Lisa – Welcome to the Atlanta Startup Podcast, the briefing room for the innovation ecosystem. I’m Lisa Calhoun, your host and general partner at Atlanta venture capital firm Valor Ventures. On this show, I bring you the investors, the founders, and the activators creating the fastest emerging venture capital ecosystem in the country.
Zak Schwarzman from Metaprop–it is such a pleasure to have you on the Atlanta Startup Podcast. Thanks for joining us!
Zak: It is a total pleasure to be here. Thank you for having me
Lisa: I hear that even though you’re in New York City, you’re a huge fan of Atlanta. Do I have that right?
Zak: Yeah, we have some existing investment activity in Atlanta. We’re always interested. It is a thriving ecosystem that we are paying a lot of attention to.
Lisa: Metaprop is a very specific type of venture capital firm. Tell us a little bit about the background at Metaprop, what you’re looking for, what you invest in. Y
Zak: We are a fairly specific kind of investment for we’re sector specialists. So everything that we invest in is a tech that is related to the real estate industry in one way, shape, or form. It’s what these days is known as
. Within the category, we are the most active investor around. We’ve now as a team, done over 115 deals in this space. So really most prolific by by a long ways.
Our bread and butter has always really been the early stage. So we are generally going to be between pre-seed and Series A investors. We’re often the first institutional money into a company but we focus really on everything that might fall within prop-tech. So we look for technology companies, be they software IOT, marketplace, software-enabled service, et cetera, that are going to impact every type of property in real estate. So it could be single-family homes, it could be apartment buildings, it could be office or retail, or it could be logistics and warehousing, it could be parking, et cetera, et cetera. And we want to find tech that’s going to touch every job or task that a real estate professional performs throughout the entire life cycle of an asset. So from the initial way that a new project is conceived of design plan to the way it’s built and developed, the way it’s brokered, the way it’s financed, the way it’s managed, the way it’s eventually disposed of, we want tech that’s going to help professionals do their jobs better, faster, cheaper, and we want tech that’s gonna more alter the nature of how those jobs are performed going forward.
Lisa: When you’re looking at your geography of investments, 115 investments, how does Atlanta pop up on your map where you see it in the whole larger prop-tech universe? Do we have a bit of a game there? Are we a laggard? Are we a forward player? How do you see it?
Zak: Great question. We are HQ in New York just to sort of set our, our grounding where our feet are. But we have always taken a very broad approach to the space. I mean, both in terms of the mandate that I was just describing, sort of the range for companies and also where they’re located. Most of our investment activity is in North America focused. But within there we view this really as an emerging market opportunity in terms of the sector. And in an emerging market, we don’t think that anyone’s crystal balls good enough to say, Hey, not all the opportunities are going to come out of New York.
We’ve invested a lot in New York. It really is the most active market for prop tech. You have the second largest venture capital ecosystem and the largest global real estate market. We’ve invest a lot in the Bay area.
We now have two portfolio companies in Atlanta. We’re looking for more.
We’ve invested in Florida, we’ve invested in, you know, the Denver Boulder area and we’ve invested in a lot in between Omaha, Nebraska, Chicago, you name it. So we are very interested in and very welcoming of opportunities that are coming out of Atlanta or another ecosystem.
Atlanta specifically has some advantages over any place else, you know, in in the country, just in terms of its intellectual capital base. Its industry base. You know, there is a lot of active development as, a sort of the hub that Atlanta is. So it has a very active real estate community there. And I think all those things play into strengths for projects.
Lisa: The Southeast I think is the region that’s growing double digits in the United States. And so hopefully that plays a rising tide lifts all boats. Why would an Atlanta founder in prop tech want to work with you? What is kind of the secret sauce, the Metaprop recipe that’s you know, attractive in the Atlanta geography?
Zak: We have a fairly straightforward answer to that. We are sector specialists and one of the advantages to being a sector specialist is you can basically design a platform offering in your entire organization to be particularly helpful to companies specifically within your sector.
Lisa: If we can, like, if this works, I’d love to use an Atlanta startup that you’ve invested in as a lens to understand how you work with companies and why an Atlanta founder might want to work with you.
Zak: Absolutely. So let’s start with the other side of our organization. So I described our investment scope as being a fairly broad, our capital base is really a mirror image of that scope. So our own investors, the limited partners in Metaprop funds, the foundational layer of that group is really folks who represent the real estate industry proper.
So in aggregate, they represent about 15 billion square feet of real estate around the globe. That is going to touch every property type and it’s going to touch every one of those real estate value chain categories that we were describing. So they’re their investors, their developers, their operators and property managers. They’re the large brokerage and services firms. So the CBRS, Cushman and Wakefield’s JLLs of the world all invested with us to really keep their finger on what’s next, right. A pulse of what’s next in prop tech and show in a lot of ways we represent because we’re the very early stage layer of the investment market here, we represent a filter for those organizations whose CTOs and CIOs inbox these days is full of pitches from prop tech companies and they need a buddy to help them figure out where to pay attention and where to archive.
Right. so we provide that role and then we’re able to provide a lot of distribution into that LP base and everywhere else. We also have a lot of weapons at our disposal in terms of providing visibility beyond that LP base to our startups. So we run the largest prop tech-focused conference. For this industry, we do the innovative programming around the world, the global startup competition, et cetera.
Lisa: And your conference when, where, what’s the next going to be?
Zak: Oh, sure. So we run with an organization called [inaudible], which is the largest events producer for the real estate industry. We run a conference called MIP PropTech here in New York. It is the crown jewel of a broader New York real estate tech week that happens with about a dozen events here and mostly Manhattan and Brooklyn. That conference is now two days and tracks a couple of thousand people and it will be coming up in November.
So we have that and we wrote quite literally the book on this space PropTech one-on-one bestselling book for the space. We have a lot of places that we can go to put our on stage and get them visibility. And then the other piece of this, which is a little more programmatic, is we have like many venture firms build out a platform effort. Meaning, we’ve hired folks on our team who specifically provide services to our startups, but we contextualize all of that for prop tech companies. So what that means is, you know, there are a lot of firms out there that can help you say you find an engineer or even a CTO, we can help you do that, but we will be the best in the world at helping you find a head of business development who knows how to sell into multifamily leasing offices.
We can help get you in TechCrunch for your funding announcement, but we will be the best in the world at getting you into Crain’s or another real estate publication where your customer base actually looks. And similarly, we have a pretty robust business development function for real estate internally here at Metro property. And so all those are, you know, in advantages where if you’re an early-stage prop tech company, you’re looking for an advantage in a market where visibility and distribution have historically been challenges for a relatively tech-averse industry that’s just now catching up. We can really provide gas for the fire.
Lisa: So there are a lot of prop tech startups. Even at Valor I get a lot of pitches . . . So how do you determine a great pitch? I mean, that’s gotta be hard and you’re looking at the very earliest stage.
Zak: It’s true. You know, it is one of the reasons that we think that that early stage is particularly in a, a really nuanced industry like this. I had very relationship driven industry is, is sort of the most durable and defensible place to play is because you, you have no forward reference point, right? You have to be the first filter. And so we’re looking through, you know, easily 50 plus companies at this point a week for formal first pitches and
Lisa: 50 a week, let’s like 10 a day are, you know, are weekends just as productive as weekdays?
Zak: I would love to push forward the idea that my weekends are just as productive as my weekday is, but it’s not quite true. Just as a point of reference, this is an industry that historically received next to no venture capital investment. If you rewound at 2013, which at that point was a banner year for this industry. First of all, there was no buzzword prop tech. There were no PropTech specific fronts. That stuff didn’t exist. But you were talking about roughly $500 million that was invested in the sector in 2019. It’s up over 10 billion. Right? So this has exploded out of nowhere. The customer base has woken up. But that all is dodgers… your question is how do you actually tell the good from the bad.
A lot of what we do is spend our time with the real estate community prop or whether there are LPs or, or circles. Beyond that understanding from them, you know, what is really, what would really drive value for you? What do you wish that you were seeing that you didn’t? And we engage our LPs similarly very early on in our diligence process. So we’re able to make introductions early on in diligence that will be helpful as a potential customer introduction to the prospective portfolio company, but also serve a diligence function for us. And through that process we can continue to hone and get, you know, in near real-time beat on what the market’s looking for.
Lisa: That’s one of the tricky parts of investing we know well from Valor. You know, you have to balance somebody from a potential customer saying, Oh that’s interesting, but I’m not sure if I’d use it. You have to always append the little parenthetical…right now. But what about two years from now? What about four years fro, now? When it is a little more industry standard, would you start to adopt? And so that’s where a lot of the, you know, the art of investing lies is trying to interpret that feedback.
Zak: It’s definitely a balancing act.
Lisa: Few visionary customers exist. Early adopters do and they’re not always employed at that moment in that firm. It’s very, very interesting. You’re right. So tell me about an Atlanta investment you made recently. Just kind of walk us through a little bit what they do, what you love.
Zak: Sure. So we are investors in a company called Saltbox out of Atlanta. Soapbox is they’re effectively co warehousing and logistics for firms that as the, CEO Tyler Scriven puts it in, not the carpet class of workers that might go to a traditional coworking space of which there are many but they are in the concrete class. They have physical goods products, maybe they’re small e-commerce providers you know, eBay sellers, folks who are doing you know, distribution operations or field operations for a pharmaceutical company, something like that. They come in all different flavors, but they’re very, very underserved by the market in terms of both office space and infrastructure to integrate with well office space warehousing space. They can flex with their growth and needs and then the infrastructure layer to help plug them into the global supply chain to do all the photographing of their items, to do the shipping and logistics work that goes you know, hand in hand their business. And so Saltbox really came about as a solution or uniquely built for that set that would allow you to have, say, you know, a hundred square foot building, three-quarters of which would be warehousing that could flex up and down with your needs, a quarter of which would be office space. And then you would have a software and services layer layered on that is all about logistics integrations. And you can you can have a separate as sort of separate revenue stream for that.
Lisa: Way back Atlanta was originally called Terminus. Because of the logistics. Do you think that Atlanta has informed that vision at all or do you think it could have popped up anywhere?
Zak: I think Atlanta is particularly conducive to it. You know, the background and Tyler’s background and his founding team, which was really quite complete at the time that the company came together. You know, it was pedigrees from places like, you know, Palentier and Stripe in the Valley. And these were generally folks who had been in the Valley of, or New York, and they’d chose to move very intentionally to Atlanta. They each did various things there, but Tyler had been an early investor and then taken over a concrete class business. It was a physical hair extensions business. That was sort of, you know, the direct to consumer in that regard. And so he was solving his own need, but it was a business that, you know, had been headquartered in Atlanta.
It sort of made, you know, it, it made you know, sense that you could start a business. I got the traffic and physical goods as opposed to, you know, just, just bits outside of the Valley. And then you could see the need of many other entrepreneurs that might for a similar solution because there were more folks with, you know fast-growing, say ecom businesses, et cetera, as opposed to building more of the digital SAAS, you know sort of product that would be more common in the Bay area or even in New York where land is so expensive and goods are so expensive to operate that that, that kind of business was more you know, commonplace in Atlanta I’m not sure is is an accident and so you could see more customer needs staring you in the face because this group was so underserved. I mean these people are usually taking out, you know, maybe an office here and then they’re using self-storage. I think somewhere in the order of 20 to 25% of self-storage is used to inventory the kind of goods of these people should be able to keep it in a flexible, small footprint, you know, warehouse facility.
Lisa: Let’s dive into the Zack attack approach. So you come to Atlanta, you come through the airport. I imagine like most of us do. And then where do you go? What part of town do you hang out in? Do you have a particular coffee place, a coworking space? I mean, what is, what is your Atlanta routine like?
Zak: I’m not sure I really have a routine at this point and I’ll actually be down on Thursdays and maybe I’ll be, you know, helping develop one. I would be eager for your recommendations. I remember I had spent, when I was spending more time in Atlanta, we would do a mix between like Decatur and was it, five points? We would sort of be in that area. But I, you know, I haven’t been regularly spending as much time as I would like to. Now that we have a couple of portfolio positions is there, I’d like to be spending more time.
Lisa: One of my favorite things to share with investors, really anyone, but I give a special lens with investors, is, walk the BeltLine. Start somewhere super easy. You know, there’s a lot of different places. Park Tavern is one that has parking and other one is parking over at Studioplex or Krog street market. And then just walk up the BeltLine. You walk past so many amazing Atlanta companies like Cardlytics or MailChimp and also so many young, passionate startups. Just in a couple of linear miles you can pick up so much information. It feels like a quarter to a third of the software developer audience in Atlanta also walking at various times. And it’s just a real pleasant way to see the city and, and feel a core of the city.
Zak: I very much appreciate that recommendation and as we’re recording this, it’s January in New York. So the idea of walking anywhere outside for a little while is great.
Lisa: It’s 65 here. So let me ask you, I know you’re still getting your feet wet in Atlanta, two investments, looking for more … who is one person in Atlanta you think every investor should meet someone that’s been helpful to you so far?
Zak: This is an industry of nodes, right? Your network is only so big. Your knowledge base is always only so big, and so you’re always on the hunt for, whether it’s in domains, whether it’s in geographies, et cetera. You know, who are people who you feel are really tapped into the local ecosystem and are your first phone call? You know, forgive me for appealing to the host, but I would say you are very much that person for me. We’ve gotten to know each other over the last couple of years through Kauffman and outside and you know, there is nobody I would call before you in the Atlanta ecosystem.
Lisa: Yeah, I’ve not paid you for this endorsement, but …
Zak (laughs): I’ll tell you my Venmo after this. But you know….it’s absolutely true. It’s you. And I am grateful as I continue on in this industry to have more and more people like that in different cities that you can reach out to and say, you, you know, you are a real specialist here the same way people call us for, you know, a second or first or second look at anything in the prop-tech world. I would call you for anything in Atlanta.
Lisa: Thank you. Well, I appreciate that. I’ll, I’ll try to live up to that expectation and I’m excited to see you in Atlanta more often. So given that you’re going to be here Thursday and regularly back for board meetings, what’s the best way for PropTech founder to reach out and contact you and get on your radar?
Zak: Email is probably the easiest first initial last name at metaprop.vc. So it’s the Schwarzman which is a S C H w a or Z, M a N at meta prop, M E T a P R O P. Dot. V. C.
Lisa: All right, well look for some inbound from Atlanta and look forward to seeing you here. Thanks for your time today.
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