Impact of Covid-19 on Real Estate Industry and PropTech (Part 2 of 3)
You know, Zain, I agree with you, I follow the PropTech space pretty closely. And, you know, I think we're at a very interesting time with this black swan event of COVID happening over 2020. While the real estate market industry as a whole has been slow to adopt technology, it's kind of been, just like many other industries during COVID, has been forced to change very quickly.
And so, I know there are a couple of articles that came out recently talking about how a number of transactions or parts of the transaction process are now being taken online in ways that they weren't before.
And so, with that, you know, we could very much so be at the cusp of all of this technological change and adoption within the industry that has historically not been as quickly to, or operators and owners haven't been as quickly to adopt. So, that being said, I mean, I'd love to talk about the investments that you are making with Zain Ventures as well as with Bluefield (or alongside Bluefield) have made so far.
So, tell us about the three companies that you've worked with, you know, and what are they? What space are they in? Why do you find them interesting and exciting?
Yeah. So, Bluefield has several investments and then in my family office, there's a few more. And obviously, there's a tie between the two, you know, in that my family offices also invested alongside Bluefield. So, actually I'm a guest lecturer at UCL, which is a university in Europe. And, you know, they pride themselves heavily on really good AI and machine learning.
And I teach entrepreneurship there from time-to-time. And one of the students in the course had started this facial recognition device. And he had the idea that when you go to an office building, it's so painful-- you have to sign in with security, you have to get an ID, and you have to tap it. And it just takes way too long. And this is what Corporate America and, you know, the rest of the world is like.
Before COVID, he started to sell this in offices. And I started tracking him. And this is really the genesis of how the venture fund came to be. Because he said, "I don't need money. I appreciate you're an established entrepreneur and I want your help and advice, but we don't need money. We're doing great, you know." They just launched the product in February, actually, so just prior to COVID. And they'd already signed up so many, you know, customers and were doing trials.
And I was, like, "Well, how about, you know, we open up our portfolio at Bluefield and you can try to test your product?" And I was encouraging him to come out to the U.S. The U.S. needs this technology more than anyone else. COVID hits, and suddenly, this solution now looks like an essential solution to reopen offices up. And in parallel, he pivots the business and he adds a temperature scanner on it. So, now …
He adds a what? I'm sorry.
A temperature sensor along with the facial recognition device. And the AI was so powerful, you could literally run past it, it would capture your face and recognize and open the gate for you in time. There's a video of the founder jogging, right? And he's jogging quite fast and the gate opens, because he's, you know, be recognized as an authorized person.
So, now, when buildings are trying to know who is in the building and they're trying to ensure compliance, they also want to make it all contactless, this is a great solution for the future. So, we made an investment into the company.
Initially, I realized that this company has so much potential, and shouldn't just be limited to officers. You know, this can be used anywhere. In our senior care homes at Bluefield we realized, you know, rather than having locks around to enter the medicine cabinet, even, it'd be great if staff could just go right up to the medicine cabinet because they're in a rush and they need medication urgently, just go up to it and it opens up for you. Or the back door entrances or the front door entrances. So, now, our vision is really doing well. They're actually doing a pilot in Newark Airport.
So, Daniel, the co-founder of the company, he moved out to the U.S. recently. In New York, he’s already doing a trial in a huge skyscraper. He's doing a pilot in Newark Airport right now. He's doing trials, and he's got revenue coming from football stadiums and he's got offices. He's now got clients across Germany, UK, Russia, and now U.S. This company is going to be explosive. You know, and COVID has really helped accelerate trends. And some startups who have taken advantage of that are going to see this tailwind like they've never seen before.
So, OVision was a company that was sort of more established. It was... You can call it pre-seed at the time, but it quickly became seed and now it's growing so fast. It's probably closer to a series A stage company. So, great investment there.
And then another company we invested in was Canopy Analytics. So, I joined the board of Canopy, and we led the seed round. They ended up raising $2.8 million. And we really understood the problem. Canopy solves the problem of transparency and communication when it comes to management of real estate.
When you have a property manager running your asset for you, you're relying on them. And often what happens is your inbox is flooded every day, with weekly reports, with pictures. Sometimes we miss an email and we delay a project because we forgot to give an approval.
I mean, we're human beings, for God's sakes, right? This is what happens, you know, even trying to schedule this podcast, right? We had a back-and-forth email chain. And if one of us misses something, we can delay things by weeks.
Well, you don't want that in real estate, you've got doubt in your property. And if your property manager is waiting for approval, that's a problem. So these guys created like a Slack-like solution, where you can log in, and you can see everything transparently. It highlights all your key metrics.
It lets you know what's going well, what isn't. You can zoom in and dive in and see every detail, from your financials to your expense reports. Your property management team can assign new tasks. You can assign them tasks. We had a lady who slept on a railing in one of our buildings, and she broke her hip.
The amount of paperwork that was involved, there were police reports, there were insurance claims, can't keep track of it. Well, now you can, through this platform. So, we invested in Sonny and Jessica, the two families who are just wonderful, and a really smart engineer there too, the CTO, Sameer.
And I would say it's pre-seed. But we had so much conviction that we wanted to lead around and now we're looking to test it out across, you know, our portfolio. We believe a tool like that can really allow us to operate more efficiently and it becomes a must have. And, you know, most VCs didn't get the pitch. And we did because we own real estate, we understand the problem.
And then another great company is InsideMaps. And with COVID happening, people weren't able to go and see buildings anymore. It was unsafe. And so, the idea was why can't you do a 3D virtual tour instead? And remember, when I started Vungle, right, we built videos showcasing apps.
The idea was that you'd see a video ad and you'd have more... You were more likely to go and download the app because you saw the video ad, rather than looking at a screenshot or a review or whatever, right, it might be, descriptions, text. Well, same here. And now the majority of listings are starting to have 3D virtual tours.
InsideMaps is one of the leaders in the space. But what I loved about InsideMaps is their vision, they want to be the Google Maps for the inside of buildings. And so, they have very powerful machine learning and AI tools now, where through computer vision, they can... You take your phone, you put it on this device like a second rotor or a tripod, it basically turns your phone around, you take photos.
Now those photos can be repurposed and used for marketing. With those photos, they stitch together a full 3D floor plan that you can browse through, as you take a scan in one location and another through the AI they're able to stitch together.
So they've got this sort of, you know, awareness of where you were when you took the photo. And that helps you have a much smoother 3D virtual tour experience. Then they started to categorize the interiors that scan the appliances. They tell you the building age, the appliance age, the appliance type, the furnishing type. When we saw that, we were like, "Wow, this is something we really need." Because when it comes to COVID, we're trying to buy buildings, we think it's a good time to buy real estate.
Well, it's very hard to do a unit-by-unit walkthrough. And if we had something like InsideMaps, we'll be able to see the whole building virtually. Someone could just come in, just snap a couple of photos, and now the whole team can literally browse through, think through how we're going to renovate.
And then we started to realize too, you know what, when a tenant moves out, there's often an argument about security deposits, right? Sometimes just don't take care of the property and the dog pees on the floor and stains it or, you know, the door is broken. And there's always this annoying situation where, you know, there's an argument about security deposits. Well, now, if you have a before and after scan, when they move in and move out, boom, I guess it's proof as you can be.
Then it hit us, then we realized, "Well, wait a second. It's not just trying to convince people to see a building and rent it or buy it, what about the insurance industry? Right? What about doing inspections or what about mortgage industry? When you take a mortgage on a property, you have to go and get an appraisal.
This company started signing up, you know, Bank of America and Quicken Loans and American Homes and, you know, it's suddenly being used by all these different verticals and they're now like 3D enterprise software. They've grown 3X since we invested in them. They're profitable now. And they're at a Series A, series B stage.
And, you know, we came in and we realized smart team, great tech, and that the tip of the iceberg is basically 3D virtual tours. It's the fact that, you know, the mortgage industry can now do virtual tours and they don't have to send human beings out. You can have a network of... You know, so InsideMaps has built, this on-demand network of gig workers who can basically come in and take a scan for as low as 50 bucks per unit. Now, that's crazy cheap, you know?
And why wouldn't the mortgage industry adopt that so they can actually, you know, do a full inspection and everything on the property? So, yeah, these are the three investments we've made. And literally, it feels like every investment we've made has done so well. And then my family office, there's probably three other companies I invested in that are relevant, actually four other companies that I invested in that are relevant.
So, first is Boxabl. Boxabl is like prefab modular homes, really smart founders. I invested in them slightly, you know, late-stage. The valuation, you know, was much higher than most startups are, but I believed in them. They had figured out that modular homes is the future. And they identified going after ADUs, which is accessory dwelling units. The idea is that, you know, even in California, there's a law now where people can put an accessory dwelling unit in their backyard, and rent it out, and make revenue. And this solves the housing crisis. So they went really after that market.
And they've figured out that the reason other companies haven't scaled is because they build this wonderful modular tech, but to transport it is such a headache. You need police escorts and you need permits. You know, things get delayed in transit. And that prohibits the cost. Sometimes the cost is more than the unit, which makes it impractical. So they re-engineered everything so you can literally put this on the back of a truck.
And now they're about to raise $50 million, they're officially raising. They have just signed with the Department of Defense, I think with an eight-figure contract. You know, they've signed up one of the world's hottest companies, I can't say who because it's confidential. But it's, you know, a company we all admire. And they're about to buy a ton of units. This company is about to change the game, you know.
That's exciting. Yeah, definitely. And … Go ahead.
Go ahead. Sorry.
No, I was going to say, I mean, I definitely want to hear about the other investments that your family office has made as well in...you guys are hitting on so many different trends. I think one thing to just, you know, point out for the listeners is the fact that what you're finding is a differentiating factor as an investor in real estate, startups focused on real estate is just the background knowledge. Like, to your point with InsideMaps, you said, right, understanding that from the smallest owner to, like, a single-family owner or a single family looking to buy a home to the large enterprise owner that is looking to buy an apartment complex, all of them are going through the same issue of trying to go through those inspections, have insurance inspections as well, do appraisals.
And, you know, I feel like it's a huge market. One, but then also being in real estate with your ear to the ground of where the problems are that exist. So, like, for example, with broker price opinions, to your point, the likes of Bank of America that need to do appraisals on homes and not just outdoor appraisals, but indoor appraisals, too. There are so many homes, that if you're doing tax lien investing, that just, you know, they don't have a digital record of what the home state is from an external point of view and an internal point of view. And these are things that, you know, typically the layman, if you're not close enough to real estate, you don't know even if you have, you know, a tangential view of what real estate is for owning a home and going through that process or apartment. So, it goes deep. And I feel like you guys are hitting it on the head with your industry expertise.
Yeah. I can tell you more about the startups, but just to add to that, most VCs don't get real estate. And when they do get real estate, it's based on what they feel like their opinion is around the world, you know. I've literally heard stories of startups telling me, you know, insiders telling me too, right, you know, when the VC is doing due diligence, they will ping their real estate contact. Who's their real estate contact? Oh, it's the broker who bought their home. Well, why are you pinging your broker who bought your home to do due diligence for you on a prop-tech startup? And some VCs are smart, they've realized not to play in the space.
There's many VCs and top tier VCs who are like, "Prop tech is so different. It's so nuanced. We do not understand it." And that's created a gap in the market where prop tech-focused VC funds are emerging. You know, we've started one at Blue Field, Fifth Wall. Yeah, Fifth Wall is huge. You've got MetaProp. I'm an LP in MetaProp too. And I think the world of those guys. They actually invested in my last startup, or Zack, the guy who co-founded MetaProp did. You know, you've got RET Ventures and you've got Shadow Ventures and you've got a bunch of Prop tech-focused funds that are starting out, too. All guys I've, you know, talked to in respect because VCs did not get the space.
And if you look at what's done really well in the private or public markets, things like Airbnb, things like Zillow, those are easy to understand for the regular consumer. Even WeWork, right, it's easy to understand because if you're a VC, you understand startups need office space. Sometimes they need, you know, hubs. Well, the hotter parts of real estate that VC dollars aren't flowing into is where private equity plays, things like we're doing at Blue Field. We're buying industrial warehouses. You know, we're building on land. We're building out hotels. These are not areas that are easy to understand for VCs. And so consequently, they don't get funded.
And that's where I think, you know, being an institutional investor in real estate and being a tech entrepreneur and running a VC fund, there's a whole world of startups that can be the next Airbnb for that category or the next, you know, Zillow, or God forbid, you know, the WeWork. I mean, WeWork has great potential, but just the model didn't work out, right? So...
Yeah. And then, you know, so sort of going back to the startups, and my family office is sort of more broad. I've invested in anything I like; it's sort of any areas I'm passionate about. Sometimes it might just be I know someone and, you know, I know, they're smart, they're going to probably pivot their idea, but I want to back them and so I'll invest in them.
So, a few more companies I invested in, Roomba. This is basically a UK-based company that's created a whole furniture brand. They're building AI around how to sort of decorate your home. So I love that concept. And I really knew... I found it pretty well there. She actually... I met her at university and I started the entrepreneurship club. Right? It was called the King's Business Club at King's College London. And so she was a president many years later of that society that I started. Order For Me, another great company. They're basically doing like contactless ordering in restaurants.
Vestaboard: I just wrote an investment memo on this, if anyone wants to check it out. It's on my website, zain-ventures.com. Vestaboard is really cool. Dorian is a wonderful entrepreneur. And during COVID, I feel like I've lost contact with my family and friends. You know, when I was staring at screens...we're doing this, you know, interview on a screen and your listeners are listening to this. There's too many screens around. With Vestaboard, they've got this, like, board that you can literally put somewhere in your unit. It's like an art piece. And people can send messages to that board. But it's not a digital display. It's got like these flaps. And it's really cool the way messages appear on there. And I realized, "Wow, this could be a new way of communication," like how Snapchat was disappearing messages, how Twitter was, you know, sending characters, 140 characters at a time, or LinkedIn or, you know, TikTok. Well, this could be in a new communication medium.
But it touches us in a way that's very personal, in our homes, where we can send messages to each other. So I love that. They've done really well. Prawn is sort of pre-seed stage company--crazy vision, by the way is Prawn. They're trying to clean outdoor air pollution. They've got an air purifier. They're based in India. The founder there looked around, and he's so upset that India is so polluted, and it's not being addressed. And so he's created this...you know, great scientist with a great team, this device that uses very powerful like electromagnetic pulses to destroy pollution within a chamber. And he's literally like, "Why can't I clean an entire city?" Now, that is a crazy idea, cleaning an entire city. But that's precisely the type of entrepreneurs I love to invest in. So yeah, these are some …
That's a good point and really interesting, you know, market thought when we think about real estate because I think the stat is...I think I heard this from Fifth Wall, but roughly 40% of greenhouse gases and greenhouse gas emissions come from buildings around the world. And so, you know, as we move into a society that is much more focused on sustainability and environmental justice issues, I would call it, that is going to be a huge trend. I'm curious, do you see, you know, any potential startups in this space that you think are interesting from trying to address that concern?
Yeah, absolutely. There's a really cool Scandinavian company. It's hard to pronounce for me “Myrspoven” Interviewer: I probably couldn't pronounce it. Yeah, no worries.
I just pretended to be able to pronounce it but one of your listeners might call my bluff there, right? M-Y-R-S-P-O-V-E-N. I talked to the team there, love what they're doing. They were too late stage for us to invest in. But they're basically automating the way utilities are used in big buildings, especially older buildings, the kilowatt cost per hour of running energy is quite high. And they were able to significantly cut operational costs. Especially for large public spaces and older buildings, utilities are a huge cost. And just having a system that can basically assess the temperature and fine-tune. What NEST has done for the residential space, they're doing at a much, much deeper level for the, you know, commercial space.
So this is a trend around smart buildings, where buildings should be autonomous and function based on sensors and inputs. Another great company we are looking at is called Kairos. Kairos, wonderful founder, honestly, so smart. And he's created these little, like, sensors that can go anywhere. You could put it on a HVAC unit, you could put it near a boiler. He's even creating this crazy, like, thin membrane you can put on roofs. And the idea is that they can sense potential water leaks. You know, I own real estate through the family office, and via Blue Field, we pay so much on insurance. Our deductibles are increasing every year. There's been a 300% increase in deductibles over the last, I think 5 to 10 years. And that's concerning.
And that means we're paying so much for insurance and, you know, we have to pay these huge deductibles because of water damage. And water is a wide context problem. Okay? If I spill water somewhere on my keyboard, you know, it might screw up the whole electricity. Whereas, you know, if a chair breaks, or if my light bulb needs screwing on, that's a specific context problem. So when water causes damage in buildings, it rots wood and causes other problems, so these guys are trying to prevent that. They're a very interesting startup that I like, and I'm seeing more and more companies use IoT sensors around a building to optimize. I think that's the future we're going to be living in.