Richard Green: Good afternoon, everyone. My name is Richard Green and I am director of the USC Lusk Center for Real Estate. And I'd like to welcome you back after a summer hiatus to Lusk Perspectives. Last year, we did more than 40 programs, webinars, and podcasts, and we are planning to maybe not do quite so many this year because people are allowed to go out of their houses now, but we'll still do two or three a month for the coming academic year. And it's great to be starting off this year with an issue that I'm sure is on many of your mind, which is PropTech and its influence on real estate. And one of the last areas of the economy I think it's fair to say that has not been seriously disrupted by technology has been real estate. And I like to cite one favorite statistic in this regard, if you look at manufacturing productivity compared to the end of World War Two, it's about 11 times greater than it was then. If you look at agricultural productivity, it's about eight times greater, if you look at construction productivity, it's 6% greater. So it is, and these are the numbers according to McKinsey, I don't always trust McKinsey, but actually they have this one pretty well documented so I'm gonna trust McKinsey on this one. And so if you ever think of an area that's ripe for disruption, it would be a place that's had basically zero growth in productivity in a very long period of time. While certainly we've had well-known firms such as Zillow and Redfin come into the market, and I think in a way have been disruptive in the sense that consumers know far more about real estate now than they did 15, 20 years ago, I don't think there's any mistaking that, still a lot of the models that we thought might change like models and brokerage and property management and so on, really have not changed all that much since the rise of the web. and what we have with us today are three people who are working on changing that and bringing the productivity of technology to the real estate space, and I think we're going to have a great conversation with them. We have Travis Putnam and Travis, you down in Century City today?

Travis Putnam: I am.

Richard Green: Yeah, so Travis is sitting in very wonderful, but old school real estate, often Santa Monica Boulevard. He is the founder and CEO of Navitas. We have with us, Tyler Scriven, are you with us from Atlanta today?

Tyler Scriven: I am.

Richard Green: Tyler. I'm trying to show space still does kind of matter, although we are in various places and he is the founder and CEO of Saltbox, which is a company that is bringing technology to logistics to try to make it more efficient. And last but not least, we have Ashley Colella, senior product manager from H2O, and just in case I told a stupid joke was, is HQL looking to be, is it liquid or looking to be liquid soon? HQL stand for headquarters, oops, operations.

Ashley Colella: Optimize.

Richard Green: Optimize, sorry about that. And so what we're gonna do is I've asked all three of these people to say a few words about what they do and what they're up to, and then we will start a conversation. And I think because I've known Travis the longest, I know he's in a really good position to give us some background on what this whole sector is about. So again, Travis, thanks for being with us and take it away.

Travis Putnam: Yeah, thanks Richard, great to be here. I'm always excited to have an opportunity to talk about technology meeting the built world and technology applied to the real estate and construction industries. So, you know, Navitas has been investing in startups exclusively in this space for the last decade. You know, timing is important. So like Richard shared stats about productivity gains and construction and how in many ways, right, it's just, over the last many decades, like it just hasn't been the right time yet for these spaces to really benefit from digitization and the benefits of technologies like we are, frankly, when we started Navitas, that wasn't the case either, we were probably, you know, five or six years too early, just kind of looking back on it with some hindsight, We spent a lot of time to try to educate people on like, man, this is a piece of big, obviously a big market, but there's a reason that a number of technology companies are going to be formed here that are going to create value. And so as a firm, what we do is invest in companies that the seed to series B stage, like Tyler's company at Saltbox and like Ashley's company at HQO. And we really provide capital and domain expertise and market access to help them grow. We have watched the space go from like a slow trickle of capital and like a relatively small handful of founders innovating and building companies back in like 2011 to 2012 to a universe today of somewhere eight, 9,000 companies that aggregate in the PropTech ecosystem across the different categories and subgroups. And we've gone from, like sub a 100 million dollars of total venture capital being invested in the space back in 2011 till today, it looks like it's gonna be roughly kind of 15 billion of venture capital into the PropTech space in 2021. And in many ways it's finally it's time, you know, like when we look at, for the space to really make an impact, we have watched a number of companies, like early companies that have demonstrated leadership in the space called public in the last 18 months, roughly $60 billion of public market cap has been created in the PropTech space. And so early investors have been rewarded for taking some early risks. And we are just continuing to see like the influx of more capital coming in, a greater number of founders looking to build the next great company in this area. And then, put them up by most importantly, the market demand for digital solutions coming out of COVID has just been tremendous. And so, you kind of mix all those things together, and this is a pretty active time in the PropTech space.

Richard Green: So a couple of things, first of all, I think the majority of our audience knows what raising money in the B period is, but some people may not. So if you could just explain very briefly what that is.

Travis Putnam: Yeah.

Richard Green: And I have a follow up question.

Travis Putnam: Yeah, so typically when we invest in a startup or we're oftentimes like first institutional capital, and a lot of times founders are able to go out and raise a friends and family round, or like a seed round, capital from either high net worth people they know, or like maybe locals, like small funds that are in the business of funding kind of local innovation. We like to be either the first sort of institutional check-in or part of like the first institutional round into these businesses. And there's no perfect science in venture in terms of like company maturity and when that might occur, but that's generally sort of how we'd like to take our initial positions in companies.

Richard Green: So the other thing I wanna follow up with you on is you talked about 15 billion of funding right now. And just some context, the market cap of rates is a little north of a trillion dollars right now. So if I'm doing my math correct, that's one and a half percent of, in a stable equilibrium, what would you see as the amount of venture funding out there relative to what we'll call, and not all real estate companies are reached, but let's just use that as a proxy.

Travis Putnam: Yeah, yeah, so.

Richard Green: The amount of capital that's in the market, the public capital that's in the market.

Travis Putnam: Yeah, great, great data point. So, yeah, I think this is fundamental to the thesis and that like real estate being the largest asset class on a planet, like there's just a enormous market segment and then you kind of juxtapose that to venture capital as a market segment, which is this like teeny tiny fraction of a quarter of alternatives, like in aggregate in 2021, which will be the strongest sort of funding year on history for venture capital will be an aggregate somewhere around $250 billion, total, PropTech, FinTech, Delta, all categories. And so within that, if you look at PropTech, let's call it 15 billion. I mean, you're looking at, I don't know, what's that, what's the math on that five.

Richard Green: Like 6%.

Travis Putnam: Roughly 5%, five, 6% of aggregate is going now into the PropTech category. I can contrast FinTech, which is some like to argue seven or eight years, nine years ahead of where, PropTech is, and sort of like directionally where we like to say PropTech maybe heading, FinTech this year just reported like 30 billion in venture capital in just Q2 alone. And will make up probably, in the year ahead, normally I'll call it 15% of aggregate venture. So if we're trying to think about where we're headed as a space, like those are some interesting kind of like guide posts to think about, like, we're always gonna be tiny relative to the asset, call it republic market gap or fund flows into the real estate sector. But, small shifts that can occur from like digital technologies or companies that get built out of this can have enormous impact on how asset value or how value creation is achieved within the real estate market.

Richard Green: Okay. I'm gonna follow up with you a little further on that, but I like to now turn it over to Tyler. Tyler, tell us what you guys are up to and what our audience should know.

Tyler Scriven: Sure. Richard, thanks for having me, I appreciate it. I'm Tyler Scriven, I'm the founder and CEO of a company called Saltbox. Saltbox was founded in 2019, as Travis mentioned, Navitas is one of our, both investors and also real estate partners interestingly. We are building a very purpose-built workspace and logistics enablement solutions for small e-commerce companies. If I put this in context, what I would say is that there are today certainly 100s of 1000s, arguably millions, or soon to be millions of small e-commerce merchants that now play a critical role in our economy. And like Amazon, they can't afford to master planes and boats and warehouses, but they still need the same essential infrastructure. And so Saltbox provides that. And you can visit a Saltbox and get a 500, 5,010,000 square foot warehouse suite, it embedded within a bigger building, but not just the physical space in a very turnkey way, also a whole host of solutions, whether that be full-blown 3PL services, or simply on demand labor, we are aggressively moving into building software to provide further leverage for these companies. And so you can think of us essentially is providing, what someone like Shopify is in the digital world of e-commerce enabling SMBs to thrive there. We are seeking the build in the physical world of eCommerce, which is obviously a critical aspect of making the whole thing work.

Richard Green: Are you selling your product to tenants, or are you selling your product to owners of buildings?

Tyler Scriven: It's a good question. Both actually. So in that sense, we have essentially two customers, let me just say, before I go there that we are not a technology company in the traditional sense of the word, but that being said many companies today that we consider to be technology companies, or at least are venture backed aren't what they would have been 10 or 20 years ago, when I think about the purpose of venture capital today and what it means to build a venture back company. It it's really more so a function of speed and kind of the scope of disruption that you can achieve, how fast can you build something new essentially than it is just this pure idea of technology. And so that being said, one of the things that does make us attractive to venture capitalists is that we don't own nor directly lease in most cases the real estate that we operate. So we maintain as best we can an asset like business model. So we are working with institutional real estate and investors or owners who have industrial assets who recognize the opportunity to partner with someone like Saltbox and drive increased value from those buildings. And so yes, we have that customer in a sense, but also our end user customer.

Richard Green: So and yeah, so before I move into Ashley, I wanna get a sense of exactly what your, so you partner with an owner and then the owner offers your software as a service to the tenant.

Tyler Scriven: No, I and actually, and maybe Travis, you wanna answer that question?

Tyler Putnam: Sure. Yeah. So I guess I'll speak as a customer of Tyler's and Saltbox on the real estate side. So effectively what we've done, and we've bought a couple industrial infill sites in the Los Angeles market, and we've partnered with Tyler and saltbox for his company to operate out of our location.

Tyler Scrien: Yeah.

Travis Putnam: And it's not just software, it's a full service offering. I kind of think of it like, almost like a hotel, like we are in.

Tyler Scriven: Exactly.

Travis Putnam: A master services agreement, they're operating the space on our behalf, but we think that there's some pretty exciting reasons to, from an NOI standpoint to do that.

Tyler Scriven: Yeah, and I think it's, Travis, I hope that from a business model standpoint, a hotel is a perfect example. And the other utility in that example is just the breadth of the activity. When one hires hotel aid to come operate a property, they're hiring everything from, the brand and the services execution, all these sort of things. And so that's what we're providing, converting that physical space into a Salt box, which is there's a very kind of purpose-built workspace, which creates on a of leverage for small businesses to operate.

Richard Green: Got it, thanks. So Ashley, tell us about HQO.

Ashley Colella: Hi everyone, thank you for having me. I'm Ashley Colella, and I'm a senior product manager here at HQO in Boston, Massachusetts. So probably a little colder than all the rest of you folks, but HQO is really on a mission to make companies and the people within those companies successful within their workspace. And so we partner actually very similar model to the, similar model in that we partner with landlords and owners of commercial real estate to activate their buildings through our technology and services. And so our goal is to help those landlords really understand through data what the people that utilize their spaces want and need in order to make their workplace in a very inspiring and productive environment when they do be within their office space. So I particularly focus on HQO's headquarters, which is the admin side of the house, where we wanna give landlords and their property teams, and those who are servicing the building all the tools that they need to really maximize what they have available, both in their building as well as the neighborhoods that surround them.

Richard Green: So let's talk a little more on specifics, and by the way, for the audience, if you have questions for our panel, please put them in the Q&A, and I will be happy to pass them along or call on you to ask them. So I find logistics fascinating and trying to figure out exactly how it is done. And so Tyler, when you talk about providing services, one of the things I think about is the difference between having a digital identification that stays with every package throughout its movement, and just having a barcode that's scanned at the beginning and end of a rooting from one place to another. Singapore is talking about they're gonna be the world's first digital port in that you were going to be able to know where any package that goes into it or comes out of it is at any particular time, again, not just origin and destination, but every point along the way, basically there's a transponder, on every package, you can take your iPhone or whatever phone you want, your Samsung and track it. It's that the sort of technology that you're bringing to the marketplace, or tell us, what's innovative about what you do.

Tyler Scriven: Yeah, yeah, that's a good question. The simple answer is, no, Richard, that's definitely not what we're doing. I think that the problem that we're solving is in a sense simpler more foundational in that it starts with the fact that logistics is kind of the foundation, the backbone of e-commerce, as much as we live on the internet today, the fact is these products, which we consume, they begin in the physical world, right, and a bunch of hands touch them to get them to where they're going. If you look at the breadth of e-commerce today, it's still a fairly immature market so to say in the United States, plus, or minus 20%, penetration is much higher in Europe for example, we're gonna continue to rise. Within that though, the SMB now makes up a significant portion somewhere on the order of 250 billion, or so this year, very clearly it can be attract to very small companies that are shipping goods on the internet, or rather across the country.

Richard Green: And this is what you meant.

Tyler Scriven: Yeah. And, if you put yourself in the shoes of those, that $250 billion of GMV, those billions of packages, many of these are being shipped by people who have to drive to the post office or drive to the UPS store who have to convert their basements or garages into fake warehouses, et cetera. It's a mass amount of activity. And if you then look at Amazon, a simple observation is that, all of their activity begins in a warehouse, right, and they have now tens and millions of square feet of warehouses across the country. And so at the most basic level, you can say then that a warehouse as it were is kind of the foundational input to logistics, but warehouse is not something that's accessible to the vast majority of those companies. And so we are providing that space, now that has nothing to do with technology quite frankly, but is innovative in the way that we approach it in a number of different ways, but more importantly, we're not just providing that workspace, we are providing, and since it's kind of full stack solution, you need a workspace, you need labor, you need capital, you need connectivity to supply chains, so on and so forth. And you need these things if you are one of those millions of SMBs in a way that is very accessible, very approachable, very affordable. You know, last thing I'll say is, if you think about a corollary here, there's a reason why UPS has almost 6,000 UPS stores across the country, right, and it's because they've realized that if they want to service the SMB, and by the way, it's much more complex now to service SMB than just, what happens in those spaces, but they wanna service SMB, you didn't have to go to where they are and they have to make it accessible and approachable in a way that a million square foot UPS facility in the middle of nowhere, just isn't. And so in a sense, we are building this logistics infrastructure, this network eventually, 100s and 100s of salt boxes, which are at once very, very highly powered logistics facilities, but at the same time, incredibly accessible to the SMB merchant. And we think that basic idea in the ways in which we're going about it are innovative.

Richard Green: So Ashley, tell us a little bit about how technology, so what you're doing is property management, right? And so tell us how tech, or no, it's that incur, when I listened to you talk about.

Ashley Colella: We're not directly doing the property management.

Richard Green: Okay.

Ashley Colella: We are enabling those to use our services and our technology to better serve those in their workplace. So property teams are users of parts of our platform and are one of our customers, and then of course their customers, our customers as well.

Richard Green: Okay, okay, so how do you make property management easier for those that are doing it?

Ashley Colella: The number one thing is the data that we're able to provide, right, all of the employees with working within the building are utilizing our software. So we're starting to understand what tools within there are most valuable to them. So things like ordering food and booking conference rooms, or getting mobile access into the building. So we're offering all of that to the employees within the building, but then servicing the data around what those users are doing and what they actually care about so that they can make better business decisions around where they're investing their money.

Richard Green: So I assume that you employ data scientists on your team. 

Ashley Colella: Yes, we're certainly looking to, like I said, obviously find patterns, but also provide benchmarking so we can help everyone to kind of understand which of their assets are doing well and what areas that they can improve in.

Richard Green: Well, the reason I asked that question is there was some years ago a very large owner in Southern California asked me to evaluate how they were setting their rents, and I said, sure, share your data with me about rents and we'll develop a model, and they said, okay, we'll do that. And the data were such a mess that you really couldn't do anything with it. So part of a job of a data scientist is just as not just analyzing data, but setting up a platform so that the data is gathered in a way that it's useful for analysis.

Ashley Colella: That's exactly one of our key focuses is how do we standardize and make the data scalable so that we can do exactly what you just mentioned.

Richard Green: Okay.

Ashley Colella: The standard is critical.

Richard Green: Yeah, yeah, yeah, no, and it sounds boring and geeky, and there's nothing.

Ashley Colella: Oh, we love it, right.

Richard Green: Very exciting about it, like if you don't do that, you can have the smartest people in the world, it doesn't matter because if data are not collected in a consistent manner and the way you put it was very good, you really can't figure out what it means.

Ashley Colella: And I think what's important to all of our customers is that they wanna understand how they match up against their competitors or are building to building their own assets. So again, the data standardization is critical to be able to benchmark across those things.

Richard Green: So I wanna go back to Travis and then we'll, we'll start looking at the audience questions. You know, one of the things to me that's always been a puzzle about VC and real estate is the issue of scalability and people in this audience know, many of them know I was a big time skeptic about WeWork. And it's fundamentally this is when you back a software company, and four out of five of them fail, but the fifth does well, you can print copies of software for next to nothing. And so your marginal costs, once you have the product that people want is very low. So if you can print 10 million poppies, you've made a lot of money. Whereas the problem with real estate is once a building is fully leased at the market rate, there's not a lot left you can do in terms of growth. So you can get some accretion, we talk about value added deals in real estate all the time, but that's really about taking a building that's worth say, $7 million and turning it into a building that's worth $10 million, it's not putting $7 million of capital into something and one, you have to put in 7 billion at some point later. So, I mean, and when I think of venture capital, I think of capital that is looking for these really big bangs so understanding that lots of these companies are not gonna succeed, but the ones that do, you're looking at ROIs in the triple digits say. How is that consistent with, what do you see in real estate that works with the VC model?

Travis Putnam: Yeah, yeah. Great questions, great observations. Like I just to start with a couple of statistics and then we can get into some more of that. So like at the 60, I mentioned earlier, like the $60 billion in public market gap that's been created out of, let's call it like 15 PropTech companies in the last 18 months. That is the total amount of PropTech venture capital that's been invested in the ecosystem in north America over the last 10 years. So you think about that, right, 15 companies have created that much equity value to offset all the money that's been invested in over a 10 year period. That just gives like an order of magnitude as a kind of when companies work in this model, like the returns can be tremendous, right. And then if you look at kind of your point around software companies maybe versus other types of business models, there is a certain sort of capital efficiency and multiplier that is a beautiful thing off of software SAS companies that have success, and the public markets tend to value those at multiples that are outside, compared to outside as compared to their peer groups. So that is why you'll see venture often skewing towards software centric business models, because it's just so well suited for the way that venture funds tend to run. And so I think like in the real estate space, I mean, we were just talking about data, right, and you asked for, like send me your data and I'll run some analytics and help you optimize how you do your rents. When I was like, well, the data that came over it wasn't structured very well and wasn't really in a usable format. And so what you're sort of describing is the need for software, right? Like our industry, whether it's on the real estate side or on the construction side is like, one of it's in desperate need because their performance has been great over the last decade, but like the opportunity, like the first sort of wave of opportunities to have here is to kind of digitize like basic workflows that are being done today, and to take it from like an analog format, like paper, pen, Excel, tools, maybe like some older web applications, but basically move from tools that are not creating structured data to tools that are creating more efficiencies and structured data in the process that will then allow for greater level of analytics, will allow for greater efficiency in the way that work is completed. And that's sort of like the phase of the industry that we're in right now, we're seeing a lot of investment in software companies that are starting to digitize these sort of basic workflows or basic functions. So if you take a company like Procore on the construction side, that's now 10 billion ish sort of market cap, it's been built over a number of years, but effectively they have created some really nice sort of automation software tools for managing construction projects. They're not the only ones, there's been a number in the construction sector. If you look on the operation side, if you take a company like Matterport, it started in creating like a digital way to tour a building, that platform is actually now being used to as a collaboration tool, right? Like it's a digital, you're now taking space, physical space, you're turning it into a digital format and you're allowing teams to collaborate remotely to either walk, inspect, take measurements, and they use that space now, not just from a visual standpoint to be able to like pull actual data out of those bottles. On the property management side, last year we invested, we actually, we helped kind of build and invest in an artificial intelligence software company that is automating the lease nurturing process for multifamily. So effectively an AI that can sort of behave as the greatest leasing assistant like on the planet that's been trained on 10 years of leasing query, customer inquiry data and can respond 24/7, never gets tired, within two minutes every single time, can understand all the subtleties that are asked in leasing assistant, like in the leasing assistant type role, and provide a greater customer experience to potential renters, that's driving higher conversions, which is driving higher occupancy, which is creating real value in those assets. And that's before any potential reduction in payroll costs, right, but again, tying it back to your initial comment, like that AI is also collecting an incredible amount of structured data in every conversation that she has, and it's getting smarter. And as the ability now to start thinking about ways to optimize rental rates. So yeah, we're in this period of time where we're collecting, we're putting in the rails to collect a lot of unstructured data, and that's gonna kind of set up the next wave of growth in the space.

Tyler Scriven: Richard, can I add something too?

Richard Green: Of course, please Tyler, go ahead.

Tyler Scriven: One of the sub-sectors of PropTech that he didn't come out to address is, are companies that are doing things in the physical world, We Work who 'cause you know is about to go public here in a few weeks. We'll see how that goes. But, it's a different business, right? The no question, the margin profile of a software company of Procore is very, very different than the margin profile of my business as is the case, the margin profile of DoorDash or Uber, very different than Facebook, but here's the thing, I'll pick on an industry, if you look at self storage, there's some $75 billion or so of public market cap today in self storage. And, we all better believe that there are startups and venture capitalists who are saying, hey, like, I'd love to have that 75 billion, how can I get it? And I think what you end up with is certainly not software companies one cannot store old sofas in the internet, right, it's gotta be in a physical world, but there are strategies that, what all is considered may end up being, more efficient than the current model, not software efficient, but more efficient. And the market will find ways to explore those opportunities and capture them. And so, self storage eventually will be disrupted, that new business will probably still have 20% margins, but it's gonna be a transference of value though ultimately, and the consumer will have likely a better user experience at the end of the day.

Richard Green: So let's move to audience questions, let's start with, and I think this is one for Tyler and Ashley both from Lamont Gibson, what are the key drivers of the decisions of which property and property types are chosen for both models? So who is your most natural customer?

Ashley Colella: Tyler, I'll take this if you want. Their most natural customer is really the owners of real estate that are looking to build a brand and build a loyal customer base. We find the most success where they don't just wanna apply our technology to one asset, but actually apply it to their whole portfolio and streamline the overall experience of how those, who utilize their product, the building to recognize who they are and what the types of experiences they will have when they're in the building. Similar to what Tyler said about like the hotel reference, right. We're moving towards hospitality and the customers that understand that and understand that they have to provide the most elevated experience to their customers are the ones that we find the most success with.

Richard Green: So give an example of what an elevated experience is.

Ashley Colella: It's not just that the company gets access to a suite and here's the space and that's it, but they actually understand that when, what the people, like I said, the employees within that company want and need, and maybe there's a concierge service or the parking offering is again, more elevated, right, I can actually text to get my car pulled up, or that again, that the neighborhoods activated around me so that my lunch is quick and easy and many of the other things I may need to do after work are right at my fingertips through technology.

Richard Green: So Tyler, who is your typical customer? Or do you not have one, or who benefits from who benefits most from your services?

Tyler Scriven: Yeah.

Richard Green: Other than small guys, who are shipping stuff to people.

Tyler Scriven: Yeah, yeah, that's a good question, that's the customer that we talk most about, but the reality is it goes well beyond that. And I think it can make a broader point here about, where I think our evolving thoughts on logistics and physical infrastructure. One of the more interesting types of companies that we see that's making their way to Saltbox are in fact technology companies that are in some form or fashion dealing in the physical world, but who are saying, hey, I don't wanna have, even though my business touches a physical world, I want to stay up here in the cloud so to say, and I don't wanna have to literally go there. So I'll give you an example of this, a custom browsers of ours is a corporate housing firm, and they manage corporate housing across the country, they need to warehouse supplies and equipment and such that use in the course of that business, historically, someone of their nature would have to go and do this all themselves, they have to stand up their own, find their own warehouses, find their own labor to staff and their own management, et cetera, but Saltbox enables that company to essentially think about the physical world and that need in the same way they might think about their cloud computing infrastructure or their payments infrastructure and say, hey, we're gonna hand this off to you, we don't wanna deal with this. And so, I think as we go forward here, we're gonna see many more of these types of use cases, we're gonna see essentially companies thinking about their needs and the physical world with respect to both space and logistics activities as something that ought to be as accessible and directed as computing infrastructure is, it's just infrastructure. And, it's companies like ours that are making that possible.

Richard Green: So the question from Elizabeth Selby, I think a really interesting one, and I'd be curious whether you run into this in your particular businesses, but she knows that with regard to construction innovations, regulations are super local compared to federal financial regulations for example, how much does this drive the ability to implement new technologies and how might this be overcome? Now, what I'm curious about is given the nature of your two businesses, which is not construction related, and Travis, I don't know if you are funding construction-related business, but this is, it surely the case that one of the reasons why construction is so unproductive relative to other sectors is because of the way it's regulated in a whole series of ways. So to what it meant, so maybe I'll make the question a little broader, to what extent does the regulatory regime impair your ability to move your businesses forward if at all?

Tyler Scriven: Yeah, I can offer a point of view here, we deal with this issue every day, as we are bringing a new innovative business model to physical space, and we have to talk with not regulators per se, but certainly perimeters and all sorts of folks involved in the kind of building construction regime in cities and explain to them, well, what are you doing and why? And this building has been used for boxes for 50 years, or a 100 years, and now you want to put people in it and why do you wanna do that? And so, we have to deal with that. The good news is that almost always, they say, oh, well, that actually, it makes a lot of sense and I can understand why we should be thinking about how to evolve our codes to allow for this sort of use case. But this is an issue to the extent that we were building a team of people just to focus on government relations as it were and navigating those hurdles.

Richard Green: So, Tyler, I'm curious, do you do any of your business in California?

Tyler Scriven: Yes. 

Richard Green: Oh, you do. Because when you said it was that officials have responded well, I was curious whether that was true here.

Tyler Scriven: It is true. It certainly hard to get to that point, but it is very true. And I think what they're realizing in the course of working with us is that the nature of use cases for these assets is fundamentally changing and they are gonna have to change their regulatory regimes along with that.

Richard Green: Ashley, any thoughts?

Ashley Colella: We don't work directly with construction, but I would, my thought is more around how do we help with other aspects of the job for our customers while understanding that there's more pieces to the puzzle there too. So no specifics on the regulation though.

Richard Green: And, Travis given what you do, I mean, to some degree, your job is to be at a 30,000 foot level on things. So what, do you have a response to this question?

Travis Putnam: Yeah, I mean, roughly a little less than half of what we've invested in is would qualify as construction technology. So we have invested a lot against the thesis that there's room for efficiency and there's room for better ways of doing things in the construction or development process. So, yeah, it's a very, most of that has been, again, like in the software realm. And so, you take a company like OpenSpace as an example that it's giving contractors the ability to attach a camera to a hard helmet and create a 3D visual replica of the project that they're working on as they walk the site each day, and go about completing the work that needs to be done. That business is enabling teams to collaborate remotely, and ultimately will create value to lots of players even like in and around the construction ecosystem, like on the financial side, around insurance or the way that a project has financed of just having greater visibility and on the progress and the conditions of a job site. So I think like in some ways, like these will have impact on like making the regulatory process of visiting a site, inspecting a site, getting comfortable with a site, like potentially more efficient, but like the reality is this is still a very thorny local issue that needs to be, we take it into consideration, right? And like how fast a solution be adopted? How fast can it scale? You know, what are the sort of local regulatory issues that need to be that need to be dealt with? So.

Richard Green: You know, it occurs to me and this dovetails into the next question about drones and autonomous vehicles, but when one of the things people are telling me is holding up construction at the moment Is just getting inspectors out to sites. It's been a thing that COVID has really slowed down and of course that slows down the construction process, which in turn makes it more expensive. I'm wondering if there's a technology out there that could basically do the work of an inspector, like measure the thickness of cement and so on, and that could be truly disruptive and truly helpful I think.

Travis Putnam: Yeah, so like OpenSpace, again, this company that I was just describing through computer vision, again, it's not just a visual, purely visual record of the construction site, it's point cloud data that is building up an actual data record of that job site, and it can compare the project to a BIM, to flag potential irregular deviations from plan and create a notification ahead of time. You know, potentially the software could create instant payments, right, because you're now saying, hey, like this work that needs to be done to trigger a construction draw has been visually documented by the software and has been verified, and that creates the trigger then to release a flow of funds. So I think as the visual and data records of construction become a more standard tool in the way that projects are executed on, like, there's going to be these benefits to speeding up the process that we're pretty excited about.

Richard Green: You know, it occurs to me too, this could be very helpful to taxpayers. I think about how when the new bay bridge was built, there were problems with the rivets, that meant that it took longer to open the bridge than otherwise was necessary because they replaced all these rivets while they had see early on that there was a rivet problem, if there was some autonomous method to identify this problem, they could have caught it earlier and similarly here in LA, we have a new light rail line called the "Crenshaw Line" where I guess my understanding is some of the rebar isn't right. And so having to redo that, and so that set back the project a couple of years, so that this could be very exciting. I'm sorry, Ashley.

Ashley Colella: No, I was gonna I say, prior to PropTech, I was in InsureTech, and I imagine that that industry will also find that technology to continue to be invested in there as well. And the more documentation on what something looked like before, there are no potential claims, et cetera, that's just even more valuable data to InsureTech as well.

Richard Green: Well, so one of the things in sort of mortgage PropTech, or I don't know whether mortgages or FinTech or PropTech or both, it's never been clear to me, but it makes it much easier to do reps and warranties when you're selling mortgages, because if you're downloading data from a bank and you're downloading data from the IRS into a loan application, then if you sell that loan to Fannie or Freddie or Jenny that they can't come, or have it insured by FHA, they can't possibly come back to you and say, hey, you made a mistake. You entered numbers wrong here because you were so well-documented and the numbers are being transferred directly from good sources to the loan application. And so from a quality control standpoint, that's really important. I do wanna get to this question, I think it's a really interesting one, on thoughts on drones or autonomous vehicle technology for deliveries and for offices, and pretty much any kind of real estate is something that people in the real estate business like to talk a lot about and we would like to hear your perspectives, and that's for anybody.

Tavis Putnam: I mean, I can started on that one, because I think on the drone side specifically, like I think what's interesting whether it's a drone or mobile device, or like a 360 camera that's on a hard hat, these are all just like data capture mechanisms, right. And so as Lidar kind of continues to follow Moore's log, it gets cheaper, it gets more powerful. And like the data that's able to get collected like through these different capture devices becomes more ubiquitous. Like it just like we are going to be extracting a lot more information out of the built world to help us track progress and make better decisions. And so like this is where we're seeing it happen. Like there's absolute progress in that area and we'll continue to, we'll see a lot of progress there.

Richard Green: Any other thoughts, drones, autonomous vehicles?

Tyler Scriven: Nothing in particular.

Richard Green: Okay.

Tyler Scriven: They're coming, just so you know. There's a lot of noise, particularly about autonomous vehicles and we can debate the years, but there'll be here soon enough. And so I think for someone like us, I mean, we don't, I think one of the things that we believe very much is that, there's a mass kind of shortage of physical infrastructure to enable the future of our retail economy in particular, if you think about e-commerce and, and so we kind of like sitting at the bottom of the stack so to say in that sense.

Richard Green: So, because we have about 10 minutes left, I'm gonna combine two questions to end, and Jean Berinsky asked the question about construction technology, and I think we at least covered that a little bit. So I'm gonna move on to a combination of questions, which is about availability of capital, and one is, what's your advice for someone who has a great idea for a PropTech company, but doesn't have the necessary capital or technological background? And Travis, I'm sure you get that question on a fairly regular basis. And then the other one is, as opposed to benefiting just from the availability of better products and services, the PropTech sector is turning out, how can non-institutional participants and individuals in the commercial real estate ecosystem get upside exposure directly from PropTech ventures i.e. by participating in the capital structure. So they're two sides of the same, how do little guys either get the money or give the money? I think is the theme of those two questions.

Travis Putnam: Yeah. Yeah, I'm happy to go firs. Tyler, I'm sure you could take both of those as well.

Tyler Scriven: Yeah.

Travis Putnam: Particularly the first one. Yeah, why don't you go? Why don't you take the first one?

Tyler Scriven: Yeah, sure. Okay, so you've got a great idea, but not the capital nor the technology background. The capital is not a problem, there's more venture capital available today than any time in history. It sounds like the human inputs may be a problem. Sounds like you just need a co-founder. I think the best way to get a co-founder is to prove that the thing you're doing is worth working on the best, so very tactically, I would say, if you can get a list of 10, 20, 50, a 100 customers who are like, I want your thing, if you just build it, that makes it easier to go recruit a really good engineer to help you build whatever that thing is. That's about the best I can offer.

Ashley Colella: I agree, like prove that the product works or that people want it, and the rest will follow.

Tyler Scriven: The rest will follow.

Travis Putnam: Yeah. I mean, we generally don't invest like that. There's every fund, every venture firm, there's no two firms that are the same in how they invest and think about things generally though, the more you can show, the more you can de-risk kind of the demand, the opportunity, the market opportunity, the more venture capitalists will be chasing you down to invest in your company.

Richard Green: What about the other side? And there are a few firms out there, not so much in the VC market, but are trying to make real estate investments available for small retail investors in the private side of the market, not the public side of the market. Do you see any possibility of small people participating in the VC market as providers of capital at any point in the future?

Travis Putnam: Yeah, that's a really good question. Like, I mean, there are some platforms today that offer that service. I'd have to go back and check names and see if I can remember who they were. I think that'll tell you like, okay, probably the biggest well-known one out there is AngelList AngelList, it's been around for a while and does get some very interesting deal flow. And so individual investors can go on there and write like relatively smaller checks and participate in these deals. There's some other ones, that's probably the most well-known one, but generally, is that gonna be a huge impact like on our space? Like I don't think that's the case. It's still so much to do.

Richard Green: And to invest with a fund like that, you still have to be a qualified investor or can just any retail investor invest in it?

Travis Putnam: There's regulation passed recently that like lowering the threshold on, you don't have to be qualified, in some cases, you don't have to be accredited, right, to invest. So, yeah, it depends on the platform, what they've qualified for and I think what startups that are issuing securities on those platforms are willing to kind of sign up for and commit to on the reporting side.

Richard Green: So last question, do you see any incumbent real estate firms out there, and I'm not gonna name any names, but we know what, I think the question your means by incumbent that are on their own innovating with tech or new operating models, or is this a place where you guys are gonna come in and just disrupt the field?

Tyler Scriven: I'll quickly to say I had known Travis has thoughts on this, but I see two approaches being taken by and large, one is incumbents who are aligning themselves with the folks like Travis and others by becoming LPs in their funds and gaining exposure in that way. And then a smaller group that themselves are, both investing directly into the ecosystem as well as in some cases building significant engineering and product organizations that are bringing innovative products to market. I mean, the latter obviously is a lot harder than the former, but both of those things are happening.

Travis Putnam: Yeah, so, like Tyler was saying, I mean, we have, in our LP base, we have a number of very large owners, operators, investment managers, publicly traded REITs, private real estate companies that are LPs in our funds and we work pretty actively with most of those LPs and, like we get to see a little bit of the gamut of what people are doing. You know, generally, I'd say the theme that kind of jumps out is like experimentation, right, where some of these groups are like trying to partner with, or get exposure to some of the best, strongest founding teams that are innovating in areas that they have particular interest in relative to their businesses, whether it's on the construction side or on the operation side. In the case of that AI company I was describing earlier, some of these larger REITs even provided data to help train the models for this company and in exchange, we're able to kind of influence direction over product and like, to really make sure that the solution worked well for the problem with they were trying to solve. And then, yeah, like, I think we see some in the market actually trying to build their own tools, but that is a tough proposition. Just think about, it's just back to like, just focus, right. Is a real estate organization with a technology team going to be able to keep up and compete with a venture back startup that has a balance sheet, like completely dedicated to building the very best in class version of that product quarter in, quarter out and not deal with the same politics and competing for budget and some of the constraints that exist within a business that's fundamentally doing something else. So, I think there's a little bit of everything going on, but that's generally what we're seeing in the market.

Richard Green: So and we're pretty much out of time, but I wanna just ask, respond to that, but with the following question is, didn't Marriot do exactly that years ago when they built their reservation system? Which was a really great innovation at the time. And they were a pretty well-established company. How is that different? I mean, I know the software they use is ancient by current standards, but that was a remarkable innovation when they.

Tyler Scriven: I think, I'm not aware of this Richard, but what I would say is that the pace of literal development has improved surely in order of magnitude in that time, the challenge of finding the talent, right. improved more than that. So on and so forth, you know? And so it's just that that would be harder today than it would had been 10 years ago.

Ashley Colella: And I think it goes back to probably the beginning of this conversation where we talked about the data structure and the scalability right. And if they don't continue to invest in that area of their business, like how are they going to support the tech long term? So we, we have had customers who tried to go build things themselves and then coming back and understanding that we're the experts in designing the experience and in producing the software while they're the experts in commercial real estate and their brand and how they wanna offer, but that partnership is where we've seen the most success.

Richard Green: So.

Ashley Colella: Where they can help us influence our products just as much as we're enabling their vision.

Richard Green: So well, we are out of time. Ashley Colella, Tyler Scriven, and Travis Putnam, thanks so much for joining us today on Lusk Perspectives.

Ashley Colella: Thank you Richard.

Tyler Scriven: Thank you.

Travis Putnam: Thank you.

Richard Green: And thanks to the audience for joining us. Have a great rest of your afternoon.