Show Notes
Summary
Chris Moreno - Primary Venture Partners
Special mentions
Company: Macy's, Luxer One, Assa Abloy, On Deck, Y Combinator, Xeal, CBRE, Marcus & Millichap, South Downtown, Bozzuto, RangeWater, RADCO, Blackstone, BlackRock, Invesco, Wellstar, Atlanta Braves, Figma, Adobe, Yardi, RealPage, Entrata, Airbnb, Loom, Saltbox, Tyler Scriven, WeWork, Switchyards, Industrious, Deskpass, Codi, Atlanta Tech Village (ATV), Fifth Wall, A16z, Flock Safety.
People: Erik Torenberg, David Cummings, Jon Birdsong, David Lightburn, Warren Buffett, Brian Chesky, Brendan Wallace.
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, happy new year. Hope your 2024 is off to a wonderful start. First episode of this year is going to be me chatting with my buddy Chris Moreno, who you guys probably know he's a friend of mine from Atlanta, PropTech guy. I think they call him Mr. PropTech, but what I wanted to do was have sort of an ongoing conversation that's a little more Freewheeling a lot up to this point have been specific topics for people we've been trying to introduce and this is going to be a little more broad, wide ranging just kind of chatter between him and I about a variety of prop tech topics and prop tech adjacent topics.
So this is my first episode with Chris. It's about 20 minutes and we'll do these every few weeks going forward and just sort of stay on top of trends and ideas and reflection. So I hope you enjoy. This is Chris, my buddy, [00:01:00] and give me feedback if there's anything else you think we should cover. Thanks.
Matt Knight: All right, Chris, thanks for being here, man. Glad to have you with us. And if you don't mind, since I know we're going to do Several of these. I'd love if you give us a quick background on you just so people know who we're talking to here.
Chris Moreno: Sure. Well, I think number one people love to earned this acronym or a name, nickname, Mr. Prop tech. So a lot of people tend to call me because I really focus on technology in the property space and love the physical world. So I real quick, I'm from California, born and bred. And left California just a few years ago to relocate to Atlanta, Georgia. But before that I went to school in UC Santa Barbara, I played a lot of golf in high school and college and worked my way through college.
And so my first career job was actually out at Macy's corporate and why it's relevant is I worked on a procurement. And implementation into our stores, building brands, and then I got to work on our tech team and that [00:02:00] working with our tech team around remote work around utilizing technology for teams in the field is what got me excited about technology, joined a startup.
So I left, I joined a startup in 2010 that was building lockers for dry cleaning and laundry. For apartment buildings and we, I joined that team and then we ended up building two new startups essentially pivoting to take software around the world for real estate owners and retail owners and then for delivery of goods and services.
And then our 3rd company was called Luxer and Luxer One focused on package delivery. So we had this thesis on the world that. Packages would become more prevalent back then buildings were getting maybe two or three or four packages a day. We said, there's going to be a real problem. This company named Amazon is going to be massive.
And so ended up we were correct in our thesis. We actually thought we, but we didn't realize how big it would become. And so we scaled that business Luxer and sold in 2018 to a company called Assa Abloy. And that was a really enlightening for me both because I could then start investing in other great founders.
So [00:03:00] that was a big goal for me. And that changed my life. And I was able. To start doing that in 2018 and then number two to learn about other technologies and other spaces. And so that's what I jumped into, ended up joining a, you know, I got to meet you, got to know you. And then I ended up joining Erik Torenberg and the team over at On Deck.
And so we built an Ollie, an early stage accelerator, which was a blast and got to focus on very early stage companies, even at idea stage or revenues, similar to Y Combinator. And my focus is really on. Early stage prop tech. So real estate prop tech logistics and got to make over a hundred plus investments.
And many of those companies are still operating today. And then I joined a company called Xeal energy and that was focused on the transition of EV into commercial real estate. And more recently I had my third child born and he actually had a little bit of a heart issue. So I took some time off and I'm now doing really full time investing in prop tech and then also doing some coaching and my wife and I started a [00:04:00] consulting business and advisory group for CEOs and founders. So that's where I'm at today. And really I spend my time connecting with really smart people like yourself and VCs, family offices, as well as founders and operators in real estate.
Matt Knight: I forgot some of that. I forgot you went to UCSB. So, you know, go Gauchos. It's probably a good way to start. And what's the I mean, I think what's different about this with you and I is we know each other well enough that we can probably keep this pretty casual and freewheeling, but I'm curious.
Looking forward, what does 2024 look like? I know you took some time, you got the consulting, you have some gigs that you're working on, but I'm curious how do you view this year and PropTech and the people you touch?
Chris Moreno: So I'm very bullish. I've. Tended to be an optimist, but I am extremely bullish.
This reminds me, you know, for those, I just had a coffee this week with an icon in the real estate world here in Atlanta. And we were talking about how he said many of the people he meets with have not been through a cycle. Right. They've made a ton of money in the last three, four or five years, but they have not seen a cycle yet.
They're [00:05:00] now living into a cycle. So we are definitely going into a cycle. It's been tough on a lot of people. You're going to, I think number one, obviously we have trillions of dollars. That will be going. And if you read these reports from CBRE, from Marcus & Millichap, you know, Barkhati, all these others, I think the thing you and I are probably both seeing a lot of, are going to see is transactions are going to be forced.
So transactions have not been happening over the last year in real estate because you're not getting buyer and seller coming together. So number one hottest elephant in the room is interest rates and because three year terms are going to be coming up. You're going to see transit dollars that are going to be forced to transact, whether someone buys it, like the South downtown project here David Cummings, Jon Birdsong, David Lightburn, Ali and the team over there, that was a forced transaction, right?
That was a transaction that probably sold for much less than what the previous people bought it for, and they got in a bad position. So, or you can, you're going to see it on the courthouse steps and the banks taking over and then someone buying it at even a lower discount. So that's part of the outlook on the real estate world.
I'm very [00:06:00] bullish because , I've been sitting on the sidelines for a couple of years. I'm excited to be able to invest. And I think this is the best time. I think downturns are a great time to invest as people are scared. You know, we need people who are ready to make investments. I think you're going to see more and more founders.
People who are laid off, or people who had great jobs are now like, I'm gonna build, I'm not gonna go back to a company I'm gonna build right now. This reminds me of the downturn of 2009, 2010, and also the downturn of 2000, 2001, 2002, where people started companies and they built incredible companies.
So I'm doubling down on my investing. I'm doubling down in my meetings and as many VCs I'm seeing are pulling back and people are questioning where they put their capital. I'm personally doubling down this year.
Matt Knight: It's like the old adage about from Warren Buffett about be greedy when others are cautious and cautious when others are greedy.
And you're seeing a lot of people being cautious and getting alligator arms. And so it sounds like you're being aggressive while others press pause, which I certainly understand. And what's funny about what you said was. When people ask me what's going on in prop tech, and then I turn [00:07:00] around and ask them what's going on in real estate, the answer is essentially the same.
It's like, it's a war of attrition. It's both sides are waiting for the other side to blink. I had this conversation an hour ago. It's like, what's going on with prop tech startups? Well, acquirers are waiting for prices to come down, right? Startups are waiting for prices to come up. And they're just like, who's going to blink first.
And same with real estate. Like you said, it's like, is my lender going to blink? Are the, are the buyers going to come up with their? 20, 30 cents in the dollar prices, or the seller is going to get distressed at a portfolio or property level and have to sell. We don't know, right? But everybody's just kind of waiting.
And I guess what I'm curious about, if you have anything specific, is there a catalyst that sort of breaks that dam and the deluge of deals that have been on the sidelines for 18 months start flowing? Do you have any thoughts on that?
Chris Moreno: Absolutely. I mean, I have several. I think number one, like I'm sitting in a room.
I don't know if the listeners can see it, but I'm sitting in a room here at Atlanta tech village that is has on the wall, like it has the Braves and it has all these sponsors, right? The corporate sponsors of Delta, [00:08:00] Wellstar, Xfinity, Equifax, Hyundai. Georgia Power, Coca Cola, these massive behemoths that not only have become hundreds of billions and now Apple and companies becoming trillion dollar companies, but they are made up of individual companies that they've acquired over the years, right?
And so I think about that just at a large scale as these, you know , the wave of investment, right? When you're starting your first real estate deal, and I agree with you, I think prop tech and real estate are tied arm and arm so if things have slowed down, things have gotten more difficult.
But when you start and you're an investor in real estate and you're operating one property or, and then you scale that to five properties and then 50 properties and 5, 000 properties, right? Or even millions of units. The same thing with a small startup, right? That smart startup has to raise capital for their first engineer there. Then they had to bring on a marketing person or a CRO or a head of product. And then you bring on your chief of staff and you grow and grow, you build more products. And then eventually you raise more capital. You get more customers. You build up more products, just like the [00:09:00] person building up their portfolio of hotels or apartments, whether you're a Bozzuto or your RangeWater here in Atlanta or RADCO, right.
You're building up your portfolio. And I think the same thing is for these massive large companies, whether it's Blackstone, BlackRock Invesco, who's also here in Atlanta, down the street, as they're building up their portfolios and they have to decide, well, wait, capital's pulling back. The government's telling us.
Interest rates are going up. We have to pull back. Wellstar has to pull back. The Braves have to pull back. Coca-Cola pulls back on their investments. And so as that happens, obviously, it starts to weed out the companies who are going to be successful and who are going to not be so successful. And I always say, like, you can have the greatest business in the world, but if you don't have the capital to run it, it's going to fall apart.
So I think about it from the standpoint of, as these companies raise capital, there used to be the safety net of IPO. Reverse SPAC or acquisition at earlier stages, right? Companies were getting after 3, 4, 5 years. I think it's just going to be longer. COVID created a little bit of a delay for some things to happen, right?
Where purchasers order orders weren't [00:10:00] getting signed for about 2 months. Same thing here. This probably won't be a 2 month delay. It's probably going to be about a 2 year delay, right? So it might be we're seeing the IPO market has been very soft, but for companies who wait and build business and their competitors go out of business, they're going to be incredibly well positioned to be acquired at a much higher number when the economy, continues to rebound.
And number two, I think you're going to see IPOs at a much grandiose scale. Because there's been so much pent up demand now again, will I be right or be wrong. I'm not afraid of looking into the future and making an assumption and then also being wrong and then changing my viewpoint. So hopefully that helps Matt.
Matt Knight: Yeah, I mean, there's an interesting school of thought on IPOs about sort of the ebb and flow of private company lives. I'm sure you've seen this like where in the 80s and 90s, the average private companies life before IPO was like seven years, right. And then in the.
com it went to like. Four. He's just went waiting, right? And then in the 20 teens, it got up to like 11 or 12, right? With SoftBank and [00:11:00] Fidelity and Wellington, Dragoneer and all these late stage companies with near infinite capital saying, stay private, don't deal with court, right? And so I wonder if there is now, I guess, an ebb, if that was the flow of people will go public faster, but the market just needs to go back to a war of attrition, right?
There is, right? For public tech companies, but who's the good one, the big one that's going to set the pricing and say, okay, there is the rest of us can get off the sidelines and start making moves, you know.
Chris Moreno: Well, I think if we think about the companies like strike, and we think about companies like, you know, and acquisitions that didn't go through the other big one in San Francisco plot.
Right. That didn't go through with visa got reversed. And so what will happen? We'll plan eventually IPO will apply, get acquired by someone else. What will happen? That's a good one. And then there's obviously obviously Figma. And for those who know, Figma was acquired by Adobe, the government, and I believe it was actually the government of Europe on one that one.
Right. So to your point, there's been some discussion about, companies [00:12:00] buying up these companies that are behemoths and they're owning the sector, right? Whether it's Yardi, a RealPage buying something up. I don't think they've had, I don't know how much difficulty that'd be interesting to like dive into in an episode is.
How hard has it been for a RealPager, Yardi or Entrata, et cetera, buying up has the federal government come in and said, no, you can't do that. And because that's been happening more and more. And so there's been a big discussion about that. But, yeah, I think there's definitely gonna be some people who will be in that range, again, I'm going to be bullish here. I'm very bullish on certain things; I'm very bearish in others. One of the things I'm bullish on is the person who steps out and goes into the arena, as they say, I think you're going to see, let's say they go out to market a lot of times, you know, some companies go to market and they go, we're hoping for a 40 billion valuation.
It drops day one to 20. Right. But other ones, right? Like Airbnb's jumped up and I think you're going to see the first companies, if they're sound companies with great ARR and sound leadership, and they've been honest and communicative and then they can get enough of the banks on board, right?
Whoever it is and [00:13:00] they go to market, I bet you, they're going to see an uptick. I see if they price it right. And I think that's the core thing is they price it realistic. They have support. Their ownership is bought in like a Brian Chesky at Airbnb who lives the brand travels the brand. I don't see him going anywhere for 20 years.
If you have the right company like that. That's a story. That's a story I want to invest in, usually I don't invest in individual stocks, but I would probably throw some money at that. So hopefully that helps. I kind of like, I think the person is going to break the ice and then on the acquisitions, we're seeing acquisitions happening.
I'm seeing them frequently. I'm actually helping with a couple of M&As right now. They are definitely happening. The problem to your point is nailing down the number and then who gets hurt. So the acquire right now is not the one who's going to get hurt. And whereas, so somebody has to get, you know, somebody wins and loses in certain negotiations.
You always hope everyone wins, but at the end of the day, not everyone wins. And oftentimes that can be later investors. Right. So you just had Loom just got acquired, right? Well, if I think Loom had been valued, maybe like one and [00:14:00] a half billion. And then they got acquired for about a billion. So obviously like there was an up round and people made a lot of money and then some people made a lot less money.
So that's how I kind of think about things is that, you know, maybe one person made a thousand times X on their return and someone else only made two times return. And I think the great thing is, is if people can make money, you know and then they can reinvest that money and they can continue to innovate. That's really exciting for me.
Matt Knight: I think one thing you said that resonates with everything that I see is you use the word story. And to me, fundraising, whether it's public or private, if it's pre seed or if it's, you know, a D round, it's always about the story, right. And telling the story. And what's interesting to me is sort of the human psychology of investing where there seem to be this 2010s. mentality of growth, right? We want these hyper growth tech companies because that's the best way to generate alpha for our shareholders, right? If I'm Fidelity and I'm buying a billion dollars of Airbnb stock, right? And now it's more the pendulum just, you know, whiplashes in the other direction. It's like, [00:15:00] well, all tech companies are fraudulent.
They're always overstating their growth metrics. They're never going to grow into their valuation. Let's just say no tech companies of any kind, right? Both of those mentalities are lazy, right? No more simplistic. There's nuance in the middle. And so to your point, what I hope we see, because this trickles down to the seed stage and the angel stage where you and I invest, is the savvy nuanced investor saying, Hey, yeah, this is a tech company.
Tech's been hit pretty hard, but I like their margins. I like their growth story. They haven't over raised. They've gotten their employee base right size. You know what I mean? Like that, what I'm saying is a story. That's a story, right? Like this has growth in the future that hasn't been maxed out by the private markets.
Let's get them public. And that's what I'm hoping. And I'm fairly positive is going to happen as much as I'm an idiot when it comes to public market. I think this is,
Chris Moreno: I am too. We're both idiots when it comes to public markets, but I, cause I think public markets are based on the quarterly system.
And I like to look more on the yearly system, you know, five year [00:16:00] system. And I think to your point, there's actually a couple of companies local, which I think seem to have pretty fairly solid fundamentals, right? I'm not close to them. I'm not in their companies day to day, but I look at a company like a pad split, right?
We know Atticus over there. You know, seems like they are doing something really transformational that Pippi really like, and they, he can, he's building very transparently there. So I, I look at that and I say, wow, he's transparent. He's sharing the challenges. He's sharing the the wins and the opportunities and the data.
And it's telling that story you're talking about. So he's someone who I think really stands out and is, has the opportunity. If he can sustain, that could be a big outcome. I think another one that stands out to me that we both know is saltbox. Right. And Tyler Scriven's over there, you know, his expertise and.
History of, of building companies and now building something in almost what I call the anti WeWork space. Right. But he's, he's got a sound business model and he's growing at the right speed and getting, you know, I think he did a tour across America and that's really exciting. And to see his [00:17:00] team and how bought in they are, and they're still bidding that sense of community.
So think about that story and how they share it. So I think there's several companies here where you look at Switchyards is another one, right? Another, I'm naming Atlanta ones cause I'm in Atlanta, but we can almost do like a city by city kind of break down, but I think about Switchyards and how they're again, my anti WeWork thesis.
We can go into another time is like, looking at how they're building that story starting slow building appropriately. Making sure they're profitable to your point and then bringing in the right investors who are value add, I think the biggest danger and no offense to WeWork and the team that was there, but they grew way too fast and they never had a path to profitability.
And that's why they went bankrupt. The faucet ran out. So, I liked that model. I think. That co working people have told me, Oh, see, now co working is dead because WeWork went bankrupt. And I say, absolutely not. Absolutely not. Like I'm seeing so many co working spaces who are benefiting Industrious, right.
Their friends over in Industrious or you know, there's Deskpass. There's all these companies. I think there's another one [00:18:00] called Codi. And so all of these companies are doing incredibly well. ATV that I'm standing right here is sold out. You cannot get a seat. There's a thousand seats. They're sold out.
They're opening a new downtown location. So, in my belief, it's about how you build it. It's not that there's, you know, I always say when someone says, oh, that was tried before and it didn't work. Great. Awesome. Let me get some of those learnings, right. But just because it didn't work, it doesn't mean it's wrong.
It means that it was poorly executed , or you ran out of money or you had the wrong people leading or you had different laws. So I was thinking about like. If it wasn't done before, well, at least someone tried let's learn what they did wrong. And oh, by the way, like look at Zoom, right? Who wasn't a video producer?
You had Skype, you had Google, you had all these people already doing it. Everything was against Zoom. Zoom should have never been successful. And now they lead the space. So that's how I kind of think in my mentality.
Matt Knight: I know you have a couple questions you want go over, but before I hand it over to you, I'm curious if you'll allow me a quick WeWork hot take, 'cause one of the things I hope we take from [00:19:00] WeWork is ignoring the arbitrage model they used is the idea of TIs that work for 90% of companies. Right? But because Goldman and Blackstone and McKinsey, they're gonna have waterfalls in their lobby and they're gonna have fancy build outs in their office space.
But for most people, like you and I, a quiet office, I can close the door, a clean bathroom in common area and glass walls to kind of separate office. That's fine for 90 percent of accounting and real estate and law firm. Like it's fine. Right. And I hope that the office sector learns that as like the custom TI package should be for about the top 5 percent of all tenants.
Everybody else should be okay with just basic space. And that that is truly transformative in office, regardless of how WeWork did if they can convince some landlords and tenants of that. I think that's a big change in my opinion.
Chris Moreno: I think what you just said aligns well with like multifamily, right?
So many companies go after the top 5 percent of buildings, right? They're going after class A new development that can afford it. [00:20:00] 95 percent of the market is not that right buildings become archaic after a couple of years. And you can't just continue throwing tens of millions of dollars without an increase in rent.
So, to your point, like, the same thing with Wework and all these others I think a lot about how businesses you can look at, you can cheat. Right. You can, even when you're building something new, you can look at another sector or another space and say, well, wait a second.
Our business actually very similar to that. Can we can we steal from that? I'm actually looking at some business models right now that are very similar to our locker model and like distribution and how they got to market it and pricing and , B2B2C models. But yeah, I think we could definitely go really deep into, obviously, like, taking Brendan Wallace's, you know, viewpoint at Fifth wall, right? And how they go about it. I definitely would love to get more from your brain on that you know, how you do distribution, how you think about, businesses that have already been done before and weren't successful, how you repackage those.
But I do want to ask you, Matt, if it's okay maybe we can have a deeper episode on CES. I'd love to get, you know, here if you're planning, I'm sure you're planning one. Could you share, since you were just there and it's fresh on your mind, I'd love to hear, was there [00:21:00] one thing at CES that maybe stood out for you?
That's exciting that maybe ties into what we're talking about, about the future of 2024 or even beyond that you saw at CES, or was there some kind of vision where there's, was there a topic or was there a company that stood out for you?
Matt Knight: The problem with CES is it's really a whole bunch of shows in one show, right?
There's an automotive component. There is a gaming component. There is big part of like, you know, curved TVs and stuff like that. And a lot of it's cool. It's candy land if you like technology, which I do. So it's a fun place to go. Let the little boy and you go play with toys. Right. buT the obvious one is AI and how you integrate AI with everything right now.
And everybody has their own GPT, which is interesting, but I go with a different set of eyes . I go to CES saying, what can we pull into real estate and construction? What is sitting there trying to sell to industrial or to infrastructure or to government or consumers that could be a good use case for our owner, developer, manager, [00:22:00] friends, right?
Chris Moreno: Yeah.
Matt Knight: And so the thing I saw is there's a million people doing IOT, right? Smart home stuff, which includes water. And tracking everything in your plumbing and your heating and , all those IOT sensors that are now pennies in Taiwan and, and Shenzhen. Yeah. There's a lot of around energy and energy storage battery innovation, which again is kind of interesting for smart grid and powering our buildings.
Energy was a big theme. And then beyond that, I think people are trying to find use cases for robotics. This is one of the few places in the world, you can really go put a robot on a floor and let it walk around, jump around, climb around. And so I spent a lot of time with robotics, different places, trying to figure out how it could apply to our use cases in real estate.
So I know that's sort of non answer, but yeah. AI touches everything. Everybody wants to talk about AI and everybody wants to show off their new flat screens and stuff. And that, that's kind of part of the course every year from what I hear, because this is my first year. But I [00:23:00] go trying to kind of bring our use cases and then people in their booth and say, have you ever thought about selling that to a construction firm?
Or have you ever thought about your fintech stack working on mortgages for commercial property?
Chris Moreno: Awesome. It was funny as you were mentioning this, I kind of think about these futuristic things, you know, like you talked about hardware, like whether it's robotics, like I really like robotics, I like hardware that you can play some mode on.
And I think a lot about to your point, we saw it during COVID. There was a complete pullback on humans being able to show up to work. And so those humans had to decide what they were going to work on right in that moment. So a lot of these things that we saw into the future became true. We're like, wait a second.
People do need help flipping burgers. People do need help cleaning toilets. They don't like cleaning toilets. So let's get them focused on the hallways and get robots to clean the toilets. Let's get robots to clean the side of buildings. Cause that's really dangerous. And insurance is really insanely expensive.
Right? So I think a lot about. So your point about robotics and [00:24:00] hardware, like you're kind of asking me about can it make money? It blows me when people say they hate hardware and they don't invest in hardware because to me, hardware is one of the biggest moats and lowest churn areas ever.
Right. It's incredibly expensive to install. It's incredibly expensive to remove, and they tend to have long life cycles. I think I actually, my water heater in my house lasted 17 years, if you can believe that. And we just got it replaced. It was incredible. And it only had like an eight year lifespan, which is nuts.
But I get really excited. And I think one company we could do a teardown on here in Atlanta is the A16z american dynamism. Their thesis revolves around hardware and around real estate, and they invested in Flock Safety. Flock Safety is a hardware business that is all SaaS, and they install every one of their products all over the country, and I think they're now valued over 5 billion.
Three or 4 billion here in Atlanta. So that to me is really, really exciting, really low churn and happy to go deeper on why I'm a big believer in hardware and software together.
Matt Knight: Well, I think [00:25:00] that's a full topic and maybe we can probably wrap it up to keep this under 20 minutes for our first episode. What let's do is let's get back together in a week or two, and let's just start with hardware. Cause that conversation, as you know, is nuanced and I don't disagree with you, but I think there's some qualifiers I would add to that as an investor who could be incorrect, but let's, let's wrap it there. And then we can kind of pick it back up when we talk in the next week or so.
Chris Moreno: Absolutely. Thanks Matt for having me on.
Matt Knight: Appreciate it, man.
PropTech Chatter with Chris Moreno