Zach Aarons, Co-Founder and Partner at MetaProp.vc explains what is going on in the proptech field and how it reacted to the COVID-19 hit. We also discuss how founders in this field should make sales, when is it appropriate to hire salesman/saleswoman and how to become a better salesman/saleswoman yourself. Awesome resources below!
101 Proptech written by Aaron: https://www.proptech101.com/
Get better in sales by becoming a volunteer at a a political campaign: https://action.dccc.org/page/s/volunteer
And today's a guest speaker, we have Zach aaron's Co, founder and partner at meta prop VC. And today we'll talk about prop tech. How did corona virus affected? What's going on in prop tech? How did the field react?
And what should founders in that field do now that copious kinda we came down winding down winding them, cut that part out.
But yeah, Zach, let's kick off by you giving us some background on yourself and on as a prop.
Thank you so much constanty. It's a pleasure to be on fundraising radio with you today. A little bit of background on me. I'm born and raised in New York City.
I went to college at Brown University, and then after that, I did a stint in investment banking, and then got an opportunity to do a startup in the walking tour space.
We're doing online and offline, walking tours of New York City. I became a walking tour guide. I've actually led over three hundred in person walking tours of our great city of New York. So happy.
I know our leaders want to hear about other things today. But if you ever want I occasionally come out of retirement for my nearest and dearest friends.
And I'll do a tour here in there after that experience, I went and got into the venture capital world, and the real estate world in a pretty circuitous way.
I was frustrated by my own lack of ability as an entrepreneur to build technology products for mobile walking towards effectively.
instead of building the technology myself,
I decided I was gonna stop funneling money into my own dev team and I was gonna start angel,
investing in other similar companies and I could lend some of my expertise and enthusiasm in the in the travel.
And tourism space to that.
So, that's how I caught the bug for the very dangerous profession of angel investing. It's not really a profession is something one does on the side. I was lucky enough at the time. I, I didn't have kids yet.
I was making a little bit of money from the tours, and I also had some family money to invest into these companies and I really caught the bug for the early stage venture and tech space. This was around two thousand, nine, two thousand and ten.
I realize, though, that in order to up my game, I should probably get some more credentials. So I decided to go to Columbia Business School. That was in two thousand and eleven and simultaneous to that.
I was, I got my dad who's been a real estate developer for many decades, had a hunch that the community engagement process that's that is required.
I wanted real estate developer, buys a site, looks to entitle the land to develop a building that that was gonna move online.
And so he brought me into into his firm to do some content marketing, some social media marketing, which at the time this is back in two thousand and ten. That was considered quite novel. And frankly, quite strange.
We got a lot of push back on, on wanting to do it from some of our more traditional consultants but that was my exposure to the real estate business. And sort of once I got involved in the real estate business.
I also caught that bug. So I was simultaneously working in a real estate company, going to business school, and dabbling in the venture capital and angel investing world, primarily investing in mobile technology startups.
And I did an internship while as a business school for a fund called.
Any adventures and so all of these sort of seemingly unconnected things we're going on in my career simultaneously, and I was working pretty, pretty hard, doing, doing being a student and then, and then having to kind of part time jobs.
So, I was lucky enough to be in a class with a gentleman named Sue Ellman, who's the teacher? And he's one of the founding partners of our eVentures, which is one of the, all this and most story venture friends here in New York City.
And he, he looked at me, and he's like, what are you doing? Real estate technology is gonna be really big. I, I have a hunch it is my hunches are typically right on tech trends.
And you have this unique opportunity to sort of wedge in there and really position yourself as an expert. And he said, I'm planning on, making some investments in the space and would love to get your your thoughts on the industry.
So, I, I did a research report for him, and that was my first eye opener into prop tech. And then also I was, I was sort of promoting that in my day job for millennium partners, which is the real estate company I was working for.
I was bemoaning how inefficient some of the processes were.
And thinking that there should be a way to do them faster, better and cheaper using software purpose, built software. So those That'll sort of coalesce and gel together. When he told me, I really should be focusing on prop tech.
What we now called what back then we had there wasn't really a coin term or an ecosystem for it. And so I went very aggressively. I sort of took that advice and I went very aggressively into that sector. Right?
I made a bunch of angel investments in the sector. I sort of stopped with my interest in, in in the mobile tourism type of businesses that I was investing in.
And I became the most active angel investor in the world in the space and fast forward to two thousand and fifteen and active,
in terms of number of deals,
not in terms of us putting in between,
usually twenty five or fifty K checks into these companies and I,
I became very passionate about it and sort of what what it's sort of consumed quite a bit of my, my Headspace and two thousand and fifteen.
I met a guy named Aaron block who had just sold his cross border Russia us E, commerce company called Bay room.
And found himself back in New York area, looking for something to do, and he had done that business. But interesting, for me also, is that he had been a partner previously Wakefield, which one of the biggest, real estate brokerage and services firms in the world.
So, he also had this sort of a bifurcated background, and both real estate and technology. We decided to get together and essentially institutionalize my angel practice and go out. And, and that was the genesis and meta prop.
And so that those conversations started happening toward the end of two thousand and fourteen, and we officially launch the business in two thousand. And fifteen originally launched an accelerator.
Now, we have a a venture capital funds management business and that's sort of our core business. But we work a lot our represent fifteen billion square feet, a state owned, and managed around the world.
And, and we also do a lot of innovation type consulting and advisory services for them, giving them access insights and execution into the broader project space.
the meta prop portfolio,
which is now eighty projects startups as well as the broader sort of ecosystem of the eight thousand companies that we now considered to be prompt tech or architecture,
ABC tech that we now,
see globally in the year.
That's a really big fruitful I mean, over a company's that's that's insane. That's great. Work.
And first questions I'm going to ask you here is what's the one he's going to finish his shift that's my Russian part coming in.
But, basically, when you've created the instead of becoming just an angel, you became a, an institutional investor, what did change in terms of your investment thesis so did you start investing in bigger checks or are you still keeping it the low?
So, like twenty five, fifty K with our, we started small in terms of check size. I think we had a more institutionalized process in that when I was angel investing.
The only people I had to report to where myself and my father.
the reporting we didn't have to do,
sort of the robust level of reporting we now do for our we also did it nowadays,
earlier in the fund funds life,
we didn't do stuff like this,
but fast forward to now.
I sit on a bunch of boards of these companies in some cases, we are the largest or the second largest investor. We're the first person, or the second person that these founders call keep in mind.
When I was an angel investor. I, I had another full time job, which was doing property management development work.
Who's a a very successful VC and general partner of a fund called bold start. He said he once had a MBA student ask him. Well, what's it like to be? D. C.
and he recount the story of having to call this woman and tell her she had to go on cobra and she was sick. And she was a single mom and was just one of the worst sort of conversations he's ever had to have.
And, you know, you never have to do that as an angel, right?
As you're the, you're the smallest check on the cap table, you maybe own, you know, twenty five basis points of the company, and you get to participate in all the upside success.
But, frankly, none of the downside you lose your money. Yes. If if things implode but you're not the one calling the bankruptcy lawyers to set up that type of process.
Whereas if you're the seat,
that that is the work that you sometimes have to do so there are,
but when you're successful and when you can really make an impact, it's,
it's a really,
really wonderful thing to form these really long term relationships with founders, I have relationships with founders that now go back multiple companies.
So, I backed them when I was an angel, my first company, and then the second company they started happened to be a profitable company, and they came to me in my metal prop capacity and I was lucky enough to have the privilege to back them again.
So, you know, I'm, I'm really in it for the long haul and I wanna be in this business for many more decades. So, working with entrepreneurs is an incredible privilege. And when I, I take very seriously.
Right, right and it's super awesome to share, you know, those relationships I go like, multiple companies back.
So, we so interesting for me to hear how you've known the founder for twenty plus years, and you've been their first investor in their first company and now three exits later your best friends. That's awesome.
I think that's the best part of being ABC, but let's move onto the next question that I really wanted to ask you, after I've heard that you at over eighty portfolio companies, how do you source years?
He was, how do you manage to find so many good companies to invest in? Yeah, we have a very programmatic data driven approach to sourcing internally at meta prop. Every week.
We have a dashboard that my colleague Brian updates, and it's kind of like a competition. It looks visually, like like a horse race and, you know, we kind of have, you know, friendly concept that, you know, I source more than you this week.
I never, you know, when we started the firm, I was the primary source of deal flow and I'm very happy to report that. I haven't one that horse race in two years.
So so the sourcing now happens from multiple points within our, within our firm. And and I'll walk you through how we do it. So typically the best deals come from other entrepreneurs.
So entrepreneurs tend to hang out.
With other entrepreneurs, as opposed to other people, because there are very few people who sort of understand the plight of an entrepreneur and the quantity and misery of entrepreneurship in in the same way that an entrepreneur can.
So, historically, my best fields have always come from entrepreneurs in my network and I have hundreds and hundreds and hundreds of entrepreneurs in my network. Also, as it relates to, like, relationships within companies.
You know, I've been lucky enough to back some companies that that have grown quite large.
Right and when a company grows to one hundred employees, typically, the people who were around from the beginning, but are on the founding team, those people, once they invest, they get a little fancy and they want to start their own.
So, those tend to be really good sources of deal flow as well just because we've had these these relationships up and down these companies for years. Another good source for us for deal.
Flow is other venture capitalists. We truly do deals with venture capitalist all the time.
Because we are a strategic, real estate partner, and we have a flexible ownership target in the bulk of the deals we do.
We are lucky enough to sort of secure allocations alongside, you know, generalists sort of Silicon Valley and, you know, some.
Some of our competitors sometimes actually have reason to bring us into a deal and carve out an application if we're gonna be strategic. So the generalist funds they do products they do recruiting for technical talent.
Very well. They do a lot of things that that that we can't do very well. They want us to to handle the real estate sales and distribution and real estate recruiting stuff for them. So they typically will cut us into deals.
So that's another great source as I mentioned. Our are all owners operators and service providers of real estate and to real estate. So they are using a lot of prop tech as customers.
So, for example, I just got a lead. I got on this interview. I just got a lead from one of our who said, you know, our senior housing group is using this technology provider. They put it into one building there. Really digging it.
You should take a look at invested. So that's another good source of deal flow. And then another thing we do is we outbound,
even though we think we built a good brand and,
everyone should think about meta prop when they have a practice company looking for financing,
there are deals that we don't get to do and then in those cases,
when we beat about them,
we will send Nicole email to that entrepreneur and see if we can get a dialogue started.
And we source a lot of deals that way.
And, you know, as I mentioned, I'm in this for the long term.
if I can't get into your previous around,
my view is,
let's start a relationship and maybe I'll be able to get into your next round or maybe I'll be able to get into your next company or maybe you never want to do business with me directly,
your best friend has a practice company as well, and they want to do something with us.
So I, you know, I don't I don't view this business, like zero sum.
I I and so, because I had that approach, you know, we have a lot of conversations going with entrepreneurs at all different stages and that's a good way to be in the flow.
So so those are the primary ways we do it I would say, and then we have, you know, a certain amount of internal PCs and and types of companies that we're looking for.
And then, and then we also are open to, you know, ideas that we hadn't thought of if they're if they're being executed by a compelling entrepreneur, you know, with a great products.
Right, right. And here anything, it's time for us to move on to actually talking about prop tag because in the beginning of the episode, I promised that we'll talk about prop tech and how it reacted to the covet and let's talk about that.
Now, what do you think is going on in prop tech right now especially in those early stage startups that work in this field? Yeah.
So we defined protech as any type of technology that can be software as a service that can be tech enabled marketplace.
That can be sensors that can be robotics that can be three D printing can be computer vision. M. L.
that relates to any process within any real estate transaction from Dirk to disposition of that asset all the way down into the boiler room and all the way up to the boardroom where that assets being managed and then across all
different asset types.
So one of the really fascinating things about is the type of technology you may use to run your hotel is quite different than what you would use to run a portfolio of, let's say, twenty single family house that you're maybe renting out.
So, that's how we sort of slice and dice the market.
So, as has been impacted by one has to look at it on a case by case basis and an asset type by asset type basis. So.
What, I mean, by that is, there are a handful of asset types who have been more impaired and others as a result of covet the most impaired would be hotels and retail.
most probably office,
no one really knows what's going on with office followed by multi family,
which some of it has had some issues and some of it's fine and then single family and logistics where housing,
which are both on five.
So those businesses in a good way, those those businesses are better than they've ever been, because of coven. Right?
So, from what we've seen, if you're a practice company, your software company, and you're selling into a portfolio of hotels or a portfolio, say retail malls or hi.
Street retail locations in cities. Chances are your customer is still pretty busy, putting out fires and trying to figure out how to reopen and trying to figure out how to collect rent that.
Even if they do want it. They're probably not engaging with you about your products.
So, you know, a lot of those companies are are struggling, you know, what we tell them is essentially sort of hibernate for a little bit focus on your technology.
And, and when, you know, whatever the new paradigm is for those asset types, post emergence.
Sort of consolidate your Gemini as it relates to your technical excellence and then you can emerge,
even stronger provided,
you can you can have the capital to survive on the equity side,
This space is white hot right now. So we do a lot and construction tech, for example, and we've had a thesis for many years that, you know, computer vision sensors.
A AI, automation would be relevant to general contractor, subcontractors and developers on a construction site. And we're now just seeing that play out.
We're seeing construction sites digitized at a rate that I frankly, would have said was unbelievable at the beginning of this year.
So some companies are accelerating through this thing at rapid clips. Some companies are hibernating and some companies, it's kind of business as usual.
And so it depends so so it's,
it's impossible to say,
the prop tech space is better or worse,
because it is highly idiosyncratic and it's highly situation I would say. So, that's and we've given.
A lot of these presentations around around town, I gave one,
I just guess lectured in my friends class at warton and gave this very presentation and we sort of show quadrant of companies that we're very much in invoke and have sort of
slowed down as they figure out what their business model is gonna be,
a lot of these alternative accommodation type companies then we look at businesses that,
that that there was interest in but now they're accelerating.
And then there are a few business types.
We don't have a lot of exposure to them that we're not even considered remotely mainstream Pre covet but now are,
for thermal scanning things like elevator,
queuing sort of software,
things like robotic cleaning solutions.
You know, those are the things we would that would pop up from time to time, but we're never really we're still considered kinda on the fringes and those are now sort of in the mainstream.
our preference is to invest in in PCs that we always had,
which is essentially the digitization of real estate,
and then take the companies that are able to execute and accelerate their sales through this.
And, you know, we're lucky enough that quite a few of our companies have experience rapid growth throughout covet because of that digitization.
I was joke about it's like, the,
the eighty year old professional plumber who now has to go on zoom for the first time personally,
because that's the only way they're gonna see their grandkids when they start doing their job again,
there are gonna be a lot more inclined to adopt purpose,
They're just less scared of it because they have to use it so much recently in their personal lives, get back to work and they're just like, oh, my God, you're telling me I can have my invoices paid online.
Like, I don't have to carbon paper this, and you're telling me I can do my accounting without an abacus like, let's go. Let's do. Right right so, actually, I want to interrupt you real quick.
Ask you a follow up on what you just said, which is sales. That's a pretty big question for me from when those early stage startup founders knew to have a tiny, tiny, tiny budget.
And the question is, do I show even spend time trying to hire someone fully commission based? So, can you actually hire someone in tech? Who is going to be as a salesman working on commission only.
You can I, it's, it's rarely successful.
You know, the best sort of strategies are focus on from what I've seen an integrative approach and an account based marketing approach where you're hitting these companies.
You're your potential customers from the top to the bottom of the organization and that requires a lot of collaboration between sort of the sales team in the marketing team and that level of collaboration does it usually happened,
especially when everyone's working remote can be very hard to get that level of collaboration,
if someone is just a sort of commission based worker and I don't think people should be hiring anybody until they figure out what their sales process is gonna be.
And we, what we do, we go into companies. We bring in consultants. We do a sales audit that audit determines what type of sales team the company needs.
Right? And in some cases, they want to build a boiler room of people cold calling. In some cases they want to have someone just doing drip campaigns. In some cases.
They just wanna be doing more consumer type marketing on Facebook and Instagram and in some cases, you want to do all three and so until we have that data, we we don't even talk about getting a budget together, right?
Once we have that audit done, do a budget.
And we see what the company can afford and we prioritize.
So I think you're, if you're starting, with the question, should I hire someone commission based, or, you know, a combination of base and commission.
You're actually asking the wrong question. Because at first, you need to actually answer how you should be selling and.
You really need your core team doing the sales to figure that out along side. You know, someone like us or a consultant to watch how you're doing it and suggest ways to tweak it.
And that's basically what the sales on it is. You want to hire an to do your sales audit, because you're just, you know, you want to test out right?
And say, okay, you're gonna call these ten companies with this script right now. Right? But that's part of your audit process and yeah. You know, you probably don't pay those people on commission.
You probably give them a little bit of a stipend and then promise them. That, that, that they're successful. You'll you'll sort of hire and full time. And those people can tend to pay for themselves quickly.
If you're if your sales engine works, so that's sort of been our approach and, and, you know, it's taken a long time to get where we are. But that's what we that's, that's what we do for our founders at this point. And, and we do it.
We do it really well and and we, we actually enjoy we're actually intellectually interested in it and we believe we're at the cutting edge of this, this account based marketing approach.
So yeah, I, the, the commission or salary question.
Is is is really the third or fourth question one should be asking when it relates to jump starting their sales engine right?
And quick question before we're going to wrap up, which is about the core team making sales. What channels would you recommend to those, you know, core team members to use to find their very first customers?
It can be cold outreach on LinkedIn. Is it going to be trying to find their email addresses and being them on E mail or what's that? Going to be.
It totally depends on what you're selling. So I have a company that got all of its first customers, and it's a B, two B company. Okay this is a there's a company that does, it's super boring. Super mosaic.
They do accounts payable management with software for multifamily. Property managers okay.
They got all of their first customers creating really funny means and advertising on Facebook getting. Okay. And so the, that.
Concept that a company can now advertise like that in a B to B capacity. I would have said no way.
Even five years ago, I would have said, that's an strategy too, but that strategy works, but it doesn't work for everybody.
So, I don't, I don't recommend that everybody does it, but if you have a business that looks like that with that sort of level of contract value, that could be a good channel for other types of businesses.
You know, if you're selling a, a pretty.
Complex to understand product and you're selling a potentially big contract value, you know, things in the, in the, in the, in the six and seven figures. What you ultimately want to be doing. Then you gotta pick up the phone.
So, if you're in the real estate business, or the construction business, the best channel we've seen is picking up the phone. You gotta do all the other stuff too. You got to serve them up with a pixel on
Facebook. You gotta, you gotta do email campaigns.
You gotta hit, em, you gotta meet them at the conferences, right? You gotta do all of that stuff. But but we've seen the most success always starts with a phone call and then you want to get somebody on a demo. You gotta get somebody if your products.
Good right? Garbage probably don't want to do it until. It's good.
But if you have a product that you think is better than whatever this person is using,
in some cases,
they're not using anything,
other than then Excel or whatever,
then you gotta get,
on a demo and the easiest way to get somebody on a demo is to call them up on the phone, right right.
That's true. And phone calls are scary. I personally experienced that problem with one of my first companies, and it was literally the worst experience. I mean, not the worst experience in my life, but it was really close to that. So I would recommend, you.
Practicing for free, we'll discuss that actually on another broadcast here in funding review and they'd for ice from my speaker was go and work as a freelancer. But how do you call those volunteer volunteer?
So, you can work on stuff on banking, only like raising money for political candidate. Very good advice. That's very, very good advice. Yes. Work on your script.
It's very hard. I did some political phone banking, and I would call people and I would, I would I would choke up. Like, I couldn't follow the script. And then I would also, like, I would get, sort of in my own head and get get arrogant and I was like, I don't need to follow this script.
Like, I see about the candidates better, you know, and then I would do even worse, you know, and so it's, it's it's pretty it's a pretty humbling experience. And so I think that's that's that's really, really great advice.
You know, the, the most important thing is is to have a data driven approach to keep an open mind.
Typically, what works is an integrated approach where you're doing all of these things simultaneously right? Or, and you're dialing them up and down, depending on what's working and what's not and then, you know, being humble enough to fail fast.
I can't tell you how many companies I've seen just like like money on fire because they thought that's selling in a certain way. Was the best way to do it and they weren't willing to hear any other suggestions and the sales just work.
The leads just weren't converting, you know, and.
And they refuse to look at a data was always like, well, if you, if we just hire this one more person, it's like, no, you don't need to hire anybody else.
I think we need to cut bait and recognize to yourself that you failed at this. And let's try and get a better strategy in the future,
and let's do another audit when it's time to do another audit when things aren't aren't aren't aren't going well,
you've had a bunch of success early on and then,
your your team scales right now,
you had one who was closing a lot of business,
but now you're five and you have to manage them and and four of them are just not performing.
That's when it's time to do their audit. Right? Because just because you have a sales process that works early on with the early adopters doesn't mean that scales as you try to across the chasm and you may need to tweak it.
And so, I think people fail when they're not data driven, when they don't use the tools, get a, you know, you don't have to spend, you don't have to buy a million dollar a year.
Like, you did, you can do an unbelievable amount now for free with these early softwares, you know so, so, because they have premium model, and they're just looking to hook you early right? And as your organization grows, you're gonna have to pay for it. Right?
So, get yourself on a cm as soon as you can get yourself to be really, really get yourself to not listen to your what you think should work.
You know, they're gonna run their companies right in the ground. Right? And on this very, very positive note, we're coming out watching up today's episode, which is a call to action. So, what was the one thing you want?
As soon as the episode is over?
The myth of the natural born salesman, the sort of Willy lowman born to be a traveling. Salesperson. Yes.
Are some people naturally more gifted at it than others without question can anybody become a pretty good salesperson using these online tutorials. Absolutely. You may ask me.
Well, why would I want to do that? Well, if you want to be a CEO, right? You're gonna have to be a utility player, right?
You're gonna have to be a generalist and so, even though you may never have to be the best salesperson, you may never be driving sales in order to recruit that person. You need to be intimately familiar with the question. What makes a good salesperson right?
And so I would urge everybody to do the work online. I've done it.
I've done a bunch of these tutorials and they're fascinating and they keep evolving and the new the new hotness,
as we used to say in the spaces is account based marketing and so if you want to be at the bleeding edge,
become an expert in account based marketing,
because what we're seeing now in technology is really helping us bridge the gap and get insights into this.
You're seeing a coalescing of the practice that we used to call marketing.
And the practice that we use called sales, and so I think the people, the entrepreneurs who understand how it all fits together.