Jake is the founder and CEO of Groundbreaker, a software application that helps real estate investment firms automate workflows in fundraising, investor reporting and investment management. Jake speaks with real estate GPs and LPs frequently, so here are some topics he could go deep with current knowledge on: - Deal structures and fees, what he is seeing on a day to day basis - Due diligence, Investor relations - RE tech (CRMs, tech stacks, scaling with tech) - Asset classes to consider during down time - Or any other topic you deem to be a match for your audience.

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Transcription:

Hello, again, welcome back to the Jason and Pilli project. Super excited for today's show. You've got some dynamic things and is actually uncanny, that I would just searching for a platform itself, that we were diving into sc we have Jake Marmulstein the show, Hey Jake, how you doing? Hey, how you doing Jason? Glad to be here. Doing awesome, man. Doing awesome. So Jake is CEO of groundbreaker software application that helps real estate investment firms, automate workflows and fundraising investor reporting and investment management. If you're doing this back from 2014, he seen the market transition just really just has a ton of talk about one from really this CRE finance and technology side, but two from the psychology side. So we're going to dive in and get some great question, but Jake filling the gaps. What I miss here? Yeah. Well, the transition of companies moving into the cloud and being able to look at their tech stack now objectively and saying, what are the missing pieces that we have here that we can automate with technology that we can fill with technology? That's going to be available 24 seven, 365, that we can turn on that we can control that we can operate, across functions remotely in a in today's world. And once you have that technology, being able to look at, the world has, is changing and continues to change moving more towards the technology, uh, being a factor in every business and being a consideration to get up and running. And have it be a piece of your company. What was it about this specific space that stood out to you in 2014, that you took a hard look at it and decide to dive all in on? So, uh, when I was looking at it in 2014 to set the context 2012 was the passing of the jobs act. And in 2014, we had an article in venture beat written about us, uh, in democratizing real estate investing by having a platform where anybody could put their deal up and they could raise capital online from accredited investors over the internet. And it was a big deal for people who have been, uh, doing everything, um, but general solicitation so that they comply with securities laws. And we're thinking as a company, do we want to via crowdfunding solution? Do we want to get a big group of investors together and direct capital towards real estate deals? Or where is this really going? What's the big picture and big picture is that people are going to arm themselves with the technology. They need to be able to harvest their own investor base. Yeah. And when you look at that and some of the, the ability to create a platform, right? So your investors can, can feel as if, as if they're, you're, you're being a safe Haven, a safe Harbor for their capital, right? And so you're not just hiding with Excel spreadsheets where things can be manipulated, but you now have a platform that creates a rectal style for the brand. You're now seeing a lot of competition come into the market. How have you seen the space develop over the last six years since you started though space has developed segmentation, uh, groups that maybe were interested in going head to head with us, uh, as providers of an investment management portal, maybe segmented towards some of the back office functions of providing an escrow account or clearing house services or transfer agent services, um, or maybe moving across different industries and not being real estate specific, but doing sort of an investment manager, CRM for multiple different industries. And then we saw companies that came right in and want to go head to head with us, uh, on real estate investment management software, but they're either going up market and moving towards institutional groups, or they might be going downmarket. And as it currently stands, there's a wide space in the market between the lower market solutions and really the institutional solutions. Uh, so we are occupying the space in between there where we can be that scalable solution. That's not only easy to use, uh, and robust, but it's also very cost effective for companies that want to onboard now and grow and not have to switch to a different solution later on once they outgrow the, the, uh, a solution that they started with because the price was low enough. So we want to be that solution that people start with and stay with. What are some of the core components of Graham groundbreaker that really make it stand out for us? Uh, the ability to send and receive payments electronically is a huge differentiator that we offer into the market. To my knowledge, there's no other solution that does that. And some of the companies might be able to pay distributions by generating a NACHA file, but we actually integrate with the banking systems so that funds can travel, uh, through, um, you know, ACH and get triggered from within the platform And using that feature. I mean, that is something right. I have talked to other platforms where you have to use some third party or some other way that you're, or you're still going back and doing distributions as you were, you know, manually before. So to have that within the platforms, highly engaging for investors who now are working with an operator who's using groundbreaker, do they have access to the portal so they can go in and see really the, the life of their deal real time? Yeah, the, the portal has, uh, five different components, the investor portal for LPs to get access to their information and they can have their cashflows, their documents detail on their distributions, and they can also see new offerings and existing offerings that either they've invested in or open for fundraising, whether it's a teaser or an active deal, that's really collecting subscriptions and contributions. And then they can go through the process of funding and transacting before other parts of the software are really for the managers, which encompass fundraising, automation, investor reporting, investor, and distributions. Um, and then you have the CRM. Has there been an asset class that's using your technology? That's that, that was surprising that you weren't originally positioned for? Not really, actually we work with both single asset syndications and funds. Uh, there's some parts about the display of investor reporting that we're working towards being able to support for specific industries and giving sponsors the flexibility to drop in certain metrics in their dashboard that they care about because it's asset specific. Maybe when you talk about multifamily, looking at, uh, the increases in rents, uh, and those kinds of more, uh, property specific asset class specific metrics might be more relevant to multifamily. So being able to give sponsors the flexibility to do that, we don't have that yet, but that's going to be on the horizon. Um, and then funny enough, the other day I was talking with somebody about a commercial kitchen, uh, business that they were launching. So, um, because of, uh, the, the, the crisis, you see a lot more food delivery, um, on their eyes and then companies that maybe need more capacity to meet the demand of doing food delivery need, uh, additional storage and additional space to be able to produce enough food, to fulfill those orders in a, in a, in a process oriented way, that's gonna make sense for their business. Yeah. Looking forward, there's going to be a whole new wave of, of opportunity for entrepreneurs to figure out the highest and best use for available property, right. And especially looking at what groundbreakers doing, where do you see your platform going in the horizon in the next two, three, five years ahead? Well, we would like to be able to use the data on the system to be able to help our investment managers produce better insights about the decisions that they're making and the priorities that they are putting forth, uh, to be able to manage those assets or choose which deals that they will ultimately be investing in and how they represent those opportunities to investors. So by having all of that data online, having it structured and then being able to tap into other data sources over the internet, um, we can achieve some of those things. So that's very interesting also having all the collection of the data on the system gives us the ability to know how operators are performing, what asset classes are performing, um, and figuring out, uh, what good performance looks like, um, when you have enough data and the sample set, to be able to determine that, um, and there's many different things we could do, uh, by knowing that information in the aggregate, whether that would be, you know, introducing, uh, introducing capital or services, uh, or just providing information to people in the general market about how syndications are performing by asset class, by geography. That's actually very interesting, right? So if you can get down to, to I new share there and see that, right, you may find a different asset classes in certain areas, performing better for whatever's the reason, right. Do you find that what you're doing today that you're having a certain percentage of, or certain asset class or certain space that's consistently outperforming other asset classes just has to do with current market timing when you look at all the different asset classes, uh, like retail and, and, uh, getting crushed and multifamily doing well because people have to pay rent to live somewhere. They have to be able to pay rent after this situation happened. So all the hype about people, you know, not paying rent in April and may, uh, not being true and multifamily performing well. I think that it's pretty clear cut. That's going to be the best performing asset class right now for a while. And, uh, and for the foreseeable future too, I don't know what other asset classes are going to perform. Maybe self storage, um, might, might be doing well. Um, if who knows people like look to downsize during this and put their stuff away for awhile or manufactured housing, which again is I consider multifamily, but, uh, an asset class that's protected and recession proof pretty much because the price will go down to be able to live, um, in manufactured housing communities. So you speak to a lot of general partners and limited partners, especially just to just talk about the platform. Is there a general throughline that you hear from limited partners? So we won't talk to COVID. So it just say an overall consensus about the certain surety that they're looking for from operators or certain things that we're looking for for operators. I don't know how much of that I could, uh, tell you that would be original and unique. Generally, just, uh, investors might be concerned how assets are performing during all of this. And they're looking for communication from their operators when there's a crisis, people just want to know what's going on. And so they're going to be more concerned about keeping what they have than necessarily going ahead and gaining more. They just want to know that things are okay. And so operators that might not might be holding back distributions or, uh, no, not communicating as frequently need to be communicating. And that's what our system helps solve. So just being able to have a system that you can log into anytime and check, and just to know that your information is in there, your distributions are in there, your documents are there, and any activity, any reports are going to be in there. So it, It, it helps to allay those concerns. And, you know, it has been said before, but it's, it's very good to be reinforced because many people shy away from, from presenting the bad news, but most people including myself would rather hear it than have to think about what could be potentially the bad news. Right? So if someone is holding distributions, because they're trying to, again, preserve capital right now, you know, they first and foremost, you know, w we want to make, we want to offer returns, but the most important thing is preservation of capital giving back the capital first and foremost. And so if that's the operator's mindset and they're potentially not, um, they're not speaking that to their, to, to their investors, even though they have the right intentions, it can be taken a million different ways. So getting ahead of it and talking to your investors and just having the conversation out front, and it's, it's most important, right? Presenting the good presenting the bad and presenting what you're working to do to correct that. And having a platform like yourself, where the investors can also reconfirm the talk track with what's available on a platform, uh, is wholeheartedly important. Do you think that there's other parts of let's all talk multifamily where technology is supremely lacking right now that we may see an influx of technology and a certain component of multifamily that's missing, I'm not entirely sure what, uh, where the gaps are, uh, to be honest, but I do know that property tourists, uh, have gotten some creative ways of running. And I have a friend of mine who owns a company that does virtual, uh, property tours. And I think they're growing by like four or five X, uh, this year because of that, because everyone's moving to virtual tours, we're just thinking about the things that we need to be able to do when we're not able to get together in the same physical space, how can we make, how can we standardize that process and the information give access to people and what kinds of areas, maybe, you know, what kinds of areas do you see missing Property management is, is one, right? And a lot of the property management companies are mom and pop operations, or just operations that have that have, that have operated for many years. Right. And they haven't inputted the technology into their system. Right. You're still living in a, in a, basically a paper world in a lot of different ways. And just like you said, yeah. There's so many times over the course of history where people say, well, no, one's going to do that. No, one's going to rent a property just by seeing it, you know, over a computer. No, one's going to buy a house just by seeing it through pictures until someone says, well, why not try it? And then all of a sudden you see it happening right. Happening before your eyes, because people will, right. There's, there's always that group who may want to physically see it, but then there's the other group that says, okay, I understand. Yeah. Yeah. It's got two bedrooms, it's got two bathrooms, it's got a kitchen and I live in a room and it's on the second floor. Understood. You know? And so, and what's the, where do I sign it? It makes it even cleaner. Right. So even at that point of, um, if there's to have the Lisa's deal to DocuSign, just teach things that, that continue to be in some format automated, but not a full throughout process where like, you're talking about here with groundbreaker where lots of times you have platforms that have a lot of the steps, but they fall off in terms of the distribution. Right. You, you can't, you can't fluently do that. Right. So, so you have like 90% of it there, you see a lot of that with proper venture company, you may have like 60% of it. There are like leasing, like we're like 70%, but you're still missing that gap. That, that gap that just makes it a, if you're a tenant or prospective tenant, you want to feel, especially if you're looking at, um, you know, a flight to quality or potentially, you know, a best in class asset, that it is going to be that kind of operation fully through, like you have to an A-class asset and you're using a C class showing process where maybe you can adapt it to a new age showing process. Like you said, where their company is now is showing virtual tours. Right. They're able to use, you know, ways that you can really feel like you're there. And so, you know, I'm not smart enough to know any of these steps, but I know that, you know, like virtual reality, it's not there yet, but it's going to have a place, right. If you can use that and be in an apartment and no, the apartment with NB, I don't know you're moving. Right. And you're moving, you're a thousand miles away. You don't have to find, you know, and Betty who lives two hours away to go see the asset for you. You can just use virtual reality and there you're there. Yeah. You can choose your, your furniture and then put it in the right places and kind of figure it out while you're in the room. There you go. That's the add on. Right. You know, and if you're, if you're not company right there, and then you started, you started having the furniture company that is your second line. Right. And then you can literally furnish the apartment. I mean, things like that, they're in this, when you, when you look at that, but one thing the internet has created and continues to create, it's a one for speed. Right. So one for speed and, and, and easy. Right. And that goes on both ways. It goes like people see someone in front of a Ferrari and they want that. And they haven't gotten off the couch in three weeks. Right. But in the same part, that's the same thing with buying decisions. Right. You know, that's why Amazon, we have the one-click right. Where like, they they've now corner that because they're just one click, you know, I gotta be careful, my little kids, they get on, like my phones are messing around and we might be buying like 64 little Yoda things, you know, just, just because, you know, you can even like have, um, an Arduino connection. Like it's like this, this kind of internet of things where you can print out a button and then have it respond to a specific purchase action that you want to take. So it could be like toilet paper, and you've got a toilet paper button next to the toilet paper roll, and you just press the button and it orders new toilet paper for you on Amazon to actually do that kind of stuff. See what, think those are, those are the things that if you are able to offer those processes as if maybe you get wholly vertically integrated as, as a company, right. And as an operator, you're able to offer that. And you're even a property manager of construction. And then now some kind of manufacturing that's where someone stands apart. Right? Because now you're able to find your inefficiencies because for me, even, you know, we use third party management and they have a lot of construction in house. Sometimes they'll have to sub out for other points. And I have to look at it for a way where potentially if I was leading construction charge, I could probably save on that, but it may take me more time to find the right contractor at that time from being a thousand miles away. And it may, and I may lose that time on, okay, Hey, I saved 500 bucks, but it took me an additional three and a half, four weeks of downtime on the unit. And so what's the cost of that on the back end. So I may pay a little bit more for the speed, but if I had the integration in place, I would save that 500 upfront and still have the speed in front. And so there's a lot of things that to, to, to grow into, as we continue to move, I feel like, um, For the real estate tech space and technology that we see coming out now, there's so much of it that people don't know exists, and there's a lag effect of applying it and commercializing it and packaging it in a way that we're able to consume. And so we're developing technology faster than the rate that we can even apply it. And, uh, you're just seeing, I mean, even OCR technology, like the ability to read files and, uh, and, and be able to do actions, automated actions, based on your capability of reading files, that's been out for many years now, and Amazon has made it incredibly easier to apply and use that technology. Um, for example, so people can now use it and it takes, uh, companies like that to maybe refine some technology, make it more marketable inapplicable for companies to apply it. Uh, and with real estate tech, the challenge I see is that there's all these other co there's, all these companies doing bunch of different things, managing important data, but the data has no way of flowing between different systems. And so when you look at it at a high level, uh, there's probably going to need to be an immense amount of consolidation in the industry, uh, at some point for these systems to start to talk to each other and become useful across various functions in the real estate investment or real estate property management space. Interesting. Yeah. Right. So I think Elias will stand out and there'll be some kind of puppeteer or some other way to that that can make the connection. Right. Cause, cause almost sometimes the space gets so flooded that even from my own self, that it's so much information to take on, but like you, you get stopped by, you know, you're missing that component. So you're like, Oh, well where do I go for that? And you have to learn this whole other space. That's, you know, 50 deep accompanies. You're trying to figure out that space and how, how that connects to this, you know, and you'll go down a rabbit hole and eventually at the end strike out because you haven't met your desired outcome because you're, you're missing something. Right. And you don't because it's not there and it's not readily known because you haven't seen it before. You're, you're missing that question. Right. So who's question, who is this? Who is this solution? Who can give me that answer? Right. So yeah, I agree. It's, it's going to be interesting. Cause right now you're going to see a lot of different ways that, that the space is going to change, right? So you may have more people working at home. And just because everybody just like you said before with the virtual tours, well, you know, I can never manage people at home. And right now they're seeing, you know, production still happening in spaces that were heavily aligned on people working. And that's going to take office space and office space may have a new transition to whatever, you know, I don't know, like big warehouse, they may come trampoline parks. I don't know. But on some part, you know, you you'll see that transition and the more that we can facilitate easy user guidance, it's going to be interesting. You know, like my, my mind is almost flooded with possibilities right now. And even hearing you talk about certain lines right there, like the furniture, that's just a whole nother thing. There's an, there's always a level that you can add on to make the customer experience because that's the end goal, right? Your goal is groundbreaker, isn't make your user and customer experience the best possible. Right. And at all points where if we keep that in line, there's going to be some massive, massive, um, new concepts coming out in the next few years based on what's just happened. Yeah. And I, I think it's going to be the logical progression of all of this. If you look at like Salesforce, uh, they, in, in one way or another, they pioneered massive adoption of CRM systems that are highly complex and customizable to businesses. And out of that was this enormous consulting, uh, industry for Salesforce there's companies that exist just to implement and manage Salesforce. So in real estate tech, I don't, yeah, you, you look at like advisors, capital, formation advisors, uh, consulting companies, they're in some way, shifting their businesses a little bit, to be able to understand tech stacks and arrange them together for businesses that want to have a fully integrated technology system. And so you're going to also see those kinds of groups. They start to become active and help, uh, Real estate syndicators and investment firms adopt technology and get paid to do that right now. It seems like the user is, is a big part of the whole back, right? Just an unhide credit is what do you think? Is there something you talked psychology and beginning, one of your, your things you really interested in that really, really draw your attention. Is there anything that you're seeing across the board that that's holding us back from adapting to new things, Maybe it's our own, uh, anxiety to get things done and solved so quickly that we've become so used to this as a, as, as, as individuals in this technology, you know, technologically driven world that we want something we want it now and we can get it and technology takes time to build. So we all have to be able to educate ourselves. I think, more to understand technology and the way that it works, uh, and its limitations In order to be better users of technology. So, Mmm that's that's just one. No, that's great. And that that's sometimes the biggest thing is just knowing what, what is the limitation, right? Cause, cause that, that helps us understand the best use of it, right? The best, the best practical approach to be able to put that in and where it can implement. Right. And, uh, and there will be people that create solutions for those shortcomings and then you're on your way with what you're doing for groundbreaker. So Jake, this has been awesome. I've enjoyed the conversation. So talk to us about the site where people can come learn more about you and the company. Yeah. Well, likewise, Jason has been fun. Uh, if you guys want to find more information about groundbreaker, you can go to our website, which is groundbreaker.co and we've got the demo videos available. If anybody wants to go and check them out. Cool, man. Well, thank you so much for coming on the show. I enjoyed the conversation. Yeah, likewise. Awesome. Everyone listened. Super appreciate your time. Think about everything that's happening right now. There's there's just so much that is going to transform. And like you heard Jake speaking there, there's just countless opportunities out there and we're just learning we're on the cusp of so many things that are going to happen and just transition the way that we look at things and you out there to confine those solutions through a wall of opportunities to be ahead of us. So thank you again. Super excited to have Jacob show's name. Awesome.

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