Khalid David, MBA ’19, joins Christopher Reichert, MOT ’04, to share how his journey working in the construction industry led him to MIT Sloan, where he was able to begin building TracFlo, an online financial tool designed to help contractors manage project risk.
Sloanies Talking with Sloanies is a conversational podcast with alumni and faculty about the MIT Sloan experience and how it influences what they're doing today. Subscribe and listen on Apple Podcasts, Google, and Spotify.
Christopher Reichert: Welcome to Sloanies Talking with Sloanies, a candid conversation with alumni and faculty about the MIT Sloan experience and how it influences what they're doing today.
So, what does it mean to be a Sloanie? Over the course of this podcast, you'll hear from guests who are making a difference in their community, including our own very important one here at MIT Sloan.
Hi, I'm your host, Christopher Reichert. Welcome to Sloanies Talking with Sloanies. My guest today is Khalid David, a 2019 Sloan MBA and founder and CEO of TracFlo. Welcome, Khalid.
Khalid David: Thank you so much, Chris. I'm so glad to be here and have an opportunity to share my story a little bit.
Christopher Reichert: Super excited to talk about it. So before we start a conversation, I'll just give a bit of background about Khalid. He's the founder and CEO of TracFlo. It's a New York City-based startup that focuses on helping subcontractors get a better grasp of their financial performance. It helps tracking and managing change orders on a job site, which can add up and get lost in the process. Prior to starting to TracFlo, Khalid worked at Turner Construction, was CEO of Bunker Hill Construction, and held various roles at KBR Construction Group, which I think was in Atlanta. Am I right about that?
Khalid David: Yes.
Christopher Reichert: He is also a first generation Black-American of Caribbean born parents. And In addition to MIT Sloan, Khalid attended Morehouse and Columbia as well. So, welcome.
Khalid David: Thanks a lot. Man, that was such a great introduction. I haven't had one like that in a while.
Christopher Reichert: Those are great schools. I mean, MIT, of course, I'm going to put in a separate category, but Columbia engineering and Morehouse. I am consistently impressed with my former work colleagues, some who've gone through Morehouse. I want to delve into that just for a moment before we talk about construction and your company and MIT. One of my dear friends, Segun Idowu, is a leading voice here in Massachusetts, in Boston, for Black-owned businesses and getting equity into the contracting system for state and city contracts and all over the place. He's the executive director of the Black Chamber of Commerce in Boston, and he's a Morehouse graduate. Tell me about that experience at Morehouse, because he has such a discipline and a focus, and I don't know if pride is the right word, but certainly a presence that I've noticed in a lot Morehouse graduates. Am I just having a tiny slice, or is that something that you get as part of that experience?
Khalid David: Well, I think we're definitely indoctrinated with a deep sense of community while there. But some context, as a first-generation American, I wasn't fully aware of what Morehouse was when I first got there. You get there and you meet families who are six generations at this institution. To really paint the picture, that means if there were Black families who got educated in, let's say, the early 1900s, it's likely that they came from a handful of these schools. So, these places have been intellectual centers for Black communities post the end of slavery. And so, this institution, it's the only all-men's black college in the nation. Part of the history that you walk into is this deep sense of not just being leaders for our community, but it's a responsibility to continue to push the conversation forward. You're definitely taught that. It's definitely part of the product. It is a value prop that they tell you, it's part of the reason why you send young Black men to that space. Yeah.
Christopher Reichert: That's great.
Khalid David: It changed my life. The alumni association is pretty cool too.
Christopher Reichert: That's great. It sounds like a great springboard for, I guess, entrepreneurial endeavors, where you have to draw from deep within and have a belief in what your mission is to be able to withstand all the setbacks, right?
Khalid David: Yes, absolutely. Absolutely. Indeed, a deep sense of who you are, especially as a diverse founder, because you're dealing with all of the challenges that exist in entrepreneurship, which is hard for anyone, but then also having to see yourself and belong in these spaces as you continue to lead is also something I feel like you need a deep sense of who you are to do effectively.
Christopher Reichert: So, you've been in the building industry or construction industry for a long time. I can see you had two stints at Turner and in between with KBR Building Group and then Bunkers Hill Construction. Did I get that right?
Khalid David: Mm-hmm (affirmative).
Christopher Reichert: As opposed to Bunker Hill in Boston.
Khalid David: It was actually a play on Bunker Hill. It was actually a play on.
Christopher Reichert: It was? Okay.
Khalid David: It was. Yeah.
Christopher Reichert: Excellent. Tell me about your motivations in that industry and how that informed what you are doing now.
Khalid David: So, I grew up in a family of tradesmen. My grandfather was a carpenter. My dad and all my uncles were carpenters. So early in life, the chores that I did growing up was learning how to install a cabinet or leveling a wall. For them, the trade was how we made ends meet. As my father joined the union and got the benefits, it pretty much provided the quality of life. He tells me every day that he sent me to college based off the work that he was doing on those job sites. So it was always a deep sense of my whole understanding of family and community and progress. So when I had the opportunity to get formally trained, I already had a knack and a passion for the built environment, and engineering just kind of... It worked for me. I was good in STEM. It just felt like the logical progression in terms of what I was exposed to, and I liked it. It really spoke to me.
Bunkers Hill was a subcontracting firm that I built with my dad and uncle. They had years of field experience. They could look across a room and see if a wall was on level. I was bringing my engineering expertise, managing the books, running the back office, and really attempting to professionalize what I've seen my family had done for most of my life. So even those early formative years, I was still committed to learning as much as I can about the industry and contributing my part to it.
Christopher Reichert: And so, you were at Turner Construction for three years. What motivated you to think of graduate school and choose Sloan?
Khalid David: Oh man, that's a great question. So, did all this stuff, finally got to Turner. I was hired after running a subcontracting firm. I was hired at Turner to be a safety engineer. They wanted me to help them use data to make more informed safety decisions. Because I had some entrepreneurial experience, they felt like I'd be a good fit because it was a new role. Well, at a firm that large, as soon as I got into data, you start meeting with the building intelligence group. You start moving all these groups that's trying to figure out what's next. I stumbled across a team that was building internal software solutions. Before I knew it, I was leading that team.
We were building all types of stuff, testing what works on sites, putting things out on mobile, and trying to help this large construction firm solve a myriad of problems that we're facing. The thing that we discovered we did really well was really stuff around cost and cost management. There weren't really a lot of solutions out there, but eventually we built this internal solution too large and they were like, "Hey, we're 100-year-old construction firm, not a software firm. We don't want to manage a tech stack. We don't know who to hire. We don't even have a career path." Eventually, they decided to shut it down. At the same time, there was enough tools emerging in the marketplace that they felt like, "Hey, there'll be more solutions out there."
At that point, I met with the CEO. I met with the CIO. One of my mentors was the Senior Vice President of Engineering. I was trying to figure out what's next with my career. I'd fallen in love with this intersection of construction and tech. She quite literally wrote my letter of recommendation at MIT and Sloan felt like the best place to bring this... I call it a hodgepodge of experiences. I felt like I could be accepted there. I needed the flexibility because it was kind of construction. It was kind of tech. It wasn't traditional at all, and I felt like it was the right place to combine this industry with tech. I guess it's turned out pretty well for me.
Christopher Reichert: Did you focus on any courses at Sloan, or for that matter, were there any courses you look back and say, "Wow. I wish I'd taken that."
Khalid David: So, I did the E&I track. I took mostly engineering, I mean, not engineering, entrepreneurship and innovation courses. I did do a couple classes in the real estate school. I always thought I was going to cross-register and all that stuff, but the real estate schools what really got my attention.
Was there a course that I wish I would have taken? I mean, maybe. I'm not sure. There was some courses I tried to get into, some augmented reality courses I tried to get into, some Media Lab courses that I thought would stretch me, but the courses that really were most impactful were the courses where pretty much what was a budding idea—TracFlo at the time—it actually helped us think about our strategy. I can name a least five courses, about five, where TracFlo was selected as a class project. Some of the strategy that I debated with my classmates, we've actually implemented. So, those courses were the most significant courses.
Christopher Reichert: So that gave you a fertile ground for sounding out ideas and honing in. And so, you talked about the building information management, building information modeling, sorry, and machine learning. How have things changed in how you were seeing cost estimates maybe with Bunkers Hill and your family who have been doing it from experience, right actually in the field, to I don't know if automated is the right word or putting it into a framework? I mean, what's the underpinning of how it works? How does it all fit together?
Khalid David: So, in my experience, you get... The way you price the job is a bunch of people asking other people what it should cost. The developer hires a general contractor and they say, "This is what we think is your cost, but we're going to talk to a bunch of these trade contractors to figure it out." And each of those trade con, they check it out and say, "Ah, this is what we think is your cost, but my field guy will know what we should get labor and material and all that stuff." Everyone sums that together. When a project is finally done, that product that you'd been looking for tends to be the focus. If we were at 10, 15% above, or what have you, or that was just part of what it took, it's done now, let's sell these apartments or these offices, or let's get these tenants in here. So, there's not—
Christopher Reichert: Thank you, next, right?
Khalid David: Thank you, next. There's not a lot of work on what was the historic outcome. It's not something that really the industry is really designed for. So every project can be different. Most contractors don't necessarily look at how they perform, how costs change. It's not something that they often do. Because of that, what's happening now with information, for the first time, people are able to really have some context about how they perform and be able to see how different parts of the project performed. Now maybe that the data was always there, but if you actually... At the end of the job, no one's going to spend three months actually trying to make sense of it all. They're going to be gone. So, now-
Christopher Reichert: So, the definition of a cost center, right?
Khalid David: Yeah, pretty much. So now you're finding that with all these software tools, thinking about how things are playing out over time, how often... Every contractor has hunches. This carpentry company, they're always underpriced. They're going to make all their money off of change orders. They're going to price it low and let it grow.
Christopher Reichert: That's a good phrase. Price it low and let it grow!
Khalid David: That's a strategy.
Christopher Reichert: Yeah. Yeah.
Khalid David: I'm having talks now, where... Particularly government contracts, they tend to have this high standard of information, where you can almost produce somewhat of a credit score for a contractor and say historically how often do they overprice or underprice and where do their prices end up, and how can you now bring that information to the table when you're trying to level set two bids and being able to understand that, "Hey, this contractor historically is always 15% underpriced"? You need to factor in that this price that you're seeing here is not going to be underprice.
It's hard, particularly government contractors because they have that lowest bid, lowest qualified bid thing. And so, oftentimes, it creates an environment, where you price it low to win the bid, but there's another 17% that no one factors in. And so, machine learning allows us to start getting an idea of the cost exposure. Maybe we can't predict it as well as we like it to be, but we're seeing now that we can start showing what's the potential exposure that's actually happening.
Christopher Reichert: Yeah. I was wondering if this software was best for new construction or does it work effectively for renovation construction as well, where you probably don't have a right angle or a level floor? A more logical stack, right?
Khalid David: Yeah, that's true. So most of our customers are actually larg,e commercial new construct. Even when it's brand new, you're still dealing with tens of millions of unforeseen changes and stuff like that. The architect put up the pipe in the wall and it's not possible to get there because it's concrete. Stuff like that still exists. We see a lot of demand there, particularly because the costs, especially when you're building in vertical cities, a bunch of trade contractors right on top of each other is you—
Christopher Reichert: You sequenced it right.
Khalid David: Yeah. It's super litigious. This guy has to get paid this plus overtime, all that stuff. So in those kind of high-pressure, high-labor costs, tight deadlines in a relatively small square foot, our product tends to thrive. That's where the financial risks are extremely high, but there is room for renovation work, any of that stuff, which is that market is a market that is in most demand for our solutions right now.
Christopher Reichert: It sounds to me like the essence of what you have compiled as an app or a package, whether it's online or on a phone, is the accumulated experience of other projects and what went right and what went wrong and a decision tree. If you encounter this condition, then it's likely going to go in this direction versus another direction and to give a closer estimation of the cost impact, and time impact, right?
Khalid David: Yes. So, in a nutshell, what we're doing is historically when things are happening on site and you're reporting it on paper, it takes about 45 to at least 60, sometimes 120 days, to really understand the financial implications of what was happening. When projects are moving a mile a minute, especially large projects, 60 days can be $2 million worth of expenses. What we're doing is not only are we closing that gap by giving people a digital medium to make these decisions, but we're also now showing that we can actually predict exposure. So we capture labor rates, material rates, costs. I can tell you what a union carpenter makes on the West Side of Manhattan versus the East Side of Manhattan.
By capturing all that, as soon as a guy goes in and say, "Hey, you know what, I'm going to need three extra guys and a couple boards of sheet rock to do this additional work," instead of having to go to a traditional proof process, we can start projecting that financial exposure in real time so you actually know how these decisions and the implication of these decisions, how it's going to affect the long-term cost on the job.
Christopher Reichert: That makes sense. Yeah. Whip out the iPad and get down to the numbers.
You started this in 2019. How did you get started from a funding perspective and a staffing perspective, presumably you had to hire some good technical people. Where are you at particularly with... We'll layer COVID in eventually, but I'm curious about the initial year or so of the company?
Khalid David: So first, my co-founder, so Jake and I, we've known each other going on six, six and a half years. He was actually the lead developer at Turner while we were working there. So when I left to business school, we brought the band back together. We've been working together since. We've gone through many personal and professional storms. He's like my brother. So, his staying power has allowed us to continue to innovate and continue to grow. We recruited AJ who went to Northeastern, who I think we met at Demo Day at MIT. He walked up to our booth and was really excited and passionate about the project. More recently, fingers crossed, we look like we may be having our first Sloanie to join the team. We're going through some finalizations right now, so really excited about that.
In terms of funding, so our first actual funding would have been Sandbox. MIT Sandbox was our first actual with PMR funding. I think we got into the Sandbox... I think it was the thing over at Fuse or something, the thing over the Christmas break, that was our first…
Christopher Reichert: Oh, yeah. Independent... Yeah, ILP.
Khalid David: ILP. Yeah. Yeah.
Christopher Reichert: It wasn't a trip down to the beach is what you're saying.
Khalid David: So, that was our first piece of funding. Then, eventually, we got rough draft while I was still at MIT and delta V. And then we also got in delta V, and that gave us some of the initial legs that, "Hey, we're onto something here." And then we eventually got... Sandbox has an alumni fund now called the SDX fund. So, we got investment from them. And then the fall after I graduated, we joined MetaProp, which is a prop tech investor group out of New York, and that's how we won a couple competitions. We won a competition at Harvard, went over there and showed them how it's done a little bit.
Christopher Reichert: There you go!
Khalid David: And that's been a journey. That's how we've fundraised early on. So we've been very scrappy with our initial fundraise. Now, more recently, we launched on Republic to do an equity crowd fundraise to open a round up to everyday investors to be able to participate.
Christopher Reichert: I want a piece of TracFlo, minimum investment, $100. I can see that here on your website.
Khalid David: Yeah.
Christopher Reichert: I'm not familiar with Republic. Is that kind of like a competitor to GoFundMe, but in a more professional sense?
Khalid David: Oh, man. So we try our best to stay away from GoFundMe language. Republic is what you call equity crowdfund. There's a few out there, and start engine is another one, but it pretty much allows... It aggregates capital from the general market and allows you to invest in a company with one line on the company's cap table. What they do is they have a robust vetting process. There's a Form C, where we fill everything from our revenue to who owes who what stocks, who's invested in this company. We go through a process of validating our financial CPAs. So we do everything to present as much information as possible to the general public and make sure that it's verified by third parties. Even the language that we have to put on the site has to be backed up or verified. I can't just say we're the best company. Everything that we put from the market needs to be validated.
What that does is, it changes what I call the gatekeepers in terms of which companies get access to funding. Historically, angel investors are usually high net worth individuals and it limits who gets funding. What Republic does, an equity crowdfund platform like Republic, it gives the general public the opportunity to invest in companies and allots capital for entrepreneurs.
Christopher Reichert: That's great. How's it going with the fundraising?
Khalid David: It's going pretty well. We raised about 170K in maybe our first six weeks. We're on a road to a million. We're looking for investors from all over and especially Sloanies. We're reaching out to some of my classmates, and quite a bit of classmates have invested already. Yeah, it's been going great in terms of the exposure and letting people know what we're doing and how we're building, and it's unlocked capital for the company.
Christopher Reichert: Wow. That's great. We talked earlier about my former colleague, Segun, here in Boston, who was the executive director of the Black Chamber of Commerce in Boston. I know you're passionate about diversity and entrepreneurship. So, tell me about that, how that's played into forming the company, running the company, seeking funding, seeking clients?
Khalid David: Mm-hmm (affirmative). That's a great question. One, I'm going to talk about what it means for as a culture, and then also I want to talk about how we fight against all the challenges that diverse founders are facing. So for me, as a culture, I'll be the first to say, we're not “Silicon Valley bros.” That's not who we are. Everyone at our company is fighting to prove something. We're the people that are often not always seen or looked over—brilliant, talented, but everyone has this level of grit, and we literally recruit for that. Even my co-founder, Jake, who's 40, he's not the traditional startup tech, head of tech. AJ came here from India. And so, we have this love for diversity and this love for the uncharted.
My belief is that if you really want to build diverse technology companies, it needs to start with its leadership and it needs to start with leaders who absolutely understand that the diversity challenge is not simply a talent issue or pipeline issue. It's that literally oftentimes people don't seek talent that's right there. We're intentional about recruiting people who are brilliant and talented, but maybe underestimated.
From a fundraising standpoint, I've done quite a few talks around issues around diverse founders and our access to capital. I've done Raising While Black with the MIT alumni and also did it Now What with MIT. I've also done things at Stanford and HBS, particularly around how we are making sure diverse founders have access to capital. One of the reason why we chose Republic was because of those same challenges.
I'll be the first to admit, I thought that I went to the right schools, I thought that I worked at the right firms, that I had the right backstory, and I'll admit it, I thought I would be the exception. I thought that I get it, that diverse founders are struggling, but I'm different. I'm not like your typical diverse founder. It was... What's the word? ... A sobering moment to realize that we could get the meetings because we had MIT on our resume and we can get the introductions, but when it came to actually cutting the checks, rules were just slightly different. Part of my commitment to, one breaking down those doors is saying, "Hey, I have to be innovative, and I have to take advantage of all the tools that are available” because by proving that it's possible, it's really going to open the doors and make it easier for the next generation.
So, part of the reason why we chose Republic and equity crowdfund was that it changed the gatekeepers. It allowed anyone from any background to be able to invest in our company, and we weren't limited to the typical monolithic group of high network individuals who made the decision, especially in the early stage, really mostly on trust. You're really betting on a person. You're really betting on the CEO when you are this early on. Oftentimes, my belief is that they just were not used to seeing people like me. Sometimes it may not be conscious, but the data says something else.
Christopher Reichert: Yeah. I think that last point is very relevant, it may not be conscious, but it's hard to get through when the person doesn't even acknowledge, or a system doesn't acknowledge, those blind spots. So, I guess the best revenge is going to be a successful company, right?
Khalid David: The best revenge is a successful exit!
Christopher Reichert: Yeah. Well, what is your definition of success?
Khalid David: Oh man. Whoa. So, that's good. So, I might sound a little cheesy here, but—
Christopher Reichert: No. No, not at all.
Khalid David: You actually made me think of the principal leader taking on the world's best challenge. But to me success, while it’s economic, it’s relational, it's health, it's spiritual. My idea of success is not simply going public. My idea of success is really building a company that looks a lot like America, where the demographics of the company is closer to the demographics of the cities we serve and the demographics of the people that we serve.
My idea of success is when the next generation of angel investors are looking at some young Black boy that was born in the Bronx, that they say, "Ooh, he could be the next Khalid David." They have some reference point that they can stick to and say, "I see it now because someone has shown me it's possible," as opposed to saying, "He could be the next who?" I've asked diverse groups who comes to mind, and often we draw a blank. So, that's part of it.
Success is also having a wife and a family that respects me, respects the work that I do in the community. Friends, we had a launch party here in New York and had a few Sloanie classmates, particularly ones that we went to BVI with. We went on a boat together in BVI. We just had a nice little moment. When I posted a photo, I was like “BVI to IPO.”
Christopher Reichert: Nice.
Khalid David: It was me and my classmate and both of our wives, two SLs. The SLs and our classmates, they got a girl group. They take trips without us. It just felt like, "Oh, this is my tribe. This is my family." So to be able to continue to have those relationships and to have those classmates who invested early on, participate in an IPO and get rewarded for betting on us. I have a sense of peace, a sense of peace that I'm moving my world forward, I'm moving society forward, that the work that I'm doing is not in vain.
Christopher Reichert: That's excellent. There was another Sloanie who has a podcast, founder of Okta. It's Zero to IPO.
Khalid David: Oh, yes.
Christopher Reichert: It might be worth listening to that if you hadn't heard of it before. They came out of Sloan, at least one of them in 2009. They're, I think, at last count 30 billion in valuation. So, it could be a nice number and a nice inspiration. Well, that's great.
By the way, did you ever figure out why buildings sway in the wind when you were a kid?
Khalid David: Oh man, you did some research, man. Wow. Yes, I did figure out why buildings sway in the wind.
Christopher Reichert: They should sway, as opposed to break.
Khalid David: Yes, it's better to bend than to break, but I was absolutely fascinated. That's why I became a civil engineer, because I said—
Christopher Reichert: I think it's a good way to look at life too, right?
Khalid David: Yeah. Yeah.
Christopher Reichert: Bend versus sway. Well, thanks very much, Khalid David, the founder and CEO of TracFlo for joining us today on Sloanies Talking with Sloanies. It's been great to talk to you.
Khalid David: Thank you so much. I do appreciate this. I am absolutely a product of Sloan. I'm leading the way. I'm having conversation on diversity. We're revolutionizing an antiquated industry and this cannot be possible without the friends, the mentors, the late night conversations, the laughs, the jokes, all of it. So, I'm grateful for the opportunity.
If you want to be investing in our success, please go to republic.co/tracflo. That's T-R-A-C-F-L-O. You will be doing your part in helping, not only revolutionizing an industry, but showing that leadership can come in many different shapes and form.
Christopher Reichert: You can also go to TracFloapp.com to see what TracFlo is all about, construction financials done right. So, thanks very much, Khalid, for your time today.
Khalid David: Thank you.
Christopher Reichert: Sloanies Talking with Sloanies is produced by the office of external relations at MIT Sloan School of Management. You can subscribe to this podcast by visiting our website, mitsloan.mit.edu/alumni, or wherever you find your favorite podcasts. Support for this podcast comes in part from the Sloan Annual Fund, which provides essential flexible funding to ensure that our community can pursue excellence. Make your gift today by visiting giving.mit.edu/sloan. To support this show or if you have an idea for a topic or a guest you think we should feature, drop us a note at email@example.com.