Unicorns Eat Dinosaurs

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Hey CRE executives...

You may have brushed off the media frenzy around OpenDoor's December round (PropTech's "largest funding round ever") and $1b+ valuation.  Your ears may have perked up after the announcement of the PropTech mega-merger of the two broker-centric firms VTS and Hightower in late November.  In 2017, my partner Zach Aarons says that PropTech startups are going to merge at a rapid clip and large incumbent technology companies are going become more acquisitive to protect their moats.  However, as our good friend and frequent co-investor Hunter Walk so eloquently put it, in 2017, GE Will Buy More Tech Startups Than Google.  The phenomenon of both aggressive and defensive acquisition won't be relegated solely to "technology" companies within real estate.  

Attention C&W, Colliers, NGKF, Savills Studley, Avison Young, HFF, Marcus & Millichap, Transwestern, Cresa et. al... You MUST pay attention and carefully consider your next move.  

Yesterday, CBRE announced the acquisition of Floored.  This is not CBRE's first PropTech acquisition nor is it the first for a large CRE brokerage firm.  In fact, PropTech observers were impressed with JLL's purchase of Corrigo just over a year ago.

This Floored acquisition is different.  This is cutting edge, VR technology.  This is a business with major customers and a fabulous team.  This is also a move by a new "CDO" executive at a major multinational.  Most importantly, this is likely a multi-year lock-up of one of the most talented, bright and connected PropTech minds in the world.  Floored's CEO Dave Eisenberg is not just an entrepreneur and CEO.  He's a sharp seed stage venture capitalist who has made investments in PropTech companies like Hightower and Dynasty.  He knows the cutting edge tech space inside and out like few others.  He knows PropTech better than almost anyone.  Most importantly, he's one of the most connected guys in NYC - the center of the global PropTech movement.  

Thanks to Dave, CBRE has a legitimate chance to corner the market for the best new real estate technologies.  This will positively affect CBRE's own business practices, their clients' businesses, and ultimately, their investors.  

It seems that CBRE acknowledges that the unicorns may eat the dinosaurs!

Michael Mandel, Co-Founder and CEO at Compstak

The Innovation Conversation is a series of Q&A sessions between the real estate technology industry's top leaders and MetaProp NYC Co-Founder and Managing Director Aaron Block.  Topics include thoughts on the future of property and technology, corporate innovation activities,  and executive development in the real estate technology space.

Michael Mandel, Co-Founder and CEO at Compstak


What are your day-to-day responsibilities in your organization?

As CEO, I don't have a lot of day-to-day responsibilities.  Mainly I focus on making sure we have money in the bank, and that our team is happy and productive. The only regular tasks I have are weekly 1 on 1s with our team leaders, and our weekly Progress meeting, where we discuss our progress from the past week, where we need help from the rest of the team, and our plan for the next week. Otherwise, I spend a ton of time in both internal and external meetings with our team, prospective employees, our customers, and our members.  I travel a decent amount - mainly for speaking engagements and new market launches. When we're raising money for the company, that becomes my full time job, and it's so time consuming.  

Describe how you became interested in real estate technology and innovation.

I've always had an interest in technology and innovation.  I studied entrepreneurship at Babson, and always intended to start a business.  Before starting CompStak, I was a commercial real estate broker.  While working as a broker, I saw tremendous opportunity to innovate in the commercial real estate space.  In truth, if you were looking for it, the opportunity for innovation in the CRE industry was everywhere.  The industry was so antiquated, and the question was not IF there was an opportunity to innovate, but what opportunity was best, and how could I make an impact.

How is today’s real estate technology different from when you started your career?

When I started working in commercial real estate, the only technology regularly used in CRE leasing in Manhattan was CoStar.  On occasion I would use LinkedIn, Loopnet, RCA, PropertyShark, Jigsaw, or electronic public records data from the NYC DOB. Some brokers used CRMs, but most just used Microsoft Outlook and others used index cards (seriously). Today, there is technology that dramatically improves a broker's workflow in every step of the process.  Prospecting is done on LinkedIn, CompStak, ProspectNow, Crunchbase, and other sites.  Market Data to negotiate deals comes from RCA and CompStak. Deal management, workflow and space tours happen on VTS, Hightower Property Capsule and Ten Eight. Customer relationships are managed in Apto, Clientlook or REThink, and space is marketed with VTS, 42Floors, TheSquareFoot, OfficeSpace.com, Floored and others.  All of these new tools provide tremendous value to brokers (not to mention investors, lenders, appraisers and others). They provide transparency in information, and accountability to landlords and tenants.

What is the most important innovation and technology-driven initiative in your organization today?

I'm most proud of the technology we've built in-house, which our members and customers never see, but which allows CompStak to grow incredibly quickly.  We've built an in-house Mechanical Turk platform, combined with Machine Learning, Statistical Anomaly Detection, and workflow tools that allow us to process an average of over 30,000 comps a month, while maintaining high quality and direct analyst review.  We've then built a sophisticated comp integration process, which allows us to maintain an average of 5 versions of every new comp we receive, uncover the differences between these versions and choose the best comp attributes to deliver a high quality experience to our users. I'm just scratching the surface of what it takes and what we've built to create a scalable platform for managing a massive quantity of data from a ton of disparate sources.  This stuff is really cool.

What do you do to stay on top of cutting edge trends and developments in real estate technology?

I really enjoy the various CRE Tech events (too many of which have the word "disrupt" in them).  Other companies in this industry are building incredible things, and a lot of them are taking inspiration from outside of the real estate tech world as well.  I think if we all really want to innovate, that's what we need to do.  We need to look at best in class technology and design in all industries and think about how to apply that to the world of real estate technology.  Our tech team shares their code repos in GitHub, and our product team shares their designs in Dribbble.  Of course, it's also important not to get too distracted with what other people are doing, and to focus on making your product as good as it can be.

As a mentor, what is the #1 value you bring to a high-growth real estate tech start-up?

Personally, I think the value I provide may be valuable to entrepreneurs more generally, than just real estate tech companies.  There are a lot of things I would change the second time around, that would have accelerated our growth. My advice will likely be around effectively telling the story of your company, identifying the biggest opportunity possible, understanding how you will capitalize on that opportunity, and selling that opportunity to investors.  Early stage entrepreneurs need to be tremendous story tellers and salespeople, and while it's partly art and partly science, it's definitely something that can be learned.

Who have been your most important mentors and why?

Jason Freedman from 42Floors once mentioned to me, that the best mentors are other entrepreneurs who have gone through what you're going through a few months ahead of you.  I think he's dead right.  I love chatting with entrepreneurs who have just closed the type of customers I'm trying to win, just raised the round of funding I'm planning to go for, just hired that big senior employee, or hit that scaling challenge.  It's wisdom that is incredibly relevant, and practical.

What is your favorite business book?

My favorite recent business book is The Hard Thing about Hard Things. I've also really enjoyed Zero to One, anything by Eliyahu Goldratt, How to Win Friends and Influence People, Delivering Happiness, Built from Scratch and Double Dip by Ben and Jerry (really).

What is one interesting thing about you that most people don’t already know?

I really enjoy manual labor.  I get tremendous pleasure out of fixing things, painting things, organizing things, building things and cleaning things.  I love the sense of accomplishment I get from completing a project.  Incidentally, I get that satisfaction, even if I'm not the one doing most of the work :-).  That's part of what I love about being an entrepreneur.  Our team is always doing new cool things, and there are lots of small wins along the way.

Jordan Nof, Head of Investments at Tusk Ventures

The Innovation Conversation is a series of Q&A sessions between the real estate technology industry's top leaders and MetaProp NYC Co-Founder and Managing Director Aaron Block.  Topics include thoughts on the future of property and technology, corporate innovation activities,  and executive development in the real estate technology space.

Jordan Nof, Head of Investments at Tusk Ventures


What are your day-to-day responsibilities in your organization?

As the Head of Investments at Tusk Ventures, I am responsible for overseeing all aspects of the firm's venture practice and investment strategy. My day-to-day responsibilities include sourcing, evaluating and recommending companies that satisfy our investment mandate and are positioned for Tusk Ventures to add significant strategic value in our sweet spot of solving complex problems in highly regulated marketplaces.

We have reached the point where cash has become the least valuable asset that an investor should bring to the table. Along with funding, entrepreneurs need to look for a trustworthy partner who provides the relevant experience as well as access to people and distribution channels that they would not have otherwise. I focus on identifying the right startups (10-12 annually) where we are best positioned to foster these types of partnerships by helping them navigate the regulatory hurdles, incumbent players, and public perception to become the next generation of great companies.

Describe how you became interested in real estate technology and innovation.

I became interested in real estate technology while working as a Director at Blackstone within the Innovations group. My role was primarily focused on the firm's corporate venture capital portfolio, identifying companies that could help accelerate either the firm’s operations or those of our portfolio companies. Given Blackstone's global footprint in real estate, I felt that it was an area where we could really help tip the scales for a company in the vertical.

From this unique position at the nexus of real estate entrepreneurs, investors, and end-users, I led the firm's first real estate technology investment in VTS. Since then, the CRE technology space has experienced explosive growth in terms of dollars raised and number of startups in the space.

How is today’s real estate technology different from when you started your career?

When I first started analyzing the CRE Tech space, there were no more than a handful of companies in the vertical. Most of the real estate startups were focused on the residential market, chasing the footsteps of Zillow and Trulia. Since then, there have been tremendous opportunities exposed that could bring increased transparency to this once opaque market. Examples of disruptors include:

- Leasing & Asset Management Workflow (VTS)

- Shared/Flexible Office Space (LiquidSpace, Breather)

- Crowdsourced Data (CompStak)

- P2P Lending (RealtyMogul)

- Mortgage Refinancing (Lenda)

- Crowdfunding (RealtyShares, Fundrise)

- 3D Visualization (Floored)

- Smart Access Building Control (Latch)

- Office Cleaning & Management (Managed By Q)

There are even companies now that can provide owners with ancillary revenues for their unused parking spaces (ValetAnywhere, Zirx)

What is the most important innovation and technology-driven initiative in your organization today?

Given that I work in venture, my sole focus is to foster and accelerate entrepreneur driven innovation by providing both intellectual and financial capital.

Tusk Ventures is focused on selectively partnering with startups to solve complex problems in highly regulated marketplaces. Our team develops an underlying strategy and executes full scale multi-jurisdictional campaigns to eliminate regulatory hurdles, achieve policy goals and shape public perceptions. Where possible, we collaborate with governments and incumbent organizations to pursue aligned goals. Where necessary, we challenge regulatory regimes and assemble coalitions to change the status quo. Our mission is to serve as a catalyst, providing sustainable growth for the next generation of great companies.

What do you do to stay on top of cutting edge trends and developments in real estate technology?

Taking a similar approach to learning about any new new industry, I have found that speaking to everyone I can in the RE Tech ecosystem is the best way to get a variety of perspectives about the newest technologies and meet high caliber founders. I utilize every aspect of my network to stay on top of the latest trends and developments, including:

- Entrepreneurs

- Real Estate Asset Managers

- Other Venture Capitalists

- Angel investors

- Lawyers

- Investment Bankers

- Accelerators and Incubators

- University Entrepreneurship Programs

In addition, my team and I use private company market data to conduct analyses and ensure that nothing has gone under our radar.

As a mentor, what is the #1 value you bring to a high-growth real estate tech start-up?

Deep real estate tech experience - which allows me to share a first-hand understanding of:

- What investors are looking for in early stage RE tech companies

- What potential enterprise customers will require prior to implementing your software into their businesses

- The hurdles you can expect from large incumbent players and other early stage competitors (and how to overcome them)

- Operating advice on how to build a high-growth business

- How to efficiently raise capital from both strategic investors and traditional VCs by focusing your deliverables on what matters most to them

Who have been your most important mentors and why?

Bill Murphy (CTO of Blackstone and former Co-Founder of Capital IQ) is a mentor that had a tremendous impact on me and helped shape my career path into venture capital. The only thing better than learning from your mistakes is learning from the mistakes of others, and he gave me the opportunity to do that by sharing the invaluable insights he learned while sitting on the other side of the table as an entrepreneur at Capital IQ. By running his department like a standalone business, he gave me instrumental exposure into being a successful operator.

Finally, his management style was one that really resonated well with me. Tenacity, grit and drive are all imperative to success, and his career is proof of that.

What is your favorite business book?

I am going to skip From Good to Great and The Art of War and hopefully go a bit off the beaten path here with When Genius Failed by Roger Lowenstein. The book illustrates several extremely important themes in navigating markets and building a sustainable business.

First, no matter how successful you have been in the past, you must continue to push yourself to always strive and learn more. In addition, it is imperative that your business strategy remains nimble. Thanks to Innovation, the world is rapidly evolving. However, that also means that what once was a profitable business model can become obsolete very quickly - always stay on your toes.

The book begins a chapter with one of my favorite quotes - "Markets can remain irrational longer than you can remain solvent", by John Maynard Keynes. Nobody is insulated from rapid changes in market dynamics – every VC could be banging down your door today, but not return your phone calls tomorrow. Founders should always remember that.

What is one interesting thing about you that most people don’t already know?

Although I am originally from Florida, my favorite thing to do (outside of investing in startups) is back-country skiing.

Why Did We Start MetaProp NYC?

It’s clear that 2015 was the right time to launch a real estate technology accelerator in New York City. 

Steve Schlafman from RRE Ventures once asked if I thought 2012 would have been a better time to do it.  I pondered that question for a while and realized it probably would have been a financial windfall to work with the crop of high growth real estate tech start-ups that three years ago were just starting out (VTS, Hightower, Managed by Q, Compstak, Floored, Compass, Honest Buildings, SiteCompli, The Square Foot, Nestio, Reonomy, etc.).  All of these companies, and many more successful NYC based real estate tech companies, germinated at this time and we could have had the opportunity to accelerate a few of them.  Now, the best of those companies have gone on to raise substantial financing rounds and are building very successful businesses. 

After some reflection, I would argue that a world class real estate tech accelerator would not have been possible in 2012 and, furthermore, is only possible in 2015.  For a domain specific accelerator to work, you need a few things to coalesce.   First, you need technological talent.  Second, you need capital.  Third, you need mentors.  Fourth, your portfolio companies need customers and clients.  Finally, you need more mature start-ups in the ecosystem.

In 2012, one definitely could have put together the talent and capital but not a large base of clients and mentors.  The industry was simply too nascent.  Landlords worked with software for property management (Yardi, Timberline, and MRI, etc.) but used very little innovative software for leasing management, compliance, HVAC, marketing, or construction management. 

In 2015, not only do you have landlords learning more about software, they are clamoring for it.  Dave Eisenberg from Floored mentioned to me on a panel that a massive business breakthrough for him was initially suggested by a client.  The fact that a real estate professional is that in the weeds with a technology product is a massive shift for the industry.  This shift has been brought about by a meaningful dialogue for the first time commencing between software developers and clients in this industry. 

In 2015 you also have mentors who have been through that dialogue.  They now intimately know the dos and don’ts of selling software to landlords, marketing software, hiring, raising money, and many other critical business building concepts. 

We assembled an all star team of mentors and corporate partners (including Zillow Group, Warburg Realty, DLA Piper, EisnerAmper and The News Funnel) to launch MetaProp NYC because we thought that this was a unique opportunity in time to bring together new founders, old founders, clients, and financiers together to accelerate businesses.  While the industry has matured quite a bit in NYC from 2012-2015, we believe that the software disruption of real estate is just beginning and will continue to push forward into the next decade as technology changes the entire process of building, leasing, and operating a building from top to bottom.