Kylie Davis: (00:00)

Welcome to The Proptech Podcast. It's Kylie Davis here, and I'm delighted to be your host as we explore the brave new world where technology and real estate collide. I passionately believe we need to create and grow a sense of community between the innovators and real estate agents and sharing our stories is a great way to do that. Now the aim of each episode is to introduce listeners to a PropTech innovator who is pushing the boundaries of what's possible. And to explore the issues and challenges raised by the tech and how they can create amazing property experiences. And my guest in this episode is someone for whom I've had a huge fangirl crush for many years. Clelia Peters is an innovator, operator and investor working in the real estate industry, now at Bain Capital Ventures. They're clearly a profounded MetaProp, a 40 million seed stage venture fund focused exclusively on real estate technology, and one of the first sector specific funds that was focused on PropTech.

Kylie Davis: (01:03)

In addition to investing in real estate technology Clelia currently serves as president of Warburg Realty, acting as a key advisor to her father, CEO Frederick Warburg Peters in managing and growing New York's only remaining independent mid-size real estate brokerage. Clelia is also editor at large for the Inman Conferences, where she acts as a moderator at the leading events series focused on the future of the residential real estate industry.

Kylie Davis: (01:31)

Now, this is actually the audio of the interview that I did with Clelia for the Inman Connect Now conference, which was the virtual conference held just a few months ago. I've had few personal things happening in my life at the moment that have made it difficult for me to coordinate interviews for the podcast. But this is a great interview packed with some insightful information on global PropTech trends, the global investment appetite, and what's coming, and also how it's all shaken down with COVID. So I really didn't want you to miss it. So please forgive the Inman references and enjoy. Clelia Peters, welcome to Inman Down Under.

Clelia Peters: (02:10)

Well, thank you. I'm delighted to be speaking to you.

Kylie Davis: (02:14)

And I think you are actually our very first interview for Inman Down Under, so we're super excited. So tell me what's been going on in your life. You started a new job this year at Bain Capital. Is MetaProp still going or what's the story there?

Clelia Peters: (02:29)

Yep, so MetaProp is still going strong. For those who don't know, I, in addition to being involved with running my family's residential real estate brokerage helped to co-found a PropTech focused venture fund MetaProp. MetaProp is really focused on early stage investing, so seed an A. And as I got more and more passionate about PropTech, I was interested in, I think being somewhere where I had to maybe a broader reach. And so I had the opportunity to join Bain Capital as a venture partner, almost like an investor in ... Oh sorry, entrepreneur and resident, but as an investor to help them build out their PropTech platform and they're a multistage fund. So they invest, sometimes as early as seed or A, but they go up to kind of D and sometimes beyond. So, write checks from two million to sort of 200 million [crosstalk 00:03:26] and given what's going on with PropTech, that was really interesting for me.

Kylie Davis: (03:31)

So, what are you seeing in the PropTech space over since the ... Well, the last time I saw you was at the conference in Vegas, but what have you been seeing over the last sort of 12 months or so that's going on in the space?

Clelia Peters: (03:47)

Yeah, well I think, probably given where we are in the world right now, there's a kind of like up until COVID and post COVID. What we've seen broadly in the past 12 months, I think even, and during through COVID has been continued interest in the PropTech space, continued investments. In 2019 PropTech was the fastest growing area of sector specific investing in venture. And I actually think we will continue to see active investing in the PropTech space, both during this period that we're directly affected by COVID and coming out of the period as well. Because I think that the property industry is clearly going to be an industry that will be impacted both positively and negatively by what's happening now.

Kylie Davis: (04:42)

I know that the story over here in Australia has been that the period of COVID has actually been a period of extraordinary adoption of a lot of the tech because a lot of it, all of our agents went into lockdown, open for inspections were not allowed to be happening. And so basically people were scrambling for answers and a lot of the tech guys leaned in and there's been a lot of solutions out there.

Clelia Peters: (05:08)

Yeah, I think that's the case across the board. I think that people have really been moving more towards the digital transaction model. In general, what I've said with COVID is that I think that COVID in many cases has just served as an accelerant. So it's basically taken trends that were already existing and it's just made them move much faster. So we saw a number of these trends. Trends towards the increasing development of an end to end platform for residential agents. Trends towards, in particular the synthesis of kind of all the different parts of the closing of a transaction coming together in platforms, sometimes together with almost FinTech style tools that would facilitate the closing. I think we've seen the new entrance in the market. iBuyers, integrated players, and I do think that COVID will accelerate consumer engagement with those new platforms and will accelerate the adoption of digital platforms by real estate agents.

Kylie Davis: (06:25)

And so what does that mean in terms of the investment environment for PropTechs at the moment, because there's been a lot of talk about anxiety with investors and economic shakedown. And so what do you think is going to be the economic and the funding impact on PropTechs?

Clelia Peters: (06:47)

Yeah, so let me start by making some general observations about things that I think are going to happen in the venture space broadly. And then we can talk specifically about the way I think it will impact PropTech. So broadly in venture I think you're going to see a couple of different trends. One is that this is going to separate kind of the good to very good companies from the sectional companies. That we've had a very active venture market in the last three to five years, there's been a tonne of money in venture. And it's important to note that there will continue to be a tonne of money in venture for at least the next 12 to 24 months. The investments that people make into venture funds they can't pull out as a result of economic activity. So we have a very well capitalised venture environment, and that is going to remain true for the next couple of years, until you start to see people try to raise follow-on funds.

Clelia Peters: (07:46)

And I suspect that when that happens, people will struggle more to raise money for venture capital, but that will be a couple of years before that happens. So right now there's still a lot of money out there. I do however think that both some existing trends, what had happened with me work, kind of the fact that we had a number of let's say disappointing IPOs last year has meant that people are really focusing more on business fundamentals. That we went through a period for the past, I would say like five to seven years really peaking in the early 2019, where the focus was on growth at all costs, acquiring users, really buried little kind of looking below the hood at profitability at the long-term prospects for the company. And I would say that is increasingly out of favour. People are looking for companies that have good unit economics that have a path to profitability, and that just makes sense as businesses.

Clelia Peters: (08:51)

So I think if you fall into that category, you are actually in a very good position right now, and we're continuing to see competitive rounds with really like pre-COVID valuations for companies that are in that category. I think if you're a company that had been relying on venture to fuel your growth for the next couple of years, while you almost like back solved for what your business model or path to profitability would be, you're going to find yourself in a much more compromised position. I also think that that will translate into, it will be a good time to raise early stage money, seed an A, because people will kind of anticipate that that's the period in which you'd be wandering around, trying to find product market fit. You're be doing a lot of exploration. That's the like you're trying to start a fire period, not you're pouring gasoline on the fire.

Clelia Peters: (09:54)

So I think that people will continue to invest in spite of the broader economic environment, because you can kind of start a fire in any environment. I think that what's going to be much more of a challenge is companies that are almost going for series B or even series C and have not quite proven that traction, don't have that unit economics, those unit economics down path, and they might have been facing a more forgiving venture world or been anticipating a more forgiving venture world based on the track record of the past couple of years. And I think they're going to find themselves in a very challenging position.

Clelia Peters: (10:36)

And then I think companies that have almost braved the gauntlet are already series C and beyond, our really scaling big profitable businesses are also going to see a lot of competition around their rounds. And that's going to be across the landscape and certainly that is going to be true for PropTech as well. And you know, what I would say is in general in PropTech right now we have companies sort of more in seed A, kind of B, somewhat moving into C. There are very few PropTech companies that have raised, let's say upwards of 115 million or $200 million are looking at series D. But if they are, they're generally deals that people are very interested in right now.

Kylie Davis: (11:22)

Wow, okay. And so it's not the only ... COVID isn't the only influence that's going on inside the market at the moment. We're also seeing what's a lot of changes at SoftBank and WeWork, let's talk through some of what those are [inaudible 00:11:44].

Clelia Peters: (11:45)

I mean, two points that I was making before. I think that it had been a more conservative venture landscape in the past six months, then probably in the past kind of two to three, maybe even three to five years prior. And that has to do, I think a lot of the assumptions that people in the venture community have been making about the appetite in the public markets for these type of risky companies are companies that grown enormously, but still don't quite have a clear path to profitability. The public market has pretty clearly indicated to the venture community that they are less, the public markets are less interested than the private markets in those types of companies. So I think that people were already reassessing the way they were investing with that lens.

Kylie Davis: (12:36)

So with the things that are going on at SoftBank and their fund, is that going to impact on Compass at all or its growth trajectory?

Clelia Peters: (12:45)

You know, I think the right answer is probably, I don't know-

Kylie Davis: (12:50)

Yeah, they're put up as the darling of the new tech, aren't they? And where real estate and technology are really coming together.

Clelia Peters: (12:58)

Yeah, I would assume, given the amount of money that Compass had already raised, that it wasn't their intention to raise more money before COVID. That it would have been their intention to basically leverage the money they had to try to grow as quickly as they could and move towards an IPO. And in that context, what's happening at SoftBank has very little impact on Compass. I think what could be more complicated for Compass is if in light of what has happened with COVID, they feel like they need to raise more money and they need to do that either to literally protect their operations and ensure that they can continue to operate as they are. Or they need to do that because they feel like they need to meaningfully grow to move towards an IPO. And to a certain degree, those things are synonymous, because a lot of Compass' operations are focused on growth.

Clelia Peters: (14:06)

But if they find that they need to raise more money, I do think that will put them in a more compromised position for a variety of reasons. One of which is obviously that SoftBank is maybe less able to make follow-on investments right now. So I know that Justin Wilson, who's the partner at SoftBank who has invested in Compass remains really excited and bullish about the company, so.

Kylie Davis: (14:39)

We'll keep watching. They're certainly part of the agenda for the next couple of days, so.

Kylie Davis: (14:44)

(silence)

Kylie Davis: (15:56)

What are the trends that you're seeing in terms of, we talked before about creating some fires and getting started. What are you seeing is the new things that are coming out or the new problems that need fire setting to them?

Clelia Peters: (16:14)

So I think, I mean, in the overall residential real estate space, I mean, recently seen a bunch of activity around everything that's virtual, but and I have to say I was historically something of a sceptic of 3D tours, virtual. I really felt like people will always want to physically interact with a space that they are going to call home or even that they anticipate as an investor that someone else might call home. But I think what I underestimated and what has really been demonstrated by COVID is the way that these tools can be used as efficiency improvers.

Clelia Peters: (17:02)

So, what I'm imagining now is a world where in the past, maybe if you had a buyer who was looking at homes, you would physically take them to 10 homes and you would whittle down to maybe two or three favourites from that list after they had physically seen them. I think what we are going to see much more going forward is that buyers use these virtual tools to whittle that list significantly down themselves before they even go look. So that instead of looking at 10 homes, maybe you'll be looking at five or maybe you'll just be looking at that short list of three. And then based on the visit, you'll make an offer on one of those homes. And so the whole process will actually move much more quickly.

Kylie Davis: (17:49)

What about maybe to go everywhere.

Clelia Peters: (17:51)

Exactly.

Kylie Davis: (17:52)

It's almost like a marketing funnel that we're sort of moving some of the virtual stuff higher up the funnel to cuddle your choices before you need to go and physically do the appointment.

Clelia Peters: (18:04)

Exactly. The other thing I would say, and these aren't trends that are fire starters, but in terms of areas where we're seeing, even now gasoline being poured on the fire, in the past couple of weeks there've been a number of announcements made related to title innovation. And I think that space of title and closing has a lot of money and attention that's sort of flowing into it now. And whereas we had companies in the early, just a few years ago, including Spruce, States Title, Qualia, Endpoint Closing, they were little companies maybe focusing on a single geography. You're now seeing those companies reach a point where they're going to start to scale nationally. And I think that we will actually see pressure and innovation in the title space as a result of that.

Clelia Peters: (18:54)

I also think that an important trend to watch in the next year or so is the trend of integrated platforms sort of taking up a middle position in the market. So by integrated platforms I mean platforms like Knock, Apply Homes, Orchard, Homeward, many of which employ an employed agent model. And they use the residential transaction almost as like the start of the funnel to sell, not just to make a commission from the transaction. But also really specifically to on sell title mortgage and home insurance as part of a single unified transaction.

Kylie Davis: (19:36)

Right, so these are businesses that are not just looking at the commission side of it as their revenue, but actually a more kind of rounded offer?

Clelia Peters: (19:48)

Absolutely. And because they don't see commission as their sole source of revenue, they often have innovated or discounted commission models in an attempt to attract consumers to their platforms.

Kylie Davis: (20:03)

Do you think that's a broader trend? We're starting to see that over here in Australia where our commissions are a lot tighter than yours, of real estate agencies needing to adopt a more balanced portfolio of where the money is coming in from. And so mortgages insurance, but over here we're also seeing things like moving services and a whole plethora of services coming off that whole transaction.

Clelia Peters: (20:31)

Yeah, I think that this is one of the most significant trends in the residential transaction space in the next, I used to say 10 years, I actually think with COVID as an accelerant, maybe it's more like five years. But I really think that we've got to move beyond thinking of just the sales transaction and think about the whole ecosystem of transactions and services that sit around the sales transaction. And that the companies that are most successful in the period ahead are going to be the companies that find a way to capitalise on that whole ecosystem of transactions, while still offering consumers a superior and sort of smoother service.

Kylie Davis: (21:16)

And so, Clelia, have you got any understanding of the Australian PropTech market? Is there anything that you've seen coming out of Australia that has impressed you or got your curious?

Clelia Peters: (21:29)

So, I mean, I feel like I should have more understanding of the market because in preparing for this interview I did a little research and it's quite an active market. I have always known that property was a key contributor to GDP in Australia.

Kylie Davis: (21:44)

My favourite [inaudible 00:21:46]. We love it.

Clelia Peters: (21:54)

I have been aware of ActivePipe, which I think is a really interesting company. I've been aware of InvestRes, I've been aware of Equium, but I didn't realise that in fact there was a much broader and more active world of PropTech in Australia as well. I think one thing that's very interesting to me about Australia is, you have realestate.com.au or that whole portfolio has played a really powerful role in your market.

Kylie Davis: (22:31)

Yeah, huge.

Clelia Peters: (22:32)

And I think there was almost more natural concentration around search in your market than there was in many other markets. And yeah, that is interesting to me in terms of I believe that actually impacted market dynamics as a whole and given that platform more power. And I think that that's an interesting lesson for us as people project and kind of what Zillow will do or what Rightmove could do in the UK or yours is a pretty advanced market in terms of a listing platform actually playing a major role in market dynamics.

Kylie Davis: (23:18)

Very definitely. And there's pros and cons I guess to that as a lot of the technology businesses that go over to the U.S. find, because we go over expecting things to behave a certain way and then bump into the MLSs, which is always fun. It's a very different structured over here. So let's talk, just quickly before I let you go. What are you looking forward to at Connect now, what are the interviews or the sessions that you're hosting that you can't wait to get stuck into?

Clelia Peters: (23:55)

Well, I have to say, I always, one of the privileges for me of increasingly playing the role that I do with Inman is getting to speak to so many of the leaders in the industry, so I'm really looking forward to a lot of the conversations I'm going to have. Looking forward to speaking to some established leaders like Adam Kontos, Ryan Korman, I'm looking forward to Thad Wong. I'm also really looking forward to speaking to some innovators. I always love speaking to [Adinah 00:24:34] [inaudible 00:24:34], and I'm going to be speaking to her and Vishal Garg from better.com together. And again, I think we really have to open our aperture of what we think about as residential real estate professionals to include title mortgage and home insurance. And there's going to be a lot of great people on stage talking about that.

Clelia Peters: (24:57)

And then I personally, it's exciting, at this Connect Brad is going to be back on stage a lot more than he has in the past few years. And I love to watch Brad do interviews and I'm really looking forward to hearing Brad speak to whether it's Gary Keller or Robert Revkin or Rich Barton from Zillow and hearing their perspectives on what's happening in the market and what they think is to come.

Kylie Davis: (25:27)

Fantastic. Clelia Peters, it's been wonderful to talk to you. I've seriously had a major fangirl moment, so thank you so much.

Clelia Peters: (25:38)

Thank you so much, Kylie. It's really a pleasure. And I feel like next time I need you to give me an informational interview about the Australian PropTech market, because clearly I should know more.

Kylie Davis: (25:50)

I would really love to do that. There's a whole lot of stuff going on over here and we'd love to share it. We should do it over a cocktail maybe.

Clelia Peters: (26:00)

Well, it was really a pleasure to talk to you.

Kylie Davis: (26:02)

Thank you so much. So that was Clelia Peters, one of the most influential women in PropTech globally, founder of MetaProp, editor at large on technology at Inman, and now at Bain Capital. I am so full of admiration for everything that Clelia has achieved in her life, including, but especially how calm and thoughtful and quietly knowledgeable she is about everything. It's kind of the complete opposite to me. After this interview Clelia and I talked offline about the Australian PropTech and the local real estate market. And when all of this COVID stuff is over, I would really love to get her over to Australia to present at a technology conference. So, if you're up for that, let me know, drop me a note.

Kylie Davis: (26:44)

Now, I hope you've enjoyed this episode of The Proptech Podcast, even if it was in a slightly different format. If you did, please tell your friends and or drop me a line either via email LinkedIn or on our Facebook page. And you can follow this podcast on Spotify, Google Podcasts, Apple, and Anchor. I'd like to thank my audio support, Charlie Hollins and the fabulous Jill Escudero and our sponsors Smidge Wines, creating handcrafted boutique wines, Direct Connect, making moving connections easy, and HomePrezzo, turning your data into amazing marketing content, which has never been more important in these days of COVID. So thanks everyone until next week. Stay safe and keep on propteching.