David Lecko of DealMachine: “I don’t need to prove anyone wrong or anything”

I wish someone told me how to give feedback without letting negative feelings fester before I started leading my company. Festering negative feelings feels terrible! Giving direct feedback is scary and I wasn’t good at it. Thankfully, I read a book called the GREAT CEO WITHIN that provided a structure for gracefully providing feedback. It […]

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I wish someone told me how to give feedback without letting negative feelings fester before I started leading my company. Festering negative feelings feels terrible! Giving direct feedback is scary and I wasn’t good at it. Thankfully, I read a book called the GREAT CEO WITHIN that provided a structure for gracefully providing feedback. It feels great to get those feelings off my chest every day in a way that’s helpful for productive

As part of my series about the leadership lessons of accomplished business leaders, I had the pleasure of interviewing David Lecko.

David Lecko is the CEO of DealMachine, an integrated, mobile-first platform for real estate investor lead generation. Whether it’s the CRM, Street Engine (driving for dollars), List engine, or Message engine (SMS), DealMachine has every tool investors need to scale, in one simple app.

David created DealMachine in 2017 to acquire his first rental property via driving for dollars. He’s built a 2 million rental portfolio with the app. Through intense focus, DealMachine has grown from $20,000 in 2017 to a $10M ARR run rate in 2020, with over 300,000 app downloads.

DealMachine also grew from 15–40 full time team members during the pandemic and has grown the largest REI lead generation technology community, with 10,000 Members in the community group on Facebook, and 20,000 active monthly members.

It’s the top-rated mobile app for REI lead generation on Apple’s App Store and Google’s Play Store, with a 4.8 average and over 2,000 reviews.

But what really sets DealMachine apart is the founding vision to address the fundamental shift in technology that has happened in all other industries outside of real estate investing, where the software business model depends on the customer having long-term success.

Thank you so much for joining us! Can you tell us a story about what brought you to this specific career path?

Yes! I was the first employee at a software startup called Chapterbuilder. The owner had several existing businesses, and I learned a lot by helping him get his latest venture off the ground. He also had several rental properties which inspired me to read “Rich Dad Poor Dad” by Robert Kiyosaki and play the cashflow game that goes with it. In the game buying rentals that cash flow is the fastest way to build up passive income and get out of the “rat race.” So instead of investing my company 401k, I went looking for a rental. Nothing listed for sale would cashflow in my area. I attended a local meetup and they told me to go driving for dollars. That means you look for run down houses and get in touch with the owner. So, I started doing that after work, but ended up missing a deal because I was not following up with the owners quickly enough. Later that weekend I put together an app with a map I could pin the property, see the owner info, and have a postcard sent to the owner immediately asking if I wanted to buy it. Later that year some friends wanted to use the app too, so I put in on the app store. A lot of others ultimately started finding it organically and DealMachine became a real business, and I become the CEO. Solving my own problem enabled me to serve others too.

Can you tell us a story about the hard times that you faced when you first started your journey?

Building DealMachine at the beginning would not have been possible unless I had prepared for many years prior. Luckily, I had saved 40% of my income for 5 years since I was 21–26 years old. I was always interested in investing and knew time was my greatest ally. For that reason, I was aggressively saving and not doing any fun expensive stuff in my 20s. Then before I quit my job to work on DealMachine, I bought a house and had four roommates! I was still driving my dad’s 20-year-old Honda accord. A sacrifice that I hoped would pay off. That income came in handy because my business partner and I put in blood, sweat, and tears into DealMachine for 2 full years before it ever generated enough to pay myself and also my business partner. I had depleted my entire savings by the time we finally ran the first payroll in April 2018.

Where did you get the drive to continue even though things were so hard?

It was my childhood dream to start a business. I was obsessed. I didn’t do anything else in my 20s except save money and work on my business.

My parents got really nervous when they saw me quitting my engineering job and spend all of my savings. They wanted me to reconsider getting a job so I could live in my own nice house without roommates and have a nice car in the driveway. They cared a lot about me and my success, but what I realized was that we defined success differently and had different risk tolerances.

For a while, proving my parents wrong was one factor that drove me. Then once we did achieve $1 million in annual revenue, I started treating my parents to their favorite concerts and I took my dad on a trip to Las Vegas for a Star Trek convention. They were really proud of me and it felt amazing to make them happy by spending that quality time with them doing things we’ve never done before. That was my why. To be able to do those things.

Now, I don’t need to prove anyone wrong or anything. I get a lot of satisfaction from learning as we grow. I’m afraid of not being the best version of myself. That is what drives me now. Every uptick in revenue brings a new challenge. And it requires me to level myself up because a lot of people depend on me now. I don’t take being CEO as a right; it is a privilege. If I stop growing and learning to lead this company, then I don’t get to be CEO. That excites and drives me.

So, how are things going today? How did grit and resilience lead to your eventual success?

Today we have 40 employees and are doing about $10 million in annual revenue. We added 25 of those team members this year and plan to add 15–30 more team members next year in 2021. Grit and resilience lead to my eventual success. In fact, I think that’s often what more people fail to realize. They don’t stick with an idea long enough to see it through. Grit and resilience will take you very far and set you apart from others in my experience. I’m glad I had great parents who instilled that work ethic in me as a kid, even though I may have applied those values differently than they did.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

One funny mistake when I was first starting out was the app was free and we would allow people to send mail for a charge. We would charge them for that mail after it was sent. This one guy picked up the app and sent $5000 worth of marketing. Then his credit card failed when we tried to charge him, but the mail had already been sent! I was trying to get ahold of him to pay his bill. I found him on Facebook and sent him a message. He replied saying that I was completely unprofessional for messaging him on Facebook and that he was going to leave a bad review. It really bothered me at the time. But I took ownership and ate the cost. Then we changed our system to charge the customer before sending mail. The lesson that I learned was even if you get the short end of the stick in life, take responsibility and don’t be the victim. Focus on what you can control about the situation in the future to ensure a better outcome.

What do you think makes your company stand out? Can you share a story?

When I started investing in real estate in 2016, Dave, my co-founder and I came from a software engineering background. Our jobs were to make a really great software. We noticed that most of the tools available for investors were focused on grabbing short term revenue, rather than building the best possible product and focusing on the customer’s long-term success.

“Launches” with large upfront fees for “lifetime memberships” were followed up with new products that had new names, overlapping features, that were white-labeled often with a key feature subtracted on purpose. This was done so that customers would have to use both products (and pay two big upfront fees) to accomplish everything they needed to accomplish. It was more profitable to have a second piece of software launch than it was to iterate on the original product and make it better. The upfront fee had already been collected and the original product had already been “built.”

For seasoned investors, they had seen this cycle enough to know they needed a longer-term technology solution for their business. This led real estate investors who do 20–400 deals annually to spend $10,000 building out a custom CRM of their own, and then connecting it to 10 different tools. The best long-term tools in the industry focused on solving a single problem really well.

For example, there was a tool for just websites, just driving for dollars, just text messaging, or just process management. To operate a business past one million in revenue, investors needed the best technology, and they needed it to work with their own processes. They were forced to actually become a software company themselves and hire a developer to customize their CRM and connect it to individual tools.

A few “all-in-one” tools for investors emerged, but today they still fail to compete with the software providers who chose to go deep in one area. The all-in-one business model focuses on “checking the box” to provide the most features.

The all-in-one sales pitch is often “one low monthly payment” that is much lower than the equivalent separate dedicated tools. Without deep focus on each feature, and without dedicated revenue to support dedicated teams, the all-in-ones fail to serve the enterprise-level investor. They primarily attract beginners who are motivated by cost rather than quality.

The founding vision of DealMachine is to address the fundamental shift in technology that has happened in all other industries outside of real estate investing, where the software business model depends on the customer having long-term success, that investors don’t need to hire a developer in order to customize their tools because the CRM allows for all the customization they need in an incredibly easy to use way.

All the tools investors need exist within a single app and those tools work separately by themselves or easily together without needing integration because they were built from the ground up with a shared backbone called DealMachine CRM.

Investors will experience a 33% growth on average within 2 months of using DealMachine.

We’re the best choice for the enterprise investor and we offer unmatched value for new investors at no cost to them.

We look forward to actively helping 100,000s of organizations to achieve success as a result of changing the way real estate investors think about real estate technology.

Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?

I would offer colleagues in my industry the following advice to help them thrive and not burn out: find like-minded individuals who are on this journey with you. Connect with them on Facebook or a local meetup group regularly. In my case I have a business partner who is a very long-term friend. (I would not recommend just jumping into business with someone you don’t know well — this is more serious a commitment than getting married in many regards).

I would also suggest getting a mentor. My mom didn’t think rental real estate was a good idea because she was talking to people at her churn that didn’t have success as a landlord. I knew it was possible because I was talking to people who were successful and had hundreds of rental properties. You can find mentors on YouTube, through literature, or you can also pay for formal mentorship. I have done all three and it has helped me be successful a lot faster.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?

Absolutely, none of us are able to achieve success without some help along the way. I am grateful towards my business partner who helped me get to where I am now. We are both software developers, but I always knew deep down he was the much better software developer than me. So, when I realized DealMachine could be an actual business I told him about the project. I invited him to join me as a 50% partner and he would focus on the tech and I would focus on everything else. I could not have achieved success without him. We have complimentary skills and recognizing what each is better at has enabled us to be successful together.

How have you used your success to bring goodness to the world?

I have used my success to bring goodness into the world in several ways that I am proud of. First, I donate to several organizations that have impacted me. Second, I have made an effort this quarter to think critically how I could develop my team, personally and professionally. One of my recent hires for director of engineering asked me, “Would it be ok if I took this job, that I ask each of my direct reports what their personal goals are and follow up on those with them regularly, not just their business goals?” and I immediately hired that person. I think that my canvas in the world is our team and who leads it, and I’m really proud of selecting leaders who proactively show a high level of caring towards each other. That is how I want to be treated and how I want my family to be treated.

What are your “5 things I wish someone told me before I started leading my company” and why. Please share a story or example for each.

  1. I wish someone told me how to let go of work after hours when things aren’t going right, before I started leading my company. When you run a software company, if the software doesn’t work after hours because your servers are overloaded, you should definitely stop what you’re doing and go fix your servers. That’s not what I’m talking about. But there are other problems that will come up that are not really that URGENT (even though they will feel that way).
    For example, it could be a partner who appears to be shifting focus on other things, or who violated your agreement. I was supposed to go to the lake with my girlfriend when this happened to us once. But I could not focus on dinner and my girlfriend felt ignored — and she had no idea why! That was creating an additional problem on top of my work problem. I wanted to be an entrepreneur so I could live life on my own terms. I could not let work dominate me like that. I ended up communicating to my girlfriend what happened, and she understood. Then I sent an email to my leadership team informing them of the issue and asking them to come prepared on Monday with solutions. Monday came and we agreed on a solution. As a leader, I need to not worry about having the right answer all the time. I need to involve my team and let go of work during my personal time. This is something I am still actively working on, but it is a must-do for personal sanity and any hopes of a personal life.
  2. I wish someone told me what Churn was, how to measure it, and how to fix it before I started leading my company. For those that don’t know, churn is the percent of people who quit your subscription-based business every month. for the first 3 years of our existence, we did not measure churn. We were growing so fast it didn’t seem like it mattered. Then we hit a growth ceiling where the number of people quitting equaled the number of people joining every month. We’ve begun putting more resources in place like high quality live training for new members. I wish we started doing that 3 years ago because the impact and growth we would see today would be enormous.
  3. I wish someone told me how to give feedback without letting negative feelings fester before I started leading my company. Festering negative feelings feels terrible! Giving direct feedback is scary and I wasn’t good at it. Thankfully, I read a book called the GREAT CEO WITHIN that provided a structure for gracefully providing feedback. It feels great to get those feelings off my chest every day in a way that’s helpful for productive.If you’re wondering the structure goes like this: Giving feedback: I like xyz. I wish that abc. Receiving feedback: Thanks for that feedback. I hear that you wish abc. I accept/reject that and here’s why.
  4. I wish someone told me how investing in my company is the best investment I can make before I started leading my company. Thankfully I read the book profit first before starting DealMachine. Every entrepreneur should read that. It tells you how much money you should take as a founder of a company at different stages of growth. Eventually I was receiving more money that I needed to live off of. I bought some Tesla stock and some bitcoin, etc. But eventually I realized the DealMachine was running hot. Everyone had too many responsibilities. So, we started investing the excess cash into hiring quality team members. This fueled more growth at DealMachine that could not be matched by any stock or outside investment. Both in my quality of life I gave away many of my own responsibilities to people who could handle them better than I could and also in the dollar amount growth of DealMachine. As an entrepreneur, investing in your own business is a greater return than you could get investing in anything else.
  5. I wish someone told me how to handle copycat apps before I started leading my company. After a year or two of growth, I started to see copycat apps mimicking DealMachine. There are at least 8 different ones I know of. It really bothered me and I worried about them. Then I heard on a Saastr podcast that if you do anything meaningful, people are going to copy you. It’s inevitable. And as a founder you should not be worried about them because you’re the one with an original vision. The copycat’s vision is just to copy you, so there’s no way they’re every going to surpass you. You’re the one with the vision!

You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

If I could start a movement that would bring the most amount of good to the most about of people, it would be to learn how your own mind works in school. Nobody teaches you how to deal with your own negative thoughts, or how to focus your mind on the most productive thoughts. Mastering your mind is the most impactful thing to the quality of your life. Side note, I’m a big fan of the 5 minute journal: simplest, most effective thing you can do every day to be happier and I just bought everyone on my team a copy!

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This was very inspiring. Thank you so much for joining us!

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