Interviewed on June 5, 2020
Interviewed by Yingying Zhu
Emily Verklin most recently held the position of Director of Capital Markets at MetaProp, one of the earliest and most active venture capital firms specializing in the PropTech asset class. Before MetaProp, she worked in commercial real estate finance for Morgan Stanley in their New York and London offices.
Emily is going to Harvard Business School as an MBA student in the class of 2022. She holds a Bachelor of Arts from University of Virginia. She also sits on the Associate Board of Summer Search, a non-profit organization focusing on helping young people reach their potential.
Note: WiPT caught up with Emily in June before she left MetaProp for Business School.
Congratulations on your admittance to Harvard Business School . Can you please tell us about your role at MetaProp? I am the Director of Capital Markets for the firm. I work directly with our Co-Founder and Managing Partner Aaron Block as well as our newest Partner Maureen Waters to grow the firm’s partnerships with both financial institutions and strategic real estate players who are looking to engage with the PropTech ecosystem. I also work closely with the investment team, the startup services team and very importantly, our innovation consulting arm, in order to provide startup access, industry insights and execution support to help our partners develop their own bespoke PropTech strategy.
“In addition to financial returns, our partners like to have eyes and ears on the ground. They want to understand what tomorrow’s technology looks like and how different trends might provide both opportunity and pose risk to their core businesses.”
Strategic investors, i.e. real estate owners and operators, make the majority of PropTech investors. What do they look for when investing with MetaProp? Being a sector specific fund, a large portion of our capital base comes from property owners, operators and major real estate brokerage and services firms. They look to MetaProp as a thought leader in the space that will provide strategic insights to develop an innovation strategy to increase NOI and drive performance for their portfolios of physical assets. In addition to financial returns, our partners like to have eyes and ears on the ground. They want to understand what tomorrow’s technology looks like and how different trends might provide both opportunity and pose risk to their core business. That way they can study, pilot and ultimately make informed decisions to successfully incorporate technology into their businesses. The venture capital rate of return our partners expect from an early stage PropTech fund is attractive, but implementing an innovation strategy that directly improves their real estate operations can have a profound impact on the overall success of our partners.
Can you elaborate on the kinds of strategic returns real estate investors are achieving by engaging with PropTech? Some technology solutions affect the NOI directly by increasing rental income or reducing operating expenses. For example, Enertiv (https://www.enertiv.com/) was able to successfully streamline the energy monitoring and management process for landlords in order to achieve direct expense saving on energy and equipment maintenance. Other solutions have an indirect impact on a landlord’s bottom line by driving higher satisfaction and therefore retention of tenants. A great example is HqO (https://www.hqo.co/), an office tenant experience application, who recently launched their end-to-end management system covering every aspect of the tenant relationship, the experience and the intelligence generated. It has become standard and expected that operators treat their tenants as valuable customers to encourage their tenant base to identify themselves with the landlord’s brand and establish customer loyalty to their space.
Given most of the investment is strategically oriented, what value-add services does MetaProp provide to both the startups and the investors? We have a collaborative approach towards how we invest, how we partner and how we create community among our portfolio companies and our investors. We have a dedicated startup services team which aims to drive the growth of startups, oftentimes through introducing founders to potential customers and partners for feedback and potential business, even ahead of MetaProp making an investment. We also have an investor services team focusing on helping our partners reach their innovation goals. For example, MetaProp helped one of our partners roll out a tenant experience solution across their entire portfolio. We vetted 30-40 tenant experience platforms and presented our findings to the partner, ultimately making a recommendation that led to both a partnership and equity investment in the startup’s business. Recently, we put together a nationwide innovation program for one of the largest real estate owners in the country to allow their asset managers to engage with technology at both the portfolio and asset level. We also help our partners with their direct investment efforts. By prioritizing a collaborative and hands-on approach in our engagement with our partners, we are able to generate this flywheel of feedback and intelligence that helps better inform our own investment theses and decisions.
What are some of the challenges for the real estate industry to adopt PropTech innovation and how would you address them? Firstly, real estate is usually about de-risking and is not an industry that has a high tolerance for failure. Therefore, it is key to adopt a culture of innovation, which means not being afraid to fail and failing fast. We have found that our partners are more likely to be successful when approaching innovation if they have a very clear mandate established from the leaders of the company, as well as dedicated human capital to support an innovation strategy. MetaProp holds innovation workshops with both prospective and existing partners to help them develop that culture further in their firms. Secondly, real estate players have found success over many years without prioritizing technological innovation so venturing outside of a traditional approach requires quick wins and having a partner that is going to put wins on the board to continuously justify the cost, the time and the resources required. Thirdly, there is no doubt that more organizations are increasingly interested in having a plan towards innovation to prevent their business from becoming functionally obsolete. But there is not a one-size-fits-all solution for every type of real estate firm. Through our expertise and dominant position in the PropTech ecosystem, MetaProp can be a filter to help our partners digest the increasing amount of solutions available on the market and develop an informed perspective.
“There are several areas of the real estate industry that are still in need of further innovation or disruption. Three categories I would highlight include - all-encompassing deal management software solutions, data analytics and retail reinvention.”
We have seen an acceleration of innovation in the real estate industry in the past 5 years, but what are some areas of the real estate industry that have yet to be fully disrupted by technology? There are several areas of the real estate industry that are still in need of further innovation or disruption. Three categories I would highlight include - all-encompassing deal management software solutions, data analytics and retail reinvention. Firstly, real estate landlords want an all-in-one software or a “Bloomberg of real estate” that links all aspects of the property lifecycle, from raising capital to acquisition to leasing to disposition, yet I do not see that being available at this point. There are certainly successful solutions that address one or two of these processes and API integration can help provide a one-stop solution, like what Plaid is doing for the fintech industry. A few strong contenders are working on various pieces of the puzzle, such as VTS, Waypoint and Juniper Square, to put an end to the landlords’ experience of using five or six different platforms to manage one asset. Secondly, real estate owners and operators possess a great deal of data and want to draw actionable insights from the proprietary information they have. Larger asset managers are starting to build out dedicated resources and teams for data governance and business intelligence. But there is a need to improve the link between existing data on-hand and drawing actionable insights to drive investment decisions and returns. The third area that is in need of innovative solutions is the retail sector. There were about 9,000 store closures in 2019, which is 16% higher than 2018, due to over expansion of malls, large retail chain bankruptcies, change in consumer preferences and the rise of e-commerce. Major CBDs and shopping corridors in Manhattan have seen retail vacancy doubling over the past 10 years. Many mall anchor tenants are now filing for bankruptcy and ecommerce is taking even more market share away from traditional brick and mortar. COVID-19 has only exacerbated the identity crisis retail is currently having. Retail owners are looking for solutions to redefine the highest and best use for shopping malls and the high street. I am interested to see how technology will play out to redefine success in this category.
What is the implication of the pandemic to your investors? Our firm has been in close contact with our key stakeholders over the past several months to check in on their health and wellness, to understand the impact of the current crisis on their business and market, and to provide advisory solutions accordingly. At the beginning, our partners were focused on understanding the current and potential impact of lockdowns and the economic implications of COVID-19 on their existing portfolios and getting used to the new normal of remote work and communication. It became clear to the majority of our partners that they needed a set of comprehensive technology solutions, more than ever, to help them reopen and reconfigure their office, retail and multi-family buildings for a post-COVID world. We believe the current moment presents a great opportunity for the PropTech industry as forward-thinking real estate players understand the importance of prioritizing innovation activities even during times of crisis. In addition to an unwavering focus on the needs of our startups during this time, MetaProp has conducted a series of webinars and workshops to help industry leaders understand the ways in which PropTech can minimize the negative impact from the pandemic on their businesses and help our partners maintain their competitive advantages.
What is the implication of the pandemic to your portfolio companies? The impact of the pandemic varies across the different sub-sectors of the PropTech industry, presenting a challenge to some trends previously in acceleration as well as presenting opportunities to other areas that previously struggled. Our team put together a blogpost in May on this exact topic.[1] There are three broad categories within PropTech in which we as a firm have seen near-term rejiggering. The first includes trends that were already in motion and now are accelerated; second is those areas that were in motion but are now under pressure; and third is those that had limited prior traction but are now capitalizing on an unprecedented window of opportunity. Some categories that have accelerated include space planning and occupancy monitoring such as Vergesense (https://vergesense.com/) for the purposes of monitoring social distancing instead of their original purpose of supporting efficient space utilization; touchless access and remote access such as Latch (https://www.latch.com/), SwiftLane (https://www.swiftlane.com) and OpenPath (https://www.openpath.com/) and affordability-oriented platforms and financing options such as EasyKnock (https://www.easyknock.com/), Till (https://www.hellotill.com/) and Padsplit (https://www.padsplit.com). Those that are under pressure now are mainly capital-intensive models such as coworking, coliving and ibuying. Some of these business models have not been tested in a time of crisis like this and may struggle. Those that are newly activated include thermal scanning, workplace contact tracing, robotic cleaning and virtual property tours, which faced a lot of friction previously, but are being adopted quickly in the current environment.
How did you get into PropTech? What do you want to achieve next? I spent the first five years of my career working for Morgan Stanley’s real estate financing division in both New York and London. I was privileged to have seen the rise of the PropTech industry in both cities which are now global hubs for the sector. At Morgan Stanley I worked a couple of floors away from the trading floor where my colleagues’ jobs were being redefined by technological integration and the rise of fintech while the real estate industry was still managing billions of dollars in static spreadsheets. I began closely following the PropTech space and joined MetaProp as one of the early members of the team. It has been very rewarding to be able to take on a more creative and entrepreneurial role while being able to draw on my prior experience to drive value for the firm and its stakeholders. I feel very lucky to have a diversity of experience across real estate, having spent time in the traditional area of the industry as well as the forefront of innovation in the sector, and my learnings will directly inform what I hope to achieve after business school.
Edited and condensed for clarity.