Building the Zillow for Small Business: An Interview with Baton Founder Chat Joglekar

Value Drivers

This podcast episode features an interview with Chat Joglekar, the founder and CEO of Baton, a company aiming to be the "Zillow for small business". Chat, an experienced executive with previous roles at Google and Zillow, was inspired to start Baton after a friend's frustrating experience trying to buy a small business, highlighting the lack of transparency in valuations. The market for small business transactions is substantial, estimated to be north of one trillion dollars annually. Baton seeks to address the illiquidity and opacity of this market by providing transparent valuations based on comparable sales data and reconciled financial information for listed businesses, unlike many other listing sites.

Baton operates as a two-sided marketplace, and their initial strategy focused on building a high-quality and "legible" supply of businesses. Chat drew parallels to his experience scaling the new construction marketplace at Zillow, where focusing on quality listings attracted demand. Baton's monetization primarily comes from success fees charged to sellers upon a successful transaction, along with a small monthly retainer to ensure seller engagement . While currently working mostly directly with sellers, Baton is also testing partnerships with third-party brokers who see value in leveraging their platform. Despite existing and potential competitors, Baton believes its full-stack approach, guiding transactions from valuation to closing, sets it apart. The company recently raised a $10 million Series A funding round, with investors resonating with the large market opportunity and the need for Baton's solution. Key internal metrics for Baton include contracted retainer revenue and gross listing value, which help track the platform's health and future success. He emphasizes that motivating his team comes from a shared vision of helping small businesses, strong core values, and a focus on solving challenging problems by deeply understanding their customers.

Key Takeways

1. Identify and Validate a Clear Market Need by Drawing Analogies: Chat's inspiration for Baton came from a friend's frustrating experience trying to buy a small business, which he articulated as the need for a "Zillow for small business". This highlights the power of identifying a tangible problem and using a familiar analogy to frame the solution and understand the missing elements in the market.

2. For Two-Sided Marketplaces, Focus on Building Quality Supply First to Drive Demand: In the context of Baton, the initial focus was on making the supply of small businesses "legible" and bringing high-quality listings to the platform. Chat emphasizes that once they had good supply with comprehensive information, demand from buyers naturally followed. This suggests that in marketplaces where supply is opaque, prioritizing its quality and availability is crucial for attracting users on the demand side.

3. Deeply Understand and Address the Unique Characteristics of Your Target Market: Chat points out that the small business transaction market is unique because the vast majority of both buyers and sellers are first-timers. This requires a different approach than more experienced markets, necessitating more education, support, and a platform that simplifies complex processes. Entrepreneurs should tailor their solutions to the specific challenges and inexperience levels of their users.

4. Establish Core Metrics Aligned with Long-Term Success, Not Just Immediate Outcomes: Baton focuses on "contracted retainer revenue" as a key internal metric. This leading indicator helps predict future successful deals, which typically take several months to close. This illustrates the importance of identifying and tracking KPIs that reflect the underlying health and momentum of the business, even if they don't provide immediate gratification.

5. Build a Strong Vision, Mission, and Values to Inspire and Motivate Your Team: Chat emphasizes that Baton's mission to help small businesses resonates deeply with many people. Their core values, such as "Know your customer" and "Problems energize us," create a shared sense of purpose and excitement within the team. This highlights that beyond financial incentives, a compelling vision and well-defined values are critical for attracting and retaining talented individuals who are passionate about solving the problem.

Chapter Summary

(00:01:00) Host Peter Ho introduces Chat Joglekar, the founder and CEO of Baton, highlighting his experience in building businesses. Chat shares his background, including roles at Google and Zillow, and the inspiration behind Baton – a friend's frustrating experience in trying to buy a small business, sparking the idea for a "Zillow for small business".

(00:03:09) Peter and Chat discuss the significant market opportunity in small business transactions, estimated to be north of one trillion dollars annually, comparable to the real estate market. Approximately 8-10% of businesses trade hands each year, representing a large volume of potential transactions.

(00:04:50) The conversation explores the lack of a great ecosystem for small business transactions compared to real estate. Emotional aspects for owners and the fact that most buyers and sellers are first-timers create unique challenges.

(00:10:04) Chat explains Baton's core strategy of providing apples-to-apples comparisons using cash flow multiples and a database of 70,000 recent sales comps. Baton aims to reduce the gap between buyer and seller valuation expectations by offering data-backed insights. They verify financial data for listings, unlike many other sites.

(00:15:51) Drawing on his experience at Zillow's new construction marketplace, Chat emphasizes the importance of building a high-quality and "legible" supply of businesses to attract demand. Baton focuses on comprehensive listings with video interviews and reconciled financials. This approach has led to a significant number of registered buyers.

(00:24:32) Chat acknowledges existing and potential competitors but highlights Baton's full-stack approach, assisting with the transaction process all the way to closing, as a key differentiator. They believe this comprehensive model provides a superior service compared to basic listing sites.

(00:26:29) Chat discusses Baton's recent $10 million Series A funding round. Investors were drawn to the large market and the need for Baton's solution. Chat reflects on the importance of understanding investor perspectives and addressing their concerns, particularly around being a tech-enabled broker versus a true marketplace.

(00:31:59) Chat shares that key internal metrics include contracted retainer revenue and gross listing value . He also discusses his approach to motivating his team, emphasizing the inspiring vision of helping small businesses, core values like "Know your customer" and "problems energize us," and fostering a collaborative environment. He personally stays motivated by the opportunity to solve problems and support small business owners.

Resources mentioned in the podcast

https://www.batonmarket.com/

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Superagency by Reid Hoffman

https://www.amazon.com/Superagency-Could-Possibly-Right-Future-ebook/dp/B0D886ZQHY

The Nvidia Way by Tae Kim

https://www.amazon.com/Nvidia-Way-Jensen-Huang-Making/dp/1324086718

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