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With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

Andrew Farah of Density, the people counting platform

Posted on: 12/14/2020

Andrew Farah

Andrew Farah

CEO - Density

Andrew Farah of Density - Podcast Summary

Andrew Farah talks about co-founding Density, a software and sensor platform that helps keep people safe. Density helps reduce space waste and optimize a building’s occupancy with its combination of people sensors and people counting software.

Andrew Farah of Density - Podcast Transcript

Scott: Hey, it’s Scott Orn at Kruze Consulting and welcome to another episode of Founders and Friends. And before we start the podcast, let’s give a quick shout out to Rippling. Rippling is the new cool payroll tool that we see a lot of startups using. Rippling is great for your traditional HR and payroll. They integrate very nicely, but guess what? They did another thing, they integrate into your IT infrastructure. They make it really easy for when you hire someone to spin up all the web services in their computer, which sounds kind of not a huge deal, but actually we did the study at cruise. We spent $420 on average, just getting a new employee’s computer up and running and their web servers up and running. It’s actually a really big deal. It saves a lot of money and the dogs are [inaudible 00:00:42]. We see a lot of startups coming in to Kruze not using Rippling. So, please check out Rippling, great service. We love it. I think we have a podcast for Parker Conrad. You can hear it from his own words, but we’re seeing them take market share. So, shouts to Rippling, and now to another awesome podcast at Kruze Consulting Founder and Friends. Thanks.
Singer: So, when your troubles are mounting in tax or accounting, you go to Kruze from Founders and Friends. It’s Kruze Consulting Founders and Friends with your whole Scott Orn.
Scott: Welcome to Founders and Friends podcast with Scott Orn at Kruze Consulting. And today my very special guest is Andrew Farah at Density. Welcome Andrew.
Andrew: Hey. How are you?
Scott: If you listen to this podcast, you know pronouncing people’s last names is difficult for me. So, Andrew is the co-founder of Density and super excited to have him on the podcast. And maybe you could start out by just telling everyone how you have the idea to start Density.
Andrew: Density was mostly born out of laziness. We wanted to know how busy our favorite coffee shop was. There was really bad weather in upstate New York and co-founders were all running a consultancy at the time. And we would walk five blocks through three feet of snow and negative 20 with a windshield in upstate New York and Syracuse only to hit a 20-minute line once we got to cafe Kubal, which is our favorite coffee shop. And we were like, “This is stupid. Why is there an API for the inclement weather that we’re walking through, but there isn’t an API for how many humans are in a space.” This must be a solved problem. What we suspected was going to be a weekend side project turned into a half decade of our lives.
Scott: That reminds me, we’ve been working together for a long time. When I was in college, I had a similar idea for… I went to Berkeley. So, there was a bar called Henry’s that was really popular. We all want to know if Henry’s is worth walking down the hill or not to go to the bar. If I just was better at designing products and building products.
Andrew: Everybody has had this problem, it’s just a question of are you willing to just truly steep yourself and how weird humans are to eventually figure out how to count them for long enough? We’ve been gluttons for punishment the last five years, six years,
Scott: You guys did something about it. That’s really kind of the essence of a founder at all, taking the leap and making it better for people so kudos to you. So, you kind of say Density counts people, you’re underplaying what you guys do. Can you tell everyone how the service works and how someone would use it?
Andrew: Yeah, sure. So, we do actually count people, that’s sort of the fundamental layer. [crosstalk] On top of that, we do this for… We began with coffee shops has essentially resulted in us working with some of the largest companies in the world, hundreds of largest brand name organizations predominantly because they’ve got a lot of square footage in their portfolio and they have very little idea how it’s used. And so, we end up with this really interesting question. Well, if I have 75 million square feet of space, how much of that am I wasting? Did you know that we clean rooms that are clean all around the world?
Scott: That’s amazing. I never thought about that.
Andrew: We clean rooms sometimes twice a day, sometimes many times a day. We clean rooms that have not been touched. And that’s because time-based schedules for cleaning are a proxy for demand or usage as opposed to actual usage being a measurement of usage. And so, if you think about like the colossal waste in or inefficiency in physical buildings, it’s kind of mind numbingly large. And we stumbled into it because we got a lot of calls. When we talked about building a system that was real-time, accurate and anonymous. And I mean anonymous by design and outsource, not anonymized, we’re not a camera.
Scott: That’s a big deal. People are more comfortable when they know they’re not individually being counted kind of thing.
Andrew: Yeah. So, we help these organizations understand how buildings are used at scale. We actually manufacture in the US and we shipped to 25 countries. We get installed at every room, floor, building level. Our entry sensor gets installed above a point of entry. And then as people walk into and out of the space, we use infrared laser light to calculate depth, which is essentially bouncing infrared light off of objects as they move beneath a point of entry and then measuring the amount of time it takes for light to return back to the sensor. And we do that tens of thousands, hundreds of thousands of times. And what you get is this gradient of sort of varying measurements of tall or short in call one pixel by one-pixel square and.
Scott: Wow. No way, at a pixel level? That’s crazy.
Andrew: Oh yeah. Then you collect millions of these things and you turn it into contiguous objects that turn out to be humans. You feed it into a machine learning model and then it outputs plus one or minus one. And then, the cool thing is that you install these things. These entry sensors that are fully customed at each point of entry, and then they operate as a mesh to understand one space. So, if you have, call it five points of entry into an engineering floor, if we’re at each of the points of entry, we can automatically reconcile real-time count and occupancy 12 time. And busy-ness so forth, space utilization and waste all from those five sensors. And we roll that up into large scale measurement.
Scott: The mesh part of that makes tons of sense. So, there’s no black areas or areas that one camera can’t get… Almost an Ocean’s 11 kind of situation, right?
Andrew: It’s not a camera. I just want to clarify. Not a camera.
Scott: Yes. But there’s no dipping away or not being counted, basically.
Andrew: No, I mean, doors are actually a really nice, natural constraint. Instead of trying to figure out all the space that people use, you’re just sort of like, “Well, if I can just figure out the entry point and the throughput, then I cover all the entry points that I can accurately count or result in occupancy data.” Which pre COVID-19, this was being applied for energy efficiency, security for stopping and tailgating space utilization. So, identifying spaces wasted, space design, moving stuff around to see how that changes behavior inside buildings. Real-time availability of assets in space. I mean, the platform uses where the long tail is very long during COVID-19, customers really only care about two things. One, can you keep people safe? And two, can you preserve cash for payroll? And it turns out that real estate is the second most expensive thing next to payroll. So, everyone looks to real estate to say, “Well, what aren’t we using?” The US federal government, I think the U S federal government might be able to save a quarter of a trillion dollars in waste space.
Scott: Really?
Andrew: Yeah.
Scott: Wow. Just because they have so many buildings and so many employees and people just aren’t using half the space, basically.
Andrew: One of the largest landowner in the world, and they’re led by a group that frankly are some of the most forward-thinking, most thoughtful people I think I’ve ever met in space utilization, design, and optimization, and setting aside all the politics that exist elsewhere. The people that run the real estate of the federal government are actually extremely thoughtful and are trying to rationalize space so that they don’t… Well, if they operate 8,000 leases and that’s half their portfolio. The other half of the portfolio is owned [inaudible 00:08:13].
Scott: That’s amazing. So, by rationalizing not only save money, but they reduce the complexity and things like that. Right? And they’re probably coordinating with all the cleaning crews that you talked about and moving crews and stuff like that. So, that’s additional complexity I never would have thought of.
Andrew: Yeah. I mean, the scale of these operations is really colossal. So, I was talking to an organization that runs… It’s 125-year-old company, 60,000 employees, all of a sudden, they’re working from home. Massive difference from Friday to Monday when COVID-19 hit and when they reopen, they’re going to reopen buildings in 60 countries. The scale of space is a physical is so much larger than I think any of us really appreciate. And so, when you think about historically what we’ve done as sort of as humans, we have been designing and building buildings for thousands of years on an architect’s best guess. We’ve guessed. There’s no measurement. It’s the most valuable asset in the world whose performance we don’t measure. And in the US, this 10.9 is about 11 billion square feet of lease your own corporate real estate just in offices. So not industrial, not manufacturing, not retail, just offices, 10.9 billion, 11 billion square feet of space. 41% of that is vacant but paid for and occupied meaning I go in everyday and I don’t use that entire portion of the office.
Scott: Wow. That’s crazy. [crosstalk] Is that stuff that they didn’t know about or there’s a huge portion of that, that you’re uncovering for clients basically?
Andrew: So, everybody knows they have this problem, but they can’t figure out which 41%.
Scott: So, you’re wasting your advertising spend, you’re just not sure which half you’re wasting [inaudible 00:09:57].
Andrew: Exactly. I know my real estate’s working. I just don’t know which half is working. But the thing is when you add it up, in the US, that’s 4.5 billion square feet of space. That’s a trillion-dollar asset of unused, but occupied space untouched. And if you look internationally, the numbers are nearly identical. So, in Europe, it’s 38% unused, but paid for. In Japan, it’s 46% wasted, but paid for. China’s a bit of an outlier, but I don’t totally trust the numbers coming out of China, but pretty much everywhere else in the world, you hover between 38% and 45%. And that’s because humans are really bad at using space or optimizing the use of space, regardless of the region, we just are bad at it.
Scott: And you said it, real estate is a company’s basically second largest expense line item after payroll. And so, that 38% of unused space, you could take that out of… If you just looked at every company’s P&L across the US and took 38% of their second largest expense, that’s a huge dividend. That’s more money to invest in engineers and more money to invest in people and help your customers. It’s a really amazing point.
Andrew: I mean, I think also, there’s always this question of practicality. It’s like, “Can I actually get rid of 41% of my offices?” And I would say, “I don’t actually mind if you waste space.” My job isn’t to tell you, “Shame on you, you’re wasting space.” It’s to say, if you’re going to not use space, at least know where that is. So, you can make an informed decision about the design, construction, use and safety of your buildings. And I know that we’re going to talk about safety, but I just want to call out that, how this practically ends up being applied, at least in the real estate sort of rationalization side is you end up with something called lease avoidance. So those 8,000 leases that I told you about with the US federal government. Half of them are expiring in the next five years. So, the question is, okay, as on this rolling basis, as they’re expiring, those 4,000 leases are showing up to expire, what do I shed? What do I keep? And what do I invest in? And those are decisions that like are being made every, every month by every major corporation, greater than 10 million square feet.
Scott: I never really put it together until this interview, but it feels like the just-in-time manufacturing revolution of the Japanese and then Detroit. The automakers copied it in the late 80s, 90s, no one really put a price and capital on all the lug nuts that were sitting around and all the car seats and all that stuff, all that inventory that was just sitting on people’s balance sheets and not doing anything. And as you’re talking about this, I’m having MBA flashbacks, the case studies around just-in-time manufacturing because… Maybe this isn’t correct, correct me, but everyone feels like they need to have some buffer space, probably. At least the big companies do so maybe that 38% goes down to 20% or 15%. But as everyone starts making that movement, the market for space becomes more liquid and everyone can continually push down their own buffer in the same way that just-in-time manufacturing. The auto makers got their suppliers to do just-in-time. And so, the suppliers then started benefiting in a work that’s the way through the whole supply chain. I can see the same thing happening over the next 10 years in real estate. Am I being too kind of pie in the sky? What do you think?
Andrew: No. You’re nailing it. I mean, think of buildings as servers [crosstalk] and you load balance a server, why can’t the human populace load balance itself? At least demand on physical buildings and physical space. The fundamental problem, if you want to answer that question is measurement. You must measure first to determine where there are discrepancies before you can make any informed decision about how to deal with those discrepancies. And so, the thing that’s most exciting about all of this is that when you follow it to its logical conclusion, if you can solve the distribution problem. Meaning an intelligent device into every relevant room in the world, you can solve that distribution problem, you earn the right to remake it. You earn the right to redesign how the surface of the earth is built. That is extremely fun quarter century project, how do we build a big, enduring business that’s capable of helping a really large…? The TAM is sort of almost a joke of a TAM, but how do you help all space to be that more efficient, better design and more aware of the people that need it. And the thing that’s really cool is that followed to its end, you actually end up if this works. I don’t know, we’re can have this conversation in 20 years, but if this works, you can have an impact on… Well, before I tell you the conclusion, we had a customer who took a $25,000 deployment of Density sensors, call it roughly $800 or $800 per sensor per year. It’s what we charge, our pricing’s public. $25,000 deployment of Density sensors in a small… It’s roughly 30 sensors deployed in an office space. They were looking at a new lease that was right next door, as they’re onboarding a bunch of new people. And they found in Density’s data for the office building that we were deployed in, which is the $25,000 project, that it was only 37% utilized.
Scott: That’s so amazing.
Andrew: So, they go to their global COO. This is a major organization says, “Hey, I got 63% more space. I don’t think we need this lease than we’re looking at.” And the COO goes, “How much is the lease?” And the guy says, “Well, it’s a million dollars a year on a three-year term. It’s a $3 million lease.” And he goes, “Walk.” Five days before signing the lease, they walk.
Scott: Wow, amazing.
Andrew: Now what that means is not only is the ROI on a $25,000 spend $3 million, which is great. And they’re now doing a national roll out. It’s a really great win for everybody. But the really cool story is who gets the lease that wouldn’t have gotten the lease? And then who downstream gets the lease that, that company that would’ve gotten the lease no longer needs? Until eventually you don’t build a new building and you have an impact on carbon. And that is so cool, that is load balancing physical buildings.
Scott: Hey, it’s Scott Orn at Kruze Consulting. And before we get back to the podcast, quick shout out to ChartHop. ChartHop is one of my favorite new SAS tools on the market. And basically, what ChartHop does is it puts your org chart in the cloud. And I always like to say, it brings transparency to your organization. And so, everyone in your organization can see who they report to. They can see the full or ChartHop company and how their group relates to other groups. It also has a lot of information on the individuals in the company. And so, you can click on the ChartHop profile and just get where people live, their experience, Slack handles, all this kind of stuff. And it’s just a really great tool. The other thing is ChartHop has started doing some cool stuff around compensation and budgeting planning. And so, you can actually start seeing what the cost structure of the company looks like during certain kind of scenarios. So, I’m loving ChartHop, check it out, charthop.com. We use it at Kruze, we really like it. And I can’t recommend it enough. All right. Back to the podcast. That’s super cool. Not even half, they build a new building is amazing. I can even in the load balancing analogy too and you know way more about this than I do. But Amazon’s got kind of your productions. [inaudible] has your production servers, but then you’ve got the… I don’t even know what you call it. It’s the old data that you never access servers and those are one twentieth a cost or one tenth a cost. And so, there’s this market that can form where maybe you do have a little bit of buffer space, but you’re paying one tenth what you would normally pay for buffer space because it’s labeled as buffer. Right? And the same way that Amazon’s like, “Hey, I never access to this data.” And then everyone can pull buffer space. And that again, leads to another building not being built, which is pretty cool. [crosstalk] Yeah. You’re in a great spot, man. It’s, really fascinating what you built and what you’re making.
Andrew: For what it’s worth, I’m the representative of 49 other folks who built this thing. I get to tell the story, which is exciting.
Scott: You’re just the guy who won the latte. [crosstalk]
Andrew: There’s a great story called the Internet Coke Machine. It’s almost the exact same story. And it talks about putting a little micro-controller inside of a Coke machine to figure out because he’s graduate students at Cornell, I can’t remember where they were. There’s only one Coke machine and they got moved to another building, but they would walk and then the Coke machine would be empty or the Cokes would be warm because they hadn’t been there long enough. And so, they put in a little microcontroller into the thing and they connected it to the local network. I think this might be apocryphal, but I’m pretty sure that as the story goes, so began the consumer internet, all over laziness.
Scott: Wow, really?
Andrew: It was the first connected thing or something like that. All we wanted to do is have a little terminal readout that says, “Is there cold Coke?” Should I waste my time and walk to go get this Coke? Or am I going to be disappointed? And so, it’s functionally the exact same thing. I also wanted to mention your response to this concept of unused or like low-cost space or sort of your access space. There’s a really good corollary, I think that I’ve heard a couple times, Google use this for remnant inventory. So, it took all the ads, all a remnant ad inventory that was unused and they made it super valuable and put a price tag on it. I think WeWork is actually the closest application of this. WeWork minus the weird cultural stuff is actually in a very similar business to us.
Scott: If I was recalling, I think they even built some tracking or something where they could… That was part of their pitch, was like, “We can actually reconfigure the floors because we know people, where their walking paths are and get more space.” I mean, Kruze, we had three WeWork offices. We love WeWork and we’re out of those because of COVID-19 and now everyone’s totally remote. Everyone in San Francisco decided to move to some other place in the country besides Vanessa and I. So, we don’t have a San Francisco WeWork anymore, We loved it. We used to have a 30-person office in downtown San Francisco, every normal startup. And it was miserable to manage and all this kind of stuff. WeWork was the greatest thing that ever happened to us. [inaudible] or someone like WeWork go in buy your Google remnant inventory, example, it’s more than a billion-dollar business. That’s a humongous business.
Andrew: The core value of WeWork, I think is your point about this excess space. It’s really how do you scale up, especially as an enterprise, how can you scale up, dial up or dial down space sort of on demand? Which is very similar to how you might dial up or dial down a demand on us with a server. So, anyway, I think these are really good metaphors but the real thing that’s going to take time is just figuring out how you maniacally stay focused on solving the distribution problem. Because if you solve the distribution problem, you become a platform layer that can be used by lots of other systems. Heating and cooling, access control, space design, architecture, demand-based needs of room booking or desk booking. And there’s just so many things that get tied to that. And then as a result of COVID-19, we’ve been pulled into safety, which is a-
Scott: Yeah. Safety, real fast check. You said people care about two things, saving cash to be able to maintain jobs and payroll, but the other one is safety. That’s what people really care about. And so, how has Density made the world of commercial real estate safer?
Andrew: I mean, we’re really small. So, I just want to say world changing is always in retrospect. So, I’d say we’re-
Scott: A little thing every single day.
Andrew: We design, so we build a system that can in real time tell you the occupancy of the space that became really relevant when COVID-19 hit to a meat processing plant that we were working with. A meat processing plant who reached out to us and said, “Hey, we just had to have an outbreak of COVID-19.” This is March, February. “We just had an outbreak of COVID-19. We are federally mandated to remain open.” I don’t know if you remember this, but the federal government mandated that meat processing plants specifically.
Scott: I remember. Yeah.
Andrew: So, we are federally mandated remain open and our employees are terrified to come in and get sick. So, what we did is we built a very simple dashboard that just shows you go or wait based on the maximum capacity that you’ve set for a room. And it was awesome. It’s called Safe by Density. And it’s really cool. It uses your existing television that might be installed outside of a room or an or any other digital device. And as long as Density’s entry sensors are installed above your point of entry, as people enter exit, you can say, “I want no greater than 50 people.” And then what it does is it just says, “Go.” Until you get to 50 and then it says, “Wait.” Once it hits 50, and then once the detriments down to 49, it goes, “Go.” And this sounds really silly, or simple. But the cool thing is that humans, if given better information like weather, make better informed decisions about what jacket to wear. And so, we didn’t want to go the route of, how do we police whether or not you’re socially distant? And instead, you’re going to socially distance or wear a mask based on your own decision as a human, we just want you to have the info that… Just so you know, is a little crowded in there relative to the overall square footage.
Scott: What I love about that story though, it’s a demonstrable, something that the meat packing company or whoever you’re using for the example, did on behalf of their employees so that the employees could actually see that they cared. I remember those stories at the time, keeping the meat packing companies open was pitted employer versus employee type of thing. Or the employers didn’t care or… That was like the emotional bent of those articles. And I love hearing that story because they actually did care. They did something about it and they put something in that’s right there and everyone’s that clearly visible so that people can make the right decision. So, I think it’s a classic win-win because both the employer and the employee are benefiting in that situation from just more information.
Andrew: Yeah. You’re also touching on something that we’ve learned from a lot of our corporate customers who decided to then implement the same system, but inside their offices as they reopened buildings. 48% of the US population can’t work from home. And so, there are a lot of organizations, we talking tech, it’s sort of normal to be like, “Oh yeah, nobody’s going back to the office for the next 12 months.” The reality is there’s a lot of folks, especially in central businesses, fulfillment centers, distribution, warehousing, meat processing plants, universities, education, K-12, these places are reopening. And in reopening, the thing that we learned from a lot of our customers, by the way, side note, so many people became experts in safety and pandemics right after COVID-19. It was amazing.
Scott: It’s amazing. There’s a lot of postal service experts right now as well. I’m in taping.
Andrew: So, fully acknowledging that we were not experts in safety. We went out and interviewed as many of our customers, we could understand how they were thinking through safety. And there’s this resounding response around one particular concept, which was safety is a two-sided problem. The first side is, can you make it safe? That’s technology tools, cleaning best practices, temperature checks, sort of all these things. The second is, can you convince people it is safe? And that’s messaging, data, a go back plan like signage. Is it safe? In fact, and a really good example of this is… My favorite example is putting Lysol wipes on an employee’s desk before they come back is an incredibly useful way to solve number two, not number one. You’re going to clean the place, the way that you’re going to clean it, that desk may be immaculate. But if you give a Lysol wipes to an employee or a visitor who can then wipe down their own space, that agency has dramatically increased their trust in the space. And so, and all it takes is freaking Lysol wipes on a desk to increase or solve for that second problem.
Scott: Agency is a beautiful word. You’re exactly right. Creating agency and letting people do it. I love that. That’s amazing. Well, hey man, I can talk to you for two more hours because I think what you’re doing is amazing. But I got to let you go. So maybe you can tell everyone how to reach out to Density if they need to get ahold of you through LinkedIn or something like that, but just how to take action and create some agency for their organization after listening to this podcast.
Andrew: Well, you can go to density.io, which is sort of where all of our stuff is. I should say, we’re not going anywhere. We recently raised a $51 million Series C through Kleiner Perkins. We’ll be here for the next four or five years, hopefully, for the next 50. Generally speaking, I’d say if you’re trying to understand how to reopen safely, Density is an excellent place to come. Even if you don’t end up using our technology, we’ve done a lot of interviews and sort of post a lot of content about how different organizations are dealing with this, whether you’re in tech or you’re in finance or you’re in logistics. Or if you’re actually a warehouse and in the event that we can be helpful, all it really takes is installing this device with a little ethernet cable above the point of entry. And you can sort of immediately give a substantially better sense of security and functionally rate limit, how humans use space. And then I think the last thing that I mentioned is there are a lot of promises right now around, why don’t we just check everybody’s temperature every time they go through a point of entry? There are a lot of marketing promises. And then there’s the reality of what’s going to happen? And investing in things that are not going to change, I think is a better way to approach what you adopt and what you don’t and temperature checks for instance, are a great place at a security checkpoint. So you go in, you get your temperature checked inside security, where you sign your NDA for instance, and then you go into the building, you’re fine. Not really necessary to check your temperature for every room that you wander into thereafter during the day that you’re visiting. And then the other thing is that a lot of organizations are starting to look at this as COVID-19 is a change agent for some type of modern infrastructure that I’ve long been trying to implement. And that tends to be a great way to also think about the system. So, if you could just snap your fingers and immediately know how every building in your portfolio is being used, how every space that you own managed or otherwise are responsible for. Overnight, those buildings becoming aware of the people in them without invading privacy. I mean, it unlocks sort of an infinitely long tail of efficiency. And so, a lot of organizations are thinking about COVID-19 as a way to think long-term about modernizing their buildings so that they can make better decisions about those buildings four or five years from now, and two, three years from now. Hopefully, 18 months from now, when the pandemic has long gone.
Scott: What you just said, and then hopefully, Density becomes that operating system layer and people who are listening to this and check out Density, start building stuff on top of it that we’ve never even thought of. You rattled off five or six things that could save money or make things more efficient. The next [inaudible] out there who hears about this and says like, “Oh my gosh, if I only knew how many people were in a room, I could do X, Y, and Z.” And we have some really amazing applications built on top of Density. That would be amazing.
Andrew: Yeah, totally.
Scott: All right, buddy. Thank you so much coming by. I really appreciate it.
Andrew: Yeah. Thanks so much for the time.
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