How Real Estate Investors Can Increase Security on Properties

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Follow Zain Jaffer at: Twitter: https://twitter.com/zainjaffer Website: https://zainjaffer.com/ Current Ventures: https://zain-ventures.com/ LinkedIn: https://www.linkedin.com/in/zainjaffer/

================================================================ How to Leverage Data in Order to Make Managing Real Estate Seamless https://youtu.be/aGwxwSGKR1o

Why a Lack of Data Impacts Real Estate Asset Decisions https://youtu.be/IFmYE8wNBbo

What the Future of Property Management Looks Like https://youtu.be/zvOwrAkfpwM

================================================================ About Zain Jaffer:

Zain Jaffer is an accomplished executive, investor, and entrepreneur. He started his first company at the age of 14 and later moved to the US as an immigrant to found Vungle, after securing $25M from tech giants including Google & AOL in 2011. Vungle recently sold for $780m.

His achievements have garnered international recognition and acclaim; he is the recipient of prestigious awards such as "Forbes 30 Under 30", "Inc. Magazine's 35 Under 35," and the "SF Business Times Tech & Innovation Award." He is regularly featured in major business & tech publications such as The Wall Street Journal, VentureBeat, and TechCrunch.

Protecting real estate properties has never been easier. This episode will discuss how investors can increase security in properties to ensure assets stay safe and sound.

Deep Sentinel is the only security system that delivers the experience of a personal guard at every customer's property. It uses deep learning with wireless security cameras to enable live guards to intervene within seconds of a perimeter breach and before the criminal enters the property.

Know more https://www.deepsentinel.com/

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How Real Estate Investors Can Increase Security On Properties

Let's talk a bit about Deep Sentinel. I will give you my perspective as a real estate investor. I came across Deep Sentinel because I live in San Francisco. I live in a condo building. I'm constantly concerned about security. We have had a lot of break-ins and I don't like that but also, I'm a real estate investor. I own buildings. I own multi-family apartments in Texas, for example. We have had things happen. We have had drive-by shootings. We have had dead bodies found. We have had homeless people break in and live in our laundry facilities. We are talking Class C apartments here, which by the way, it is most of America.

We talk about institutional investments and we think, “Class A,” but a large part of America lives in multifamily housing. A large part of that also is a Class C workforce housing, and sometimes, affordable Section 8 Housing. I wanted to improve security, which was part of our value add. I was so disillusioned because we had a few options. We had to go buy normal security cameras. We have some dummy cameras too, and people know they are dummies. If people know they are dummies, they are going to continue to do whatever they want to do.

People eventually find out you've got real cameras here but you are not recording constantly. There's no one monitoring. It's reactive. Another thing we looked at was hiring actual security guards. The courts we’ve got were tens of thousands of dollars per month for security patrols, and that would have killed my NOI. Think what tens of thousands of dollars would do to my property value.

That’s hundreds of thousands of dollars in property value destroyed. In fact, millions would be destroyed because we have live human guards having to patrol them. We thought, “What happens when those human beings develop a normal pattern of patrol, they slack off, only work certain hours,” or eventually, we decided, “Security is great. Let's get rid of that.” Crime is going to come back.

When I came across Deep Sentinel, I couldn't believe it. I’m a big fan of Deep Sentinel, and we're trying to use it in our portfolio. I'm a big recommender of it, but the idea that you have this very affordable, low-cost camera, and not just that, the camera can talk to you. There’s two-way audio. That, to me, was pretty powerful.

I love the videos on the Deep Sentinel website where you guys have scared off a bear that was trying to break into a cabin or live people caught and people are confused. They are like, “Where is this voice coming from?” The fact that you capture crime before it happens and the fact that you've got a live witness who can call the police is a value proposition that blew my mind. It was a quick thesis on why I invested in Deep Sentinel.

The value proposition as an investor was powerful, and David is the right type of crazy Founder who can make hardware companies work because hardware companies are a lot more difficult than software. You can build great returns with hardware. I rarely invest in hardware, but in the cases I have, it was all about the founder. In hardware that we have invested in has done really well. Boxabl is another company I invested in that’s going to the moon. That's what Deep Sentinel is. I will spare you the intro because I know you do this 1,000 times a day, but let's continue with the story now that we have defined Deep Sentinel.

I appreciate it. What you described was perfect. The reason I started it is because I personally was looking for a way to protect my family. My neighbor had had a home invasion. We talked to the police, and it’s the same conversation you had. She has an alarm and cameras, and the cop was like, “What did you expect those to do? Did you expect the cameras to jump out and stop the crime?”

This security system doesn't create angst and anxiety for you. The only time you get an alert from Deep Sentinel is when there's a problem.

I didn't think about it. I put cameras on my house. I spent maybe $10,000 installing cameras all over our property, and I realized in a moment that was all wasted money. Not only are they at best recording but they are completely ineffective. In her case, there was a picture of three masked men preparing outside for about 5 to 10 minutes, and they are getting ready to break into her house. They go inside and come out two hours later. Now, all you have is evidence of three masked men. There’s nothing the police can do about it.

I realized that there's this humongous space between $50,000 a month for an alarm, and $10,000 to $20,000 a month for an armed guard, and not even an armed guard but any sort of guard. I then started digging into what guards do, and I was like, “They are so ineffective.” Every one of us knows it. A cop, a Special Ops person or a military person, take your favorite person or your most bad-ass friend that does that, and ask them to sit on your front porch for 4 days and 8 hours a day, and watch nothing happen. Do you know what they do? They fall asleep or play on their iPhones.

I interviewed Zuck’s security team, and what they do is they have this pushup and jumping jacks routine that they rotate through at night. They are doing everything they can to stay effective, and that's what you are paying for. You are paying $20,000 a month for these people to try to stay awake for you. What Deep Sentinel does is it takes the efficacy, the effectiveness of what you would have imagined those guards are going to do, and then jams it using technology and artificial intelligence into a price point that's way closer to the alarm.

When I landed on that as a business, I realized three things. I realized that one, to my skills, AI can change this. It can change the cost, which is the obvious one but maybe more importantly, it can change the effectiveness. When I give an AI technology to our guards and I'm using that to point them in the right direction or look at the right thing to remember this, I'm using the AI to evaluate their performance. I train the AI based on the guard’s activity or data. The clicks from the guards are the input into the AI. That was the first realization.

The second realization was that effectiveness thing. As I interviewed people that have guards, I was blown away at how much Bubble Bash and Subway Surfer were going on. If you live in a city like New York or LA and you've got a doorman, you know when you get out of the elevator that they are doing any crossword. They are doing Wordle. They are posting on Facebook and Instagram, and has been on for the last three hours. I was blown away there like, “What do you expect these people to do?”

The third thing I realized was it is hard. Fixing this problem is hard. Maybe I had an elevated view of myself that I probably shouldn't have had. I was like, “Not everyone can do this problem but I'm going to go do it.” I got some investors motivated by it. After four years of busts and tails, we are at the point where we do it. We change the lives of our customers.

I will tell you that the most motivating thing to me is if you look at the Deep Sentinel YouTube channel, you will see all of our videos. My favorite video on there is our holiday one because we do both business and residential protection but we have all these customers that on Christmas Day or Christmas Eve came outside. They wave to the cameras and the guard said, “This is Mike at Deep Sentinel. What can I do for you?” The customer’s like, “I made this Christmas card for you. I know it's silly,” and they hold up these handmade monstrous cards so that you can see them on the camera that is 2 feet wide and 2 feet tall.

They are like, “I wanted to thank you because you make me feel safer when I sleep at night, and I live in a neighborhood. I wouldn't feel safe without you guys.” That's why I wake up every morning and that's why I love Deep Sentinel. As passionate as I was about what we did at Redfin and as exciting that was having 400,000 people on the first day, it's nothing compared to this. It is nothing compared to changing the lives of our customers every single day for the rest of their lives.

The real estate impact too which on the show is very big because no one has attacked the problem in the way you are. It was an obvious investment for me because the market size is humongous. You've got companies that have been reigning in their position with not very impressive growth rates. ADT had $1 billion-plus in revenue, but its stock has been flat throughout. The industry is massive. We are talking billions of dollars growing large compound annual growth rates.

The whole market is $200 billion. Our segment, which we don't even have any competitors in, is serving mid-markets like yourself where you've got an owner saying, “I’ve got to hit an NOI number. I can put guards here.” One of our customers told me something, and this is a quote from their mouth, “If I hired a guard, I would essentially be working for the guard because all of our profits would go to them.” I thought that was such a profound statement. This guy owns 10,000 units. He’s a pretty big owner. He's like, “In every single one of our properties, we need more security because we are losing tenants and value. We have to do this. It's the right thing to do but we don't have options.”

It has not seen that it’s as nice to have. It's an amenity. It's also security. Residents appreciate that you've got someone looking out for you. The interesting thing is you wouldn't appreciate how large the industry is although it's somewhat fragmented, the global video surveillance market in 2019 was valued at $42.94 billion but is expected to more than triple by 2027 to $144 billion.

When you were telling me about the idea, we thought that was an understatement. This is creating a whole new category. You look at the real estate market. You don't think of that as a new opportunity to target because you think it is enterprise and your average everyday consumer that buys a nest device or a ring doorbell. Here, you are changing the economics for investors. The arbitrage opportunity here for a lot of investors is my buildings add value. What is the pricing now? Is it $500 a month per camera?

It's a couple of hundred bucks a month. It depends on the facility. For multi-tenants, it’s a little bit different. Think about it as versus 20,000-plus a month. The arbitrage opportunity in my mind is massive as it relates to us, and that's where we turn the corner. I shared a little bit about our numbers in 2021. We are now taking over portfolios. That's part of how we are hitting our number this April 2022. We are going to take over an entire portfolio.

We are going to take over 1 or 2 more portfolios in May 2022, and those portfolios all make money on that investment. It’s not like this is a big long-term investment opportunity. They are either reducing their expense on guards or they are able to completely change their pricing model because the value that they are adding to their assets is fundamentally different. That's where I came up with the investment thesis in 2021 as I approached new investors that Deep Sentinel’s segment of the market where we don't have competitors is going to be about $50 billion.

You nailed it. It was going to go from about $49 billion to $150 billion, and worth $50 billion in that growth because it's net found. There isn't an alternative. When you get the presentation from Deep Sentinel like, “You've got this multitenant property for $800 a month. Do you want to protect all 20 of those properties and increase the monthly fee by $75 to $150 per unit and you advertise uniquely that you get private security 24/7 on your property?” You win. That's in communities.

That's in San Antonio, Dallas, Oakland, Michigan, New York, and Connecticut in every single market as it relates to people that are looking at the NOI on their buildings. That NOI is under six months. You have a six-month payback and a fundamental change in the economics of your property. You change the demand equation too. You now have an exclusive offering that other people can't offer. It's valuable to your customers.

The words that we think about when we think about user experience are trust and meaning.

The best thing about investing in PropTech is some startups can nail the distribution. It takes time. You have to run some pilots. You have to show an improvement but the moment you show an impact on the investor’s NOI, there’s an urgency to implement you and not just implement you in a building, which gives you access to hundreds of units, you get deployed portfolio-wide.

This is how certain companies like Latch and others in PropTech can scale to magnificent heights. It’s portfolio-wide rollouts. That's the dream of every founder but it's also the hardest one to actualize because you've got to break through the door and prove it. Also, investors are ruthless. You would need to cut costs to improve revenues because to have LPs, they want to get more cashflow that matters.

I'm going to tell you a little secret that we have. You mentioned that we are a hardware business. Most of our sales now are not hardware bound. We are hardware agnostic but we continue to sell it on hardware. Our Deep Sentinel camera, if you go to the Deep Sentinel website, this is the one that you see there. This is incredibly magic. It's magic because of a word that you said, which is enterprise sales. Every one of these portfolios has a managing partner or a CEO, or a COO that's thinking about this problem.

Let's take Securitas or ADT. What they don’t have on their enterprise side is I have the sickest consumer product you can buy. For less than $1,000, I can get the CEO of a company that has 10,000 units. I can send them our consumer product, and in less than a week, they have it set up in their house. They are getting a full Deep Sentinel experience. They set it up, 30 minutes after they received the box, they put the batteries in the camera.

They drill one hole per camera in their wall. It's on their front door, back door or garage. They wave at the camera at the end of set-up and they hear, “Hi, this is Denise from Deep Sentinel security. Thank you for trusting us with your home. I checked all your cameras, they look okay. Thank you again for being a customer. I would ask you if you could take your backdoor camera and point it down a little bit for me. That will help us with the angle.” It’s a magic moment.

The thing too that happens is that CEO's husband or wife comes home that night and is like, “What's that thing? It talked to me when I came up to the house. That's pretty cool.” “We have private security now at home.” For the next week, they are thinking about Deep Sentinel the whole time. The reason the word enterprise sales matters is because my last company was an enterprise sales company.

In an enterprise sale process, you would give every second of every day, every dollar you have, and every brainwave that you have to get your customer's CEO to think about you for fifteen minutes. I don't get fifteen minutes. I get your next week thinking about me 24/7. It is the craziest enterprise sales process backdoor that I have ever gotten a chance to accidentally build. I didn't do it on purpose but we now go into these as an enterprise.

It sounds like you did though because even when you described your early values around founding Redfin, even UI was very important, and that's something that I appreciate a lot with a lot of project founders. They obsess around the UI, and that results in an ROI that is incalculable but it's that mind shift. People love it. It integrates into their workflow. Workflow means it's not intrusive. It’s just there. It's looking after you.

It takes your mind off things. Technology sometimes takes all of our attention. We are bombarded with these streams of popups. You go to a website and you get this popup and a paywall sometimes. You have to turn your notification on. You've got this annoying chat thing coming up. Technology is sometimes intrusive.

You nailed it. The words that we think about when we think about user experience are trust and meaning. From Deep Sentinel, you turn off all of your notifications. I have my Deep Sentinel on and I have people going in and out. I have my gardeners here and my wife's coming in and out and I'm getting no alerts. Why? It’s because there's nothing for me to worry about.

My security system doesn't create angst and anxiety for me. The only time I get an alert from Deep Sentinel is when there's a problem. They are intervening. They are talking to someone. They are turning on the siren. By the way, if that's the case, I also get a day-lish of contact because it's meaningful and transparent.

For example, “I've got a guy who's trying to break open your window in your car,” is a meaningful one. I don't want 45, “There's motion in your driveway or there's a person in your driveway,” alerts. I don't get any of those. It’s meaning in the user experience. The other thing that we hear from a lot of these CEOs is they are blown away at how few alerts I get, but the ones that they do get are all meaningful and memorable. That's one thing.

The second thing that we thought about in user experience is the design of the camera. Even though most of our customers are now buying third-party hardware and attaching Deep Sentinel to it, the fact that we put all this thought into the design of our camera still orchestrates our narrative. It defines our brand in the mind of these customers. We spent a bunch of money. We worked with a firm called Ammunition to do this industrial design and it was awesome.

Still to this day, we've got this red ring on the camera that tells you that someone is watching. I get these emails from CEOs where we are doing $500 million proposals to them. We ship them our camera system and they are like, “This is such an amazing experience.” You said that I didn't do it on purpose. I did the user experience on purpose, but I didn't realize it was going to be this crazy back door into B2B that we would be able to close $500,000, $25,000, or $1 million deals because of this great user experience on the B2C product.

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Subscribe to Zain Jaffer: https://bit.ly/2SWhYW5

Follow the PropTech VC Podcast:

Listen on Apple - https://apple.co/2Izoznu

Listen on Spotify - https://spoti.fi/2STWDwq

Listen on Google Play - https://bit.ly/2H7s6c0

Follow Zain Jaffer at:

Twitter: https://twitter.com/zainjaffer

Website: https://zainjaffer.com/

Current Ventures: https://zain-ventures.com/

LinkedIn: https://www.linkedin.com/in/zainjaffer/

How to Leverage Data in Order to Make Managing Real Estate Seamless https://youtu.be/aGwxwSGKR1o