Where Are The Biggest Trends & Opportunities in PropTech?
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Obviously you have a fund for property tech companies. You talk to a lot of CEOs, a lot of companies in the space. I’m just curious what your general thoughts are. Where do you see the trends in property tech?
Where do you think the most disruption might happen-specifically for those investors focusing on the real estate market (either institutional or individual, as opposed to Zillow targeting home buyers).
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Zillow is a home buyer-and by the way, I like that model too. It will be interesting to see where they go. I've set up a PropTech VC fund because there's just so much opportunity throughout PropTech. I think the area you're in right now with property acquisition is very interesting, and you're focusing obviously on the smaller investor.
It's very difficult if you're a private equity fund. I also am a partner of a private equity fund called Bluefield Capital. We've bought about $1.5 billion worth of real estate over the last six years, and there aren't really a lot of tools and technologies that help you here as well. I think a big opportunity is actually for the private equity funds themselves to build a lot of data and go out and acquire a large scale.
I think I've seen one fund emerge called “Skyline” It’s quite difficult to figure out exactly how they work; it's sort of a black box but their pitch is basically “we're a private equity fund, we have cutting edge AI, and we are able to analyze the market, pull data from so many sources and basically use machine learning to bid on properties.”
I do think there's promise in that. I actually think it's still just a pitch right now; I don't think it's actually concrete enough yet, but you've got to understand my background. I founded Vungle, and Vungle was all about helping developers buy users so in the advertising industry at the time when I started Vungle, people were buying on a ‘per view’ basis. “We'll put a video out there, and we'll pay per view.” There was no focus on performance. I'm a huge believer that you need to use AI, and you need to focus on performance.
With Vungle, we flipped the model on its head. We actually changed the pricing model where it would be about buying users. I don't care how much you spend on the view. I don't care how much you spend on a click. I'm gonna build a product for you that if your user is worth ten dollars, you can spend seven dollars on our platform to buy that user.
It doesn't matter how many views or how much the views cost-- the view could cost you $20--it doesn't matter if the user makes you more than that, that's the key. I actually think that approach can be really powerful in real estate right now. It's the huge, huge ‘hundreds of billions of dollars under management’-type of firms that have real technology. You're talking about the Blackstones; you're talking about the KKRs. Those are the type of institutional investors that have built technology internally. There's this big gap in the market with private equity investors.
Most of the private equity investors still today run their entire business on spreadsheets. It's crazy… just spreadsheets. They're not even using tools like you are using, and those guys are seeing so much value in what they do. There's no push right now--there's nothing pushing them to go and invest in building technology infrastructure so when I joined forces with Bluefield Capital, the opportunity was very exciting as a tech entrepreneur to join a private equity fund, bring technology to real estate and just explode it with opportunity. I’m actually implementing this model right now where there's no single one area but there's a huge spectrum of areas.
What we are doing with the VC fund we've set up is that we invest in startups that can improve the NOI (net operating income) of our actual portfolio. If we can bring in technology, and we can improve the rent collected by a few dollars, that has a big impact on the bottom line…and if we can improve that on one unit, then wow! We can scale that out across our entire portfolio of thousands of units. We have other partners who we invest with that have tens of thousands of units under management, so the first opportunity is any technology that can increase NOI (net operating income) in a property is great.
Right now it's pretty much a tick box for everyone. I'm sure you do this on your platform too right-- especially with the BRR model. Buy this property; rehab it a little bit. You know, bring in new countertops and improve the rents a little bit. Do some landscaping; do some interior design or whatever you can to improve things. Well, there are new technologies that are emerging that can do a lot more than that. There's a few things we're looking at right now too that could really boost the NOI of our property, especially with shared services … so that's one.
Like I said, with deal analysis, I think that's a huge opportunity--especially for the large PE funds. If they can take their technology and be more efficient at buying and bidding, that would be very, very powerful. Another big trend that I see now is with coronavirus. I'm curious to see if there's been any shift in how dealcheck.io is doing things but with COVID happening, it's forcing the industry to adapt.
Every segment of real estate has been hammered since COVID has come in (even multi-family). You can't necessarily have in-person tours anymore so people are now suddenly adopting 3d virtual tours; people are building CRMs now. People are actually really investing in infrastructure there. Who knows how retail is going to bounce back? Office is another area we're investing in. There is a company that is focused on contactless technology where you can enter an office building just through facial recognition.
There is a device that can recognize you in just 0.2 seconds in order to let you in--and they can also scan your temperature! Companies right now are scrambling to figure out an answer to the question, “How do we comply with social distancing regulations, and how do we make sure our environment is safe?” This is creating a huge spectrum of opportunities, which is why I've also started this show as well, to bring on interesting startups.
This is the PropTech VC podcast. We give you unique insights into how innovative technologies are disrupting real estate. We interview top entrepreneurs, investors and knowledgeable experts to share the inside scoop in this fast-moving industry. It's hosted by PropTech VC Zain Jaffer.