20VC Special The Real Estate Fintech OGs on Why This Is Not The End For The Bay Area and What Can Be Done To Solve It, The Pros and Cons of Working with Corporate Investors and How Leading Their Teams Has Fundamentally Changed in a COVID World

In a special episode of "20 VC," host Harry Stebbings interviews four pioneering leaders in the financial real estate market: Asaf Wand, CEO of Hippo Insurance; Neema Gamsari, CEO of Blend; Max Simkoff, CEO of States Title; and Brandon Wallace, cofounder of Fifth Wall. They delve into the unique challenges and insights of building companies in prop-tech and fintech. Wand emphasizes modernizing homeowner insurance, Gamsari discusses streamlining banking processes, Simkoff focuses on improving the mortgage closing experience, and Wallace highlights the importance of venture capital in real estate technology. They explore the impact of COVID-19 on remote work, the exodus from Silicon Valley, and the future of their industries. The conversation reveals the critical role of corporate venture capital, the evolution of leadership in crisis, and the importance of strategic investors to drive revenue and growth.

• Harry Stebbings introduces four guests who are founders in the financial real estate market.
• Asaf Wand is the founder and CEO of Hippo Insurance, which has over $700 million in funding.
• Neema Ghamsari is the founder and CEO of Blend, with over $665 million in funding.
• Max Simkoff is the founder and CEO of States Title, with $229 million in funding.
• Brendan Wallace is the co-founder and managing partner at Fifth Wall, with over $1.3 billion in AUM.

"Asaf is the founder and CEO at Hippo Insurance... Neema is the founder and CEO blend... Max Simkoff, founder and CEO, states title... Brendan Wallace, cofounder and managing partner at Fifth Wall."

This quote introduces the guests and their roles in their respective companies, highlighting their significance in the financial real estate industry.

• Hippo Insurance is setting a new standard for home insurance and focuses on today's homeowner.
• Blend is building a digital platform for banking products, streamlining the journey from application to close.
• States Title uses machine intelligence for a simpler and more efficient closing experience in real estate.
• Fifth Wall is the largest venture firm focused on the real estate industry and property technology.

"Hippo are setting a new standard for home insurance... They are building the digital platform, streamlining the journey... States title are using machine intelligence to create a vastly more simple and efficient closing experience... Fifth Wall are the largest venture firm focused on the real estate industry and property technology."

These quotes describe the mission and impact of each company represented by the guests, emphasizing their innovative approaches to the financial real estate market.

• The founders have learned from each other that there are multiple paths to success.
• Asaf Wand emphasizes a customer-centric approach.
• Max Simkoff values operations and sales, and highlights the importance of naivety in entrepreneurship.
• Brendan Wallace has learned about persistence, corporate bedside manner, and the potential for startups to buy entire businesses from corporates.
• Neema Ghamsari discusses the debate on whether to work with corporate clients or go direct to consumers, and the different strategic focuses each founder has.

"I think the interesting thing that's going on is that you learn really, really fast and soon. There are a lot of ways to be successful."

This quote from Asaf Wand encapsulates the shared understanding among the founders that success can be achieved through various strategies and that learning from one another's strengths can enhance their companies.

• Fifth Wall's sector-focused strategy involves partnering with corporate real estate investors and early-stage proptech businesses.
• Brendan Wallace has learned from investing in the founders' companies and their different approaches to the industry.
• Max Simkoff's actions demonstrated the unforeseen potential of strategic partnerships between startups and corporate investors.

"Given mean, kind of max touched on like we just learned a lot through investing."

This quote from Brendan Wallace acknowledges the learning experience gained through investing in companies like those of the other guests, which has expanded his understanding of the industry's possibilities.

• Early debates at Blend about whether to work with banks or go direct to consumer.
• The founders often discuss configurations for solutions to reach the market faster.
• Each founder has a unique strategic focus, from distribution to creating a delightful homeownership journey to removing friction from home buying and closing.

"The guys on this thread, Brendan, a little different. Different just because he's a venture capitalist. No offense, Brendan, but the guys in this know because we're so ambitious and we have so much in front of us, and this industry is still so much, I would say the real estate industry is so nascent."

Neema Ghamsari's quote reflects on the dynamic and ambitious nature of the founders in contrast to the traditional venture capital industry, pointing out the unique challenges and debates they face in a nascent real estate industry.## Venture Capital Fund Internalization

• Venture capital funds invest in dynamic, thoughtful, and outlandish individuals.
• The funds operate with a consistent investment strategy but learn from the CEOs they work with.
• There is an emphasis on adopting the ambitious approaches of the CEOs in their own business practices.

So a lot of what venture capital funds do is they invest in the most dynamic, thoughtful, outlandish people and they do the same thing every day of the week. We've kind of learned a lot from our ceos in different ways from everyone on this call.

The quote explains that venture capital funds consistently invest in innovative people and also take lessons from the CEOs they back to improve their own operations.

• The reality of an exodus from Silicon Valley is acknowledged, with debate over whether it is a permanent shift or a temporary one due to COVID-19.
• The discussion touches on the unique qualities of Silicon Valley, including its academic institutions and historical significance in counterculture.
• There is a call for those leaving Silicon Valley to engage positively with their new communities and not disparage the Bay Area on their way out.

The exodus from Silicon Valley is real, certainly if you follow Keith Raboy's Twitter.

This quote acknowledges the observable trend of people leaving Silicon Valley, which has been a topic of discussion on social media platforms like Twitter.

You cannot take that out of this region. This area is going to only get stronger as a result of the dynamic change that's going through.

The quote reinforces the inherent strengths of Silicon Valley, suggesting that despite the exodus, the region has enduring qualities that will continue to foster growth.

• Silicon Valley can be an echo chamber that overlooks significant industries, such as Proptech.
• This echo chamber effect can lead to venture capitalists and entrepreneurs focusing too much on solving local problems rather than broader issues.
• There is an acknowledgment that while Silicon Valley has problems, there is also a desire for community engagement to solve these issues.

There's an echo chamber that exists in Silicon Valley that has actually perpetuated some of the problems in venture capital in the Bay Area and overlooking huge categories like Proptech.

The quote points out the insularity of Silicon Valley, where a narrow focus can lead to missing out on investment opportunities in important sectors.

• Silicon Valley's strength lies in its networking effect and the concentration of talent.
• The ability to find experts in various growth stages and fields is unparalleled in Silicon Valley.
• Though there are other valuable locations, Silicon Valley remains a prime location for scaling a company due to the available expertise.

I think the power of Silicon Valley is about the networking effect and the level of talent that you have at any given point.

This quote emphasizes the networking effect and talent pool in Silicon Valley as key factors in its ongoing success and influence.

• The timing of the exodus coinciding with a wave of IPOs and liquidity events raises questions about whether tax considerations are a driving factor.
• There is a consensus that taxes may play a role in the decision to leave Silicon Valley, with individuals moving to states with more favorable tax laws.

I'm sure it's correlated.

The quote suggests that there is likely a correlation between tax implications and the movement of individuals out of Silicon Valley.

• The advancement of remote work tools has made it possible for employees to work effectively from various locations.
• The cost of living in the Bay Area has become prohibitive for many, influencing decisions to leave.
• Employers are recognizing the need to provide flexibility and are considering the implications for future hiring and company location.

The amount of innovation that's happening there now, most of it's just like copycat, me too type things, but there are some really powerful, innovative tools that mean that people can work not as effectively, but almost as effectively from anywhere in the country, maybe anywhere in the world as they used to be able to need to go in person.

The quote acknowledges the growth in remote work tools that has enabled people to work from almost anywhere, reducing the need to be physically present in Silicon Valley.

• Leaders must adapt their communication strategies to maintain company culture and engagement in a remote environment.
• Transparency and open communication have become more critical.
• Remote work has challenged the traditional ways of infusing company culture and solving complex problems collaboratively.
• Leaders are finding new ways to connect with employees and maintain the pulse of the company without in-person interactions.

You need to be a lot more thoughtful on external communication with the company.

This quote highlights the increased importance of deliberate and effective communication within companies as a result of the shift to remote work.## Real Estate Market Dynamics During Crisis

• The real estate market experienced a pause in March and April, which was a humbling experience.
• Companies had to adapt by being candid with employees about the lack of new information and the potential worsening of the situation.
• Transparency and honesty in communication were valued by employees during this crisis period.

"The experience that I think all of us went through last March and April around the real estate market, basically being on pause, that was pretty humbling."

This quote reflects on the impact of the COVID-19 pandemic on the real estate market and the speaker's realization of the situation's seriousness.

"We did weekly all hands calls where basically the purpose of the call was to tell people that we had almost no new information."

This quote illustrates the approach taken by the company to maintain open communication with employees despite having limited updates to share.

• Leaders often have to wing it during crises, contrary to the belief that they always have a specific strategy.
• Sharing the reality of the situation with the team can be reassuring.
• Regular updates, even if they contain no new information, can reinforce communication and trust within a company.

"In times of crisis, people like to assume that leaders have a very specific strategy, and they've mapped everything out and they know what to do. And the reality is we're just winging it."

This quote emphasizes the misconception about leaders always having a plan and the reality of improvisation during unforeseen circumstances.

"People knowing that you don't have the answer, you're not delivering them to the promised land... I felt like it reinforced a lot of the communication lines in the company."

The speaker highlights the importance of honesty in leadership and its positive effect on internal communication within the company during a crisis.

• Building intimacy and trust with founders is challenging, especially over virtual platforms like Zoom.
• The COVID-19 pandemic has led to existential questions for commercial office buildings and cities.
• Real estate owners are recognizing the necessity of technology integration as an existential component of their business, not just an enhancement.

"The hardest thing in venture is how do you build that intimacy with a founder."

This quote discusses the challenge of creating a close relationship between investors and founders, which is crucial for successful partnerships.

"We're seeing real estate owners for the first time since starting fifth wall four years ago, recognize that tech is no longer a nice to have... It's actually existential to your business."

The speaker points out a significant shift in the real estate industry's attitude towards technology due to the pandemic, with tech now being seen as essential for survival.

• The increased awareness and adoption of technology by corporates in real estate has changed investment strategies.
• There is a need for highly specific, verticalized product offerings for different subsectors of real estate.
• The capital influx into property technology (prop tech) has led to a stratification of the industry, with different needs for different real estate subsectors.

"We've never seen corporates take a more forward posture on tech and tech adoption."

This quote reflects the urgent and proactive approach corporates are now taking towards technology in real estate.

"The difference in the needs and the requirements of real estate companies is getting more broad."

The speaker notes the diversification within the real estate sector, which requires tailored technological solutions for each subsector.

• The most valuable investors are those who can help a company gain more customers.
• Raising capital is a challenging process, and the public perception of it is often more glamorous than the reality.
• Strong investor relationships are crucial, and alignment of interests is key, especially in later stages of funding where long-term commitment is necessary.

"The most important thing for us as a business... is our customers. And so if I can find at any point in the journey investors who can help us get more customers, that's the most valuable thing."

This quote underlines the importance of investors who not only provide capital but also add value by helping to acquire customers.

"I would agree completely with NeMA that the most valuable investors you can have are those that produce revenue."

The speaker concurs with the previous statement, emphasizing revenue generation as a primary solution to business problems.

• Entrepreneurship is portrayed as more straightforward and successful from the outside than it is in reality.
• As companies scale, they face different challenges, such as meeting quarterly targets and driving innovation.
• The journey of entrepreneurship is not consistently upwards and to the right, and securing the right funding is often difficult.

"From the outside, it always looked like it was very, very easy, and people are throwing money at you."

This quote addresses the misconception that raising funds is easy for successful companies, contrasting it with the actual difficulties faced.

"It's not getting easier. It's hard work. It's never up until the right. It's not easy to close the right funding and the right round."

The speaker clarifies that the process of scaling a company and raising funds remains challenging, regardless of the company's stage or success.## Contrarian View on Corporate Venture Capital

• Corporate venture capital can bring immense value and be a game-changer for early-stage companies.
• Corporates, left to their own devices, often make poor decisions without proper guidance.
• Fifth Wall, as an early investor in companies like State Title and Hippo, faced initial skepticism from corporates.
• Corporates need chaperoning to direct their potential value effectively.
• Working with corporates can be challenging due to different incentives and a stigma associated with corporate venture capital.
• Corporate venture capital has network effects, with strategic LPs providing access to significant market share.
• Corporate venture capital is hard and requires meticulous effort to be done well.

"While they have all this potential left to their own devices, corporates will make terrible decisions."

This quote highlights the need for strategic guidance when corporates engage in venture capital to avoid poor decision-making.

"It's not that corporates are kind of running towards the light on their own. They need like, chaperoning to make sure that all that value doesn't get misdirected."

The quote emphasizes the role of experienced investors in directing corporates to make valuable and strategic investments.

"These things have network effects... we have four of the top five home builders as strategic LPs in our fund."

Brendan Wallace points out the cumulative benefits of having multiple strategic partners, which can amplify the network effects and value for entrepreneurs.

• Max Simkoff's favorite book is "A Heartbreaking Work of Staggering Genius" by Dave Eggers, which he admires for its story of overcoming tragedy and building community.
• Max looks up to Barrett Tone, former CEO of Expressscript, for his impactful leadership and value creation across all stakeholders.
• Nima Ghamsari values optimism and persistence in the face of long sales and implementation cycles, and the need to stay focused despite challenges.
• Asaf Wand prioritizes resilience, risk-taking, and independent thinking as traits he wants to instill in his children.

"A heartbreaking work of staggering genius by Dave Eggers... a story of somebody's experience through tragedy and then rebuilding community in the Bay Area."

Max Simkoff explains his admiration for the book and its narrative of resilience and community-building.

"I would say Barrett Tone, who was the founding CEO of Expressscript... building a business that delivers amazing value for all stakeholders."

Max Simkoff expresses admiration for Barrett Tone's leadership and his ability to create a successful and impactful business.

• Corporate investors are a significant and growing part of the venture capital ecosystem, representing 45% of all dollars into venture capital.
• There is a common misconception that corporate investing is easy and that corporates represent a small percentage of the venture ecosystem.
• Brendan Wallace predicts that corporate venture capital will constitute more than half of the venture ecosystem in the next decade.

"Corporate investors represent 45% of all dollars into venture capital... I expect that sometime over the next decade it'll be more than half."

Brendan Wallace dispels a common misconception by revealing the substantial and increasing role of corporate investors in venture capital.

• The role of a board is to provide corporate governance, including hiring and firing CEOs and approving budgets.
• Outside board members and advisors help mitigate bias and provide different perspectives.
• Jerry Chen from Greylock is highlighted as an exemplary board member for his willingness to understand the business deeply and provide thoughtful, credible advice.

"The real reason is corporate governance and the role of a board is to hire and fire a CEO and approve the budget."

Asaf Wand discusses the fundamental purpose of a board in corporate governance.

"Jerry Chen from Greylock... He will actually go and understand the business, understand from first principles the problem, and make suggestions that are super thoughtful."

Nima Ghamsari appreciates Jerry Chen's deep engagement and thoughtful contributions as a board member.

• Proptech has grown five times in the last four years, and significant enterprise value has been created on the call.
• Proptech is expected to grow ten to 20 times from its current state, disrupting the largest industry in the United States with technology.
• The entrepreneurs on the call are seen as beneficiaries of the future growth in proptech.

"Proptech is ten to 20 x from here. And everyone on this call I think is going to be a big beneficiary of that."

Brendan Wallace predicts a substantial growth trajectory for proptech and the entrepreneurs involved in the industry.