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Adi Tatarko's Reluctant Ambition
Building Houzz Into a $4 Billion Industry Disruptor
Justin Gordon
November 12, 2023
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Adi Tatarko
Adi Tatarko, the co-founder and CEO of Houzz, a home renovation and design software company, built a multi-billion dollar business within seven years.
She went from a reluctant entrepreneur to creating a giant in the industry.
Along with her husband, Alon Cohen, Adi took a personal frustration with her own home renovation project and built the company she wished existed.
Turns out they weren’t the only ones who were experiencing the pain of a home renovation.
What started as a website used by a few parents from their kids’ school and some professionals in the Bay Area turned into a platform used by tens of millions of people around the world.
I thoroughly enjoyed learning about Adi’s journey and there are a number of lessons we can learn from her.
Let’s get to it.
Early Days
Adi was born and raised in Israel to parents who worked together in real estate.
From 1st grade through 8th grade, she studied with the same 38 kids in the same class and she’s in touch with the vast majority of them still today.
I think this illustrates a trait of hers that would prove valuable in growing the Houzz community later on.
As part of her required military service for Israel, Adi went into the Air Force, an experience that had a big impact on her:
A big part of who I became later on is due to my amazing experience in the few years I serviced in the Air Force and my time there.
She went on to do a Bachelor’s degree at Hebrew University in Jerusalem, graduating in 1996 with a degree in international studies.
On a trip to Thailand with a few friends of hers, Adi met a person critical to this story and her life - Alon Cohen.
After the bus driver on a 15-hour trip in Thailand escorted Adi to the back of the bus to make room for more passengers, seating her right next to Alon, they struck up a conversation and hit it off immediately.
Adi described it as having 5 or 6 dates in a row and, while she had plans to travel with her friends on that trip, she ended up spending the rest of that vacation with Alon.
Back in Israel, they started ProMIS Software, a small tech-services company and by 1998 the two of them were married.
In 2000, they decided to leave their tech jobs in Israel and move to the United States, starting in New York.
This was far from an easy decision, as Alon wanted to move to the West Coast, in Silicon Valley, the land of limitless opportunity, but Adi wasn’t convinced at the time of living in suburbia, hence the move to New York, a place Adi loved:
It was such an amazing experience because we did everything that we dreamed about. We only ended up living there one year, but we said, “We’re not going to go back to the same restaurant the whole year. Let’s just try different things. Let’s just go as much as possible to the theater, to museums, to the symphony, meet different people, meet different friends.”
They had a few months until their Visas were up and they’d have to move back to Israel, but Alon wanted to move to Silicon Valley, even though it was right around the time of the dotcom crash.
After 16 interviews over 4 rounds that took place in a month and a half, Alon got a job at eBay.
Adi at this time agreed to the move to Silicon Valley, but it came with a change in career:
I’ll do it if you’re allowing me to get out of tech. I am done with it. He asked me why, and I said, “Look, I’m working 16 hours a day, and it’s around the clock. I want to have a family. It’s impossible to have it all. So I’m going back to school. I’m going to have a little bit of a different career path. I want to study financial planning. I want a life that will allow me to have kids and a career without killing myself.
Adi, after deciding to leave tech, pursued a job as a financial planner, working at Commonwealth Financial with her friend, Phil, who ran the branch. The idea was for her to learn the ropes and one day take over when Phil retired.
This seemed like a great idea to Adi, allowing her to have a lowkey job and a family, thinking a career in tech and being an entrepreneur was too intense for her given her familial ambitions.
So Adi and Alon moved to Palo Alto, buying an untouched house from 1955.
The house, to put it lightly, needed some work, but it’d be some time before they could renovate it:
We had no choice, we had no money. When we finished paying for the house, we had very little left. We knew we were going to live with it for a while and we would need to save again in order to start slowly updating different parts of the house.
For the first three years after moving into their house, they lived with the inconveniences of the place.
When they did decide to make some updates, the challenges of the renovation process led them to start a company that would one day be worth billions.
But those weren’t exactly their ambitions at the start.
Starting Houzz
It’s 2008 and Adi and Alon are struggling with the renovation process for their home:
We started working on this project, and reality was so far from this dream. I always say it was almost like a nightmare because we were trying to explain to professionals what it is that we want to do. We didn’t have the language. We didn’t have the money. So when we ended up getting plans, we couldn’t afford doing this, not even that we liked the plans that much. So we were very frustrated from the process.
This is at a time when many professionals in the home renovation industry didn’t even have a website.
So, not only were Adi, Alon, and other homeowners frustrated by how difficult a renovation could be, but professionals were also frustrated by the process of working with homeowners and catering to their unrealistic expectations.
After realizing there had to be a better way of doing it, Adi and Alon decided to take matters into their own hands.
After working a year with multiple professionals and meeting homeowners who had been through remodeling projects in their area, they approached them and told them about the platform they were trying to build:
I say, “Okay, let’s talk to homeowners, let’s talk to professionals, see if it’s really something that everybody would enjoy collaborating around.”
It started with a community here in the Bay Area. The first users were 20 parents from our kids’ school and architects and designers from the Bay Area.
Before we knew it, we found ourselves working nights and weekends, putting the kids to bed and responding to [email protected].
They knew two things at this time:
A solution needed to be very visual
It needed to bridge gaps between what professionals in the industry know and what homeowners don’t know
Continuing to work at their jobs, Adi and Alon started Houzz as a side project.
With his technical abilities, Alon started building the Houzz website, a domain that they purchased for only $35 and a name that was a combination of “house” and “buzz.”
They got the initial photos for the site from those professionals they had talked with during their own renovation process, fulfilling the visual component they needed for the site.
In 2009, Houzz launched.
At the time, Adi thought maybe Alon could continue working on this while she built her financial planning business.
She was a hesitant entrepreneur, much preferring more of a lifestyle business for Houzz, given that they had two kids, family was very important, and the demands of a startup would be challenging.
But after Houzz launched, growth happened quickly.
On Houzz, users could refer people and they could upload photos and fill in data themselves making the site even more robust.
Renovation and design professionals would tell their homeowner clients to use the site, and homeowners would tell their professionals to use the site, fueling rapid word-of-mouth growth.
While they launched in the Bay Area, inquiries for Houzz quickly grew outside of California.
Within six months Adi and Alon had requests from New York and Chicago of people wanting a section for them on Houzz.
For the professionals on the site, it was great for brand-building purposes while homeowners could get inspiration for the projects they wanted completed:
So for the professionals it was, from the get-go, an ability to build a brand in a way that never existed before.
This is not a blind connection to somebody, this is a true prestige – this is how they refer to it – way to build their brand in a very effective way, and along the way educate the relevant clients that will connect to them. We have to have both sides in order to create that magic.
They uploaded their portfolios one after the other. Each picture was connected to the rest of the house with all the data attached to it; cost, materials, what they used, how they thought about this space, why it worked.
It was a great example of a network effect, with this flywheel spinning through word of mouth.
However, while growth was strong from the start, there were some bumps in the road.
Several months after launching Houzz, after spending no money on advertising, Adi and Alon got stuck at around 20,000 users:
There was a certain point where I remember us thinking that this is pretty much it. I think we were around 20,000 users, and it got stuck there for a while. And we thought, “Okay, so maybe this is the potential of it. It’s expanded way beyond our original community but that’s the level of interest.”
But Adi knew they were onto something and they pushed on, keeping this as a side project with her and Alon working on the site on nights and weekends, enlisting the help of friends and members of the Houzz community who were willing to help with things like social media and design.
They knew 20,000 users wasn’t the peak:
But then we looked at it again, and we said, “No, it can’t be because it expanded in so many different directions, so each one of these directions can expand and scale so much more.” But you have these moments where you look at it, and you said, “So this is it?”
Frankly, you don’t have the ability to invest much more. There are no other people working with you. There is no money for marketing, so all the exploration needs to happen with: Can we expand that love? Can there be more people that would love this? Is that going to grow?
Houzz would continue to grow at a rapid clip, bootstrapped by Adi and Alon, and fueled by the desire to not give up, something Adi talked about on the Masters of Scale podcast with a story of two frogs:
You know these two frogs that fell into a bucket of milk, and they start jumping. That’s natural, you don’t want to drown. They jumped and jumped. One of them gave up at some point and unfortunately just died. But the other one didn’t lose hope, and she kept jumping and jumping and jumping until the milk turned to butter, and she climbed on it and got out of the bucket.
If you have the mindset that something big is there waiting for you and you have the conviction in this, you can’t give up.
We had so many levers there because we were growing the community on both sides in parallel. There were homeowners sharing the love organically, and there were professionals bringing other peers from the same industry and other industries, and it came from different cities. We realized that we can be, in each one of these levers, a little bit more proactive in the way we do it, both with the product and funnels there.
They continued bootstrapping for more than a year.
Looking back, Adi thought it was a great decision:
In general and in retrospect when I'm looking back I think that was an amazing thing that happened to us because many times I see entrepreneurs spending the first six months to one year chasing investors, convincing them that they have a great idea and they're going to be able to execute that idea.
The truth is most of us are not serial entrepreneurs so we have to prove that we can actually execute and we know what we're talking about.
Then I see and I feel really sorry for entrepreneurs that just go and meet with the investors and then they tell them go and change your attack this is not the right direction you have to do it differently.
Then they go back to the office and start brainstorming and then they go back to the next investor implementing all the great points that they've got from the previous investor and guess what? The new investor is telling them something completely different because the hype has changed in the last few weeks…
Sorry, we do have great investors and I do love them but there are some investors like that out there and this is bad because it's not about the investors it's about us as entrepreneurs believing in something, thinking that this is the right way to do it, being very passionate about them, and somebody from the outside, without even knowing us, is judging us and telling us that they know better how to do this job.
So go and create your own company if you know better how to do this job. Really it's about the entrepreneurs and what I say to entrepreneurs is go take the first six months to one year and just build the most amazing product that you completely believe in. Bring the best people on board that you can. Bootstrap it.
We didn't have vacations… we kept it very lean and we learned how to do everything by ourselves.
By the time we got the investors we were so knowledgeable which was amazing and again we were able to pick the best investors because there were no doubts anymore that we know what we're talking about that we really have something good in our hand and we can execute and that's all that they want.
So if I would have to do it again I would do it the same way, I would just invest the time and energy to prove to everyone, including myself, that this is a good idea and other people like it and I can execute it and then the investors will come.
Of course, you know they didn’t bootstrap Houzz forever.
How did things change?
Well, in 2010, after a serendipitous conversation with an incredibly successful entrepreneur, Adi and Alon were convinced that raising capital might be the best path forward.
To raise, or not to raise, that is the question
Breaking through the 20,000-user barrier, Houzz grew to have hundreds of thousands of monthly users by the time Adi spoke with a man named Amos Wilnai, at an event for their kids.
Amos, an Israeli grandparent of one of the kids at the same school as Adi and Alon’s children, previously sold a company, MMC Networks, for $4.5 billion and he asked why they weren’t raising money for Houzz.
Amos thought it was crazy they weren’t going bigger because if Adi and Alon didn’t raise money, someone else would raise money and eventually put them out of business.
At the time, Adi and Alon thought of Houzz more as their thing, a great lifestyle business that clearly was something people loved, but that wasn’t making money yet and was costing them $2,000 for servers.
They didn’t want to find VCs or investors who would tell them what to do and they didn’t want to clutter the user experience by putting up ads and making a few dollars.
In an interview in 2018, Adi reflected on the strategy behind this decision:
The decision not to try to monetize in the early days was a very strategic one.
We felt that as a small company, we can’t focus on too many things and while we’re building the product and trying to bring the community on board on all fronts, vendors and sellers and professionals on one side and homeowners and renters and other users on the other side, we can’t just shift focus to how do we make a few dollars here.
We also wanted to make sure that when we choose from many different options on how to monetize this robust community and platform that we built, we’re going to choose something that would be in line with what our community wanted. For that we needed more time to figure out the best things that we should work on. Opportunities indeed came from the community itself, which proved that strategy, at least for us, was the right one.
After the conversation with Amos, they’d bring him on as an advisor and they made the decision to raise money.
Given the progress Houzz had made so far, investors were excited about the company’s potential:
When we talked to investors, we already had hundreds of thousands of homeowners and thousands of professionals that dedicated their time to upload portfolios and were engaged in the community.
The investors said, “Oh my goodness,” exactly like this, “Oh my goodness.” Our first investor will say today, “What I saw was, well, if this is what this couple is doing in their spare time when they put the kids to bed, imagine how much more this can scale? The idea is definitely working without marketing or dollars behind it, and they obviously proved that they know how to do something with it.”
But Adi didn’t want to go down Sand Hill Road with a bunch of imaginary numbers on a deck going to pitch a bunch of VCs, she wanted something different:
I wanted somebody that would see it, fall in love with it, say I love it just the way it is. I like it, I’m behind you. Take the money. Keep doing it.
She found what she was looking for in the investor Oren Zeev.
After meeting with a number of investors at their Palo Alto house or at nearby coffee shops, Adi and Alon met with Oren one day.
Oren had a very different approach, investing in only a few companies each year, his own money, and in larger amounts.
A few days after their meeting with Oren he said he wanted to invest and could give them money by the end of the week.
In July 2010, they ended up raising $2 million from Oren and a group of investors that included Amos Wilnai, Donald Katz who founded Audible, Jeff Fluhr the co-founder of StubHub, and others.
By this time, Adi and Alon had both quit their jobs, with Adi becoming the CEO and Alon the President of Houzz.
But remember, Adi was a reluctant entrepreneur.
What pushed her to do it?
Her answer to an important question:
When I asked myself, “What would I be more excited to do when I wake up in the morning?” It was definitely that.
What would I be more excited to do when I wake up in the morning?
I love that framing and it’s also a big reason why I’m building Just Go Grind.
By November, Houzz had more than 60,000 high-quality photos from 10,000 design professionals on the site.
Houzz’s ideabooks, which are the online equivalent of cutting out designs from magazines and putting them in a folder, already numbered well over 130,000 created by users.
After raising the initial round of funding, the money stayed in the bank for a long time, but, only a few months later, they’d go even bigger, using more capital to scale faster.
$11.6 Million
Oren Zeev had changed Adi and Alon’s minds about raising money from venture capitalists.
Oren mentioned how having a top-tier venture capitalist invest in Houzz would help them hire top engineers and build their team.
In December 2011, Houzz raised a funding round of $11.6 million, led by Sequoia Capital.
By this point, they had 10x’ed their online traffic from when they raised a $2 million round.
Houzz had what Alfred Lin and Sequoia Capital loved, described as the three C’s: Unique content, passionate community, and integrated with commerce.
By 2012, they had 26 people working at Houzz and more than 65,000 design professionals had uploaded 365,000 photos by March of that year. The Houzz iPad app had already been downloaded more than a million times at that point too.
Houzz was still growing organically through word of mouth and it’d be years until they started doing any significant paid marketing.
Adi and Alon in those first few years spent 50% of their time on hiring. Besides hiring, while Alon focused on the tech side of things, Adi focused on growing Houzz’s community of homeowners and professionals:
One thing I said, “Bringing the experts that will see the future and the vision of: How do you leverage content for community in a very different way? How do you take the data that we have and give it back to the community so that it’ll come back even more?”
So I actually expanded on both fronts, bringing folks on the editorial and content front and community builders front.
They also continued to focus on what drove the business forward:
In fact, until the end of 2012, there wasn’t even one finance person in the company. I really, really focused on, “Let’s continue expanding on this community, synergy, flywheel, professionals, homeowners, and the content we create with them and for them.”
At the end of 2012, they also started developing and testing their first revenue channel, Pro+, a freemium subscription model for professionals who wanted a local solution to get clients. They soft launched it in 12 markets, quickly selling out several of them.
They ended up fully launching this in 2013, rolling it out to 425 markets.
Global Expansion
By February 2013 there were 115,000 active professionals and 9 million homeowners using Houzz monthly and they had recently landed a big strategic partnership with Lowe’s.
Furthermore, Adi and Alon had raised a $35 million Series C in January.
They also recognized an interesting insight at this time:
In 2013, we actually noticed that about 30% of our audience, both pros and homeowners, are coming from countries outside of the U.S. It was very interesting because from some countries the proportion between homeowners and professionals and that flywheel of creation of content and uploading portfolios and providing data and homeowners engage with it is very similar. That was very interesting.
And the idea of global expansion kept coming up:
In board meetings we kept bringing up the stats and not pushing to do it, but saying, “Look, it’s there. At some point we will need to decide: Are we going to be global all the way or are we just going to keep the U.S. platform open to everybody but not go all the way with localization?”
I was also pregnant when we had to make this decision, which was kind of, “Wait a minute, what am I doing here? I’m pretty controlling here. If we do it, I actually want to go there to all the markets and meet with the professionals and understand it all the way and choose the team members. Wait a minute, I’m pregnant, I’m about to give birth, so how is all this going to work together?”
But at the end of the day, if you feel that something is right, you go ahead and do it. I did give birth to our third son at the end of 2013, and we ended up launching our first countries outside of the U.S. mid-2014, and from there every year added more countries.
I ended up traveling with that baby, and we are closer than … Any imagination you can have of how this is working, a mom flying with a baby all over the world, but it worked. He’s a happy child, I’m a happy mom, and international is one of our greatest pride in this company.
By the end of 2013, the team had grown to 150 employees and Houzz had more than 2.4 million high-quality images on the website, not to mention a mobile app with 12 million downloads and more than 100,000 five-star ratings.
Global expansion, in hindsight, was something that was always on the roadmap:
We always thought of our business as a business that will have a lot of impact on local professionals because in nature this is a local thing.
But then you discover that design is crossing borders and people want it to cross borders. It started even before we turned Houzz into a company and raised the first round where we got the initial feedback from the community members, and we said, “We are tired of seeing these Bay Area houses. Show us what’s going on in Milan. Show us what’s going in Sweden. Show us.”
Houzz launched in Europe and then Asia. By 2019, half of all new users were international and they had six international offices.
And the global expansion had unintended benefits:
What we didn’t anticipate beyond the inspiration and the global community growing is that people not just literally leverage the pictures to get the ideas and transfer them crossing borders, but also the services and the products and materials will cross borders. And this is absolutely not something we anticipated.
I think when we started hearing stories from our professionals in the community that they were hired to do landscape design in Dubai, flying all over to Australia, between countries in Europe, being hired remotely to do things, a pro in Australia being hired by a husband and wife in Singapore that are planning to move to Australia, so everything is being done remotely.
By July 2014, Houzz had grown to a team of 200.
In October 2014, a few months after starting to expand globally and raising a $165 million Series D led by Sequoia Capital, Houzz beta launched the Houzz Marketplace for home products in the U.S. with a million product listings and taking a 15% commission. They don’t stock any inventory, they simply route orders to the appropriate vendors.
Less than two years later, this revenue channel had grown exponentially, with 6 million products available from more than 15,000 merchants and sales increasing 4x year over year from 2015 to 2016. By 2018 the marketplace would have 10 million products available from 20,000 vendors around the world.
At this time in 2014, Houzz is valued at more than $2 billion, with Adi and Alon owning a combined 33% of the company.
The team is more than 300 people strong by this point and thousands of architects and designers pay between $2,500 and $4,000 for extra visibility on their regional directories.
By November 2014, 25 million people were using the platform every month and 500,000 active professionals around the world were on it as well. 4 million projects were uploaded to Houzz every month by this point.
Asked how she does it all - mom, wife, founder - Adi responded:
We are constantly juggling… We really really love what we do. For me, I didn’t want to give up the opportunity to be a mom. The kids are the most important thing in my life.
This is an important point that comes up in Adi’s story throughout my research - putting her family first and not sacrificing her family to build a business. She’s proven you can have both.
Though Houzz was already worth $2 billion at this point, they’d double that valuation only a couple of years later.
$4 Billion
Houzz’s continued expansion in 2015 included the launch of HouzzTV, which showcased celebrity home improvement projects in online videos and was a concept that Ashton Kutcher, a Houzz investor, came up with.
He appeared in the first episode and as Adi would say:
Ashton was really keen on not just investing in the brand but also being as involved as possible.
We did the pilot and it worked really well, so decided to launch it as a show and have had celebrities such as Gordon Ramsey and Olivia Munn take part.
By April 2016 more than a million professionals and 35 million homeowners were using Houzz monthly and over 9 million projects were on the platform.
In June of the following year, Adi and Alon raised $400 million for Houzz, valuing the company at $4 billion according to Bloomberg.
Their marketplace, which launched in late 2014, had 9 million products from more than 20,000 sellers by this time.
Expanding its offering for interior designers, Houzz then acquired IvyMark in February 2018, providing more business management tools for them. The deal was for a reported $30 million to $40 million.
Growth didn’t come without its challenges though, as Adi would soon have to make some difficult decisions about the business.
Difficult Decisions & Bouncing Back
Houzz had grown to 40 million monthly users by June 2019, but a few months prior Adi had to make the decision to cut about 10% of Houzz’s 2,000-person workforce, laying off 180 people.
A spokesperson for the company would say in a TechCrunch article at the time:
We restructured our international marketplace workforce... so that we can double down on the areas that will have the greatest impact for Houzz.
Whatever the reason, layoffs are never easy.
Then, in April 2020 with the global pandemic, they let 155 more employees go and had to cut executive salaries.
Around the same time, they launched their Houzz Pro software for remodeling and design professionals, a suite of tools to help them run their businesses.
And there were some macro trends helping Houzz rebound from the pandemic:
Baby Boomers were heavily remodeling homes in preparation for retirement
Home equity loans at record highs
Lots of aging homes that are 40 years old or more
Adi also changed her belief about working from home:
The theory I had that work from home could never be productive and you needed to be in an office: It's not true. I'm so happy.
While the layoffs were a low point in 2020, there was a surge of interest in home renovations and Houzz had a 60% increase in homeowners looking to work with professionals on renovations.
Two years after those pandemic layoffs, Houzz grew to 65 million homeowners and 2.7 million professionals using its platform every month.
Today, Houzz continues to expand, with Adi and Alon still running the show and building on their initial idea from nearly 15 years ago.
Adi’s Wisdom
In each edition of the Just Go Grind newsletter, I like to include a few more quotes at the end from my research into the founder who is featured, sharing their wisdom.
On being open to new opportunities:
The one thing that I learned: never say never, stop making these declarations, always look at opportunities when they come your way, and make the best decision from that moment going forward versus just justifying what you said in the past.
Yes, I did say I don’t want to move to the Valley. I did say I don’t want to work in tech anymore. I did say I don’t want investors there. I basically went against all these saying, and only good things came out of it. So be open-minded to change, and stop making these crazy declarations. Be open.
Adi’s advice for entrepreneurs:
Don’t enter if your plan is an exit.
It's wonderful really. It's not always just glory and fame and we do go through hard times as I always say it's like a really crazy roller coaster of good days and bad days and good things that happened to you and bad things but as long as the direction is up and you keep the good spirit and enjoy it, it's wonderful.
On juggling a family and a business:
You need to learn how to switch between the two. I have three children, each of them their own universe, their own startup.
From the beginning, I said, “My kids are here and they’re not going to go anywhere. I'm not going to abandon my role as their mom."
I refuse to live by any other standards…
Prioritization forces you to focus on what really matters and our ability to juggle makes us much more efficient.
On her greatest inspiration:
My grandmother survived the Holocaust. She rebuilt her life from the ashes. She did lots of remarkable things, including building an amazing career at a time when women were not so into their careers. She kept saying all the time that everything is possible. As long as you stay true to yourself, as long as you live by your own standards, not by other people's standards, not by other people’s expectations.
That got stuck with me. I couldn't ignore the fact that, if she did it having no support, coming from where she came from, and was able to create something so wonderful, I don't have any right to complain about anything. Everything looks like nothing compared to what she had to go through. It’s very helpful when you have somebody so inspiring to look up to.
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