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5Q PropTech Interview – Dave Mullen Investor at SVB Capital

May 25, 2021

1. Dave Mullen, could you describe briefly who you are and what has brought you to where you are today?

Absolutely. I spent the first four and a half years of my career with J.P. Morgan, a role that took me from Miami to Chicago and gave me my first taste for tech.

Some of my clients were Groupon, Morningstar, and Fiserv. Compared to some of the more traditional manufacturing clients I had been working with, I was drawn to the excitement around what these tech platforms were doing and decided to double down.

After starting at University Chicago Booth School of Business, I began working with startups, and investment firms focused on tech. It became even more apparent venture investing was my path forward.

After finishing up my MBA at Booth, I was asked to join Wells Fargo Ventures, which is where my first real exposure to PropTech came.

In my first year alone at Wells, we invested in the likes of Clutter, Industrious, and Flexport, investing alongside pioneers in the category such as Fifth Wall, which made the investment process all the more exciting.

Of all tech categories, PropTech is perhaps one of the more relevant to the daily lives of folks living outside of tech hubs globally, and I was and still am very drawn to this.

You’re also never bored looking at the category – the versatility of models speaks for itself, be it enterprise software companies like Reonomy, consumer-facing models like OpenDoor, or frontier tools like Proxy.

Since joining SVB Capital a few years ago, I’ve continued covering PropTech and FinTech, which are core areas of our investment strategy.

2. Dave Mullen, you are a PropTech Lead for the EVCA. In your opinion, how does the broader VC investment community view the emergence and growth of PropTech?

Removing my biases here, I think the sector’s perception from outsiders is still overweight on the residential sector of the category.

When most folks think of PropTech, even within the venture community, front and centre are the facilitators of residential transactions – your Redfins, Zillows, Opendoors of the world.

Though a massive opportunity, the category has so much more to offer. Specifically, a growing number of PropTech enthusiasts support the notion that the sector encompasses all things digitizing the world around us, touching so many parts of our daily lives, be it mobility adjacent like Culdesac, energy efficiency tools like Blueprint Power, or even those facilitating the emergence of eCommerce like Flexe.

PropTech allows us to rethink the way we commute, work, and live, and the opportunity to leverage technology to drive this change is as underpenetrated as it is enormous.

How can we create more sustainable paths to business ownership like With/Co? How will urban planners rethink the way cities are built or how we respond to disasters like Pixxel? How will REITS rethink hybrid working environments with an increased focus on service and property management solutions like Industrious?

These are all the questions the category is sprinting at and flipping the paradigm for investors, consumers, and corporate buyers alike. Though single-family residential is especially pronounced, we see more and more attention in the broader community beyond specific points in the consumer home buying transaction.

3. Dave Mullen, which Real Estate Technology segment has attracted your attention lately and why?

Trying to stay focused on so many different opportunities is tough. To me, the most viable models are those with a substantive data component. In this light, I’ve been spending a lot of time on an outside-in data approach to the category.

In a sector with significant ties to the broader economy’s health, a huge component of derisking this cyclicality is a tech-heavy model steeped in data. Having previously written about this in Space for Thought, data that can be extracted from these assets has the potential to not only boost the value of these physical assets but also create longstanding IP for a model from which to expand product offerings on the top line, and the bottom line via enhanced efficiency.

A prime example of this is Roofstock. The company has been collecting unique and proprietary data points on residential real estate and more recently augmented this with their acquisition of Stessa, a platform helping real estate investors track rental property performance, accounting, and financial health.

Today Stessa’s users track more than 170,000 individual properties representing over $45 billion of assets – it is these data points that will continue to augment Roofstock’s software engine. Additionally, public equity markets will value high margin dollars, which a strong underlying technology component will help facilitate.

4. Dave Mullen, in your opinion, how has COVID-19 impacted strategic investment priorities?

The phrase ‘10 years of tech adoption was compressed into 10 weeks’ has very much been beaten into the ground. But it’s true. Front and centre was the record year for single-family residential – lumber yards still can’t keep up.

In addition to record home buying though, public markets took notice of the category in big ways – take for instance Opendoor which lost almost half of its revenue in 2020 but was at one point valued as a $20B company, far exceeding forward multiple precedents set in public markets.

Additionally, continued focus around ESG across investment strategies and corporates alike have brought carbon-free technologies front and centre. This is all the more prescient when thinking about the enormous carbon footprint created by the ‘Built World’.

Lastly, industrial and real estate solutions to accommodate for the proliferation of e-commerce benefited from substantial acceleration of adoption. Solutions like Chunker knocked it out of the park under the premise that e-commerce requires almost three times the logistics space of brick and mortar retail when considering the value chain requirements from D2C brands to your front door.

Though 2020 was less kind to certain commercial PropTech platforms, given REITs and corporate buyers spent much of the year navigating the ambiguity of 2020, there is a huge opportunity here, notably, as we return to work. All that said, 2021 will be a big year in distinguishing true product-market fit from COVID market fit.

5. Dave Mullen, how can the US continue to accelerate as a leading Real Estate Technology hub, and what are the main challenges against this?

I think the key to adoption, particularly within commercial, is continued education, specifically at the corporate level.

We have seen an immense amount of success with residential and industrial-focused PropTech tools. Still, the adoption of commercial software solutions are fairly nascent without a true understanding coming from buyers or within large corporates.

A key hurdle to adoption, particularly for commercial steeped solutions, has always been a rounded understanding of where technology can benefit enterprise top and bottom lines.

To make matters worse, there’s a challenge in placing folks with tech experience in real estate firms to help drive this paradigm flip. I think the key to this is continued developments of platforms like CREtech as advocates for promoting PropTech via events, content, and connecting folks – this has been a big win for the broader community.

Another area needed to drive investment and adoption in the category is a growing IPO pipeline for PropTech companies. The Opendoor and Porch SPACs were both beacons in this sense, but for true capital to flow into the space, in addition to continued corporate adoption, more high profile exit proof points will be key.

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