LiquidSpace

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

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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 is Airbnb Worth $24 Billion and What Does it Mean?

The recent announcement that Airbnb was raising a new round of financing at a $24 billion valuation left many people outside the start-up and technology communities scratching their heads.  In fact, some of my friends in the real estate and hospitality communities emailed me when the news broke thinking that the press must have made a mistake and missed a decimal place somewhere.  They just couldn’t wrap their heads around the idea that a real estate company with no tangible real estate assets could command that kind of valuation from investors.  How does a platform for sharing real estate demand a much higher revenue multiple than a company that owns real estate?

I am not going to bother opining on the exact revenue multiple that Airbnb should have.  I am certainly happy that they are worth $24 billion (two of my investments, Localmind and Fondu, were both acquired early on by Airbnb).  However, I will let the far more sophisticated growth equity investors doing the deal set the valuation for me.  I am happy to be along for the ride. 

Nonetheless, I can say this with certainty: the fact that experienced, late-stage investors are willing to place such a growth premium on Airbnb shows that we are in the midst of a tectonic paradigm shift in the real estate industry.  Moreover, I believe that we are only in the third inning of a nine inning ball game.  The crux of this paradigm shift exists in how people conceive and inhabit physical space, and how people are able to maximize the efficiency and financial opportunity of that space, driving prices down for “tenants” while simultaneously creating more profit for “landlords.” 

This may seem like a contradiction but it’s not: when space is used more frequently and more efficiently, landlords can earn more money while charging less money to tenants.  This is the “holy grail” solution that exists when you merge collaborative consumption, on-demand services, and the shared economy with real estate.  This is the genius of Airbnb and it has galvanized an entire industry in its wake.  People can take unused real estate and turn it into occupied real estate.

In the olden days, the perception of space was rather rigid.  People lived in houses, tenements, or apartments, and they worked in office buildings, factories, or stores.  When they traveled, they would stay in hotels or hostels.  Airbnb was the first company to flip the script on this model, and more change is coming.  Because of technology, social networking, on-demand services, and collaborative consumption, all of these spaces can be used by people when they need them

Imagine a world where you can use a specific type of space only when you need it and you can pay for it by the hour or by the day?  This was the major innovation of Airbnb.  People thought to themselves: “I am going away for the weekend and no one is going to be in my apartment.  Why don’t I earn some money and rent it out?”

Now, this type of thinking is getting applied to other asset classes within the real estate spectrum.  For example, if you are only in an office for a few hours a week, why not book a Breather instead of getting standard lease on an office space? (Full disclosure: Breather is a portfolio company) Schools are vacant from 5 PM-6 AM.  Why not have dinner parties and other events in schools provided people are respectful and responsible?  Why can’t a hotel turn into an office building during the day, and vice versa?  When no one is in our conference room at work why can’t I rent it to others for an hour to have a meeting (i.e. using LiquidSpace)?  I only use my vacuum twice per week.  What good is it doing sitting in my closet when it can be cleaning someone else’s home or office and potentially earning me some money?  The list goes on and on.

An old saying in the real estate business is that land is a great investment because they aren’t making any more of it.  Today, this rings more true than ever with real estate prices skyrocketing and people getting priced out of places where they have lived for years.  However, although the earth isn’t making more land, people are beginning to think about how they use physical space in different ways.  Instead of conceiving of space as an owned or leased quantity, they are beginning to think of it as a shared quantity.  This shift will ultimately prove the most financially viable solution to solving the affordable housing crisis, ensuring that people have reasonably priced places to start small businesses, and providing people with the ability to travel and expand their cultural views on a shoestring budget.

So, in summary, I don’t have any idea what Airbnb should be worth.  What I do know is that the investors who are valuing it at $24 billion, whether consciously or not, are recognizing Airbnb as the initial catalyst for the largest disruption in the history of the real estate industry since the invention of the skyscraper in Chicago at the end of the 19th Century.  At MetaProp NYC, it is part of our job to educate the entrenched real estate industry about this seismic shift and show them that they don’t have to resist it.  We can also educate the technologists and startup community about how to approach people in the real estate community and explain the new ecosystem in relevant, appropriate terms.  No one has to go into hand-to-hand combat.  In fact, if done correctly, everyone can create additional economic and social value in this new ecosystem.  It doesn’t have to be a zero-sum game.