Real Estate Economy, VC Expansion and Trends with Aaron Block and Zander Geronimos

In this episode The Propcast talks to Aaron Block and Zander Geronimos from Metaprop about real estate economy, VC expansion and trends.

Today’s guest joining us today from the US, is VC Metaprop. So welcome Aaron and Zander.

Before we start the questions let me give a brief introduction to both Aaron and Zander. So, Aaron is the co-founder and managing partner of Metaprop, a New York based VC firm, focused on the real estate technology otherwise known as PropTech industry. Founded in 2015, Metaprop’s investment team has invested in well over 100 technology companies across the real estate value chain, which is insane. The firm manages multiple investment funds both financial and strategic real estate methods representing a pilot and test ready sandbox of 15+ billion square feet across every real estate asset type and global market. Prior to co-founding Metaprop, Aaron served as an investor, CEO and chairman of BayRu, US Russian ecommerce, shopping and shipping specialists.

Prior to that Aaron was a commercial executive with Cushman and Wakefield, responsible for 270 professionals in the Chicago region. Aaron has a BA and MBA and has also co-authored the “PropTech 101”, which is a must read for those interested in PropTech. He has also featured in dozens of international publications media, including the Wall Street Journal, Forbes, Yahoo Finance and many, many more. Outside of work he served as a board member of numerous organisations, including Young Presidents’ Organisation, New York City Community Board 5, and many more. In addition, Aaron also enjoy speaking Spanish and Russian, which is extremely impressive as I can only manage broken English!

Now for Zander, as the head of the junior partnerships and business development for Metaprop, Zander leads relationships and communications of key pairs across the real estate value chain, and acts as a channel between strategic real estate firms and the emerging PropTech community. Prior to joining Metaprop, Zander was a senior solutions engineer covering the North American region for VTS, but he spent four years working across business development, strategic data analysis, marketing and solutions engineering. The breadth of experience allowed him to work with sales, marketing data, product engineering and design. He’s a founder of the University of Virginia Alumni in Real Estate which boasts over 200 members internationally. He’s a regular guest lecturer at the University on real estate technology topics. Outside of work he’s an avid cook, and traveller and has a big love of dogs.

So guys, look welcome again to the podcast. I hope all the listeners have been impressed by your experienced in the industry and knowledge within that introduction. So, let’s kick start with the questions. Aaron, so I stop talking please can you tell us a bit more about how Metaprop came about? Your growth has been insane.

Aaron 

Thanks Lu, you’re a little bit too kind. We appreciate your efforts to promote the PropTech space and to support all of the stakeholders involved throughout the world here, and you’re doing a great job and without an entire village of folks trying to support each individual group and the collective masses here, we wouldn’t be where we are. So thank you for your contributions as well. They’re very valuable and you’ve made a difference in the time now that you’ve been focused on PropTech.

Aaron

Metaprop came about with a vision from Zach Aarons and Aaron Block to really create some connective tissue between the real estate technology start-up world, and the broader real estate and investment ecosystem. Those two stakeholder groups were really missing each other for many years. When we got together in 2014 and started talking about the idea, the seedlings of what became Metaprop, the real problem was industry was looking for solutions and didn’t know where to find them through technology. Venture Capitalists were interested in exploring the last frontier, the last industry to be disrupted, from their own words being property and real estate, but weren’t sure how to connect with and understand and underwrite entrepreneurs and technologists building solutions in the space. And perhaps most importantly and severely from our perspective, we recognize that these great entrepreneurs with whom we have met and had done angel investments into over the previous years, were struggling to get access to capital, from strategic players in the real estate and property business, access to proof of concept, POCs, as we call them, pilots, tests, scale ups in the space, and this lack of connectivity was really the driving force and still is today in many ways behind Metaprop. We do this from a higher calling, we have a mission. And our mission is to be a part of creating the connective tissue between these stakeholder groups. It’s what got us up in the morning and 2014. It’s what founded the launch of our business in 2015 and it’s what continues to motivate us and hopefully our broader team today in 2020.

Louisa

Yes, I guess so from starting from 2014, how have you gone about raising funds? Obviously, the interest has only increased in investment into this space. Has it become easier to raise funds? Are there more competitors for this space, who want to raise funds to invest? I’d love to hear more from you.

Aaron

There’s always been some pool of capital willing to invest in early stage entrepreneurs who are solving real estate problems with technology. Over the early few years from 2010 to 2014, my partner Zach was really the most prolific angel investor in the space. And that was the typical profile of investors into property technologies. They were individuals, sometimes smaller family offices, who had made their money or had been around the real estate business and were making small early stage bets, and then piloting and testing in many cases, some of those technologies within the four walls of their own assets. Over time, in the early days, you started to see some folks create pooled capital vehicles, call them funds, to invest more programmatically, as opposed to one off angel investments or syndicating. Very quickly starting in about 2017, late 2016 you started to see a number of entrants starting to professionalise those pools of capital, and create real fund structures and investment management teams and firms to focus on the PropTech space.

Now, this being said along the way, there have been a number of generalist investors and venture capital, really strong institutional grade pools of capital managed by top flight professionals, who have been investing in real estate technology on a one off or semi-formal basis. Probably the most famous of them all is Trinity based in the West Coast here of the US, and they’ve done a number of great investments for many, many years. If you fast forward to today, it’s not just the Trinity’s of the world who are generalists that happened to do real estate technology investments from time to time, but now you have a real breed of top class PropTech investment firms focused on different aspects different geographies of the PropTech world. In the UK you have specialist investment firms, in mainland Europe and the continent you have specialist investment firms, you’re starting to see the beginnings of specialist investment firms in Asia, certainly in the US, you have two big brands and Fifth Wall and our firm Metaprop, but a bunch of others who are focused on different aspects of the real estate technology worlds investment opportunities. It’s become a really nice space.

Most interestingly, Lu, I think to your point on the maturation of investment capital into the space, where you’ve really had a shining moment, a marquee lighthouse effect, impacting the real estate technology and PropTech world, in 2018, really 2019 and now 2020, as institutional capital has become more comfortable allocating, investing in funds and participating and potential co investments in the PropTech space, PropTech is now a category for institutional investors from their own direct capital into co-invest their indirect capital into investment management funds who deliver great returns. That’s a huge moment for our space and bodes very well for the future of the industry.

Louisa

Yes, it’s awesome. And so as there’s more activity, you’re investing more, the Metaprop brand is just growing, how have you built your team around you since 2014? I’m sure as the brand, the space grows, you have lots of people wanting to get involved in Metaprop, what a lot of people ask me, how do I get into VC? What do you look for when hiring?

Aaron

Well, that’s a very, very good question. Because the key to success is people. This is a people business. We don’t manufacture any products. We don’t distribute, we don’t have supply chain. The real value in our business is the people and we invest very heavily in our own teams, both literally and emotionally, in the success of the individuals in order to make a fabulous outcome for the whole firm writ large, that individuals who want to get into VC find themselves in a particularly difficult place right now, although venture capital has grown quite a bit, although PropTech venture capital is now an investable asset class for institutions, there are still very few opportunities In the real estate technology space to get involved in venture capital, and there will be scarcity in this space for a long time. That being said, there are a few ways that we’ve been able to help folks who didn’t come from purpose built venture backgrounds, ease into the real estate technology, venture capital space. We have run an internship program and we have a very high profile affiliation with Columbia University, where we run an accelerator program that has graduated its seventh cohort here in 2020. We’re very proud of our affiliation with the university and our ability to work with a number of their students and recent alumni, faculty and researchers. And that’s one way to get engaged is through university or internship program related.

Another way to get engaged is we happen to work with professionals who have established careers over the years with whom we’ve built long term trustful relationships, and put them into positions as venture advisors, entrepreneurs in residence mentors in our accelerator program, and other tangential affiliated roles within Metaprop community and orbit, without being full time employees off the bat. That’s another way. I think Zander can speak most clearly as someone who has actually made the transition from industry and technology into venture capital about ways that folks can think about, position themselves, build relationships and execute on plans to get closer to venture capital.

Louisa

Yes, well Zander, we’d love to hear about your experience of VTS, and how I guess you were introduced to Aaron, tell us your story.

Zander

Thank you, I appreciate the tee-up Aaron. And I think that’s an excellent point. When you sit on the other side of working for a start-up and you join in a relatively at the earlier stage, you have little knowledge of the VC world, you start to have at least surface level knowledge and introductions. But as you start to look across the room and start to make those introductions and start to expand those relationships, then you start to really understand who are the main players and VTS we were fortunate enough to have exposure to, and we were able to attend meetings with our venture backed firms and also with our investors. So we were able to understand who they were, what they were focused on, and why they cared about our company and the people that were involved in it, and that was something that was always stressed by the venture firms was how much of the people mattered at our firm and what we were doing and how we were building a culture that was something that would last and proliferate.

And just from my own perspective, I always had an interest in my mind, though, to switch over to VC. I saw that as a long term goal. And as I was really growing my career on the solution engineering sides, I was taking stock of the whole firm. So I didn’t want to just look at one piece and just be on the sales side or the account management side, I thought I would encourage others who work at these projects start-ups to reach across every group and try to gain exposure and a perspective. So working with the finance teams, the data teams, the account management, the sales, the product engineering teams, just to have as many sit downs and casual conversations or informal projects to work on, so that you can gain a full view of really what’s happening at your firm, and your company, and how you can grow from there. And then as that starts to evolve, you’ll gain such a strong subset of knowledge that as the opportunity arises, you can really come in with a strong perspective that it can then advise the newcomers into the space, which is something that really attracted me to Metaprop, when I was just first introduced by a dear friend who came to see me speak and do a presentation on the landscape of commercial real estate technology. And then from there, we were off to the races.

Louisa

How did you first get involved in this space from university? Why real estate technology for you?

Zander

I think it really stems back to when I first got into university. I was working as a research analyst at a hedge fund working on the finance side, and I saw that it was more or less a lot of my fellow alumni and friends were switching over technology or we’re getting more embedded within the real estate world. So I had a thought, this is five years ago, actually six years ago that what if I could combine the two? Is there anything that exists? This was before PropTech was a really a buzzword or just a word that was common to use. So, I looked around, interviewed at as many places as I could, and was lucky enough to be introduced to Bob White, who became and has been a mentor. Bob White is the CEO of Real Capital Analytics. He’s been a strong mentor for identifying opportunities and seeing how the space has grown. And I think that’s also really important advice I give to anyone entering and growing into spaces to always identify who would be your mentors and advisors, and grow that network from your onset to always look out and always stay in touch. And whether those are family relations or friends or those you can just network, just really hit the pavement as much as you can. So, I was introduced with the idea that there are new technologies coming out, so Bob suggested strongly to look at Hightower and VTS. And then as I looked at, fortunate enough to have joined the VTS team and, and saw the opportunity that I could really make a difference in a part of the value chain just within real estate that really had not necessarily been touched or moved. And with such a growing and vibrant culture that truly attracted me to decisions, everything that I was looking for, at that point in time, and it was a truly exciting and moving experience.

Louisa

And I guess since joining the Metaprop, you went in and became involved in the student partnerships, how has your role changed, and the space grown? Have you got another remit to your role as well?

Zander

Yes so, though we are focused on North American opportunities and North American entrepreneurs, we have the ability and have identified opportunities globally. I think from my role, I like to take as much of that global approach as possible. And I think there’s a lot of demand and folks pining for really the innovation that is coming out of North America, and we’ve seen that from our own companies, or the companies that we’ve invested in. So I like to really make sure that I’m touching and being in constant communication with as many growing markets as possible. So, after traveling extensively in Europe and in Latin America, made some great relationships which I’ve been able to expand in this role. So its constant conversations with folks in Argentina and Brazil, and then in Germany and in the UK, and then also in Southeast Asia and Mainland China there’s always exciting folks who are looking to expand their knowledge and share in this next wave of innovation so that’s what really my day to day looks like

Louisa

Yes, well hopefully when we are back to some normality in travels, I’m looking forward to having you over here in London or no doubt connecting I guess someplace in Europe. I brought that up as our listeners they’re coming from across the world, so anyone who’s listening to this at the end, we’ll be sharing how you can contact Zander as well, and Aaron. Going back to some of the questions we discussed earlier, Aaron obviously there’s been a lot of change in the past few months and we spoke about the space growing, do you foresee this space continue to grow at the same pace? I guess you predict things, what do you think the future of PropTech looks like when I say future of the next five years?

Aaron

We’ve seen a some of the medicine being taken, so to speak already with the IPO of Wework, and the resetting of expectations for many of the more asset heavy real estate technology related plays. So that’s really good. The reset of entrepreneur expectations around valuation and capital structures to support their innovation efforts really gives me the final piece of the puzzle to feel extremely bullish on the future of our space. First of all, as we mentioned earlier, there is an institutional capital alignment that never existed before, our tiny space has grown to become a more mature investable category for institutions around the world, that creates additional momentum and positive flow to the ultimate entrepreneurs who need capital and want to grow, which in turn creates more entrepreneurs who want to invest their time and effort building companies in the space because they can access more capital. It’s a wonderful cycle.

Number two, we have seen a change in the real estate cycle. As we’ve seen properties move from cash flowing nicely, cap rates compressing, to a more uncertain real estate market and the beginnings or middle of a downturn. fewer landlords, owners, developers, operators of property are willing to be reticent around engaging in innovation, particularly in North America, which was way behind from an interest perspective, what we saw in Europe regarding real estate technology, proof of concepts, pilots, tests and scale ups. Now that the wheels are in motion and that it is required to create new revenue streams or to squeeze out in efficiencies, or to differentiate a brand through technology, we are very excited about the next few months and next couple of years of real estate technology start-up growth.

Number three is you have a very strong orientation toward health focused technology solutions due to COVID. It’s almost like the icing on the cake. The folks who also were reticent. who were stuck in the dark ages, who were unwilling or unable to find ways to try, test and implement technology have changed their tune. Their first reaction now is how can technology allow us to get back to work? How can technology allow us to use space more effectively? In during a health crisis like COVID-19. How can we reopen our buildings faster or more efficiently using technology? It went from the last priority to the first priority, and that is the ultimate catalyst for more success in the space. So the resetting of expectations, overlaying all three of those main fundamentals gives us a very bullish perspective, particularly for early stage investments in the space. If you look at venture capital Lu, over the years the best performing funds tend to be built coming out of economic downturns, those funds tend to perform up to two times as well as their pure funds built during different vintages. So everything’s pointing to a very good time to be an entrepreneur in the space and an excellent time to be a top tier investor in the space.

Louisa

Are there, I guess you said about certain technologies in getting people back to work, are there any  exciting markets or start-ups you would like to hear from, for the start-ups who are listening to this podcast?

Aaron

Yes, well I think anybody who’s solving problems around senior care are very interesting to us and have been for about 18 months now. We’re really excited about the opportunities that now exist in this fragmented asset sub sector within property and real estate. Obviously, there are thousands, hundreds of thousands, millions of beds around the world for independent living, assisted living, skilled nursing, hospitalization, rehab and other senior use types. There has been very little innovation that’s been able to be developed and implemented in the built environment aspects. And we’re really excited now, thanks to the crisis in some ways unfortunately, to be able to have momentum to find great new technologies to try to invest in and to pilot and test within our partners portfolios and the broader property community. That is a challenge to anyone who is thinking about developing a business or evolving their product, the senior space across the entire spectrum of subtypes is really hungry for technology driven solutions today and we’re excited to invest in them.

Louisa

Yes, well it’ll be interesting to see what happens over the next few years. We’ve seen a surge in co-living which obviously, from what I understand really started in the US and now it’s definitely over here in the UK into the Europe. So it would be good to see the growth and the senior living space, and it’s definitely, definitely needed. Unfortunately, this is bringing us to the end of the show frustratingly, I’m sure we’ll get you on our next in a series and to talk about another topic. But before we go Aaron and Zander, is there anything you’d like to share with our audience and listeners about the best way for them to connect with you? Aaron would you like to go first?

Aaron

Yes, thank you. Our website is www.metaprop.org Please come check out our portfolio companies, understand our vision for investing and supporting start-ups and the broader international PropTech community, and if you have questions, emailing info@metaprop.vc is a great way to reach us.

Zander

I would welcome anyone to connect with me on LinkedIn. Then my email will be my zgeronimos@metaprop.vc and in there, you’ll find my Calendly and my cell, I’m always available and always excited to have conversations. It’s kind of a constant thing that Aaron can attest to and I think you can as well Lu, it’s just what I’m here for, here to listen and here to get everyone connected because , the really exciting and what the great thing that’s coming out of Metaprop, that magic that we are involved in, is something that I am implored to share with the world. And that’s what makes me happy and it gives us fulfilment. So I’m always happy to have that conversation.