talk about this a lot that when you have an exit, more times than not, it’s not just a clean break. There’s some sort of earnout that exists. They pay you a certain amount up front, and then you have the ability to earn more based on the performance over a series of a timeline, a series of years, however it’s structured. And so, what did that look like for you? What was your earnout? You earned something up front. You had benchmarks that you could hit for extra income. They probably paid you a salary during the interim as you stayed on.

Alex Day: Yep. So, we were hired as executives at Compass. We continue to run the Modus branch. We had to split some of our product engineering team to work on some of the Compass’ core products, which obviously was a big shift for us, but we continued to work on Modus, which was exciting because title and escrow is a major profit center for a real estate company, right? If you look at a brokerage, you look at lending, like mortgage companies, you look at title insurance, and then their various other services that go on through a real estate transaction. But title insurance and escrow is a massive profit center.

So, the goal was we had a road map to become profitable. We were operating and executing toward that. We launched operations in Texas and in Florida. We were kind of expanding that, but it required investment. And when Compass went public, this is publicly available information, and it was mostly kind of a tech sector situation at the time too, but a lot of stocks didn’t do well, a lot of tech stocks went public and didn’t do super well because the market wanted companies to become profitable. And I know that probably sounds insane to say, like, why would unprofitable companies ever be acceptable when you go public? But there was an appetite for growth at all costs in the past, and big investments to get these companies going to a point where they have a tech differentiated strategy, and then you focus on improving your economics to become profitable. That was what people were okay with in the past. That changed quite a bit. I think this interest rate shot up and the economic situation changed. So, companies that weren’t profitable and were burning a lot of money every quarter started to see that reflecting in the stock price.

So, Compass unfortunately had to get tighter on the investments they made and things like new acquisitions. And so, unfortunately, we had to go through a full wind down of the business. And that was super hard. And it was something that was out of my control, unfortunately, and something that any founder has to do and we have to make fiduciary responsibilities that support your investors and support the business strength in the long term. And they had to be tight about that. So, we ended up winding the company down in September 2020 and super hard. I spent my time with the founders, personally working with every single person who wanted support and landing in a new place, references jobs that we were able to accelerate people’s earnouts and that sort of thing as well, which helped a lot of employees. And some employees had some life-changing situations with their equity and almost all investors did well, even the latest ones still received their money with some premium back. So, all the time, purpose is very tough final days with the wind down, but ultimately, a really fast and exciting outcome.

Justin Donald: Well, it’s incredible that you were able to, inside of three years, start, grow, scale, and exit a company. That is so rare, so hard to do. You were able to do so at an incredible multiple, I mean, what a total win. You had a high eight-figure exit, I believe, three founders plus the money that you raised, you split it up, you pay some taxes, you have what’s left. What’s left is always a lot less than whatever you think based on the purchase price. The purchase price is always so big way up here. And then, the take-home at the end, you’re like, oh, that’s a big difference. But I still have to imagine this is life-changing money, a life-changing opportunity, and really an income that allows you to pivot and take your time to figure out what’s next, to do whatever you want to do. And you found your way, as did I, in a Post Exit founders group, where there are a lot of people just like us that they’ve got their story and some were colossal successes, some were epic failures, some were a little bit of both. I mean, we have many people in here. There are two and three and four and five-time founders with exits. It’s really incredible.

Alex Day: Yeah. No, it’s amazing. And I think the biggest thing now is looking back and essentially saying it’s been a little over a decade since I’ve been full time, full-time professional. And looking back at everything that I’ve learned, I think, a lot of– there’s this great, it’s more of a picture than a graph, but it’s like this ball of yarn and then a straight line that comes out of it, and there’s this straight up into the right graph. And it’s kind of like, I think the caption, something like what people think life is and what life is, or it’s like what the entrepreneur thinks a startup is going to be and then what it isn’t. I think that’s the biggest thing now that I’m thinking about is how can I share more about what I’ve done, not from a point of being special. There are people that have done this much bigger, much more often than I have, but being able to share a lot of this with people who are considering doing it or doing it and they’re struggling and they’re in that ball of yarn because it’s so important for this economy to have people that are starting businesses and employing people and hiring people. And I just believe so deeply in supporting entrepreneurs. And so, I’m one forever, I’m going to continue to do new businesses and continue to grow in my own way. But also now, I’m thinking a lot more about how I can give back and support those. So, I do a lot of angel investing, advising and that sort of thing, and do some programs here at the University of Washington to help student startups as well. So, I’m very involved and it’s just such an important part of my life.

Justin Donald: I love that. And I do think that for those of us that kind of figure a few things out in life and business and wealth, it is like we do owe it to other people to teach, to share, to give back, to do it with time and mentorship but to also do it with our resources, our financial resources. And so, I do think that’s important. As you make more money, it should not go. I think it’s very unhealthy that it go completely to consumption, right? We need to have better outlets and use those dollars to have impact and positively change the world. So, I love that you do that with both of your time and your resources.

Now, you and I have gotten a chance to spend more time, and we’ve gotten a chance to like even talk through like ideology around passive income and even more so now that you’ve joined The Lifestyle Investor mastermind. And I’d love to talk to you a little bit about kind of where you were prior to joining, why you joined, any shifts that have happened, any conversations that you and I have had just around money. In fact, you just ran a really cool passive income workshop for a bunch of post-exit founders and did a great job, which is cool. So, I love seeing you teaching it, right? But at first, you got to learn it. And you’ve done a great job of that.

Alex Day: Yeah. So, most people in the tech founder role I’ve seen just through my friends and networks and so on, you do this company-building thing, blinders on, heads down, obsessive focus for so long, you hope for a positive financial outcome. And then you assume, “Now, I’m kind of like whatever, I can do what I want, there’s more freedom.” Like, that’s the hope. That’s what everyone’s building towards. Like, build something impactful, employ a bunch of people that you can support with this thing that you and everyone have built together, and then there’s this financial outcome for you to give you more freedom to do things. You get to that point where you think you have the freedom to do things, you have this money, and then you start investing in things that you know, right? Because you think, “Oh, I’m supporting all these people.” And the next thing you know, you’re locked into these completely illiquid deals like investing in tech companies, like investing in VCs, like investing in private equity shops, like all of these things that are big max IRR, max return type vehicles because that’s what you know. You poured your entire self, your whole net worth, all your savings, whatever into a startup that is a 10 to 20-year time horizon. And so, that’s what you think is normal.

But you get to a point where you realize that freedom ultimately to continue to take big swings and to support your family for those who have families or to support you, yourself even, you need some sort of constant income. And so, when you’re building a company, you’re paid a salary, fine, you sell it, you have a bunch of this money you’re investing. You’re kind of peeling off principle for yourself, and that’s your income. But you get to a point where you’re like, “All right, I’ve invested. Do I want to start a college? Probably start a company soon. Because why? Because I want to build something. Yeah. But also probably because you want some sort of income. And you can lock a bunch of money away into things that are generating 4% or 5% right now because of interest rates, which is awesome. But it’s not going to be like that forever. And you have to start thinking more broadly about passive income as a lever for freedom to do what you want and to take bigger swings. And so, at first, I really thought passive income is for suckers and like I’m not going to put a bunch of money into T-bills and like things that are just boring and slow. Like, I don’t want to lock up on liquidity. I like doing deals. I know how to pick good deals. I’m going to go and do deals and max out IRR.

And I remember you posted something to the post-exit founder group and I looked you up and I was like, “This guy’s about lifestyle investing. Like, what is this? Like, come on. What is this really about?” And then I read the book and I started thinking about this, and I was like, this is the deal junkie, high-risk person’s dream is to have all of your bases covered with your normal life through passive income so you can take big swings. And I remember you kind of explained that to me probably multiple times. And it got to a point where I was like, “It’s not just passive income for passive income’s sake. It’s never that. Well, that’s never the point of wealth. It’s always the why kind of thing. And the why is to continue to take massive swings. Well, you have all of your bases covered, so you can really think freely and think big about what’s next.” And so, I realized a lot of tech founders had the same sort of journey as to like work hard, build the company, sell a company, make some money, invest all of your money. Now, you’re like, “Damn, I need to make some income. I want to figure this out,” but I don’t really want to go and like pick a bunch of deals but there’s no fund you can invest in for passive income either.

So, yeah, I’ve been doing these sort of blind leading the blind workshops with people sharing my thought experiments I’ve been developing over the past two years since my own exit. But there’s just been a ton of interest. So, I’m trying to figure out how to formalize that in a way that really helps founders build passive income so they can start more companies and hire more people, and give back as much as they possibly can.

Justin Donald: I love that. I mean, it’s so cool to see. And for most people, they don’t realize being an entrepreneur and being an investor are two completely different skill sets. It’s a huge chasm in between. You have to learn. Just because you are a successful entrepreneur does not mean you are going to be a successful investor. It might actually be more likely that you’re not. And I see a lot of post-exit founders show up with all this bravado, all this confidence that they can do it. They can figure it out without putting in the reps. But one of the things that you had shared and when I think back on life, I remember early on in my life, people were like, “Hey,” I have mentors that are like you need to save 10% of what you make and just do that over a long period of time. And then at some point in time, it became 15% and then it became 20%. And so, the common statement would be save 10% or 15% or 20% of whatever you make. For me, maybe it was that I was trying to get better and save more over time, but maybe it was that the language around how much you needed to save per year changed, right?

And so, one of the cool things that I realized is that if I do a good job of buying assets that produce income and I can cover all my expenses, then all the surplus income can completely be invested. So, we’re not talking about 10% or 20%. We’re talking about 100% or whatever’s left over after charitable giving. Right? So, maybe it’s 80% or 90% or maybe it’s less than that but you’ve got like 100% of the surplus income can go to charitable endeavors and investing. And that just when you talk about how do you compound wealth, how do you multiply it? There are a lot of people good at making money. Most people aren’t. But in the category of money, the biggest category is making money. Then you get into managing money. It’s much smaller. Much less people know how to do that. Then you get into multiplying money and you have very few people in that category, and then making money matter. And so, there are people at all different levels of wealth that are making money matter. But the more you make, the more impact you can have with those dollars.

And so, I just think that it’s neat. It’s not that you don’t take the big swings. You said this yourself. It’s that now you can actually do it in a little bit more of a responsible way. Like, if you want, you know, for me, I like 1% of my portfolio to be in a seed or early round investing. I’ve got another 9% to 10% in venture. So, these are all your early-stage companies. I don’t want any more than that. But what I’ve been able to do is produce income so that the surplus dollars go towards those investments. So, it’s not that I don’t swing for the fences, it’s that I have passive income that becomes the capital that takes the swings. So, that way if I miss and most of the time on early stage companies, you’re going to miss, it’s a numbers game, but now every month that surplus income comes due and I can make another investment or I can choose to put it in treasuries or whatever I want to do. I can offset it. I can balance it. I can say, “Hey, I’m going to put 30% in treasuries or 20% in treasuries, and I’m going to put a small percentage in these high-risk, high-reward type of investments.”

Alex Day: It totally makes sense.

Justin Donald: So, you attended your very first Lifestyle Investor retreat this past December. And I’m so excited that you’ve already renewed. You’re still inside your first contract and you already renewed for a second year. So, obviously, you’ve experienced some good value there but I’d love to hear your perspective of what you thought it would be versus what it is and why do you feel like this is a community of people that you want to be around.

Alex Day: Yeah. That’s a great question. So, there are two big steps for me, I think, in getting into the group into where my mindset is that’s been really beneficial. The first is I set some intention around a goal to be more involved in building community. And I have a bunch of personal friends in Seattle and that sort of thing but what I realized is I don’t necessarily have a network of people that are thinking about the similar things when it comes to call it finances and lifestyle. And lifestyle, meaning thoughtful lifestyle design as a son, a brother, a husband, a partner, whatever it is, a father, I’m soon to be. And so, I thought, first, I need to find these types of communities that really care not only about the financial side but about lifestyle design in a way that’s intentional. And so, that led me to really looking at different groups, and a lot of them focus heavily on the financial side and not as much on the lifestyle side. And so, then when I came across you and what you were doing, I thought, “Oh, this is interesting,” because it seems to cover both and like I have an echo chamber of a lot of tech founders that I’m inside of.

So, I was like, “It would also be nice to find other people that are maybe entrepreneurial in a similar way but in different industries.” And so, your group really covered that for me too. And there are tech people in there and so on but I love to see that it’s not just founders. It’s people with W-2s or higher W-2 types that are looking to figure out that lifestyle. Because no matter what, even if you’re the best brain surgeon in the country, you’re still required to show up and sell your time for money and work for your income. And so, everyone has the same goal. And it’s not just passive income, it’s passive income to build this intentional lifestyle. And I thought that was really cool. And it’s probably something that shifted since thinking about becoming a father and so on. But, I joined because of that community interest and that lifestyle design.

And then I think the second piece is the community of people connecting and supporting each other was really cool. Because at first, I thought, “Okay. We come and we’re going to talk about tax strategies and some deals.” But ultimately, people really want to help out and share their experiences and we get super vulnerable. And so, that lack of ego was really interesting because often when you’re around certain types of people that I’ve been around in the past, it’s very guarded and it’s almost like you don’t want to show yourself as weak or as vulnerable. And it’s much rarer to find people like that but that’s where the real connection and the real learnings come from. So, that’s why I renewed. Joined for the community and lifestyle, renewed for the members.

Justin Donald: I love it. Well, I’m part of a number of groups and some of them I feel like, by the way, when I say groups like, I think one of the best investments that exists is investing in mentors, coaches, and peer group communities, right? So, to me, that’s the first place that I want to spend money if I’m trying to grow myself, and I want to play the game of life and business and wealth creation with people that are playing it at a higher level than me. Like, I want to learn. I want what they’re doing to rub off on me. And so, I join all kinds of different groups, masterminds, investment communities but I also noticed that a lot of these groups, there is a lot of pretentiousness and that drives me crazy. I can’t stand it. I don’t like that entitled, outlook, and way of living. And so, I want to distance myself from that. And I knew whenever I started Lifestyle Investor, if anyone had any hint of that, they would never get in because that to me just ruins the culture that I wanted to go after. And so, what’s neat is seeing how humility is kind of like a bedrock of the mastermind and the types of people that it attracts and the type of people that it retains, and really the culture that builds from it.

So, it’s been really special even for me, even though it’s people look at it as my mastermind, I look at it as I facilitate a lot of stuff but I’m a participant just the same. And that’s exactly who I want to be around. And so, this morning I went to breakfast with one of our members because that’s who I want to spend time with and they’re my favorite people to spend time with. So, I think it’s so cool that you’re in this community. I love your story. I love all the cool stuff that you’re doing. You’re even now investing in real estate. I mean, feel free to share some of the stuff that you’re doing with real estate in the Seattle area.

Alex Day: Yeah, definitely. So, this, I guess, I’ve been calling it a project but it is my full-time day job, to be clear. And if investors in the fund are listening, I am 100% committed to this thing I call project, but I’m basically running a new fund for a long-standing real estate development firm in Seattle. So, the firm is called Alchemy. It’s someone who I’ve invested in in the past before joining them and love the team, love what they’ve built, and they’ve been doing this for about 25 years, and they’re one of the more prolific infill residential developers in Seattle. And they’re solving a really important issue that we’re facing in Seattle, which is lack of housing inventory specifically for home buyers and often first-time home buyers. If you look at Seattle on a map, it’s clear why. I mean, there’s water and mountains everywhere, and it’s been one of the fastest-growing cities because of Amazon and Microsoft and a handful of other massive companies. Starbucks, REI, Costco, you name it. It’s a crazy employer base. So, it’s growing like crazy, real big housing issues, and housing pricing issues.

So, we figured out a really unique way to actually build single-family homes with ADUs and DADUs, which are this mother-in-law suite, detached, sometimes attached product that’s really interesting and a great way to develop the city in a way that allows more families to live in these core Seattle neighborhoods. So, I was investing in these projects. I decided I love the mission and I love the team. And so, I actually ended up joining them, coming in-house, and raising their first-ever equity fund that allows new investors to come in and invest in this type of development in Seattle. So, the returns are awesome. That’s a huge part of why I’m there but I also love the mission. And so, launched that fund in August and basically wrapping up our first little $10 million equity fund.

Justin Donald: I love it. That’s so cool. And congratulations on that transition from being an entrepreneur to being an investor and getting around other people that are doing it for a living and really taking the reins. I think that’s so cool. You’ve been successful at all the things you’ve done. You figured out a lot about yourself, which is cool. And I’m just thrilled to have you in the mastermind, have you as a voice of reason and counsel and education for all the gifts that you have that you get to offer to our community, and now to all of our podcast listeners and to those watching on YouTube.

Alex Day: Yeah. No, I really appreciate you having me. This is a blast. First one in the books.

Justin Donald: I love it. Well, hey, it’s an honor to have your first podcast here with us at Lifestyle Investor. I love ending every episode that we do with a question for our audience. So, the question once again is, what is one step that you can take today to move towards financial freedom, to move towards living a life by design that you truly desire? So, most people are living life by default, and I’m excited to hear what steps you’re going to take that you learned from Alex today. Alex, thanks so much for joining us. Where can people learn more about you?

Alex Day: So, I was actually prepped with this question, everyone. And I am so bad at having socials and all these things running for myself. I’m not a very public-facing person. So, I’m on LinkedIn, but I did create a landing page for a website I am going to build out with various learnings and blog posts and things that I’m going to share about myself and my journey and it’s AlexDay.co, just all one word. And just throw your email in the subscribe box, and I’ll start sharing things and building this out over the next month or so. But really excited to get that going to start to share more with the greater population.

Justin Donald: I love it. Well, you have a great personal brand that you didn’t even know you had until recently, and I’m excited for you to start flexing the knowledge that you have. So, thanks for joining us. And to everyone, find your one step that you’re going to take to move towards financial freedom. And we’ll catch you next week.

Alex Day: Awesome. Thanks, everyone.