Perspectives on investing in CRE Tech...

One of the coolest parts of running our own real estate content and connectivity platform are all of the amazing startups I get to connect with on a daily basis. Literally, every day I get calls and emails from emerging startups looking for exposure, advice, feedback, etc… And I friggin love it! To be able to spend so much time with so many amazing entrepreneurs is my idea of a great gig!

When you put yourself out there as someone who wants to help others, you get into some really interesting and insightful conversations with people. Truly honest, transparent conversations..

One of the questions I get asked a lot is if I can help make intros to prospective investors. And I do always try. But one of the things I try to point out in these conversations is that you really need to study WHO you are targeting for your fundraising. Understand their objectives, goals and unique perspective. Simply asking for money isn’t a strategy.

I also advise my fellow entrepreneurs that they should be thinking about what types of intros are the most beneficial to them at this stage in their business. Because if there is one thing I have learned the past 5 years in CRE tech and in speaking to a ton of prospective investors, it is that they are all incredibly different.

While their money may be treated the same, their goals, strategies and objectives never alike.

So I asked six different people who have all invested in CRE tech for their perspectives on investing. Each from a different role and vantage point. Pretty insightful. I hope it helps anyone on the fundraising trail.

 

What do you look for in considering a new investment in a tech co?

Being in the real estate business for over 20 years I First I look for real problem that is being solved. Second yet probably even more important is the team of people that will be executing the sales efforts. It's the single biggest missing part of why these amazing ideas succeed or fail.

What are some of the biggest lessons you have learned in evaluating these decisions?

You can have the greatest product in the world but if you don't make your customer know and feel why you are doing it and why it is necessary it will die on the vine.

What are your thoughts on the current state of the CRE Tech market?

Its reality time. As we know there will always be early adopters to any product which is around 10 percent of the crowd. If you don't bust through the next level of customer which are the influencers who make up that 11 percent to 20 percent you have not penetrated the market enough to survive the long term. We will see which products and do that this year.

Are you considering making additional investments in the sector at this time? If so, what are you most interested in? If not, why?

I will always look at new opportunities. But as I stated above. They have to have all the pieces of the puzzle.

What advice would you give another investor considering investing in this sector?

Invest. in what you understand. Or with people you trust that do. Otherwise you might as well just go to vegas and roll the dice.

Connect with Jon on LinkedIn, Twitter, Facebook and Instagram.

 

What do you look for in considering a new investment in a tech co?

As investors in strictly seed-stage startups, many of our companies are pre-launch or so early in their maturity that we generally have no metrics on which to base our investment decision. Instead, what we’re left with is our assessment of product vision, size of market opportunity and - most importantly - the capabilities of the founding team. Roughly speaking, we base about 80% of our investment decision on our core belief in the founders. For something like CRE investing, that’s a combination of the raw talent of the founders and the domain expertise and connectivity with which they come to the table. We don’t want to back business school students who dreamed this up in an entrepreneurship class; we want to back people who are solving problems they have lived and experienced and deeply understand. Beyond that, we know that at the seed stage there’s little more critical to success than the ability to acquire three key things: early talent, early customers and capital. There’s a consistent thread of salesmanship and raw leadership that runs through those things, and we pay a lot of attention to that DNA.  

What are some of the biggest lessons you have learned in evaluating these decisions?

One of the things we’ve learned is that, while there are many repeat entrepreneurs who we - and many others - would be thrilled to back based on their track record of success, there are even more entrepreneurs who haven’t yet succeeded but who have the core ingredients for success. Some entrepreneurs may have seen only modest success at prior companies, while others may have faced challenges that caused their startups to outright fail. We’ve learned to celebrate that failure when it’s coupled with a reflective founder who has learned a lot from the experience. There are a million reasons why startups fail, and luck is usually very high on the list. It would be quite dangerous to think of those founders as unbackable, yet many investors do. Instead, we look at the founder and evaluate his/her responses in the face of those challenges. Has he/she reflected intelligently on his prior failures with a fierce determination not to make the same mistakes again? Does he acknowledge his failings and have a clear sense of what he’d do differently? Does this founder have the hunger and drive to keep chipping away until he succeeds and exceeds his goals? We find that the chip on the shoulder of a past failure can actually create even more intense drive. Bottom line, there is so much about starting a company that isn’t strategic rocket science, but which can set you back massively if you get it wrong. Simply having been through the experience once or twice can remove a tremendous amount of friction.

What are your thoughts on the current state of the CRE Tech market?

The CRE Tech market is huge, and still has tons of opportunity, though it has been experiencing a bit of a slowdown after running white hot for the better part of 2014 through early 2016. But with trillions of dollars in assets being managed still via antiquated processes, there’s sure to be continued innovation in the space.

Beyond that - and consistent with our broader view of the vertical SaaS market - we’re experiencing a transformation in the leadership ranks at enterprises in every sector of the economy. The people in upper management today are increasingly people who communicated via email in college, who’ve been living their entire adult lives on the web, and for whom there is a base-level expectation that “there’s an app for that.” That’s the trend that’s been driving technological change in industries that historically have been resistant to change. The CRE space is no different.

Are you considering making additional investments in the sector at this time? If so, what are you most interested in? If not, why?

We are, but we’ve also got a lot of exposure currently (Reonomy, FieldLens, Latch, SquareFoot), and we try to consciously keep our portfolio balanced overall. We love the bets we’ve made in the sector, but realistically, our bar for investing more in that sector is very high today.

What advice would you give another investor considering investing in this sector?

The CRE Tech market is not one that you can invest in because the business pencils out in a vacuum; you have to be pretty deeply connected and knowledgeable about the dynamics to make smart and responsible bets. To that end, make sure you’ve got a network of genuine experts who are living in the market and deeply understand its dynamics. Additionally, there are lot of reasons why things will continue to be slow to change in certain corners of the market. You have to be able to navigate the relationship network of the CRE industry, while simultaneously understanding who has the economic leverage and motivation associated with any contemplated change in business process.

Connect with Brad on LinkedIn and Twitter.

 

What do you look for in considering a new investment in a tech co?

The team, the people involved and their understanding of commercial real estate.

What are some of the biggest lessons you have learned in evaluating these decisions?

Never waiver from the original criteria, it's always about the people.

What are your thoughts on the current state of the CRE Tech market?

It's still just the beginning, so far to go and so many opportunities right in front of us.

Are you considering making additional investments in the sector at this time? If so, what are you most interested in? If not, why?

Great question, I will have to respectfully not answer.

What advice would you give another investor considering investing in this sector?

It will never be a better time than now, why wait.

Connect with Duke on LinkedIn and Twitter.

 

What do you look for in considering a new investment in a tech co?

The first thing I consider is, “Do I believe in the CEO and the leadership team?” That’s not as easy as it sounds. Having a great idea or product isn’t enough. The key is the execution of that idea and if I don’t believe that the team can execute, I won’t invest. Period.

What are some of the biggest lessons you have learned in evaluating these decisions?

I have learned so much in a short time. First, you have to be patient. These are all long plays. Second, nothing happens overnight, so you have to be even more patient. Also, if you think you are going to have a voice in any of the companies you invest in, you better right a HUGE check. Even if you are a customer, most only want to hear from you so often with improvements to their product.

What are your thoughts on the current state of the CRE Tech market?

CRE is more exciting now than any time since I entered the business in 1998 because of the tech. It’s changing at such a quick pace that it looks like music in the sixties. Innovation is happening so quickly and what we think is cool today will be obsolete in a short time. I have to imagine that what’s coming next will continue to change the industry for the better.

Are you considering making additional investments in the sector at this time? If so, what are you most interested in? If not, why?

I am always open to additional investments. I am interested in augmented and virtual reality, but I am also keenly interested in anything that brings us closer to our clients and connects us to others in the industry in a meaningful way. LinkedIn isn’t the answer, but we don’t have anything industry specific yet.  

What advice would you give another investor considering investing in this sector?

Ask a lot of questions and be prepared to lose more often than you win. If you don’t think the CEO is building a company you would be happy to work for, or worse, if you don’t think the CEO cares as much as you do, run the other way. Sometimes the best investments are the ones you don’t make.

Connect with Jeremy on LinkedIn and Twitter.

 

What do you look for in considering a new investment in a tech co?

The answer to this question varies greatly depending on the stage of the company. Most of our investments are in the seed stage, so I'll stick to that. We look really long and hard at customer acquisition DNA these days - and not in the fancy shmancy jargon sense of the word. But rather, literally being walked through how our potential investment is going to get one customer, then the 2nd, and the third. In real estate, this is especially important because most of the time our portfolio founders are knocking on the doors of big PE and CRE firms. Having the DNA and soft-skills to talk the talk in this space is more crucial than in others.

What are some of the biggest lessons you have learned in evaluating these decisions?

Since we are entrepreneurs in addition to investors, one lesson we learned the hard way is: Don't make investments based on what you think you can execute. We've made deals in the past based on the problem a team was solving and how interesting it was, thinking to ourselves: "I could see how I would be able to execute this." but we quickly learned that it's about the jockey, not the race horse. In other words, we're investing in this particular team, at this particular time, to solve this particular problem. Not our ability to execute, but theirs.

What are your thoughts on the current state of the CRE Tech market?

Same as everyone else's - booming. There are a lot of clones popping up tackling low-hanging fruit problems since most of the industry is still lagging behind with regards to technology. Every once in a while, though, you come across a team tackling a very nuanced, difficult, and exciting problem. These are my favorite types of opportunities to come across as an investor.

Are you considering making additional investments in the sector at this time? If so, what are you most interested in? If not, why?

Certainly. We're pretty active and try to make a 3-7 investments per year - depending on what we come across. I'm most interested in very niche problems with a very methodical approach to going to market from the founding team.

What advice would you give another investor considering investing in this sector?

Don't jump in... it sucks. :) Kidding. (That's a joke we say in surfing to newcomers... Surfing sucks don't try it) I'd say to spend some time getting familiar with the world of tech startups if you aren't already. Investing in real estate is completely different than investing in real estate technology. This market has a significantly higher risk profile and is more dynamic, but is also more exciting. The "tech" type thinking takes a little while to get accustomed to and you soak it in through osmosis after a year of two of being around it a good amount. CRE Tech is small right now and is fairly easy to get around. Get to know the players, shake hands, kiss babies - and be prepared to make (or lose) a lot of cash :)

Connect with John on LinkedIn and Twitter.

 

What do you look for in considering a new investment in a tech co?

We are looking beyond the company as a standalone investment to how it would integrate into our platform. We are looking for how the solution drives efficiency for our existing customer base or opens up an expanded market to us. Next is scalability, we need to sure that the opportunity can grow rapidly with us. Finally we are looking for great leaders and teams with innovative ideas, talents or resources that augment our own.

What are some of the biggest lessons you have learned in evaluating these decisions?

Invest where you can add value. Many tech “companies” seeking investment are not really companies yet. They are founders with concepts and a core group pursuing a dream. They need a lot more than capital…they need a marketplace and organizational resources. Find clear and natural extensibility to your existing platform or infrastructure to create the greatest leverage possible.

What are your thoughts on the current state of the CRE Tech market?

We are at an interesting time. The marketplace is aggressively seeking to adopt technology and an incredible array of new solutions have been built to solve different parts of the “problem”. The challenge remains for the customer to figure out how to put it all together. They are somewhat overwhelmed by the “noise”. Every day they learn about something new and don’t know what they will tomorrow or who is going to around for the long term.  Unfortunately many great solutions have been built but have not been able to achieve scale in the market. We are expecting to see a wave of consolidation.

Are you considering making additional investments in the sector at this time? If so, what are you most interested in? If not, why?

We remain interested and are actively looking at a number of opportunities to build, buy or partner with companies that provide adjacencies that extend our scope or feed into to our platform to support better faster decision making

What advice would you give another investor considering investing in this sector?

There is no shortage of great ideas and cool technology. The real challenge is standing out in the market and getting to scale to truly build a business. Many companies have exhausted all their resources creating their product and have nothing left to get to market. Getting to market is actually the heavier lift.

Connect with Jeff on LinkedIn and Twitter.