Thank you so much for coming to check out another episode of the Stashcast where we have interesting conversations with interesting people focused around the world of commercial real estate and prop tech. The Stashcast is brought to you by Needle. What if you could use data and analytics to predict real estate transactions? You can with Needle. Come check it out at needlenedl.us to learn more. Okay, I'm excited. I've got the Vidura Gupta with us today. He's the founder of Beacon Analytics and Vidura. Thank you so much for coming to join us. Thanks, Stash. You great to be here. Thanks for having me. You and I forget exactly how you and I came into contact. Maybe you had sent me a message on LinkedIn and I dug in a little bit more and I was like, "Oh, I need to talk to this guy." But maybe let's just start a little bit with what Beacon does and then we can go into how you got to where you're at now. Yeah, absolutely. Absolutely. Beacon is an AI platform much like Needle. What we do is squarely on the asset optimization side. So we use machine learning to optimize both folios of apartments and single family homes by increasing occupancy, reducing downtime, maximizing NOI. So that's the business. Typically ads between $30,000 to $60,000 in higher NOI per property per annum and say it's between 50 to 500 hours of manual power, spread sheeting, everything that leasing teams and asset management teams end up doing 100 cases. That's amazing. So how did you start your career? How did you, I'm curious about the backstory? And for those that are interested in Beacon, it's B-E-E-K-I-N is how you spell it. But how did you get here on this journey? Yeah. So first off, by the way, Beacon is named after the B. It's called Beacon because we be survived 60 million years of evolution because they collaborate at the same time where the dinosaurs who coexisted 60 million years ago were next extinct because they hunted alone for the most part. So our hope is real estate is too much of a dinosaur and I think the only way it gets to 2.0 is by collaborating a lot more and data would be that linchpin to collaboration. So that's our hope and a little prayer that we live by. It's in our name. But anyway, so I spent about 15 years on Wall Street. I was an investment banker, a usual looking paper, doing deals. And then in 2012, I joined a private equity firm. Another investment banker I was mostly doing high-eat bonds, like ready liquid assets. And then I moved to an investment fund, a private equity fund, but my job was doing the same. But then I accidentally became a real estate investor. And for someone who was used to buying, you could buy 20 million dollars of Apple stock by clicking a button or a bond. It beat me why you had to call someone who then called someone to come up with a simple answer to something which was equally valuable. And doing deals is fun. You do deals all the time. Doing deals is exciting. Is life after the deal, which is the asset management side and making the business plan work, which is death by a thousand paper cuts for anyone who's lived it. Because information is compartmentalized and it beat me why no one had made it smarter for all the hundreds and thousands of real estate investors in the world. And I knew the answer would be not human bodies, but machine learning and all the data that exists in the world. So that's where we can was born. Yeah, it sounds like we actually, how did you become an accidental real estate investor? I was associated on the team and there was a real estate team that came our way and no one really was willing to underwrite it. No one was willing to put up their hand. I said, hey, I'll do it. How hard can it be? It's just breaking heart. I still remember it's its own jargon. It's got its own sort of, it's its own thing. Nothing you learn, I think, elsewhere apart from like some basic corporate finance translates to real estate because it's its own little kingdom. So yeah, that's it. Yeah, I was going to echo what you're saying. There's all these different nuances and you got to figure out the problem that you're tackling is rental rates. And I remember when I first got started, I was doing rent surveys and I used that as the hook to give, have people give me their email addresses. But I was like, hey, if you'd be kind enough to help me out, I'd be happy to share a copy with you. And I was just wondering, okay, how many one bedroom do you have? How many twos, threes, and then what are your rental rates? And then as I got into it, who's paying the heat, especially for these older buildings that's relevant? And I was like, that didn't even occur to me. Brand new. It's very green. But yeah, and then you have things like tax abatement. How do you underwrite a tax abatement? And that is a whole other skill set on its own. Yeah. Yeah. And multi-family is very different to office. Like the least terms are longer, right? It's not as operationally intensive. Because there's like nuances within these, like you underwrite the tenant a lot more in office. Like you go crazy about who your counterpart is. So yeah, there's all these like nuances, even within real estate, which make it fascinating, exciting, but also a bit closed. Yeah. So with, I can speak from our journey with Needle, tackling the data and standardizing it has been a massive challenge. I'm just curious, how have you and I assume you have a team? How have you guys gone about and tackled the problem of, call it data standardization, so to speak? Yeah, it's tough on. I don't think we are done yet, to be honest. It's a journey. Yeah. It's done yet just because new data sources keep coming up. There's more information about a property. There isn't an industry-wide standard, right? The debt world hasn't standard, but that's a bit like the CNBS market has a standard and can standardize stuff in that format. But it's not still not at a property level. Yeah, we, these are hours of data engineering time as probably you do too. But I think the way to validate is always in the real world, which is either one or two, is it giving you the right signal or two, is it helping a client make decisions in the real world, like in the wild? Those are the kind of, in my opinion, that is the asset test of that data quality, because if data gives you the crazy answer that they want to believe in, then there's something wrong with the data, right? But now it's been a few thousand hours of work to just get these data sources standardized. And I think you might face these two data companies don't really play ball with each other. Every data company has its own thing going, co-star for example is the big daddy, right? And very few companies can work with them efficiently not to say they don't want to, but everyone wants to conquer the fort, so to speak on their own. Yeah, where they claim, but they want to go and do it all. And now with the AI and everything everyone recognizes that data is the keys to the kingdom. So the ones who do have it, you have the haves and have nots. So the ones who have it, oppose it very cold, it close to their chest, which makes it extremely hard to get a complete picture, right, as a company building data solutions, like trying to do with stuff with the data, because you're always missing a piece of the jigsaw. Yeah, exactly. So you touched on it earlier, and I've said that commercial real estate has been just so slow to adopt technology, and it's been so very relationship focused. Why do you think that is? Like you mentioned earlier, you could buy 20 million worth of Apple stock with a click of a button, but you got to call a broker who's got to call a client who's got to think about it and then get back to you in three days at best. Yeah, no, it's my ask myself that question three often. I think it's the credibility, it's the risk perception in general as a group of conservative investors, right? Because it doesn't trade is illiquid. So you've got to hold the baby out of the bath water most of the time, market and bad, right? So you basically have a group of extremely conservative investors sitting around a table, right? So that and they've been financially successful, right, across cycles. Just by holding the asset, right, like even post GFC, if you held the asset through 2014, you would be fine. You would actually make a bunch of money. Yeah. They have been the financially independent, successful and conservative. So changing status quo is always hard, right? So that's my hypotheses. I could be wrong, right? Unless there was like a structural challenge, right? If tomorrow, BlackRock opened up in ETF where you could buy private property anywhere in the country, starting at 20 bucks, that would be, and that is a lot of money. That is happening surprisingly. But when that happens and that vehicle has as much money as it is, that's what it is.
blackstone or something, then people, that's a structural change, right? People can potentially do the same thing. And the ticket to ride is a lot cheaper. Yeah, you see a lot of groups trying to do tokenization of real estate. And I think that they thought that it was really going to take off and be the next big thing. And it just hasn't seemed to catch fire yet. Because there is, you live and die by your management is what I've found. And if you have a poor man, you might be great at raising money. But if you can't manage a deal, you're going to lose it. So maybe that's a contributing factor. Yeah, absolutely. Still a very authentic aspect. Yes. I saw a headline this morning and it's been circulating for the past couple of months about a number of large property management companies being sued by the federal government for colluding to keep rents high. What do you avoid being in a trap like that? From your perspective, if you're trying to help push rent rates? Yeah, that's a good point. I think one, of course, I don't have a personal view about the actual lawsuit, right? It's about my pay grade to a fine on right or wrong. But you got upset prices. Like everyone's got a set price. Let's face it, right? Uber has to set prices. Gas stations have to set prices. There is a price and that price is a function of your cost and your market. So that act doesn't go away. If you own rental property, you've got to set rates. And those rates have to change based on things around internal and external. So that fact pattern is true. And it's been true for 800 years since real estate became like a tradable asset class. The hunter gatherer started replying around and letting him live there. You have to charge for that service. So I don't think that should change. I think the manner in which it's done or the approach is probably coming under question. So the way we go about it is all testament to the team, our fantastic team that's spent tons of time on making sure we so we don't mix data between properties. So each property is its own financial asset. And the way we make that prediction better is by getting a bunch of data or the neighborhood from places like Google Maps, the US, Answers, distance to jobs, travel time, all the fun stuff that defines a property. And it's available in the public domain. So you can encode it and you can model it. So each property is its own thing. So we don't call mingle data. And our market data is all public. So it's procured and sourced from ILSS. In some cases, it's purchased from other companies who might be screen-spraping other properties. So it's all public data. So it's not necessarily. Yeah. So property manager would probably do the same thing like they would go onto a listing site, figure out what the four columns are and what their rents are. I mean, machines can just do it better, smarter, faster, cheaper. But yeah, we're pretty right from the get-go, not because of any impending loss, but just because one we wanted to build better technology. Right? Yeah. And that comp's based approach of constantly looking at the market is also wrong because you miss what's happening inside your property. Maybe everyone has it wrong. Right? Maybe everyone's missing a trick. And suddenly if you just looked inward a little bit more, you would be so much better. So talk to me a little bit more about that. Maybe you have an example where the comps for wrong and the subject property was rightfully significantly better opportunity. Oh, yeah. So on the asset optimization side, we have a few patents for what we do. So we're very proud of creating truly new technology. One of our patents is for predicting renewal retention. So using AI, we can predict if a renter will renew their lease. Interesting. And if you think about it, if you've done all the work as a property to make renters happy, you fix their repair request, you really service them properly, you're keeping rent sensible, you're not really pushing stuff like crazy. That's an asset. Right? That means your that's an asset with value where your rental base is going to stay a year after year. And that means you won't have turnover cost, you won't have downtime on releasing the pressure to rent stuff in reasonably soft markets. So you will continue to outperform your comps because you have done this simple task to your earlier point of managing better. And that's not reflected in the comps. If your comps are constantly like, I've got to charge what I've got to charge, what about the P, like half your rent roll? In fact, in quite a few mid-west markets, it's actually more than half of your rent roll. Just renews it. Right. And it's the world's best opportunity. Think about airline or hotels. None of them have customers who keep coming back to buy or just have to buy. So, my family has this unique opportunity where just by keeping heads in beds, you will make money, particularly in this market. Yeah. Because if you have constant turnover, that means your turnover costs to actually turn the unit, it accumulates. And I think the philosophy that you're articulating is what a lot of the old school mom and pops have said is, I'm going to keep my rents low and keep people in here. And that's going to be that has been their philosophy. But I'm going to keep it reasonable and keep people happy. Yeah. And you could be at market or and still keep people, but I agree with everything going on in the economy. One of the biggest risks that the data is throwing up is how stretched the consumer is. So consumer debt is going up. Delegancies are going up on credit cards. And that all demonstrates that the actual consumer post-COVID is pretty stretched. And what that means is it will translate into and most of these consumers are renters. So the renter is price conscious and the renter is trading down. Right? So it will show up in demand. It will show up on people applying. It will show up in the quality of the applications. There'll be more application fraud. There'll be more all these stories happening, which are just ductailing on the back of that economic reality. So if all of that is happening and you've got like a bunch of renters who are paying rent on dying were pretty happy. They're able to afford the rent because their salaries haven't been cut or they've been on their off. You've got to keep them. Like that to me is an asset. Yeah. Yeah. You've got an existing customer who doesn't want to move. Why would you push them out? Just to make 20 bucks more. Yeah. Just because your cons are charging 20 bucks more and that's you want to jump on to the gravy train and get 20 dollars more. And that's and keep in mind like that's decision engineering. Right? Which a property manager has to do. But they cannot do all the math in their head. No. Right? And too they've got to be fair to them. They've got a lot going on in their lives. On the property they've got broken glass into some people. They got insurance claims. They got like everything and they keep them saying coming to them. Right? So they don't have the time to maneuver and sit down and think like a machine learning engineer and he'll like yeah, let me do sophisticated modeling on renewal probability and break even on downtime. That's too much for them. Right? So that's what you built beacon to do. That's it's help property and asset managers make those calculations on the fly. And then straight through processing that goes to the website, goes to a property management software, goes to a letter. So there's no human in the loop for checking it, making sure it's right, making sure it's done on time. Right? And there's value to that. Yeah, they're definitely in. So that's great. I'm curious. I went through a revenue accelerator program through a company called GrowthX last year and they had us really nailed down who your ideal customer profile is your ICP. Who would you say your ICP is? Yeah, so it's it's multi-family owners or managers who want a new age revenue tool because revenue management has this is a pretty old legacy industry. It came into multi-family 17 years ago. So anyone who wants new technology and who doesn't want to overpay for legacy tools because a lot of these legs, so someone who wants simplicity, ease of use and lower cost. Right? And it's a little more growth focused. So if someone study Eddie, I've got to stabilize portfolio and I'm fine. They would probably not be the best fit for us because candidly if your markets are I was looking at Asheville in North Carolina recently. Yeah. Secondary market. I'm doing fine. Right? You could probably be fine in Asheville.
doing nothing. Just close your eyes and increase range 2% every year, right? And you own two properties, you'll be fine, you don't need machines, right? You can benefit from it. But with a finger in the air exercise, I think you'll probably come pretty close. So I think those aren't necessarily, but if you want to go grow from two properties to 15 properties in a year, because you're in growth mold, then you realize that you may be out of Asheville, you'd have to go and buy in Columbus, and you might have to go Cincinnati, you might have to go to markets where there's opportunity where finger in the air won't work. And if you keep doing the old school way of getting your property teams to do that, you're just losing money. And losing money is not an option anymore, it was an option three years ago when Rachel Lowe, right? Because Reef Eyes would save you all the time. But right now there's very little by way of Reef Eyes. Yeah, no, if you refinance now, your rate is going to be significantly higher, and therefore your payment is going to be a lot higher too. So are you looking at property owners? So you're talking about like growth-minded, is there like minimum number of units that make sense for you to target in owners portfolio? Yeah, I would say 2000. You have clients who have 1000 units too, but 2000 is where they start. You're building a real portfolio or real business, you're setting up systems and processes to become institutional. But at the same time, we had incoming calls from a lot of the large operators, like the super large top two, three operators, really work with some of them. But they want to just move off legacy tools given everything going on in the press. They also recognize it's a bad time for a change. And they also recognize that they don't overpay for software, given all the tech out there, costs has come down, you're building a tech company, the cost of building a tech company has come down significantly, which means the cost of software should come down. You shouldn't necessarily otherwise it's all margin, right? I think quite a few people are recognizing that reality. Yeah, that's interesting. Just pondering on that for a moment, the prop tech space is evolving with things like what you and I are doing and chat GPT and large language models, things like that. Where do you think the prop tech space is headed in the future, if you had say a crystal ball? I don't know, but after having done this for as long as I have in real estate, I think going back to our paradigm about how real estate is conservative, it's exactly the same reality when it comes to software or prop tech, where you have a universe of early adopters, which is, I'm just making a number of like 10% of the overall market, but fairly tiny. And then there is, there are fast followers who are like, I'll follow the herd once everyone by like my early adopter, buy it, I will buy two. And they are by far the majority. Right? So, prop techs run the risk that if you first need to identify the earlier adopters, and then you've got to stand in line for your chance because guess what? Every other prop tech also wants to sell to the earlier adopter, and they are inundated with propositions. So you've got to finance that power, that holding power where you're like, I'm going to wait to get a shot. And then I'm going to prove value. And once I've proven value, then I hope I can get to the fast followers. I have enough distribution power, where I can go to all these other people. Right? And in any stage, you have execution issues where you'll get the first few or you have this no man's land where you got the earlier adopters, but the fast followers aren't coming, they're just waiting and watching. Then you have no challenges. So I think most prop techs have that adoption issue. Some of them can't really finance it through value sheet, where they give a stake to a bunch of users and user groups finance companies. And those end up being the most successful you can't believe because the users haven't inherited the requirement to use the prop tech and use it properly. And so you get deployment and validation pretty quickly. And then you have a sensible business out of the day. So I think that playbook isn't really changing. Nothing is changing that model yet. Right? Where like in most other industries, right? Like we went to Y-combinator, they would say sell to small and medium companies, sell to people like in multi-family, that would be people who have 200 units. But guess what? It'll take you a generation before you build a sensible business if you're selling to people who have 200 units, because they don't have spare cash flow to sell on. Yeah, they're living off the deal. If they're an owner operator, they're running their cell phone through the property and just I wouldn't say milking it, but utilizing every extra dollar out of that. Exactly. So I think all the playbook that that is written for SaaS kind of does not work in real estate. And the one that does work is get money from a consortium or get your users involved in the development of your company. Right? Yeah. And that solves the product problem, solves the validation problem. That is what. But no more is needed. Look, don't get me wrong. I think I still believe it's one of those sectors where he encumbrance and pick any name. I hate to name names here, but any encumbered has a disproportionate share of the market. They have like 25, 30, 40 percent. And the big risk to prox is as you get to that tipping point where you have all the fast followers starting to use you, the incumbent can do one of two things. They can go build a me too solution. Right. That is honestly not great, but just about okay. And they can go to all their clients and be like, I'll bundle it in for you. It's 30 percent cheaper than this upstart company. Integrate stocks to each other blah, blah, blah. So what you have done then is you have just validated the market for an incumbent. If you can get SK velocity and you can really get revenues under the belt and it looks like you're running away with the market, maybe the incumbent buys you on. So those are the two outcomes that look most conceivable for prox. Few of them truly get SK velocity and be like platforms on their own. Most companies go and their exit game tends to be I'm just going to sell out to an incumbent. Yeah, that's, I wouldn't say that's ours necessarily, but that's something that we've definitely thought about and contemplated talked about. Yeah, yeah. It's fairly, it's completely fair as a founder to think of it. I mean, can you, it's completely fair as a founder to think about those eventualities. I'm just articulating it because for others who are thinking about the space, they should be aware of this is not going to deliver the next slack, right? It won't deliver the next zoom. Right. Right. Just because of the unique nature of buyers and how much you could build a zoom outside a sales force outside a hotspot. So I think that is a bit different in real estate. So I think it's completely fine. Look, don't get me wrong between you and me. If you build a 20 million dollar company and you know, you own reasonable economics, that's a pretty good outcome for colleagues and founder. I'm just saying it has to be capitalized. You cannot raise 100 million dollars to build that company. That's not, that's not the VC thing. So even VC's have to be real estate about 200 X thousand X returns coming out of Robtech for them, but not be unnerved by that reality because Robtech does need it away. Like real estate still needs innovation. Yeah, it does. I think I was going to bring this up earlier, but we moved on. I think that part of the evolution of real estate is going to come as the younger generations start to get the reins of the assets, either through building themselves or inheriting or whatever the mechanism is. I think at, or just coming up through a legacy established company, they're like, there's got to be a better way to do this. I mean, I need to paint a very picture here. It's just exactly the same financial services. Right. I come from that world is exactly the same in banks. They all use the same crappy back end. It's very hard for a new one to start. So it's the same challenge, right? The different between banks and real estate marginally, or banks are very regulated. You have to also tap dance around with regulation when you're sending to them. And sometimes regulation opens up enough business opportunity on its own, which unregulated industries like real estate for the most part do not have. So just as an example, I was on the by side, and I'm not saying this ever happens in real estate, but mind, if you're a bond broker or a stock broker and you say something wrong about the price or how much demand you have for a security, that's illegal. Yeah.
lose your license, right? I'm not sure how much that happens, how frequently that happens ever in real estate, maybe hopefully it doesn't. But if someone says like this property is not 2.5 million, it's 2.8 million or something or the other, or it says I've got 10 buyers for this property when they really have zero, right? That doesn't work in other markets. Like it's just not, it's off the table. Like you lose your license to operate, right? Yeah. And that's an example of regulation. I'm just saying I'm not saying it's good or bad or forming a view on business practice here. I'm just saying those are the nuances of a regulated industry. Because real estate is, it's a bit of a card game, especially in the broker's position. Somebody, when it's told, I think he used to be, yeah, he was a broker. I think he is a broker. He said real estate is selling deals. It only takes one who thinks that there's going to be another down the road. And it's true. You can run a best and final practice or process and represent as though you've got multiple bidders in it, but it may not actually be the case. Well, hard to say. Who knows? Exactly. Who knows? Yeah, no, I agree with you. I think, and it does, it does parlay into how technology companies are built, right? What kind of companies are built? A lot of companies are still building on the basis of more efficiency. Our business model is more efficiency, potentially more hazard value or growth in asset revenue. But I think what the market reacts to the best is more deals, more transactions. Which is what new folks are doing. You're delivering more transactions to brokerers. So I think those use cases tend to fly faster because it's near-term revenue, near-term PNL, to a lot of investors. So no, I think both are completely finding in terms of business models. Yeah. I'm just curious, how has your-- how have you had experiences with the VC community and how has that been for you? We did raise venture money. I think given the compute cost and data cost and all the highly discounted pricing that Amazon gives all of us, that is not that discounted. Quickly, you just need money. You need money to build tech-intensive businesses. So yeah, we did raise venture capital. I think we spoke to a few real estate folks, real estate VCs. And we understand in their situation, quite a few then we hear a lot more validation. There is a lot more customers, et cetera. Their LPs are real estate companies. So they're almost validation from their real-- I say, yeah, my experience was mixed. Some of them are extremely experienced. And they completely get it. They're operators and investors. But it's such a small community. I think at the early stage, it's a lot trickier because there's fewer of them. And quite a few of their portfolios-- these on the super early stage haven't done very well. So they're in the weird situation of raising more money. Like they're stuck. They can raise more capital, which means they can deploy more capital. But starting more late stage has a slightly better ecosystem where they are more thoughtful. And at that stage, it also opens up non-real estate VCs or smaller private equity firms who understand the real estate dynamic and little better. So it's a mixed bag. I think early is really tough. And that has to-- my sense is increasingly has to be financed with friends and family for a longer. But once you cross the chasm, so to speak, you can get to slightly more growth stage where you're distributing a product as some early product market fit. And customers are early users are very happy and willing to renew. That's where you could go to a slightly broader ecosystem. You don't necessarily have to stick with the VC community because the risk with them is they won't finance three companies in the same category. They'll probably end up doing just one. They will want a category leader or someone who looks like a category leader. And that takes a while in real estate. It takes forever to start to emerge as a category leader. So you just have to hustle not more, I think, to finance in the early stage. Yeah. Yeah, that's been our experience talking with the VCs. Let's not here to see the show Silicon Valley on HBO. Yeah. Yeah. Never take any revenue. You're pre-revenue forever. That way, you can have the highest valuation. Same as that. That's not true. Yeah. They want to see revenue. They want to see adoption. And it makes sense because probably when the VC space got started, it was like, yeah, sure. We'll take a flyer and then a bunch of these popped off for maybe no good reason. Yeah, sure. But then you can-- you get burned too many times. And you're like, OK, we got to learn from this. That's true. And I would say there are just pockets of interactivity, right? And you know this, right? The Bay Area, Boston, right? Where-- and New York a little bit more on B2B real estate a little bit. So you're bound to find more success than just because there is ample liquidity for this kind of stuff. So I do think other-- like I live in Houston, Texas. I'm not to discredit any VC from Houston, Texas, who might listen. But there isn't a lot of pro-tech stuff in Houston, Texas. So it's unlikely you will get VC who understands you has had lunch and coffee with you 20 times to truly get the business. You have to get on a plane and get to the car or first institutional investor who wasn't Boston. Because that's where there's a bunch of more tech, deep tech having kind of investment. And people understand this a little bit more. So I would say those are the other two things who keep in mind. I think we ought to be fishing whether waters are a bit deeper. That's right. That makes a lot of sense. Hmm. A lot to think about, a lot to ponder. This is-- I really enjoyed our conversation, Fedor. Thank you. We do. It's fun. Thank you. It's a lot of me. Yeah. If somebody's interested in learning more about Peac and what's the best way to get in touch with you? My first name, the
[email protected] Or just hit us up on the website. Happy to chat. And if anything, just be very happy if I can convert one more person to the data journey. That's-- It's going to be a long battle one. Yeah, absolutely. Well, great, man. Thank you again so much. And I hope you have a great rest of your day. You do. Get some rest. Enjoy the 2025. Thanks, Ash. Thank you.
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