How a built environment data geek became an entrepreneur
We had the opportunity to talk to Mariela Alfonzo, founder and CEO of the data analytics company, State of Place (SoP). Mariela and her team "harness the power of predictive urban data analytics to quantify what people love about cities and why it makes economic sense to make them better." Mariela reveals what it was like to make the shift from academia to entrepreneurship and the lessons she learned along the way.
Tell us a bit about yourself and your startup, State of Place.
Mariela: The connection between Mariela Alfonzo and State of Place comes back to where I grew up, in a typical suburban area of Miami. Miami has all of the disadvantages of being an urban place (like congestion, traffic, etc.) without any of the true advantages (walkability, access to museums, culture, etc.), that is known as ‘bad density.’ Growing up there without a car meant that I had to take my life in my own hands. The importance of place hit home very early, and how much the lack of a place influences people's quality of life.
That's what led me to study urban planning. My PhD is focused on urban design and behavior. I examine how the built environment–determined by people, as opposed to a natural environment like an unaltered forest–influences us. Early on, I looked at it from a walkability perspective–how does the built environment influence our decision to walk? –because walking is so connected to how we perceive a place, how we get attached to a place, and how we get to know a place. But back then, there was little evidence of this connection, especially as it relates to health. So I helped create a tool that researchers could use to test hypotheses about how the built environment - street benches, trees, sidewalks - influenced physical activity and obesity.
In the end, my colleagues and I created a very long list with 162 different features that could potentially impact your decision to walk, the Irvine Minnesota Inventory. It was a great academically-focused tool that researchers could use. And soon I became the built environment data geek.
Everyone wanted to use the tool but did not know what to do with the data. At the same time, I was talking to people in the real-estate industry and the health and livability benefits of walkability didn't resonate with them. I had to show what I was measuring impacted their bottom line for them to take walkability into account in deciding where to develop and what to develop. So there was a need for a way to analyze that data - and then, for that data to be useful or to make an impact on how the built environment was developed, it was necessary to tie it to economic value. These two key “customer insights” shaped my journey as a consultant and entrepreneur.
In 2005, I developed the earliest version of the State of Place algorithm, that pulls together all that data into an easy to understand score from 0-100, as part of my very first consulting project. And in 2011, I co-authored a Brookings Institution study (published in May 2012) that tied State of Place to a variety of real estate premiums. At the time, I thought all my hard work had finally paid off - that this seminal piece of research would single-handedly catapult me from bring a lowly academic consultant to smart-city startup unicorn. But it was just the end of beginning.
Thankfully, I had the NYU entrepreneurial/startup eco-system...
Five years and many knocks of my head against the wall later, we now have an actual web-based app (we did the “Wizard of Oz” style, concierge-based MVP - otherwise known as product-based consulting - for four years) courtesy of funding from a NSF SBIR grant, have honed in on our primary customer segment (cities), and can really nail their problem (gaining approval/support of their plans to increase walkability and quality of place) – and our value proposition (making the economic case for great places). We’re still testing our pricing and revenue model, with the aim of applying a Software as a Service (Saas) model directed at cities and eventually real estate developers. While we are addressing an acute need today, attracting more people and firms by making places more walkable and livable, our long-term mission is to “Moneyball city-making”, and disrupt the way cities are planned and developed. We want to drive the shift from an expert-based, project by project approach to a more data driven, evidence-based one. How do we get there? Continue to iterate and learn from our customers. For us, success isn't just about selling more; the more we learn from our customers,, the easier it is to serve cities better so that they can do their job of creating better places.
Were you alone in this journey or did you have a founding team?
Mariela: I established my consulting practice in 2005 and up until 2012, I worked alone. Research assistants helped on the projects when I launched the beginnings of my venture, with me as the sole founder. Michelle Woodhouse, joined me in 2014 as the strategic operations director, now our COO. About 6 months ago, we received funding from the National Science Foundation through their Small Business Innovation Research program. That's really when we were able to bring on employees and grow the team.
Was there a moment when you decided to make your research into a business?
Mariela: As a consultant, I felt that there was a need to come up with some sort of product that would allow me to replicate and scale. Consulting is difficult, you're always looking for the next gig, and there's very little that you can use from the former one. So, I wanted to simplify my life a bit and, I realized that I didn't want to just rank places, I wanted to help shape them from not so great to great destinations.
When we were developing State of Place there were other tools like Walk Score that did rank places, but they lacked a diagnostic component. When the results of the Brookings study showed that SoP was linked to economic value, I knew that was a compelling story. But what made it commercially viable was that SoP had a diagnostic component. So it wasn't just that we could say – "Hey, place matters to the bottom line so you should do something about it” – we could actually show them what they needed to do to up their walkability and justify why (added ROI) they should do so...It wasn't just an advocacy tool or a research piece that could inform policy and/or practice.
Many people who read these interviews are researchers or professors who are thinking of starting a business. Can you talk more about how you make these two things work?
Mariela: I'm in a bit of a unique position. I actually turned down all of the tenure track positions that I was offered when I was first on the job market and nearly rebuffed academia altogether except for my mentor who didn't take no for an answer, as my initial intent wasn’t to be a professor, per se, but to use research to help fix places. I spent four years as essentially a glorified postdoc at Virginia Tech, but that allowed me the freedom to balance the worlds of academia and consulting. Then, during my first two years at NYU, I whole-heartedly began working on State of Place, but I was also doing research on China teaching one class every semester, and still wrapping up my previous consulting projects. So in those two years, I got work done from a research perspective but it was slow going for State of Place.
I decided to marry my two worlds better. In two of my classes, I integrated State of Place as a service learning program. And now I primarily teach an internship course that meets less often during the semester, and that showcases my strengths as a mentor and provides students access to a professor with a lot of “real-world” experience. I also stopped any consulting jobs that had very little or nothing to do with State of Place. I provided my research collaborators access to State of Place pro bono or for a very nominal fee if they could write me into their research budgets. Consequently, State of Place has been used in our research on China and in several other research projects that have produced academic papers, giving me another way to stay active as an academic.
Do you have advice for fellow faculty members who are commercializing their work or pursuing entrepreneurship?
Mariela: The first piece of advice is just to get out of the building. And I'm not the first one, nor will I be the last one, to say that. As an academic and researcher, I think no one is better suited to apply startup principles. It's research 101, and scientific method 101, and yet we're still not doing it.
That's not unique to academics, but it makes it that much harder to swallow because we're primed well to do this. You have a hypothesis, you run an experiment, you test it, you iterate, and you keep going. In order to do that, you have to talk to the people who are potential users of your product. The difficult thing for academics is that the fundamental reason for doing research is often about a search for knowledge and not really about commercializing something and becoming an entrepreneur. It’s a big leap for most academics.
Even if you're doing applied work, you can’t just have an idea, go out, and do it. It can’t just be super cool or super interesting. For me as an entrepreneur when I hear the words "that's really cool" or "that's super interesting" I think "no, that's bad!" You know that they're impressed by it but that's it. That's where it ends. They're not going to buy it. They can't see how they'll use it, or how it actually addresses their pain points. That's the key pivot that academics need to make if they want to commercialize something - it cannot just be a “significant contribution to knowledge.”Academics have the makings of great entrepreneurs because their research generally already benefits society. They just need to understand: whose pain is this addressing and why would they buy it? Those two questions are the same. If you are addressing a pain, people are generally going to buy it, they'll clamor for it. They'll ask: "when is this product going to be done?" Or they'll buy it before it's done, which essentially happened to us, just because they need it so badly.
Do you think that the NYU entrepreneurial ecosystem played a part in your journey in any way?
Mariela: There's no question! When I first got to NYU in 2011, I already had my eureka moment. I applied to the NYU Entrepreneurship Challenge but I didn't even get past the first round. I look back at that application and I had no idea what I was doing. I remember meeting the previous head of the Berkley Center. I asked him about the NYU mentorship program, and he recommended that I go and pitch. So, I got four different mentors from that program with whom I worked with closely for 2-3 years. I'm still working with one of those mentors - Mike Blubenfeld. I can't even say enough about that experience, they're just lovely people. They want to contribute, and have a ton of experience. They asked tough questions and they stuck with me even though they probably thought they were talking to a brick wall.
When the Leslie eLab opened, it was amazing to have a space where you can go and be surrounded by other entrepreneurs. I've gotten to know Frank (Rimalovski) over the last couple of years and he's great. He's offered a lot of his time and advice and even put us in touch with an accountant and a lawyer, who we brought on when we got the grant.
Do you have any advice for the students who want to start a business?
Mariela: Take risks! It's so much easier to do it when you're younger than in your mid to late 30s. But also don't be stubborn and arrogant. With the push around disruption, there are young people who think that that goes hand in hand with being young and that older people can't bring that to the table. That's really short sighted. My main mentor, Mike, who I still work with is almost 80 years old, and he has some of the most invaluable insights that I've ever received. If I were to have dismissed him just because I didn't think someone his age understood tech or cool things it would've been remiss on my part.
Also, even if you're not going to start a company, don't think that you cannot be an entrepreneur. The things that go into being a great entrepreneur - they are infinitely transferable skills. – bringing that entrepreneurial spirit to how you develop your career is critically important these days. I would tell everybody: go take the lean launchpad courses or whatever else you have access to, even if it's just for fun. You learn so much about how to manage your own career. In fact, the internship course I teach at NYU is centered on the idea that Lean Startup thinking and entrepreneurship can and should be transferred to professional and career development (as per The Startup of You)
Do you have a favorite lesson learned, that you want to share?
Mariela: I thought I was doing lean startup when my mentors would tell me to, and I would say, "yeah but I've been a consultant for 8 years, I don't need to go and talk to more people." I thought that I was actually doing it when I wasn't. In the last six months, having received this funding, it gave me the opportunity to say, “I'm going to do this right.”
We took 2-3 months to do 70+ interviews, and I learned more in those three months than I did in the five years since the idea for State of Place was born. I wish I had done it earlier but besides thinking I had already done this, I was constantly coming up with excuses for why my situation was unique:. .It’s not like I can just go “get out of the building” and ask random people in Washington Square Park about the challenges they were facing attracting people to come live in their city or developing walkable neighborhoods. Where was I going to find a group of cities? But I was determined to do it right this time - and compelled by the SBIR folks to do so (they make you interview at least 30 people). So I found this book called Lean B2B, which can help a lot of academics too, that highlights how companies servicing governments or businesses can go about finding people to interview and provides a roadmap for how to do so properly. It was so much easier than I thought. I went through my network and found people I thought might be customers. The lesson I learned is don't convince yourself that you're doing lean when you're not. If you don't know how to do it, find someone who does and ask them to teach you (you can always email me!). Don't just say that it's too hard to do that in your position.
The interview was conducted by Carol Ourivio. She recently graduated with a Media, Culture, and Communication major from Steinhardt, and is now trying to make it as a UX designer. Carol works as the graphic designer at the NYU Entrepreneurial Institute. She was the lead graphic designer for the NYU Entrepreneurs Festival 2016.