The Exchanges

Q And I'm really pleased you said about marketplaces there, because in the last couple of weeks, I've become a complete nerd on marketplaces for some bizarre reason. So I wanted to quickly discuss kind of the breakdown, and I have to ask what the core component for you in the beginning of RealtyShares was. Was it in building the supply, or was it building the demand?

A So we started with the supply because it was the easier element for us to solve for. I mean, if you don't have deals for investors to invest in, it's going to be really hard to get To get their attention and keep them interested. So because I came from the real estate industry, I was able to leverage some of my existing relationships there, um, and convince some of my existing relationships to try realty shares to raise capital. Um, and those existing relationships were a lot more patient because they knew me. So we saw for the supply first and by having the supply on the platform, we were able to leverage that supply to actually put a real product in front of the demand or the investor base. And that really helped Propel the first few deals and get our first few transactions completed. Um, and then after that, I sort of snowballed and started creating, um, additional customer acquisition on both sides of the marketplace because people saw it working aside as a great way to raise capital, a great way to invest. Um, and in, this was back in 2013 when, you know, this exists today where yields were really, really low. So we also benefited from a very low yield environment where a lot of our investments were paying eight, nine percent or more And you were getting half a percent in your bank account, right? So I think just a low yield environment, as well as the fact that I came fro…

AI assessment note: “So we started with the supply because it was the easier element”

Q So, so it's interesting. What's your favorite blog or newsletter then when it comes to the industry?

A Uh, I really love, Bill's blog, but, uh, the two that I've kind of read since the beginning is, uh, AVC from, by Fred Wilson and both sides of the table by, uh, Mark Suster. They're both really good. And I love Fred Wilson, obviously, because he's part of the USB family, but he, he has a, uh, a new post every day, right? And sometimes it could be, have nothing to do with startups. So I just, it's really good, uh, just reading his thoughts on the world sometimes, but also he has some really good lessons for companies and startups. And, and the USB is one of the best investors in the world. And, And, you know, their funds are a little smaller than some of the other bigger firms like Sequoia, but they have one of the best performance track records of any, any VC. So, um, I love that blog. And then Mark Suster, right? He was both the VC and, uh, and an operator. So he has the vision and viewpoints and insights of both sides. And that's why it's called both sides of the table where he can present viewpoints on from the VC side, but also the entrepreneur side. So I really love reading his thoughtful posts on running a company and fundraising, et cetera. So both are great blogs.

AI assessment note: “the two that I've kind of read since the beginning is, uh, AVC”

Q And I'm really pleased you said about marketplaces there, because in the last couple of weeks, I've become a complete nerd on marketplaces for some bizarre reason. So I wanted to quickly discuss kind of the breakdown, and I have to ask what the core component for you in the beginning of RealtyShares was. Was it in building the supply, or was it building the demand?

A So we started with the supply because it was the easier element for us to solve for. I mean, if you don't have deals for investors to invest in, it's going to be really hard to get To get their attention and keep them interested. So because I came from the real estate industry, I was able to leverage some of my existing relationships there, um, and convince some of my existing relationships to try realty shares to raise capital. Um, and those existing relationships were a lot more patient because they knew me. So we saw for the supply first and by having the supply on the platform, we were able to leverage that supply to actually put a real product in front of the demand or the investor base. And that really helped Propel the first few deals and get our first few transactions completed. Um, and then after that, I sort of snowballed and started creating, um, additional customer acquisition on both sides of the marketplace because people saw it working aside as a great way to raise capital, a great way to invest. Um, and in, this was back in 2013 when, you know, this exists today where yields were really, really low. So we also benefited from a very low yield environment where a lot of our investments were paying eight, nine percent or more And you were getting half a percent in your bank account, right? So I think just a low yield environment, as well as the fact that I came fro…

AI assessment note: “we started with the supply because it was the easier element for us to solve”

Q that, you solving the supply side first, uh, led to this incredible growth of the company that you've seen. Now, one thing that kind of is always very interesting to me with incredible growth like yours is kind of changing, uh, internal organizational structures. So, how do you look to To build the company infrastructure in the right way, and how have you seen this vary with your progressing stages?

A So we have two elements we always think about in building our company. One is just, as any startup has to think about, how does the culture change and how does the team dynamic and communication change across the organization as the company grows from 10 people to 40 people to a hundred and beyond? And then that second element is, you know, given we're in a regulated industry, we're Regulated by the SEC. Regulated by, you know, state lending boards and organizations. So there's a lot of regulation in our industry. So we also have to think about how do we grow and create traction while also focusing on compliance and regulation. So on the first side, I think really one thing I've done is surrounded myself with great mentors that have been part of a company that has scaled and really know what to look for and pattern recognition and how to really make sure that the company is aligned towards a common mission and vision. Some of the things we've done here is one is, you know, when we had, you know, 10, 15 employees, we created a clear company mission. Like, what is it that we're trying to solve? So we all could align ourselves to that mission, and now it's posted on our wall, so any new employee that joins can see, like, what is RealtyShares really about? What are we trying to solve? Some of the other things we did as we started growing, you know, to that number that usually will …

AI assessment note: “how does the team dynamic and communication change across the organization as the company grows”

Q that, you solving the supply side first, uh, led to this incredible growth of the company that you've seen. Now, one thing that kind of is always very interesting to me with incredible growth like yours is kind of changing, uh, internal organizational structures. So, how do you look to To build the company infrastructure in the right way, and how have you seen this vary with your progressing stages?

A So we have two elements we always think about in building our company. One is just, as any startup has to think about, how does the culture change and how does the team dynamic and communication change across the organization as the company grows from 10 people to 40 people to a hundred and beyond? And then that second element is, you know, given we're in a regulated industry, we're Regulated by the SEC. Regulated by, you know, state lending boards and organizations. So there's a lot of regulation in our industry. So we also have to think about how do we grow and create traction while also focusing on compliance and regulation. So on the first side, I think really one thing I've done is surrounded myself with great mentors that have been part of a company that has scaled and really know what to look for and pattern recognition and how to really make sure that the company is aligned towards a common mission and vision. Some of the things we've done here is one is, you know, when we had, you know, 10, 15 employees, we created a clear company mission. Like, what is it that we're trying to solve? So we all could align ourselves to that mission, and now it's posted on our wall, so any new employee that joins can see, like, what is RealtyShares really about? What are we trying to solve? Some of the other things we did as we started growing, you know, to that number that usually will …

AI assessment note: “We have two elements we always think about in building our company.”

Q A there, uh, what's your take on kind of valuation Realism and you as the founder, obviously it's a boom time. They want to write checks. How do you instill a sense of realism with the knowledge that series B would be tough to hit those metrics and those valuations? Do you instill that realism or do you kind of turn up the music and let the party carry on?

A Uh, I think it's, I think, I think the realism is very important, right? I think a lot of companies didn't raise that really high series A valuations or series B valuations because the, the, the market was very, um, irrational. Um, And now are having a hard time, you know, raising that next round, you know, because they, they weren't able to hit the growth metrics that they either promised or that were really driven by more capital raising, right? A lot of companies bought growth because they were like, well, money's flowing and look, we just need to get to that next round. Then we'll raise another a hundred million and then we'll go IPO. Um, and I think, you know, that, that obviously is no longer, no longer happening. And so a lot of companies that over-raised, I think are, are hitting that problem. So I think it's, I always think don't optimize for valuation, optimize for the company and the, the, the company that's investing in you and then the board member that's joining your company. And if there's a strong fit there, because ultimately there's not a big difference between what, what VCs and investors are going to write in terms of valuation. There may be a, you know, five percent higher hair, 10% higher there. That's not worth having a bad partner or someone that doesn't just see the vision and, and, and what the company is trying to achieve. So I always think optimize f…

AI assessment note: “I think the realism is very important, right?”

Q of me, but how do you look to kind of build a relationship with prestigious mentors who've done the scaling process when you, when you were starting Hadn't, and being blunt, kind of, were not NAV that you are now, and the kind of prestigious owner of realty shares that you are now. How did you look to relationship build with them, and kind of get into that inner circle?

A Yeah, so living in San Francisco, it's not overly difficult, but, um, you've got to know kind of what, what circles to go to, because there's so many great founders, and VCs, and advisors in this community, that there's, around the corner, there's always someone that Has some insights and advice to, to share. So what I did was, um, you know, I started with our investors. So those folks that invested in the company obviously have, you know, alignment with the company and the company's success. So really tapped into them first and said, look, this is my first rodeo. This is my first company. And I feel like this is going to be something that's going to permanently change the real estate investment landscape. But I know what I don't know. And I want to learn from those that have been there and done that. And because really for me, for us, it's really about execution. We have a really big opportunity in front of us. We, you know, we've assembled an amazing team. We have a, we're providing a great product to our customers, so it's all about execution. So there, you know, the advice of folks that have been there and done that is very important. So I tapped into our investors early on, and some of them became advisors and mentors. Others referred mentors and advisors to me that they had invested with before. So that, that was a great start. Also, we, we went through an incubator, 500 …

AI assessment note: “tapped into our investors early on, and some of them became advisors and mentors.”

Q And you said about, kind of, solving for the supply side first there. I'm intrigued. Do you think that's applicable to other vertical marketplaces, or was it more specific to yours? I mean, do you think marketplace founders should always focus on supply first?

A You know, I, I think supply is the area to focus on first, because if you don't have a product for the demand side, that experience Your experience is going to be pretty bad, and your earliest, your earliest buyers are probably going to be your biggest proponents, and then the ones that really refer others to the, to the platform. And so, I think the supply side has a little bit more patience, typically. If you think about, for example, Airbnb or Uber, if it took 10 minutes to get a car, if it took, you know, 20 minutes to get a car, the experience isn't any much, any better than it would be if you were hailing a taxi. And if an Airbnb You can only find three properties and all of them are more expensive than a hotel in a specific city. You're not going to have a great experience as a buyer. So I think the supply side is very important because the buyers, again, you're trying to create less friction and how those buyers interact with the product. And it has to be a better experience than what they're getting offline. Otherwise it won't be a sticky buyer. So I do think the supply side is pretty important, but as you know, with any marketplace business, It's constantly balancing supply and demand, and so I think it's, it changes in any given moment, but the supply side, I think, is the easier aspect to solve first, and a very important problem to get right in order to create the …

AI assessment note: “I think supply is the area to focus on first”

Q Do you agree with the thesis that some people are purely meant to For one stage of the business and kind of transition isn't really on the cards, or do you agree with the fact that actually you can have employee number two who goes on to be still at the company in the same role till employee a thousand? Do you agree with that kind of flexibility and transition?

A Yeah, I think it's, it's a great point. It really, I mean, I think you see both types of people, right? You see the folks that are really good when the company is a series A company, but once it becomes a series B company and things change or the roles become a bit more defined, um, That they're just not a fit, and maybe they decided they're not a fit, that this, this company's changed to a point where they, they just aren't having the same, they don't feel like they have the same ownership they did when, when the company was 10 folks. And then you have the other folks that, you know, and it could even be the CEO that, um, or that grow as the company grows and are able to take a company from 10 folks and, and still be thriving in the company when it's, uh, when it's a thousand folks. So you see, you see both types of people Um, in startups, I think as a, as a CEO of realty shares, the kind of position I always take is any employee can grow with the company and it's their sort of job to lose. So they show signs that they can grow either because they can't focus on a specific role as a company grows and they're more of a, you know, jack of all trades or because they just don't, you know, as a company culture changes, they're not able to adapt. It's really their job to lose. But I was going with an eye towards anyone could grow into any role, um, As a company, you know, grows from…

AI assessment note: “I think you see both types of people, right?”

Q And you said about, kind of, solving for the supply side first there. I'm intrigued. Do you think that's applicable to other vertical marketplaces, or was it more specific to yours? I mean, do you think marketplace founders should always focus on supply first?

A You know, I, I think supply is the area to focus on first, because if you don't have a product for the demand side, that experience Your experience is going to be pretty bad, and your earliest, your earliest buyers are probably going to be your biggest proponents, and then the ones that really refer others to the, to the platform. And so, I think the supply side has a little bit more patience, typically. If you think about, for example, Airbnb or Uber, if it took 10 minutes to get a car, if it took, you know, 20 minutes to get a car, the experience isn't any much, any better than it would be if you were hailing a taxi. And if an Airbnb You can only find three properties and all of them are more expensive than a hotel in a specific city. You're not going to have a great experience as a buyer. So I think the supply side is very important because the buyers, again, you're trying to create less friction and how those buyers interact with the product. And it has to be a better experience than what they're getting offline. Otherwise it won't be a sticky buyer. So I do think the supply side is pretty important, but as you know, with any marketplace business, It's constantly balancing supply and demand, and so I think it's, it changes in any given moment, but the supply side, I think, is the easier aspect to solve first, and a very important problem to get right in order to create the …

AI assessment note: “I think supply is the area to focus on first”

Q of me, but how do you look to kind of build a relationship with prestigious mentors who've done the scaling process when you, when you were starting Hadn't, and being blunt, kind of, were not NAV that you are now, and the kind of prestigious owner of realty shares that you are now. How did you look to relationship build with them, and kind of get into that inner circle?

A Yeah, so living in San Francisco, it's not overly difficult, but, um, you've got to know kind of what, what circles to go to, because there's so many great founders, and VCs, and advisors in this community, that there's, around the corner, there's always someone that Has some insights and advice to, to share. So what I did was, um, you know, I started with our investors. So those folks that invested in the company obviously have, you know, alignment with the company and the company's success. So really tapped into them first and said, look, this is my first rodeo. This is my first company. And I feel like this is going to be something that's going to permanently change the real estate investment landscape. But I know what I don't know. And I want to learn from those that have been there and done that. And because really for me, for us, it's really about execution. We have a really big opportunity in front of us. We, you know, we've assembled an amazing team. We have a, we're providing a great product to our customers, so it's all about execution. So there, you know, the advice of folks that have been there and done that is very important. So I tapped into our investors early on, and some of them became advisors and mentors. Others referred mentors and advisors to me that they had invested with before. So that, that was a great start. Also, we, we went through an incubator, 500 …

AI assessment note: “So what I did was, um, you know, I started with our investors.”

Q In terms of kind of being dependent on the macro, to what extent do you think you are? And does it ever concern you that kind of changes in the macro might lead to a decrease in demand because of more attractive places to put up their money?

A Yeah, I mean, I think, you know, we're always looking at the macroeconomic environment. We have our chief credit officer who came to us from Citi Mortgage, and we have an asset management committee meeting every month where we look at the macro environment and kind of really get a sense of how that could impact our business. Over the last four to five years, and maybe up to seven years, because of the low-yield environment, because of a lot of inefficiency through over-regulation on the banking side that's made capital Harder to get. Um, I think we've really benefited and it was, it was a great time to start the marketplace because on the one hand, we're able to provide our investors with much better yields than what they're getting in bonds and in money market, but also provide a lot more efficiency in how companies are raising capital. So we've really benefited. Obviously the one thing we always think about is, you know, what happens if the real estate market, you know, takes a dip? Um, you know, we saw a really bad recession in 2007, 2008. But coming out of that recession, there was abundant opportunities to invest in real estate. So when we look at our deals, when we underwrite our deals, we are a curated marketplace. We're always thinking about not only the market today, but where it could be in three years or five years. So I think we have a really strong underwriting cap…

AI assessment note: “the macro environment is always factored into, into how our business is growing”

Q What's been the big lessons for you then in kind of hiring out the team that you have now at Realty Shares? Have there been any that stand out?

A There's a saying that says hire slow and fire fast. You know, I think, I think there's components of that that are true, but, but really I think there's a lot of times where you should hire fast, um, and not, not hire slow. And I think, uh, you know, I think ultimately, um, when you have, when there's good talent in front of you, I think you can't, one thing you can't afford to do is not hire good people. And so I think founders have this analysis paralysis problem of there's probably a better person out there than, you know, this profile. I think the key is really knowing what you want before you start the hiring process. So when you see it, you don't let it go by. And then ultimately, you know, you sort of waste months because you should have hired that person, but you, you know, you kind of trying to hire slow and you want to see what else is out there. So, you know, you could find the right person in that first interview and doesn't mean you can, you can't or shouldn't hire them. So I think there are times when you have to hire fast. Because ultimately you're building a company that's growing quickly and execution. And again, like for our company, execution is really what's going to make the difference between this being a very big game changing marketplace for real estate investing versus it not being, you know, a game changing marketplace for real estate investing because…

AI assessment note: “the key is really knowing what you want before you start the hiring process”

Q Do you agree with the thesis that some people are purely meant to For one stage of the business and kind of transition isn't really on the cards, or do you agree with the fact that actually you can have employee number two who goes on to be still at the company in the same role till employee a thousand? Do you agree with that kind of flexibility and transition?

A Yeah, I think it's, it's a great point. It really, I mean, I think you see both types of people, right? You see the folks that are really good when the company is a series A company, but once it becomes a series B company and things change or the roles become a bit more defined, um, That they're just not a fit, and maybe they decided they're not a fit, that this, this company's changed to a point where they, they just aren't having the same, they don't feel like they have the same ownership they did when, when the company was 10 folks. And then you have the other folks that, you know, and it could even be the CEO that, um, or that grow as the company grows and are able to take a company from 10 folks and, and still be thriving in the company when it's, uh, when it's a thousand folks. So you see, you see both types of people Um, in startups, I think as a, as a CEO of realty shares, the kind of position I always take is any employee can grow with the company and it's their sort of job to lose. So they show signs that they can grow either because they can't focus on a specific role as a company grows and they're more of a, you know, jack of all trades or because they just don't, you know, as a company culture changes, they're not able to adapt. It's really their job to lose. But I was going with an eye towards anyone could grow into any role, um, As a company, you know, grows from…

AI assessment note: “the kind of position I always take is any employee can grow with the company”

Q What's been the big lessons for you then in kind of hiring out the team that you have now at Realty Shares? Have there been any that stand out?

A There's a saying that says hire slow and fire fast. You know, I think, I think there's components of that that are true, but, but really I think there's a lot of times where you should hire fast, um, and not, not hire slow. And I think, uh, you know, I think ultimately, um, when you have, when there's good talent in front of you, I think you can't, one thing you can't afford to do is not hire good people. And so I think founders have this analysis paralysis problem of there's probably a better person out there than, you know, this profile. I think the key is really knowing what you want before you start the hiring process. So when you see it, you don't let it go by. And then ultimately, you know, you sort of waste months because you should have hired that person, but you, you know, you kind of trying to hire slow and you want to see what else is out there. So, you know, you could find the right person in that first interview and doesn't mean you can, you can't or shouldn't hire them. So I think there are times when you have to hire fast. Because ultimately you're building a company that's growing quickly and execution. And again, like for our company, execution is really what's going to make the difference between this being a very big game changing marketplace for real estate investing versus it not being, you know, a game changing marketplace for real estate investing because…

AI assessment note: “So those are some lessons that I've learned and also leverage your network”

Q In terms of kind of being dependent on the macro, to what extent do you think you are? And does it ever concern you that kind of changes in the macro might lead to a decrease in demand because of more attractive places to put up their money?

A Yeah, I mean, I think, you know, we're always looking at the macroeconomic environment. We have our chief credit officer who came to us from Citi Mortgage, and we have an asset management committee meeting every month where we look at the macro environment and kind of really get a sense of how that could impact our business. Over the last four to five years, and maybe up to seven years, because of the low-yield environment, because of a lot of inefficiency through over-regulation on the banking side that's made capital Harder to get. Um, I think we've really benefited and it was, it was a great time to start the marketplace because on the one hand, we're able to provide our investors with much better yields than what they're getting in bonds and in money market, but also provide a lot more efficiency in how companies are raising capital. So we've really benefited. Obviously the one thing we always think about is, you know, what happens if the real estate market, you know, takes a dip? Um, you know, we saw a really bad recession in 2007, 2008. But coming out of that recession, there was abundant opportunities to invest in real estate. So when we look at our deals, when we underwrite our deals, we are a curated marketplace. We're always thinking about not only the market today, but where it could be in three years or five years. So I think we have a really strong underwriting cap…

AI assessment note: “it will impact the speed at which it will grow”