Show Notes
Summary
Chris Moreno - Primary Venture Partners
Special mentions
Company: SUMSEI, Rise Buildings, Lowercarbon Capital, Fifth Wall, Moderne Ventures, NMHC, Trammell Crow, Camden Property Trust, The Bozzuto Group, XPRIZE, Equity Residential, Comunidad Partners, Greystar Real Estate Partners.
People: Roger Breslin, Laurie Baker, Ken Valach, Julie Smith, Jay Parsons, Susan Rice, Peter H. Diamandis, Barry Altshuler, Bernard Fulton, Antonio Marquez.
Transcript
(Disclaimer: Please be advised that this transcript may contain unintentionally confusing, inaccurate, and/or amusing transcription errors.)
[00:00:00]
Matt Knight: Hey guys, Matt here. Round two with Chris Moreno, my buddy. We're talking this time about CES hardware and this was back before NMHC, which is now a couple weeks ago. So it's a little dated, but it's still pretty, hopefully pretty timely. So this is me and Chris just chatting again. I'll have another one up in a couple of weeks where he reviews NMHC.
And so just keep your ears out for that. Otherwise, enjoy me and Chris chatting round two for about 20 minutes.
All right, Chris. Thanks for being here. Round two. Excited to dig in more. And I think it is your turn to ask the kickoff question.
Chris Moreno: Yeah. Thanks for always connecting and sharing, your thoughts, Matt. I know you can go down rabbit holes and prop tech and real estate. And I love that. You went down to CES, which is, I think one of the biggest shows of the year around [00:01:00] the world.
So I'd love to hear your thoughts around what you saw at CES that pertained to real estate and technology. And maybe even what you saw around things that are must haves versus things that are pie in the sky.
Matt Knight: So, the thing about CES is it's so big that the layout is hard to understand, right?
Like, you kind of know where the cars are. The cars were over at the Vegas Convention Center. But in every single, I'd say there were eight, like, main exhibit halls. Two at the Venetian, three at the Convention Center, one at ARIA, like, they're all over, right? And each one of them had at least one section where they had these signs hanging from the ceilings that says Smart Homes, right?
And so, how is Venetian Floor 2 Smart Home section different than Venetian Floor 1 Smart Home? Like, they're all over the place. So I couldn't, maybe just because I'm new, but I couldn't gather a rhyme or reason to sort of why things were laid out where they were. Right. [00:02:00] And so you would go and see a smart home section and you would see Sam has sung, right.
And here's the new, you know, Google offerings. And here's the things that whatever, you know, people are doing IOT for your sprinklers and that's all great. Right. But it made it sort of hard to synthesize any one theme or trend other than IOT is massive, right? Here's a bunch of internet enabled stuff that you can put in your house, which could be dishwashers, right?
I saw one. There's a cool demo online. We can Google and probably put a link in the show notes to where there's like an AR augmentation to a vacuum where you can see what area you've covered or not. So you sort of gamified vacuuming, right? And so stuff like that, where there was a ton of it, but I didn't discern any one theme because I would see it in the three hours later, see very similar things three miles away.
Okay. Right. And so part of what I did, and I think I said this last time was I tried to find things that weren't necessarily obviously for us. There was one guy I've been talking to that's a [00:03:00] wifi signal booster. And I said, have you ever thought about selling the multifamily? Cause they have issues with that.
And he's like, we'd love to, right. There was another one called SUMSEI, which I loved. And they had this blacked out booth where you walk into this it's almost like a shipping container and they hit you with scents and sounds and lights where it feels like you're in nature, like the ideas are supposed to be in nature.
And so I kind of went over to their booth and their director of partnerships and I was like, Hey, there's some cool common areas in hotels, in apartment buildings, maybe even an office where having a little more green nature, like experience would be interesting. Would you be open to that? And he's like, absolutely.
And so I know that's a long winded way of saying, but like, it's hard to draw parallels when the smart home stuff is so disparate and all over the place. And a lot of what I was there to do is say, Hey, this would be super cool if commercial building owners could use this to improve the lives or experience of their tenants.
So that was the bulk of what I spent [00:04:00] my time on.
Chris Moreno: Got it. And what would you say from the things you saw there, what percentage were. Like actionable things you thought, you know, everyone thinks they can come to market. Everyone thinks they can raise capital and get sales on day one or early.
What would you say is the percentage? Was it like 70 percent was like, this could be in multifamily or this could be in real estate, or was it more like. 10 percent that you saw that could actually happen in the next three to six months.
Matt Knight: You mean of the whole of all exhibitors or of the ones that I thought were relevant to our space.
Chris Moreno: Probably more relevant to our space, like what percentage even then, like was relevant to our space, number one, maybe number two.
The second way to answer the question is, within what was relevant, what percentage was pie in the sky versus, you know, now.
Matt Knight: I'm going to guess five to 10 percent was relevant and it's probably closer to five if I had to guess. There's a lot of cool pet tech and health tech and new robotics that have nothing to do, you know, maybe I should tell you that I define [00:05:00] PropTech as something you sell the landlord.
The person that owns the building. So if you have a really cool inventory robot, right, or outdoor delivery robot, that's probably not prop tech, right, because inventory is going to deal with the person that owns the inventory, not the person that owns the building, right, and outdoor delivery, but what I look at like indoor deliveries, I was like, Well, that could be interesting from your formal world.
Could I take things from a package room or from a mail room and deliver them via elevator up to my tenants on the sixth floor, right? There's a use case there, right? So I think it's five to 10%, probably closer to five. And most of it is ready because it costs so much to get hardware to Vegas and display it.
You're probably not outside of the country and university specific booths. You're probably not going to bring tech that doesn't have some commercial ready applications. Does that make sense? Yes. Yeah. I'm not going to pay 7, 500 to put my robot on a boat or a truck and then pay [00:06:00] the unions in Vegas, unload them and set up my booth.
If I can't make a sale today, like you, you kind of have to be market ready. And there's, I think tens of thousands of vendors there. So there's a lot of people there and it's, I think they're all in varying degrees of market ready. And some of what it's famous for, as you see on YouTube or Twitter, whatever is here's a prototype car, right?
Here's a prototype, you know, Caterpillar had a cool booth with a prototype dirt mover. Like there's some stuff there like that, that is prototype, but those are massive companies that have things they can sell you today. And they're, they're using that eye candy to hook you. Right. Most of them are, here's a new smart leash for your dog or whatever.
So it's, all hardware. And it's all ready to do something. And depending on the size and stage of the company, it's varying degrees of market readiness, is what I would say.
Chris Moreno: Great. Yeah, that's, you know, I think what's interesting too, like to get your thoughts around, you know, the hot topics of AI, you know, whether it's hardware, like what [00:07:00] did you see?
Was it 90 percent hardware and robotics? Or were there actually companies there talking about the data play and not having hardware, but maybe integrating with hardware or whatnot?
Matt Knight: 90 percent seems high, but it is a lot. It is well over half at 75%, I would say, because it's. That's sort of the appeal, I think, of CES, and I came away convinced that I should go to CES every year just for this role of trying to bring more tech into our space, but the point is that the little boy in you can go and play with toys, right?
Like, that's kind of why hundreds of thousands of people show up is you can go try the next robotic Kids toy robot, you know, sit in the next self driving 360 degree turning Range Rover, right? Like it's it's a lot of fun to do that. And that's, that's why I like it is because hardware is so important to what we do.
And maybe that's a good segue into what we were talking about last time about why people get alligator arms and get so cautious around hardware. And I know you have [00:08:00] experience with that. I'd be curious to get your take on maybe sort of a broad answer. Take on PropTech's relationship with hardware and your, your experience on it.
Cause I have my biases and qualms, but you, you have way more experience than I do.
Chris Moreno: Yeah. And I think your, you know, your qualms and biases, everyone's got a, I've got a viewpoint on hardware, right? Whether it's, I knew some people will, will say they will never touch hardware with an investment. They don't like it.
They just do software because they're looking for higher returns. And then you see companies that are. You know, you can have incredible returns. You can solve a major problem, and I think you can do it now, right? I'm thinking about whether it's water sensors or it's space management, right? In these buildings, these are the things that people need immediately, and they can, the decision makers can see it immediately.
And I think one of the most outsized things I've been learning over the last few months and realizing how important it is, [00:09:00] is where do you make your biggest differentiation? Like, where can you save the most amount of money and where is the biggest head bakes on real estate , and some people on linkedin hit on this at some of the biggest funds like at fifth wall, right?
It's the maintenance. It's the updating. So if you think about maintenance teams. And the things they see, whether it's cracks in building, water leakage air , and then what they can solve for, whether it's access control for the internal teams, for your residents and for guests security is a big one, right?
So, if you're in a class a building, you probably have a lot of security features and hardware, but a lot of these middle of the road properties, affordable housing may not. And that's where you see the pings. On next door, or the things on Google, you know, reviews. And so I think when buildings are looking at differentiation and buildings are looking at how to save money and or increase their rents.
I mean, a big thing is [00:10:00] safety. Like, if you don't feel safe and you don't have the technical hardware in the building to keep the residents safe, then the residents don't care how great your pool is. They don't care how great your software is. If the hardware can't keep them safe. If the hardware of the fundamentals of the doors access You know, their units, the temperature control, right?
It's busting. So I think like thinking about I think right now it's a return to basics. It's a return to hardware for many people in the industry. But again, that's my viewpoint. And I think many of the AI companies can be very helpful. But they've really got to make sure that they're showing a return on investment where you can show a return on investment in, months or immediately on hardware and on software.
Sometimes you can't.
Matt Knight: Yeah. I think that's the crux of it for me that you could maybe disabuse my stereotype, but it's like, it's so capital intensive upfront. That the return profile has to be meaningful or the hardware. Like when I invested [00:11:00] in Rise Buildings and they had a hardware component, it was merely a hook to get in the building.
Both the bulk of their returns with software. And so to me, I see it as, and I'm aware of what Amazon and Apple, I know the big physical infrastructure moats that are built by some of those valuable companies of all time. I'm aware of that. But I'm also a limited capital seed stage investor that has to see where that turning point comes.
You like, you know, that analogy, right? It's like once Amazon has warehouses within two hours of every human in America. That is a moat. No one else will. I don't want to say ever, but likely ever beat right. Once Amazon has or Apple has hardware figured out, you're probably not going to out hardware Apple, right?
And so I get that concept. But the question for me as an investor is what does it take you to get there? And with my limited capital, why would I invest in that? Or is that more likely than a 70 or 80 percent gross margin software business? That's usually how I think about it.
Chris Moreno: Yeah, and I think that makes sense. I think there's a debate. [00:12:00] One of the biggest debates is investing, whether it's investing in real estate is going really focused into just multifamily and just class A versus going into other sectors, right? Military housing, student housing, and then thinking about. Do you invest in strip malls?
Do you invest in mixed use residential? Do you invest, in corporate office? Right? So, some people like to have more of a diversified approach and some people like to have a really focused approach. And I had some of those calls this week and I think. The same thing applies to software.
Some people will wanna be really focused in just like two or three areas, whereas other people will say, absolutely not. I wanna be well diversified and if I see great founders building great technology that can be put into the world, that's what I, I wanna be a part of. Right. So I think you definitely wanna have a thesis around who you focus on or else you're gonna be too wide and too broad.
But to your point, I think you're seeing some people like you know, whether it's out in Sacramento, or there's some people strategically who do want to work on boring businesses who want to work on [00:13:00] hardware because they've been down that road. So, I think the team, no matter what has to, whether it's Lowercarbon Capital, whether it's Fifth Wall, whether it's Moderne, you know, many of the people in this space, if they've got people who have experience in the actual management and implementation of operations, maintenance, you know, capital markets. And they're saying, okay, these are the things we know we need. And these are the serious problems. That's what I get excited about. So like JLL as an example. They have people in the field and they have people who've worked in these spaces and say, wow, this founder, this team could be really helpful to solve a problem around, whether it's you know issues of, price management or controlling assets or hardware. So, it was interesting talking with Roger over there about some of the cool things they're working on. Yeah, I think I'd go on and on on this. I think, we talk about, like, the challenges of capital markets right now. I think there's somewhere else.
We want to go with this as well. It's going to be hard. You know, if you've got a high cost to install of a hardware product and you multiply that out and you're not going to [00:14:00] see a return for a while, you've got to create either come up with creative financing, right? That can be lucrative, whether it's through one of your debt partners or it's through the company who's selling it to you.
That's the other thing is, do people want to take how big of a risk they want to take on new technologies versus ones that have been around for ages?
Matt Knight: I think that's fair. And I, one of the things you said that I think resonates with me is hardware incorporates supply chain in a way that software does not.
And so, supply chain is one of those seemingly simple but surprisingly complex things as you know, where experience goes a long way. So maybe what I would say is from an investor perspective, experience matters way more to me in a hardware startup than a software startup. Not that it doesn't matter. And either matters highly in both, but you could probably have general tech experience and have some people on your team with real estate industry knowledge and build a decent prop tech SaaS product, [00:15:00] right?
Like if you just, but can you, can you listen to your customers, right? If you listen to your customers. You'll figure out what they're griping about over drinks, right? Hardware, probably not. Like you need to understand supply chain, Just-In-Time. You have to understand things that break back up redundancies, like tariffs, international building versus domestic near shoring versus like, there's so much else to learn that I almost, if I were doing a grading rubric on interest in startups, the experience part becomes one and one a of, of looking at hardware start-up. I guess that's for me personally, but I don't know if you agree with that.
Chris Moreno: Yeah, I absolutely think that I think also each person's very unique. So I think thinking about like, you know, and as we tie into like NMHC next week, you know, I'm flying out to to San Diego and I'm excited to, to You know, being in real life with many of these people, I think everyone's so unique, depending on their role and their company of how they make that decision.
Right? So, they're [00:16:00] a long term holder versus a short term holder. If they're a developer, right? We're going to have developers and architects and then you've got the long term holder. You got the rates. You've got family offices. And some of these people want to hold forever, right? They have no purpose to reason to sell, whereas other people have a 5 to 7 year outlook, right?
And so they might say, I'm not going to put in this technology at these properties because. It's too short of a return. I don't need that. I'm gonna sell it anyways. Whereas other people like, yeah, we're gonna be holding this. Let's make the investment. And I think the teams who have CTOs or heads of data, the teams who are larger tend to have the more opportunity to be able to roll in these types of hardware, these types of technology, also because they have mandates.
That some of their institutional capital are requiring, right? ESG, you know, like you said, governance or feedback and monitoring all this. So there's definitely opportunities for tracking this. There's definitely customers, I think, for everything. [00:17:00] It's just how big of a market do you need? Right. If you're building, you know, cladding with solar in it, what percentage of the market do you need?
If you get 1 percent of new development, that could be a massive amount of business, but if you are targeting all Class A properties that exist today, maybe you need to get 5 percent for to be meaningful, right? If we think about some of these public block access control companies, right? So I'm excited. I mean, Matt, like, you know, you think about the different Okay.
Perspectives at NMHC and like why people go like looking at capital markets, money has to flow. If money can't flow, people freeze up on buying technology. They freeze up on investing in technology. And so I think that's a big thing for this coming week. And I'm really excited to hear from different CEOs and investment teams on like how they're allocating their resources, how they're allocating their capital.
And then what is the focus, you know, and I think a lot of a lot of the key things, if you can build hardware that saves money and [00:18:00] shows the ROI, that's a no brainer, like, people will put you in or there's some kind of regulation around capture you know, New York's laws, like local law. You know, in New York City, people are realizing they have to make a move.
So, that carrot versus that stick. So, I mean, I'm excited to hear from some of these folks, like, Ken Valach over at Trammell Crow. I know Laurie Baker at Camden is going to be speaking. You've got team from like, Julie over at Bozzuto. Some of the folks on, like, LinkedIn, like, Jay Parsons, who's the economist, hearing him speak.
But yeah, a lot of these VCs will also be there. I think they even have, Susan Rice who's an ambassador to the United Nations. She's going to be speaking on policy. And the things that come that they talk about, that's going to steer decision making. Right. And then one other person who's speaking is Peter Diamandis from XPRIZE foundation.
So he's going to be there talking about technology, talking about innovation and real estate and beyond. So I'm excited about these different discussions.
Matt Knight: I'd love to do a follow up after NMHC to get your takeaways from that since I'm not going and you [00:19:00] are just like we did with CES, but one of the things you said that I would love to regurgitate in my eighth grade brain is owner hold period should affect your sales strategy.
Did I hear that correctly? Am I oversimplifying that?
Chris Moreno: Yeah. I think the question is, should it, if that's what you're asking,
Matt Knight: someone who's only holding an asset for, let's say a family for 20 years, right. Very different than a wall street firm trying to hit a return hurdle in 24 months and may not be able to, or have the appetite to fiddle around with a new accounting system or PMS or whatever access control, right.
Whatever it is. So. Hold period. It's basically our admonition to startups to be knowledgeable about the structure and goals of the owner. And then you can build your sales funnel and your sales strategy accordingly. Like going after the wall street types that are turning properties every 24 months, probably not a great way to sell accounting software.
Or access, [00:20:00] right? Like, that's probably not a great sales strategy. You want the longer term holders, maybe the reads like, so that's what I'm getting at is if I were to distill it into a bullet point, it's like owner hold period should affect your sales strategy.
Chris Moreno: I think too, to your point, it's very unique.
Like if we take some examples, so like you've got Barry Altshuler over at Equity Residential, right. Who's focused on the investments and then they do a combination, right. Of Development management ownership all internally. And then you've got teams who are just.
Management going to be very different on the decision making process and what they decide to do. There's a vice president of housing policy and regulation, Bernard Fulton is going to be speaking real interesting to hear what's going to come down the pipe, whether it's nationally and locally. There's a big discussion around fees and what buildings are allowed to charge besides the rent and also energy usage.
So how do you reduce energy costs? And what does that amount [00:21:00] to to the building can the building actually make money? On some of these things, is there some kind of limitation to how much money they can make so that we've been seeing locally in some markets, and I'm interested to hear how that pans out nationally, obviously, someone else who is really big into technology, Antonio Marquez, right at Comunidad Partners, he rolls out technology. He likes to innovate, you know, so I, I really like some of these folks who have sound businesses, whether it's thousands or tens of thousands of units under management, and then they really look at how can we create a better experience for our tenants.
And we're willing to be the guinea pigs of sort right we're willing to take a chance on something that could improve the lives of our residents because that's what it's all about. So, I also think about Bozzuto, like they do that in a big way. Greystar tends to do that in a big way. RPM is another example.
So, yeah, I'm excited to report back on some of these different teams and what they share when we go out to market.
Matt Knight: Well, then why don't we shut it down there and we'll just leave it as a cliffhanger to hear what you've learned [00:22:00] from the biggest brains and multifamily next time we get together.
Chris Moreno: Sounds good. Thanks Matt.
PropTech Chatter - Round 2 with Chris Moreno