To satisfy federal and state diversity requirements, how do developers get connected with minority and / or women-owned firms for construction projects? Many developers actually struggle to fulfill these requirements because they can’t find minority and women-owned subcontractors. This is where Tough Leaf comes in. Learn about how this tech platform is bringing something new and innovative to this process.
Tough Leaf was a 2023 Ivory Prize for Housing Affordability Finalist for Construction and Design.
Released in Partnership with the Builder's Daily
TRANSCRIPT
00:00
My name is Hannah, and this is the House Party podcast from Ivory Innovations. We bring you the top entrepreneurs, researchers, and practitioners in the industry to shine a light on housing affordability solutions.
Intro Music
00:25
HANNAH: Joining us today is Wissam and Shaunna with Top Leaf, one of our most recent Top 25 finalists for the Ivory Prize. What started as a manual and tedious matchmaking process in Google Sheets is now a robust software platform with over 200 million in contracts awarded. We will hear how they made that happen. In the last decade or so, there have been new federal, state, and city diversity requirements and incentives ushered in for real estate developers. For example, depending on the type of project and type of funding it has received, a percentage of supplier firms must be minority and /or women -owned. One example on the incentive side, a developer can secure up to 25 years with no property tax for an affordable housing development if they use a determined proportion of minority -owned contractors. I think we can all agree these mandates and incentives are a good thing. However, many developers struggle to fulfill those requirements because they can't find minority and women -owned subcontractors. This is where Tough Leaf comes in. Minority women and disadvantaged business enterprise firms claim their profile and showcase their capabilities on the platform. Tough Leaf uses machine learning to match the right subcontractor to projects posted by developers seeking subs. We nominated Tough Leaf as a finalist for the ivory prize because what they bring to this market is new and innovative. There are some consulting firms that provide similar services in regional markets, but nothing with this kind of national scale. Tough Leaf's focus on diverse suppliers also really sets them apart. Today we have Wissam Akra, the founder and CEO, and Shaunna Randolph, the head of business development at Tough Leaf. Thank you both so much for being here.
02:06
WISSAM: Thanks for having us.
02:08
SHAUNNA: Happy to be here
02:09
HANNAH: So we saw you came to the US from Lebanon in 2013 and enrolled in a master's program at Columbia University in construction management. But even with this degree and prior experience in construction in Lebanon, you struggled to find a job that you felt like matched your expertise and educational background. Can you tell us more about this experience and how that inspired you?
2:34
WISSAM: Yeah, definitely. First of all, thanks again for having us on this. We're happy to be here. I'll start by saying, I can't believe it's been 10 years already. When you said 2013, I'm like, wow. That's a 10 year mark. So it was a humbling experience. You know, I came here, I already had managed multi -million dollar projects. I came to a very respectable school, Columbia University in New York, and when I first graduated, I had very high dreams. I was able to get a job with a reputable construction consulting company, but what I was doing was not really the best use, in my opinion. And, you know, I kept complaining to my managers, their managers, everyone that could listen. You know, I was doing some manual things like, you know, filing paper, putting things in the right folders. And it wasn't really what I wanted to do, it wasn't really where I saw my future. And finally, after complaining a lot, someone took notice and my boss at the time was like, "Yes, it doesn't make sense. Why don't we have someone who was a project manager before and has a master's in construction management doing these important tasks, but they're not up to what he could be performing for us." Finally, they gave me more responsibilities, more tasks, and that was the beginning of my career in the U .S. That impacted me a lot because it made me realize that, you know, you can have the credentials, you can have the experience, but if no one vouches for you, if you don't have the network, if you don't have the seat at the table, then all of that doesn't really matter. You know, people need to see you in order to be able to give you a chance. And that's very important. and very relevant to what we're doing here today, and kind of when I finally got a seat at the table, I wanted to make sure that we pull up more seats for other people that aren't qualified. 'Cause I'm not one out of one, I'm not one out of 100. There are thousands like me, whether they're individuals or companies that are capable that have the experience that wanna do more, I wanted to make sure that we pull up more seats for other people that are qualified. 'Cause I'm not one out of one, I'm not one out of 100. There are thousands like me, whether they're individuals or companies that are capable that have the experience that wanna do more, but are not just given the opportunity yet. that's kind of, you know, a major part of our mission and goal here at Tough Leaf.
05:10
HANNAH: Mm -hmm. Gotcha. So you finally got a seat at the table as you shared. And then about seven years later, you actually went back to Columbia to get an executive MBA. And you shared with me that you started doing some customer interviews and really testing out the idea that that would become Tough Leaf and you actually got 20 signed letters of intent from prospective customers saying we will buy this product if you build it which is pretty impressive as part of you know just the initial testing of an idea and chatting with customers but spoiler alert things at this point didn't really go as planned so what happens after this?
05:51
WISSAM: Yeah we had uh 20 signed signatures and we're very excited to go and build the product and then go collect the money or the team and all of that. Good stuff that they teach you in business school, right? That's kind of how to build a product 101 is the playbook. But in real world, in the real world, things don't fan out as you expect them to. So we went out, we built up. product, we went to these customers and we got all sorts of excuses from, yeah, this is great, but not the right time for us. My manager didn't approve it, I don't have the budget, just fill in the blanks. It was a whole lot of excuses. And that was kind of, you know, everyone tells you that the startup life is a lot of ups and downs, but the ups are very high, the downs are very low, and that was like a very low point. for me and for the company in general, because it was very disappointing, but from challenges comes opportunities, so we kind of change the way that we do things. We change our approach to this, and I think in the real estate technology market or construction technology market or whatever you want, the business school playbook doesn't work as much. for many reasons that I'm not going to get into it but the main reason for me is that customers don't necessarily want to use new software or learn new software. What they care about is their problem being solved. They want the headache to go away. So we change our approach and we're like okay well how about instead of you having to go into our software and to filter and search for these companies? Because what we did in the product they were talking about was basically a database of the certified businesses in the country. So minority owned, women owned, disadvantaged, and small businesses and other certified businesses would have a profile that contains all their data that then real estate developers general contractors could log into the database search, filter, find the right company for them. But they didn't want to learn how to use this new software, they didn't want to really get into it. So we changed our approach, we're like, well, how about you just tell us what you're looking for, give us your requirements, and then we'll do all the work for you. We will basically go, search the database, filter it, find the right companies, we will pitch to them ourselves. and we will tell them about your project and see if they're interested in actually providing a bit for you by your deadline and then we will provide you a short list of these companies. So you don't do anything just give us your requirements, we do that at work, you get a short list and they're like “oh that sounds amazing, give me the letter of intent, I'll sign it right now.” I'm like those days are gone, there are no more letters of intent.
08:46
HANNAH: We've been here before. Before.
08:48
WISSAM: We've been here. You know, I've seen this movie. So what we changed, and it was like, "Okay, no, if you want this done, you gotta pay for it." And we're ready to do it right now. So, you know, we're ready to just give us your requirements and we'll get it going. And then that's when we had actual people saying, "Yes, I'm willing to pay for this." And we collected these payments. And now we had to do everything. manually. As you mentioned, at the beginning of this recording is that we had to do this work manually from Google Sheets. We had to search our platform manually. But that allowed us to basically test if people want to actually buy this before we go ahead, build a product and automate it. And that's kind of when things turned around for Tough Leaf.
09:38
HANNAH: Got you. How many initial customers did you do that manual matchmaking process for before you started to shift to automation?
9:49
WISSAM: We did it for, I would say, five or six customers on about 15 projects. So we wanted to see repeat business. We wanted to see that, okay, they try it once and then they come back to us and they say, "Okay, this works." works we wanted to get when we started seeing this repeat business and the ability to sell to more customers but okay we need to start building a product now that we want we know that people want to buy it our initial hypothesis was like if they sign a letter of intent then they want to buy it and that didn't really work the second one was like no if they pay for it that means they want to buy.
10:24
HANNAH: Exactly I mean you'd think a letter of intent intent, it does like demonstrate intent. So it's not crazy.
10:32
WISSAM: Yeah, it's not crazy. And I know it worked a lot in FinTech and other industries. It just, for us at least, it didn't work in what we were doing.
10:42
HANNAH: Yeah, yeah. So Shauna, I wanna get some of your reactions to all of this. So you joined Tough Leaf pretty recently in June 2023. So I imagine the interview process and the process you went through to learn about Tough Leaf and figure out if you wanted to join the company is still pretty fresh in your mind. And, you know, hearing the story, which I'm sure you've heard a million times, but hearing it again from Lisa right now, and why this is such an important and much needed solution. I'm curious what drew you in to Tough Leaf and what inspired you to join the team?
11:16
SHAUNNA: I think the first thing that I thought about when I heard about Tough Leaf when the opportunity was presented to me was just like, I get it, you know, I completely get it. And, you know, I have a long B2B background and, you know, one thing that really touches me is just the idea that there are amazing, you know, ideas out there that people come up with. And it is heartbreaking for me that... there's a possibility that they won't connect to their end user, the people who really can benefit from them because, you know, the communication is off or the person, you know, they go through all this effort to create a great product, but then, you know, they kind of lose the moment when they can actually, you know, convey that effectively to the people who can use it the most. So I've really I was like, I can sell that and I get it. So when I first spoke to Wasam, I, you know, just hearing his experience and understanding what it is to be kind of on the periphery of, you know, a really great opportunity, whether that's, you know, all the opportunities that Construction Energy Street can provide or from the tech aspect. And, you know, expanding that access to people who are normally on the outside of it.
of that, that's what really drew me in and just, you know, and it's been a wild, wonderful ride ever since.
12:42
HANNAH: So I guess to kind of get into the, the wild, wonderful ride. Since you joined, you know, with some shared that the platform has changed a lot since, since everything started moving from, you know, a manual Google sheets profit. process into something that's much more automated and pretty sophisticated. And I know startups, things change very quickly. Things are changing every day. So in the five months that you've been with Tough Leaf, what have been some big changes that you've seen the company go through?
13:15
SHAUNNA: I think like, well, for what we grew, we went from just serving and only serving. certain states to all of the 50 United States, which was a really big deal. And then also, obviously, the automation process was a very manual process. We have a new product manager, which we're all excited about. But on my end, I really think, again, just taking all of the... We're a group of incredibly intelligent experts. experienced people. And, you know, where I was able to come in and help is really, you know, build that marketing platform and that outreach platform and, you know, just take the feedback that our sales team was giving us and creating, you know, campaigns and experiences that really connected with the people they were trying to understand and, you know, connecting the dots with why didn't this, you know, designed piece work out? the way that I wanted to? And I saw that my ability to provide value with that really quickly. But, you know, since then, I've just really fallen in love with the process of creating a really great community, an educational community for our diverse firms. As you can imagine, you know, again, these are firms that are all small businesses. They're very busy. They have a lot of big, hairy projects to deal with. a lot of problems and, and challenges to solve.
And so what I'm trying to do is, you know, work with our capacity building team or capacity building partners to help them solve those challenges in a very educational value driven way. And, and I'm just really floored and really happy about the great ideas that I've been able to pull from our capacity building partners on, you know, these are the pain points that the diverse firms are having. And this is the webinar, these are the resources that we can provide to help them solve that pain point. And you know, like you said, I started in June, it's not been a long time, but we definitely see an amazing runway in the future for doing something really special.
15:29
HANNAH: Yeah. And it does feel like, and given that you're the head of business development, I'm sure this is something that you've thought about a lot. It does seem like the capacity building and the resources that you're providing to the diverse firms that are on the platform is something that is pretty unique to Tough Leaf, and maybe there are other repositories of a bunch of diverse subcontractors, but it's just a platform, it's just a database. and there's not that like added education and support. Is that what you've seen? Is that the case? That that is something that really sets Tough Leaf apart?
16:05
SHAUNNA: Well, I think it's unique because t it pulls into the underlying idea that Tough Leaf is really here to support the diverse firm. And the reason why I say that is that we're very careful about choosing our capacity building partners. And again, you know, that spark, that great vision that we all have is because they're connected to the pain points that our firms have and they want to solve them. And it's always supported and additive. And that also kind of aligns with, you know, with the matching process. and the fact that we offer free bid, you know, the matching process is free to the diverse firm. So I think in that respect, we are very unique in that there isn't a catch for the divorce. And it's really interesting because we were just at an event earlier this week. And they're so used to getting spammed and like, it's really great limited time offer only 99, you know, and it takes a moment where I have to tell them, no, we're here in service of you, we want you to succeed. And this is why you're not being charged. And this is why we have these capacity building partners. It's a very, it's a very thoughtful process. And so that, you know, I don't know if that really answers your questions about whether it's like other companies, B2B companies that offer, have partners and blah, blah, blah. But I think the biggest thing is that it starts from a very different place as you mentioned as you remember Wissam said You know, it's about bringing people to the table. It's about expanding access and at the end of the day if they learn from us from interacting with us We've won/
17:49
WISSAM: You know a lot of times we have to repeat a multiple times like don't pay.
17:54
HANNAH: Are you sure? (laughs)
17:55
WISSAM: They're like, I don’t pay when I sign up, but I have to pay later if I win a project. I'm like, no, you don't have to win when you win a project. Oh, so after a year, I have to pay, like, you never have to pay, not now, not in the future, not ever, we're here to support you. And that's definitely something that you need to Tough Leaf. If you know, there's other great programs out there for the first businesses, like, you know, the ascent program and the rising stars or rising contractors and so on, but they tend to be local for us. a specific number of people or companies that can join up or work. I'm offering these capacity building services to any diverse firm in the entire country is something that no one else does. And we're very proud to have these programs that Shauna has championed.
18:41
HANNAH: Yeah, I mean, I think when I was first learning about Tough Leaf, that was one of the biggest things that struck me as well is that the diverse firms are paying to be on the platform. platform. So Shaunna, you mentioned the matchmaking process. And maybe, Wissam, you can walk us through. I feel like we haven't touched on that too much yet. So what kind of automation and machine learning did you integrate into that process to help get projects matched with the right subcontractor?
19:12
WISSAM: Yeah, so I mean, I guess I would start by talking about how we're capable of doing this is by having that data on the diverse businesses. And that's something that's Tough Leaf for part is that we have data on over 100 ,000 diverse businesses in the country. And we know not only there's certifications who certifying agencies, but we also know what the revenue is. is, what kind of work do they do, where do they work, how long they've been in business, are they union contractors, non -union, prevailing wage. A lot of data points that the people who want to hire the diverse firms want to know about them. And that data is what enables us to match the diverse firms with projects. And the way this works right now, maybe I'll start with the way it used to work with forces, we spoke about the manual processes. We had the database and then we literally had someone from our customer success team using the database to search and filter based on the requirements that we got from the contractors. In order to find out, all right, here are the 50 companies that meet those requirements. So that was the first fully manual iteration and then you have to copy it to Google Sheets, copy those details. And then the second iteration was we had someone from our data team querying the database, basically writing a code with the requirements to find out who the companies that meet those requirements are. The third iteration is machine learning.right? So because we brought so many codes, so many queries, we've done all of this manually. Yes, it was manual, yes, it was manual queries, but everything was recorded and we were able to use that for our machine learning AI aspect, which now, as far as, you know, when you put the requirements in, that list of companies is automatically generated without having to do a lot of work from the human side. Now we always have customer success people managing that process, making sure that the results look okay, but instead of taking us hours, now it takes us minutes, and that's easy. The power of having the data and the technology in order to streamline the process, and put the right people in the right chairs.
21:43
HANNAH: Yeah, and I imagine that's also what's in it. you to scale to so many places. Just how fast the process is.
12:48
WISSAM: Absolutely, yep.
21:52
HANNAH: So now that we kind of understand the backend, I'm wondering if either of you have a customer story that you can share that you feel like, from either side, that really kind of demonstrates the impact that this, you know, all the like, fancy back -end algorithms and like matching like what kind of what the impact of that is on on your customers.
22:17
WISSAM: yeah the thing that I have I have a story that I'm very proud of I'm not gonna share the name of the contractor because it's not very flattering for them at least but it was a general contractor that we were working with and they weren't really serious about their diversity requirements. So there was an old school general contractor, they've been in business for 60, 70 years, and they've seen these goals come up 10 years ago, and they were just goals, right? It would be good to have a minority in all businesses. They weren't a requirement. So, you know, you could just brush them to the side, the government will. – well, you know, you should just pay attention to it, but there was no real repercussions up to the point where this changed in the past couple of years to become a requirement. And then they found themselves in a very difficult position of their clients telling them, "We're going to stop paying you until you figure this out." Lucky for us and for them, that was when we met and we started talking. talking to them about Tough Leaf and they're like, okay, well, we have this problem job. If you really mean what you've been saying, then let's figure it out for us. And that was basically the pilot that we started on. And the process that I'm going to be talking about now became really how we onboard customers is starting off with the pilot just to show them what we're capable of doing. So they gave us a problem project and not only were they not in compliance, but at the same time, even the minority of normal businesses that were giving them bit knew that there was no competition because they didn't really have, the contacts didn't really have a network of minority normal businesses. There was no competition and they were overpricing what they needed to do. So the contact capable of doing and to show them what we're capable of doing. work with them because the price just doesn't make sense, right? They're charging 60, 70 % more than once and non -minority subcontractor was charging. So it was just unbalanced. So we came in, we found more minority human -owned businesses that are capable of doing the job. They're out there. That's kind of what we told them from day one. They're like, "No, they don't exist. "They are non -minority." I'm pretty sure there are. There's over 100 ,000. of them and we can find you the right one. So we did and we presented them and not only we got them into compliance, but we also saved them money because now there is competition. The diverse business knew that there is competition. You can't just work with a company because they're diverse. They need to be able to do the job, give you a good competitive price and be diverse. That's kind of what needs to happen for a contractor to be able to work or real estate developers to be able to work with the first business because it needs to make sense financially at the end of the day and we're not talking about industries where the profit margins are 50 -60%, these are very competitive industries. So we solved the problem for them, we got them into compliance, we got the benefit. We placed, I think, $7 million worth of contracts to minority human -owned businesses. So it was a very successful pilot for us, for the contractors. It was great for the minority of all businesses as well. And then from there, they started using us on more projects, and now we have an enterprise deal with them, so they use us in all their projects. And not only is it no longer a problem for them, but now it's a business development tool that they use. They, we're not, we're best in class when it comes to diversity. We don't meet our requirements, we exceed our requirements. This is a company that a year ago was not even meeting their requirements, and we were able to really turn it around for them very quickly that now, as part of every presentation that they give to their clients. So, hey, we use this company called Tough Leaf, we exceed our requirements. Here's our experience for the past year. Don't look at what happened before. before because it's a different story, but look at how much we improved and they won jobs because of that, because of showing their commitment to diversity.
So not only, you know, where they be able, where they're able to get clients but to grow their business at the same time, which is every, everyone involved, I think. Yeah, that's my, the story that I'm most proud of, I guess when. when talking about the impact of Tough Leaf and the things I'm able to achieve in such a short period of time.
26:51
HANNAH: Yeah, wow, I mean, as you shouldn't be proud, that's an incredible story. So like, I think that really illustrates, I mean, you said just within a year's time, like the impact that this platform can have. I'm wondering where Tough Leaf goes next. Like, what's sort of the big picture vision for the future? the impact that Tough Leaf can have on a national level?
27:15
WISSAM: Yeah, I mean, we awarded so far this year around $200 million to diverse businesses. I shouldn't say awarded $200 million went through our platform to diverse businesses. Our goal for next year is to get to a billion dollars. You know, there is a thing called a billion dollar business challenge. roundtable, and if you see the companies that are there, they're all Fortune 500 businesses. I want to see Tough Leaf's there. I want to make sure that we're giving as much dollars to minority women -owned businesses as possible, and to see that impact just keep on growing and being part of this ecosystem. I can't say that Tough Leaf's going to solve all the problems, but be a major part of the ecosystem in order to solve them. all that money that's being left at the table get to the head of the diversity. Shaunna, I'm sure you have something to add there.
28:09
SHAUNNA: Well, yeah, I would say just making sure that Tough Leaf is seen as a resource and just like the must have and must be a part of community when it comes to the diverse firms. You know, I think trust is incredibly important. We want them to take our call when we call them for actual opportunities, but it's just not enough to be able to just hear that opportunity. We want them to be able to rise to the occasion and show them what we know that they can do. And a lot of times, that's a learning process for them. And it shouldn't start when we pick up the phone or send the email. Like, it should be something that just-- is always a drumbeat and always on. So I think my goal again is just, you know, whenever someone first gets certified or they're talking at an event to their colleagues, the first thing they say is, have you heard about Tough Leaf and all the great programs and resources that they provide. And it's free, you know, I'm really lucky. to be able to have some really great conversations to understand where these diverse firms, the owners are right now and, you know, what will get their attention. And so really next year, it's putting all that into action. And, you know, again, just building the runway and just building the boat and running the boat at the same time if I could use that metaphor.
29:39
HANNAH: Yeah, I guess that's great and thank you both. I kind of related to that last metaphor you shared, Shaunna, like I think I've heard from a lot of folks that have worked at a startup, but it is often like, yeah, building a plane and flying it at the same time, whatever one of those. What has been for each of you your biggest learning or reflection throughout this journey thus far?
30:03
SHAUNNA: Yeah, I think, actually it just happened. I thought I was learning a lot. But last week we hosted a Tech Week event for construction tech. And one of the one of the panelists on the platform, you know, she said, you know, in tech, we tend to swing for the fences when it comes to innovation. And in construction, you really they just really want to solve the problem. And you may. more of an impact, and you get more trust and credibility if you solve the small problem that's in front of you, and then create something amazingly huge. And that just blew my mind. It was something that was just so obvious, especially if you know enough about the construction industry. There's so-- it was just a really great way to bring it back to just like, it's not that difficult. It's not that complicated. Just-- Just look at what they're dealing with and solve that. Don't worry about drones flying around or robots or what have you. And I think Tough Leaf has a really great example of that. It's an elegant solution to something that's really been a challenge. So yeah, I have to thank Doreen next time I see her because that was aces.
31:18
HANNAH: Yeah, I love it. And I think like so much about construction and the housing supply issue can feel really overwhelming and daunting. And so to be able to just be like, we're gonna solve this. It's right in front of us. It's straightforward. We're gonna do it really well. And I love the word you used elegant 'cause that's been how I felt kind of being on the Tough Leaf website and learning more about what you all are doing. So thank you for sharing that.
31:44
WISSAM: Thank you, Shawna. Yes, from my end, my reflection would be embrace yourself. You know, you hear a lot about the challenges of being in the startup world and how that affects you as a person, but it's more than that. Like people can tell you and talk to you about it as much as they want, but until you experience it yourself, it's difficult to... to kind of imagine because you know your personal life versus work life line starts getting blurry and there are some great times and there are some difficult times and you know it's really a personal journey and a group journey because you're working with all your great teammates. So what I would say is that learned that I need to be open with my teammates, tell them what's happening, what's going on. And be open with myself as well and understand that it's not always going to be perfect, there's going to be some good times, there's going to be some difficult times, there's going to be certain things that happen that will make you question everything that you've been doing for years. But it's very very important to, you know, keep on basically working hard until you figure out the right path forward. You know, you've got to try a lot of things to find the things that works. And before, you know, he asked me five, six years ago, I used to always think a startup is like, oh, this is a great idea. An idea is is like maybe 5 % of it, 95 % execution and how to get it done. And that's kind of what I've learned the most is like, who do you hire? Who do you work with? That really what makes or breaks the company is not that it's not the idea of this idea is going to change throughout the process.
33:42
HANNAH: Yeah. Yeah, you might get 20 letters of intent signed for an idea and change course. (laughs)
33:48
WISSAM: Absolutely.
33:51
HANNAH: Well, thank you both so much for folks listening to this that want to get in touch and learn more about Tough Leaf. What's the best way for them to do that?
33:58
SHAUNNA: Well, you can visit our website at toughleaf.com, but easy enough, you can also send us an email at hello@toughleaf .com. And we'll be happy to answer your questions or set up a demo. (laughs)
34:08
HANNAH: Awesome. Perfect. Well, thank you, Shauna. Thank you Wissam for joining us today. We're excited to see you. where Tough Leaf goes, and hopefully we see Tough Leaf at that $1 billion business roundtable next year. (laughs)
34:21
WISSAM: Hope so.Thank you so much for having us.
34:25
SHAUNNA:Thank you, Hannah.
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34:29
HANNAH: Our story next week starts with the conviction that no unit should sit vacant while there are people in need of a home. We'll hear how this founder, through a focus on innovation, culture, and risk -taking, has helped over 5 ,000 people get housed in Seattle, Denver, and Dallas. That's all for today. Thanks for listening to House Party with Ivory Innovations.
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