What do builders and franchisees have in common?
they need way better data platforms to cure information asymmetry
A quick update: I’m testing out a new Verticalized content schedule. Every week expect a long-form piece on Wednesdays and a roundup on Fridays from around the vertical tech landscape. More to be announced in the coming weeks.
As every industry accelerates into the digital age, there are all sorts of emerging needs for better data.
There’s many kinds of data platforms, but the one I want to focus on today are platforms that contain industry-level data that informs buyer or seller decision making. Data platforms that catalyze transactional decisions are ultra-important and ripe opportunities for startups. Because at the end of the day, it boils down to one question: can you make me more money?
I’ve written about one of my favorites, Convex, previously. Here are two (very) early stage ones I’m keeping an eye on.
Governmental data is a wealth of information and yet it’s nigh impossible to get insights out of.
Shovels thinks this is especially true for construction permits. Construction permits are a wealth of insight, containing data on every single building project that gets underway. Jurisdictions have tremendous data stores.
That raw data is somewhat valuable but it’s not usable or even that accessible. First, there are approximately 20,000 permitting jurisdictions in the US. Querying each one is not in scope for any single industry organization. Second, this data requires a ton of cleaning work to even attempt to make it usable.1
But if you somehow do all of that, there’s some really interesting second-order insights you can pull out. Beyond things like making the data queryable and tying contractors to permits, Shovels is transforming this data into a source of actionable insights.
Trying to figure out which contractors are the best for solar installs? Go on Shovels and find out. Making a decision around a construction loan? Shovels has coined new metrics for you to parse. Verify how long a contractor’s projects usually take, their inspection pass rate, and more.
And if you are trying to parse the best contractors for your new build, there will be no better way to do that then with these sorts of unbiased insights.
It’s this sort of data that is only obtainable by doing the raw aggregation and transformation. Previously no player has been positioned to use this given the magnitude of the project. Now with Shovels, my bet is most of the construction industry will gravitate towards this platform as the source of actionable, unbiased intelligence in this part of the ecosystem.
At some point, Procore will use this in their insurance underwriting, proptech companies will rely upon it to determine which building projects are viable to sell into, and builders and financiers will come to use it as integral to their due diligence processes.
Franchising when done right creates a ton of value for entrepreneurs. Buy the playbook, buy the brand, and run the operations.
If you’re a great franchisee, you can build an empire. And the great franchisees tend to exhibit one particular trait beyond pure operational talent. They are extremely good at picking the right franchises to work with. That requires a ton of research to do.
Research to date has been pretty difficult. There’s inherent information asymmetry. Franchises want to look like an attractive opportunity and will often share only partial information before you take a call. Sure, there is some publicly available data, but you still have to comb through various websites and franchise prospectuses to get a sense.
And while these data points will inform a general stance on the viability of the franchise, any franchisee worth their salt will be spending time ensuring the business makes sense in their particular market.2
To date, all this research occurs across disparate web searches, Google Maps, and spreadsheet.
And this is where Krokit’s genius lies. They’ve created the single data platform for franchisees to suss out all this information.
Data here gets tied into the an aspiring franchisee’s workflow.
A franchisee can comb through a repository of 1,777 franchises for insights.
They can evaluate each franchise and competitor within their region.
Finally, they can handle their entire franchise acquisition process within the platform.
That’s a huge unlock. And at a $20 per month price point, there’s a solid chance this becomes table stakes for any semi-serious aspiring franchisee.
But it’s not only for aspiring franchisees. Krokit has another bet: current franchisees don’t have great benchmarking tools to judge their performance.
They’re fixing this too with a data model that takes some lessons from Pave, a Series C company that has started to dominate the headcount planning and compensation space. Pave has a pretty unique model: connect your compensation data and we will benchmark it against the rest of your industry.
Since everyone is naturally curious about how their compensation bands stack up to the industry norm, Pave has been able to source a premier data set around compensation. This in turn creates a virtuous cycle: better data fuels better insights leading more companies to connect their data to unlock those.
That’s the dynamic that Krokit is aiming for as well. Krokit allows franchisees to connect their financials and get instant insight into how a current franchisee’s performance measures against the market.
In turn, Krokit will not only become the best external database for franchise data, it starts to also have a proprietary dataset that adds value to all franchisees on the platform.
“Your information asymmetry is my opportunity.”
Information asymmetry is at the heart of both startup opportunities and inefficient markets.
Every startup is a conspiracy to change the world, as Peter Thiel says. It’s premised upon a secret currently invisible to the rest of the world.. This is information asymmetry that once unveiled creates enterprise value to the tune of billions.
But in markets broadly, information asymmetries lead to inefficient markets. There’s even a classic problem in economics defining this: The Market for Lemons.
The basic premise is that when a transactional environment is full of fraud or faulty goods, prices across the spectrum get suppressed and liquidity dries up. If I’m at risk of getting a lemon car, I’m not going to pay anyone fair market value; I have to price in the risk that I might be getting a lemon.
Industry data platforms tackle this head on. They define the lemons and the true gems in a market and unlock more efficient industry economies. That in turn increases liquidity and unlocks more efficient pricing. When Shovels inevitably works, the best contractors will get their actual market value. Franchise liquidity, the number of franchisees opening the best franchises (and also selling eventually), will increase through Krokit’s platform.3
In both cases, finding and solving where the information asymmetry lies was a secret.
Now both Shovels and Krokit have a shot at increasing the GDP of their respective industries.4
I’m excited about the next dozen industry data platforms that will do the same. In the process, by becoming vital to the industry transactional flow, these platforms have the prospects to become incredibly valuable.
Government forms have lots of basic data cleaning problems. Shocking, I know.
Do you want to be the 50th Domino’s within a 5 mile radius?
Can someone please do this for the moving industry? Truly the worst offending industry in information asymmetry.