The Real Market With Chris Rising – Ep. 65 Jonathan Wasserstrum

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Chris Rising (00:49): Welcome to The Real Market with Chris Rising. Excited to have Jonathan Wasserstrum with me today. He’s the CEO and co-founder of SquareFoot, and SquareFoot, for those who are in the know is really taking on the big boys. They’re going after brokerage in a way that is really exciting to see. And I think coming out of this pandemic, I think is going to have a lot of legs. So, Jonathan, welcome to The Real Market.

Jonathan Wasserstrum (01:12): Thanks for having me, Chris. I’ll argue that we had legs going into the pandemic too, but you got there.

Chris Rising (01:18): All right. Well, I think it’s going to be really interesting over the next year or two, as we look back and say, what were ideas that were started before, and people weren’t as aware of, as opposed to what happened while it was during the pandemic? But I think the point is, this is not a new thing that just came up during the pandemic. You’ve had a good decade under your belt building this business, but why don’t you tell our audience exactly what SquareFoot is, and where you compete?

Jonathan Wasserstrum (01:45): Yeah. And I’ll give you that we are even better positioned now than after. But yeah, look, SquareFoot is a tech enabled commercial real estate brokerage. We help companies solve their real estate needs. We do that by bringing transparent access to inventory with squarefoot.com. You can think of it like a Zillow for office space. So, first step anybody has on their journey is I want to see inventory.

Jonathan Wasserstrum (02:12): But everybody also wants and needs help with that transaction. So, we have a whole bunch of brokers in-house to do those deals. That’s how we make our money on transactions. And then, we build a bunch of tech and products for our clients, the tenants, for in-house brokers, and we’ll have a landlord product over time as well. And that tech makes the process a lot more enjoyable, easy and efficient for all those parties concerned.

Chris Rising (02:39): So, there’s a lot of people out there who know technology, companies like LoopNet and CoStar. So, there is somewhat of an assumption out there that the commercial real estate industry has some technology that’s related to brokerage. But I think we all know that that’s… trusting CoStar is a tough way for your broker to make a living. So, what makes SquareFoot unique compared to CoStar, LoopNet, some of these other sites out there that if somebody get as a web search, they might be able to find some office space?

Jonathan Wasserstrum (03:12): Yeah. So, taking those two in order. So, LoopNet is pretty good probably, if you’re looking to buy a small pad site, small investment sales type work. It’s really not good for leasing, even from a discovery process. And then, it’s also not involved in the transaction. So, it’s fine. It’s like Craigslist for office space or Craigslist for real estate.

Jonathan Wasserstrum (03:37): So, you can see all the couch or you can see some couches that are for sale on Craigslist, doesn’t try and show you all the couches. It’s just the people that happen to be selling couches at that moment. But if you’ve never bought a couch before, and you don’t know how to negotiate trying buy a couch, you don’t know the gotchas, probably not the best way to buy a couch.

Jonathan Wasserstrum (03:58): Not to mention, it’s not all the couches on the market. So, that’s LoopNet. And then, Co Star, if you’re a prospective tenant, you don’t have access to CoStar. We in the industry, although not we at SquareFoot, but traditional brokers have access to CoStar. You as a prospective tenant do not have access to CoStar. And then, in both of those, they’re just listings platforms, doesn’t actually help you with the transaction, and I’ll maintain until I’m blue in the face that tenants want and need help with that transaction.

Chris Rising (04:32): Where does VTS fit in all of that as it prepared to SquareFoot?

Jonathan Wasserstrum (04:39): So, historically, they were a better version of Excel for asset managers, which is amazing. Excel is a trillion-dollar business, and asset managers were using Excel, and there should be a real estate specific app for that, and that’s what they did. Now, they’re starting to dip their toe, Truvo, which is now called Marketplace, which actually might just be called Market now.

Jonathan Wasserstrum (05:02): They’re trying to be involved in the transaction, but they’re trying to be an extension of a broker. So, again, if you need help with a transaction, don’t go to VTS. If you are a broker, and you want to look at some portion of the inventory that’s on the platform, you can use VTS, and it’s going to have nice pictures, and all that stuff.

Jonathan Wasserstrum (05:04): And I think you actually do transactions through the platform. So, baby steps in the right direction. Ultimately, I think they’re trying to compete directly with CoStar. I don’t think they’re trying to get a lot of brokerage. But we’ll see. That’s-

Chris Rising (05:46): My take is that they’re not taking off brokerage. They want to be helpful to the brokerage firms, support them. A lot of things I want to go on in today. But one of the things, since I get asked this all the time, I have to imagine you do. What is the pandemic going to do to the demand for office space? And does that threaten your business?

Jonathan Wasserstrum (06:08): So, two things. One, both are good things, that and that. Actually, we’ll talk about the unalloyed good thing. And then, maybe me just trying to pee on my own leg, and tell me it’s training. So, the unalloyed good is that if the pandemic has shown us one thing across industries, it’s that people are more inclined to use technology than they were yesterday.

Jonathan Wasserstrum (06:31): So, whether it’s healthcare, a lot of that’s moved online, a lot of which does not move back offline. So, yes, virtual visits might still be there. But even just the pre-checking stuff is all online now. And even when you start going back IRL to your doctor, that stuff is not going back in the genie. Grocery delivery, sorry, that genie is not going back in the bottle. Grocery delivery, same story.

Jonathan Wasserstrum (06:57): I used to love going to the grocery store. Now, I’m habituated to ordering. And I really like on the grocery store. So, I’ll probably go like once a month, because I like it. But most of the time, I’ll be ordering, and it’s going to show up in my house. Which those are two things that if we had had this conversation 18 months ago would not have been things.

Jonathan Wasserstrum (07:21): We were already seen in commercial real estate that people were more and more inclined to go online. We’ve already seen it for the last 15 years with residential. The thing that’s always funny when I talk to a commercial real estate broker, and there’s like, “No, nobody is ever going to use technology.” And I say, “How’d you buy your house, man?” It was on Zillow.

Jonathan Wasserstrum (07:42): I was like, “So, what’s special about us?” And the answer is nothing. And so, that’s like the unalloyed good. People are online looking, and that train has left the station, and picking up steam. Now, more directly your question about demand, demand will look different. I’m not smart enough to know if that’s a drop of 5% or 30%. I don’t think it’ll be 30%. It surely will be 5%.

Jonathan Wasserstrum (08:10): By the way, I don’t own any building. So, it doesn’t really impact me. It does impact me because we do make money leasing transactions, and if rents drop, then my percentage, the percentage, obviously drops. I think some companies are going to go full remote. I think that’s a really, really small percentage.

Jonathan Wasserstrum (08:30): And then, the companies that are going to go and look, everybody makes up words depending on the day, but the companies that have some remote, some in office, you say, “Great, Chris, how many days a week can you be in the office?” And you say, “I don’t know, like two or three.” And I say, “Which two or three?”

Jonathan Wasserstrum (08:45): Nobody’s picking Monday and Friday, which means you have everybody who says they want to be in the office two to three days a week, or in the office the same to three days a week, which means you need the same amount of office space. Now, maybe it’s configured differently, because the people who are going to “work” from home on Monday and Friday are going to do their deep work on Mondays and Fridays.

Jonathan Wasserstrum (09:04): And then, we’ll save Tuesday, Wednesday, Thursday for in-person interactions. So, you’ll have more collaborative space, and maybe not everybody has a private desk. So, I don’t think you’re going to see this drastic drop in demand there. By the way, when there is a drop in demand, assuming the same amount of supply. I know enough economics to know that that should make prices drop.

Jonathan Wasserstrum (09:29): And when prices drop, people consume more of something. So, in New York, where the average rents going into COVID were 75 bucks a foot, you’re like value engineering every square inch of that space to see how many desks you can squeeze in there. If, and I don’t think this is going to be the case, or not seeing it be the case.

Jonathan Wasserstrum (09:48): But if tomorrow we woke up and it was $50, well, everybody should get more office space. If you look at the average amount of space a company uses in New York versus, let’s say, Houston where you have 35 buck a foot average space, people have about one-and-a-half, two times as much office space per person. So, you’ll just see that.

Chris Rising (10:06): Well, let me ask you this because you hit on the Monday Friday thing. I don’t really feel like the pandemic has now decided that we’re all going to work only three days a week. I think there’s going to be a lot more pressure put on the time that you spend at home working with your employee.

Chris Rising (10:23): But where do you see just from the clients that you have people coming down around fear of missing out? How does someone get that promotion? Young people, this is their social life. When I was young, before I got married in my 30s, my social life was my business life.

Jonathan Wasserstrum (10:40): I agree, but I’m biased. So, I try and unpack those two things. The example I’ll use as myself, and you’re not supposed to extrapolate your own personal experience. But my job in real estate before business was JLL. And I worked in this group called International Capital Group. It was me and my boss in DC, my boss was 40 years older than I am.

Jonathan Wasserstrum (11:02): And then, analogous pairs throughout the world in major capital markets. So, the rest of my team sat in Sydney, and Dubai, and Shanghai, and London. I haven’t talked to any of them, except for my boss in the last one, when I left JLL, 10 years ago. I still text on a weekly basis with some of the guys that sat next to me and monthly with others. And I work with them.

Jonathan Wasserstrum (11:26): They just happen to work at the same company the same time, and we wound up hanging out together. So, that to your point, that in-person interaction is more important than anything else, and especially young 20s living in a city I’d never lived in before. That was one of my social outlets. So, the notion of all of a sudden, great, everybody’s going to work from home.

Jonathan Wasserstrum (11:49): And it’s a bridge I’m not comfortable crossing, especially in the markets that young people want to live in. So, a New York, a DC, an LA, any of the top 10 markets were by the way, real estate is expensive, both on the office side, and on the residential side. So, if somebody lives in a studio apartment in New York, and you’re like, “Okay, Sally, you should also work from home.” Again, a bridge I’m not comfortable crossing.

Chris Rising (12:14): Yeah, yeah. When you’re looking at the universe of potential business for you, I’m just guessing, but I got to imagine IBM doing a million-square-foot lease isn’t direct market. But if you take it from that, where do you find most of your clients coming from as a firm and as you grow? Because we should talk a little bit about the growth you’ve been under, because you guys have been growing quickly. What’s the perfect client for SquareFoot?

Jonathan Wasserstrum (12:44): And actually, I have a question. I have a provocative comment on the last thing, because you said, “Well, what about promotions and stuff?” My provocative comment is that if you care about your career, you want to be in an office.

Chris Rising (12:59): Yeah. Jamie Dimon said it best, young people and hustlers are going to come back, because that’s how you get things done.

Jonathan Wasserstrum (13:05): And there’s a bunch of people who are like, by the way, if you don’t care about your career, I don’t judge you. Not everybody wants a corner office. By the way, you can have my corner office, it’s not all it’s cracked up to be. I have plenty of friends who like there’s this difference between live to work and work to live, and neither of them is good, or neither of them is perfect.

Jonathan Wasserstrum (13:26): But if you don’t really care about getting the best performance reviews, I don’t believe you need to be in-person in order to show face, in order to get a good performance review. I believe you learn 100 times more and 100 times faster if you’re in the same room with the person who’s trying to teach you something.

Chris Rising (13:43): Yeah, I agree with you 100%. I think one of the things that’s been lost in the punditry over the last year, is that there’s some jobs, you’re right, they probably don’t need to be in an office. There’re probably some coding jobs, there’s probably some, especially writers, reporters, the need for a newsroom doesn’t seem like exists anymore. Chris Rising (14:05): So, I get that there were probably users who shouldn’t be in an office, and they were just doing it because that was what people did. But I think there’s so many other businesses with being mentor, having the conversation, literally, “Hey, you want to go grab a bite of lunch,” really matters. And I just think when everything shut down, nobody can really have a voice about that.

Chris Rising (14:31): And if people who are professional writers and professional Twitter users can get their point of view out there all the time. I also made me question that a news intake I get on Twitter because I tend to react more to people who say the opposite is that I just don’t think it’s true. But having said all that, you’ve got a business around that’s all about getting clients who want to have an office space.

Chris Rising (14:55): And you have a great website that allows someone to go on there. How do you look at your competition, and what do you think that you have around IP that makes it unique so that a CBRE can’t one day just say, “Oh, we can compete immediately with this?”

Jonathan Wasserstrum (15:13): Let me answer that. I’m always one step behind. So, let me answer your first question, which was about who uses us? And then, I’m going to answer why we’re better than CB, and JLL, and why they can’t just copy us. So, who use us? It’s not IBM for 500,000 square feet, although we are bringing on brokers who have that experience. So, we’ll start doing more of that work.

Jonathan Wasserstrum (15:34): So, that’s going to be sourced the traditional way, probably and not online. But we’re actively working a deal in actually, LA, where we just opened up shop. That’s 100,000-square-foot headquarters deal that found us by googling, I don’t know, Santa Monica office space. And we’ve done a bunch of deals for Fortune 500 companies for their satellite offices.

Jonathan Wasserstrum (15:58): We’ve done a deal for Baker Hughes, which is a subsidiary of GE. GE, last I checked is not what GE used to be, but it’s still a Fortune 50, 100, I don’t care, but they’re googling for office space. This gets back to that shitty joke I made about when I asked a commercial broker how they found their house and they say Zillow.

Jonathan Wasserstrum (16:18): And then, the fact that they think that it’s going to be any different for us is I think foolish, quite frankly. So, anyway, everybody uses us. Our bread and butter is two to 50,000 square feet all day. So, those are groups that aren’t being as actively chased by the traditional players, especially the lower end of that. And more likely to have a tech forward decision maker.

Jonathan Wasserstrum (16:50): Though now, I’ll maintain that my 75-year-old dad does everything on the internet. So, everybody is on the internet now. That was maybe harder, say 10 years ago when the iPhone just came out. But now, again, everybody. So, yeah, everybody is our target user. Why the big firms can’t do this? A few things. It’s just not in their DNA. It’s really like if I have to have one sentence, that’s how and why.

Jonathan Wasserstrum (17:18): It’s hard to switch trajectory or course on an ocean liner. And JLL, and CB, and all those guys who made a ton of money doing business a certain way. And it’s really hard to change that. Plus, one of the interesting things when you think about the industry, brokers don’t work for brokerages, they work at brokerages.

Jonathan Wasserstrum (17:43): And if I’m a senior producer, fill in the blank firm, and fill in the blank firm, and they’ve all done this, so I won’t name any by name, but they all fill in this bucket, just spent $10, $20, $30, $50 million on tech. That CEO of fill in the blank firm, walks down the hall to senior producer, George and say, “Hey, George, I need to use this app, it’s going to make your client’s life a lot better.”

Jonathan Wasserstrum (18:06): George says in words I won’t use here, although I’ve already cursed once. “No, thank you, I’m going to go down on the block.” And George has made a trillion dollars over the last 30 years, and is not about to change how he does his business, which really puts those guys at a disadvantage there as it relates to this.

Jonathan Wasserstrum (18:27): And also, I think that those firms being like really JLL, CB, Cushman have really built themselves to be, I call them commercial real estate supermarkets. So, they want to be all things to all people in all markets. So, they can walk into an IBM and say, “Look, we have you covered.” Whatever GO, whatever property type, whatever service line. And in order for them to do that, they have a really big base of operations, which is really expensive to run.

Jonathan Wasserstrum (19:02): Which means actually, small and medium sized deals don’t really make sense for them to do. So, I think what you’ll start seeing is those big firms just go after the big business, and the Fortune 500 will be covered by one of those three or other people who are trying to, like whether it’s a new mark, or colleague of yours, you’re trying to get into global business, because you need that global platform in order to do global business.

Jonathan Wasserstrum (19:25): And there’s a ton of fixed costs associated with having that global platform. So, I think you’ll start seeing maybe a bifurcation in the industry of really, those global supermarkets and then everybody else.

Chris Rising (19:38): So, some of the more traditional firms that I think that emerged along the way, if you look at, I’ll date myself a little bit, I remember Edward S. Gordon, and that was a Chicago firm.

Jonathan Wasserstrum (19:51): And the best brokers in CB, in New York are all the ESG guys.

Chris Rising (19:56): Yeah. And I was going to go with the old Studley that’s now Savills.

Jonathan Wasserstrum (20:02): Our president used to run that. So, we know a bunch about them.

Chris Rising (20:06): So, what I’m getting at is that it seems like there’s been a disappearance of that local tenant rep, focus, sharpshooter and their opportunity. Maybe you talk a little bit about what market you’re in, and why you think your ability to grow in those markets are may be different than global strategy?

Jonathan Wasserstrum (20:23): Yeah. So, look, we started the business in New York. We just launched, we were supposed to launch last year, a few markets last year happened differently than everybody in the industry thought it was going to play out. So, that all got pushed. We launched Houston… excuse me, in LA about two months ago, three months ago, end of February, and for one and a March… or sorry, beginning March the other.

Jonathan Wasserstrum (20:50): We’ve already closed deals in both of those markets. We’re about to get to terms in what will be a fourth market. That’s a good top 10 market that we’ll now have a presence in. We also recently closed, we haven’t announced yet, an acquisition for a flexible space platform that covers all 30 markets that matter, all 50 markets that matter.

Jonathan Wasserstrum (21:18): So, everywhere is the short answer, and we’ll just go around the country, hopscotching, and planting flags, hiring brokers in those markets who know those markets well. They bring their business. We get them a bunch more business in a suite of products and services that their clients can’t find anywhere else.

Chris Rising (21:36): Well, let me ask you this, as you look at the markets and your growth, are you doing it based on some sort of algorithm or some like that? Or is it dependent on finding the right broker who can carry the flag?

Jonathan Wasserstrum (21:47): Yeah, the right broker carry flag because we turned on LA and used [inaudible 00:21:51], we find the right brokers, and we’ve already closed deals there that we sourced. They also have business, but that platform has already sourced deals in both those markets. Because we can turn on the platform everywhere overnight, anywhere overnight.

Jonathan Wasserstrum (22:04): And even before we started planting flags and hiring brokers, we were already getting leads in business all over, we just had partner brokers. But that’s not how we want to go deep and I guess we’ll call it vertically integrate a market, own the whole transaction process, start to finish because it’s a much better experience for the tenants, and better experience from the broker. But we already sourced business all over the country. So, it’s just a matter of time of officially planting the flag.

Chris Rising (22:35): So, let’s take a step back. So, you went to Emory in Georgia, and then you ended up going to Columbia. At what point in your career, and when you were at JLL did you start to get that bug, and saying I think I could be an entrepreneur?

Jonathan Wasserstrum (22:52): So, look, after college, I did consulting for a couple years, then got a real estate JLL. When I was applying to business school, which would have been 2009, I guess doing the applications. My essay was, and I was involved in a small business at the time with a buddy of mine, and my business school essay was about getting in real estate development.

Jonathan Wasserstrum (23:15): And bringing together the business stuff, which I like, small business stuff with real estate, which I really liked. And I grew up in Houston and downtown now looks even different than it did when I wrote this essay 11 years ago, but Downtown Houston looked completely different 10 years ago than it did when I was a kid 35 years ago going downtown with my mom on the weekends when she had to go to work on the weekend sometimes, like you didn’t want to be there after five.

Jonathan Wasserstrum (23:50): Not only was not a 24-hour city, it was a get the fuck out of downtown before it gets dark city. Excuse my language. So, the essay was about you know wanting to go redevelop corners myself because I saw how awesome an effect that can have on a city. And then, I started business school, and got a call from somebody who was looking for space for their last company.

Jonathan Wasserstrum (24:15): And they had gone and try and do that, thought they could, they recode it, so we decided to try and fix that, we started SquareFoot. So, there was never like, I thought I wanted to do my own thing at some point. I thought I was going to be real estate development. This opportunity came first, and here we are. I’m having a lot of fun, I don’t… not a rush again.

Chris Rising (24:37): So, most people when they do take this job, they don’t have any secure income coming in. And everybody in the world tells are you sure you want to do this? How did you deal with that when you decided I’m going to start this business?

Jonathan Wasserstrum (24:51): Yeah. So, in some ways I was lucky. Well, a lot of ways, I’m really lucky, but timing was interesting because I was in business school. So, I was already not getting income. I was not planning on getting income for that two-year period. We started the business summer internship time. And by the time I graduated, there was enough… they’re there that said, let’s try and do this thing. So, I didn’t take a salary just after I graduated.

Jonathan Wasserstrum (25:21): But within the first six months or a year, I was taking a salary, not like a business school graduate salary, but enough to pay for my… I lived in a six-bedroom apartment in New York with somebody so my rent was reasonable for New York at least. So, yeah, I never had to make that like, holy shit. I have a mortgage, and a wife, and kids, it’s time to mortgage all of that. The second part, which was like, do you know what you’re getting yourself into? I did not. Nobody ever had that conversation with me.

Chris Rising (25:54): Just yourself. When you were in business and you’re looking at the challenges that are out there to start a business, what was the number one or number two that you had to overcome yourself? Was it parent’s expectations, or own expectations, and you’re coming out of Columbia? Got to imagine that it would have been a very high-paying analyst job, or acquisitions, or asset management job. Did you have to overcome anything, or did that not even get into your mind?

Jonathan Wasserstrum (26:24): My parents were always supportive. The conversations we had were like, let me go try this. And I didn’t want to go into investment banking, or consulting, or any of those traditional paths. And this was 10 years ago. So, three people went to Amazon and two went to Google. That was before tech was cool. And so, the conversations I had both internally with my parents were like, let’s go try this. If it works great.

Jonathan Wasserstrum (26:50): If it doesn’t, I’ll just go get one of those real estate analyst jobs, which are just in time hiring anyway. So, downside, we do talk about one-way doors. This wasn’t a one-way door, nothing that I was closing was… no doors that I was closing were ones that I couldn’t go reopen, that I cared about. So, the downside from that perspective were pretty minimal. And yeah, my friends and family were supportive. And look, I said, I lived with six guys out of business school. So, I didn’t have my own apartment. I made it work.

Chris Rising (27:27): And did you start the business on your own, or do you have a partner-

Jonathan Wasserstrum (27:30): A couple guys I knew from home at the time.

Chris Rising (27:33): And did you raise money, or have you raised money, or you’ve just done it all like a gamble?

Jonathan Wasserstrum (27:38): Yeah, we’ve gone through four financing rounds now. We did an Angel round, a seed round, an A. We thankfully raised a Series B at the end of 2019. So, gassed up the engines, just before the car broke down. Sorry, not the car broke down, before the-

Chris Rising (28:02): The road got closed.

Jonathan Wasserstrum (28:03): … highway was close. Yeah, before the highway closed. So, yeah, we’ve raised about 25 million bucks so far.

Chris Rising (28:11): So, how much time do you, as the leader of this business spend on the technology side of it? Firstly, recruiting people and running the business. Are you more focused on the tech being really good, or where do you spend your time?

Jonathan Wasserstrum (28:28): I have three jobs as CEO, three things I have to do as CEO, which is one, make sure there’s money in the bank. So, that’s financing. Two, make sure we have the right folks on the team. So, that’s recruiting. And then three, make sure everybody is in the boat rowing in the same direction. So, that’s the mission, strategy, execution piece.

Jonathan Wasserstrum (28:51): Thankfully, we have a fantastic leadership team, including the president of Studley or Savills. Have a CEO who runs product, and who has a product background, so tech and product reporting to him, marketing reports into him. We have fantastic leaders for all of those different groups individually. It doesn’t mean I can just hit the snooze button.

Jonathan Wasserstrum (29:16): But it means like on a day-to-day basis, I don’t need to worry about the trains running on time, which then I want to say frees me up, but it lets me focus on those three things that I need to be doing, which is once every 18 months financing, and then constantly recruiting, and then a bunch of time, spent managing and running a business. Chris Rising (29:36): So, what do you think the biggest threat to your business is? Is it new technology? Is it, I guess maybe nobody goes back to the office? But be realistic, that’s not the case. What’s your biggest threat as a CEO when you look at your business? Jonathan Wasserstrum (29:51): Honestly, it’s all execution at this point. I don’t lose sleep about is the market there? The market is there because JLL, Cushman, CB are each trillion-dollar businesses. And none of them even have significant market share. I’m not talking trash, just like it’s an enormous, enormous business industry that I’m playing. I think we have a better service delivery. So, I think brokers over time are going to start gravitating towards us.

Jonathan Wasserstrum (30:17): We weren’t trying to recruit brokers, by the way, until last year, again, crappy timing. But the same reason why everybody can clutch their pearls talking about Compass valuation, but Compass has a shit ton of brokers who work for them now doing a ton of business. That’s what we’ll start looking like over time. And so, yeah, it’s all about like left foot, right foot, left foot, right foot, can we go do this?

Jonathan Wasserstrum (30:43): Can we continue doing more business here in New York, where we’re just getting started? Can we continue launching new markets, where we’re just getting started? Can we continue building out the suite of services that we have on offer for our clients on the tenant side, and over time, we’ll start doing some stuff on the landlord side? So, yeah, not the finicky thing, and I’m just making sure that we keep doing what we’re supposed to be doing.

Chris Rising (31:08): So, when you started the business 10 or 11 years ago, you probably had a slide deck that raised money, you probably updated and updated it. How different is the business today from the original slide deck?

Jonathan Wasserstrum (31:22): Well, the original-original one, we thought we were just going to do like Zillow for office space. So, just the listings piece. And then, we pretty quickly saw, within first six months, we saw that everybody needed to help with the transaction. So, I said, “Why try and fight friction here?” Fight, whatever, why fight anything? So, then we started doing the transaction.

Jonathan Wasserstrum (31:42): So, but the business hasn’t really changed much since then. Except, going into our last finance round Series B, we were going to roll out a pretty significant other business line with FLEX by SquareFoot, which was actually going to own leases. We were going to sign leases on behalf of clients who want a lease flexibility. Thankfully, we didn’t ramp that business up.

Jonathan Wasserstrum (32:07): I’m still very bullish both on flexible space, as well as that particular way of providing it. But the markets are still in disarray right now. And everybody’s trying to figure out which way is up. So, I’m not in a rush to sign a bunch of leases.

Chris Rising (32:22): Yeah. Well, having a painful experience with WeWork competitor as an investor, I think I played a little bit. Let this play itself out a little bit here. I agree with you. I think flexibility is probably the biggest issue with owners of buildings are going to have to face. And it all ties into the financing of the building. So, I don’t know. I think it’s easier for banks to maybe debt funds to be more flexible.

Chris Rising (32:50): I don’t think the CMBS market is going to be good for it. But yet, most of the class A buildings are owned via CMBS. So, it’ll be interesting to see how that plays out. But there’s clearly a demand from tenants to say, long gone are the 15-year leases and the 10-year leases. And then, people want to say goodbye to the five or the seven-year leases.

Jonathan Wasserstrum (33:12): And look, in the capital markets right now are the tail wagging the dog. But over time, things will adjust. It just can’t happen overnight because all the CMBS stuff. Because who am I supposed to go talk to?

Chris Rising (33:25): That’s actually a few million bucks, go talk to them, and then one can see what happens.

Jonathan Wasserstrum (33:34): I don’t anybody, I guess for better or worse, I don’t think there’s going to be that much medicine that gets taken. So, I think it’ll be more like the next set of buildings that start getting bought, not this year. But once we start figuring out what the new normal looks like, we’ll just get financed slightly differently.

Jonathan Wasserstrum (33:52): Not like not using debt, obviously. But everybody is going to go in knowing that our rent roll is going to be… X percentage of it is going to be long term leases to law firms who still will want 10-year deals. And then, Y percent is going to be three to five-year. And then, the balance is going to be some sort of flexible stuff.

Jonathan Wasserstrum (34:12): And you’ll put different underlying assumptions for each of those. By the way, as you go from 10 years to 10 days, your per square foot rent goes up, but your lease term goes down. So, it starts looking like the 10-day lease, looks like a hotel. But by the way, there’s a trillion hotels that have gotten financed. There’s an answer for all this, it just hasn’t had to get solved yet.

Chris Rising (34:36): I agree with you, I think. And I think you’re going to see a lot of property management firms, and exactly what you said, I think we’re going to have every building we own will have a floor or two that’ll be more flexible. It’ll go up the building for longer terms. Let’s move back over and talking about company culture. I think it’s really important.

Chris Rising (34:55): I know my audience really enjoys hearing how an entrepreneur started their business. But what technology decisions did you make from the beginning? Would you just say that Microsoft is the dominant operating platforms? And we’re going to build everything off of that? Did you go with Google? And how does that tie whatever you do use to your company culture, and how you interact digitally with your employees and team?

Jonathan Wasserstrum (35:23): We’ve used the Google Suite from the start. I’m trying to think what else is interesting to talk. We’re a tech company that we build tech for our clients. I don’t spend much time thing about what our internal productivity stack looks like. So, we still use a lot of Microsoft products, because everybody sends us at lease in work, but internally, we collaborate using Google Sheets, actually.

Jonathan Wasserstrum (35:52): And yeah, from a culture perspective, everything we were doing was already in the cloud. We use Google Docs, we use email, we use Slack. Which was nice, actually, when everybody started working from home, because we were like, holy crap, how do we operate? We already had the nuts-and-bolts infrastructure there, by the way, not for nothing.

Jonathan Wasserstrum (36:21): We’ve had a team in Belfast for four years now. So, we’ve already been… from an all-hands perspective, there were already people calling in from another office. By the way, they were in an office. So, remote doesn’t equal Sydney and the couch, which is a misnomer, but whatever. Yeah.

Chris Rising (36:41): Well, there’s the people in Ireland, are they programmers, or coders, or are they brokers?

Jonathan Wasserstrum (36:49): Programmers. Yeah, programmers. We’ve also overtime, had some marketing people out there, too. We don’t currently.

Chris Rising (36:56): Yeah. That’s the biggest risk, I think, for most employees who think that leverage has changed. I think most employers are going to go, “Wow, if you can work from home in New York or Los Angeles, I bet I could find someone to work from home from India, or Belfast, or at least Boise.” And I think that’s going to be a real issue.

Jonathan Wasserstrum (37:21): Yes. Another provocative statement, I think you have a bunch of people who are yelling from the rooftops, how awesome work from home is. And what that actually just means is that an employer is going to be able to find somebody who works twice as hard for half as much working from your couch.

Chris Rising (37:39): Yeah. And the other point, I’d say, but I think it’s a trick because we both tend to agree on this. What I find interesting is everybody is looking at maybe March of last year, or when the second and third check-ins happening in November or whatever and saying, “Oh, it’s great. We had 12 Zoom meetings today.”

Chris Rising (37:56): And it was one thing when we’re all told, and our kids, and everybody was told to shut down, and you can have 10 Zoom meetings. But we’ve been coming back to the office for a while, because I don’t like to. It’s important that what we do, but I like it. And I can’t have zoom calls all day, because I’m having meetings, and lunches, and breakfasts.

Chris Rising (38:14): And so, we’re not going to all adapt to those people who want to stay at home. And I just don’t know how it works. One of my frustrations is why did Zoom kill every conference call? There was a reason why you had conference calls. You have to be on a video. And I think there’s a lot of pushbacks to that. So, I think the office was as a long term once we get through this.

Chris Rising (38:37): But you’re a great example, one of my points, which is we’re seeing the boomers, and the one thing that pandemic did is it forced retirement for a lot of boomers, and Gen X, and Millennials are taking over. And they’re going to run the companies the way they for 20 years, 10 years. Thought the boomers were screwing it up. And part of that is going to be digital, but I don’t think anybody is going to say, “Hey, just stay at home and my business will be fine no matter what the business is.

Jonathan Wasserstrum (39:06): The same thing because you hit a nerve there. I agree. The only businesses that haven’t really handed over the reins the next generation yet are commercial estate brokerages.

Chris Rising (39:16): Well, you looked at CMW and the McDonald’s on the mid-40s. So, you’re starting to see this [inaudible 00:39:24], but it’s slow. It’s slow. I agree. And it’s going to be interesting. Now, I want to go right back into the technology because it seems to me that whether it’s CMW, CB, Colliers, JLL, they do have pockets of money, and they’ve been given money to the fifth walls in the world.

Chris Rising (39:45): And doing things like that, trying to figure out how technology will enhance their business. But you don’t yet view, or do you view one of those major firms saying, “Hey, we’d used SquareFoot as some competition we don’t like, and we need to be like them?” You don’t see that threat as something that’s jumping out of here?

Jonathan Wasserstrum (40:12): No, is the short answer. Look, when I think about our differentiators, so one, it starts with how we acquire a lot of our business, which is squarefoot.com, where when you Google in a market that we’re in, you Google downtown office space, you find us. That’s something that is not easily turned on overnight. That’s bunch of years of not blood, sweat and tears, whatever it takes to make Google happy.

Jonathan Wasserstrum (40:41): That’s one, two, it just gets back to like, the example I always use is Kodak had a digital camera on their shelf. And Kodak is no longer in business because they’re like, “Nobody is going to use this.” Actually, even if they thought nobody was going to use it, it’s never a sure thing until you look in the rearview mirror and say duh. And you have companies, and here, you don’t really have companies.

Jonathan Wasserstrum (41:08): You have consortiums of individual producers, who are used to doing things a certain way. And getting them to adapt something. These firms have all tried… I love my boss from JLL but this is old. But when they were trying, I guess, to use CRMs, he would still have our admin print out on 4, 11 by 17 pieces of paper, all of his clients. And that actually hasn’t changed. And by the way, this was a guy who at the time not to date myself, whatever that means is a 38-year-old.

Jonathan Wasserstrum (41:44): The iPhone had just come out. And my boss is running around the office calling himself Mr. Technology because he had his new iPhone. He was so happy he had his new iPhone. And again, that’s in his personal life. I have an iPhone, look how cool I am. I’m so forward thinking. And they’re like, “And here’s this thing that will make you 10 times more productive at work.” He’s like, “Fuck that. I’m using the printer.”

Chris Rising (42:03): Yeah. I hear you. I hear you. I think a lot of that mentality is… the pandemic did a lot to push them off. But they’re still making decisions. I get that. So, one of the things I do want to talk because you haven’t been bashful about making some acquisitions, which is a tough thing to do when you’re a small company. Can you talk a little bit about your thinking about acquiring companies? And I know you’re on your second one now since you’ve started the business, and it could be more, can you talk about that?

Jonathan Wasserstrum (42:33): Yeah. Well, I like to think that we think as if we’re a big business already, or whatever size business, which is any given point, you can buy, build or partner. And there are some times, when each of those makes sense. And we all can also be opportunistic about it. So, when we bought PivotDesk that was a very opportunistic deal. PivotDesk, unfortunately went the way of the dodo.

Jonathan Wasserstrum (43:07): Industrious bought them. Industrious wasn’t using them. I called Jamie. I said, “Jamie, can I have PivotDesk?” Said, “She can’t have it, but I’ll sell to you.” So, that’s how we got PivotDesk. With this flexible space platform that we just closed on a week and a half ago that we’ll announce later this month. It’s actually similar story to the story I was just talking about JLL, and CB, and that you were telling about CB.

Jonathan Wasserstrum (43:36): Except, what we’re building here is the commercial real estate services firm of the next generation, not the commercial estate services firm of the last generation. So, every morning when we wake up, we say, what does the tenant of the future need? And by the way, when you’re solving tenant’s needs, you’re also solving landlord’s needs because those are just the clients, customers.

Jonathan Wasserstrum (43:55): Which is a very new way of thinking about the business, which is not unique to us. But that’s not how people thought about the business 30 years ago. So, we say great, flexible space, the bigger part of it, we leaned it in with PivotDesk, we started leaning with PivotDesk, mentioned FLEX by SquareFoot, which is now on the shelf temporarily, and then with this new thing.

Jonathan Wasserstrum (44:14): And then, there’s other things that don’t exist, like our tour book platform that there’s no off the shelf tour book platform, so then we built that. And now, as we look to go into new markets, same buy, build, partner. I’ve told you we’ve done deals in the most of the top 30 markets, most of that has been on a partnership basis before. As we go into some new markets, we’re building.

Jonathan Wasserstrum (44:40): Hiring somebody, three somebodies, five somebodies. In that new market that we’re not there yet, but hopefully yet, we’re going to be buying a brokerage, and that’s how we will go into that market. But I like to think that we’re pretty no pun intended, but flexible. We’re not dogmatic about many things, and going with the flow, and when all opportunities present themselves, we like to be ready to take them.

Chris Rising (45:05): So, how do you look at the last 10 or 11 years as your journey? What’s changed in your personal life around being a CEO into being an entrepreneur? And what do you think the challenges are going to be over the next few years as an entrepreneur?

Jonathan Wasserstrum (45:20): I think I finally know… well, two things. One, I think I finally know a little bit about what I’m doing. So, I’m less feeling my way around in the dark. And then, two, more crucially, I know what I’ve gotten myself into. I was joking around with a buddy yesterday. If somebody was like, “Oh, do you want to go do this, by the way, it’s going to be the next 10 years of your life?”

Jonathan Wasserstrum (45:46): First up, nobody ever said that to me. And I don’t know what I would have said. Now, has been the last 10 years of my life. And in both an exciting and sobering sentence, we’re just getting started. I could be so lucky for this to be the next 10 years of my life.

Chris Rising (46:02): Yeah. Looking at some of the biggest companies out there that started Granch barely from Microsoft, and Apple, the first 10-year, yes, things, people, Steve Jobs started in the garage and all that. But it took 10 years for those businesses to start to get their legs and then explode. Very few, I know, obviously, there were some Slack, and a few others we can point to that exploded right away. But that’s the exception, not the rule.

Jonathan Wasserstrum (46:28): Yeah. Slowly then suddenly.

Chris Rising (46:31): Yeah. Has the pandemic got you to rethink some of your lifestyle choices or anything like that? I know for me, it certainly has. And I’m hearing it more and more that it’s at least put a lens on some changes people want to make in their lives.

Jonathan Wasserstrum (46:48): It’s interesting. So, three things happen March to May of last year. The pandemic started, went into lockdown, we moved to the suburbs, and we had our first kid.

Chris Rising (47:00): Wow, that’s some life changes.

Jonathan Wasserstrum (47:02): Yeah. So, any one of those three, my wife will point out would have been like a big adjustment. And all three of them happen at the same time. And I actually have no idea how to tease out how much of my lifestyle, which they looked very different from had we been talking February of last year, to now as a result of any of those things.

Jonathan Wasserstrum (47:25): Last February, I didn’t have an 11-month-old that I like seeing before he goes to bed, which means I do go to the city, and I love going to the city because working in an office with the people you work with is irreplaceable. I take an early train home, because I like to… I make sure I do my meetings when I’m there, either internal or external. And I take the 4:36. So, I’m here to play with him for an hour before he goes to bed. And then, beauty about the internet, I can just open up my laptop, and work for two more hours after that.

Chris Rising (47:52): Yes. I think that a lot of people have come to that. I know I’ve been on. I’m coaching my 11-year-old little league, which I swore I would never do. But because of the pandemic, I was like, “Well, the last opportunity.” It’s been a lot of fun.

Jonathan Wasserstrum (48:10): And I think there’s been this false dichotomy that people we’re like, the remoters, I guess I’ll call them. Like, say, “Okay, if you go to an office, you can’t ever hug your child.” That’s not true. If you work in the office seven to seven, you can’t. But by the way, the same thing that enables remote means that I can work, like I’ll get off the phone, and I’ll go play with my kid for a few minutes before he goes to bed. And then, I’ll go do work for another hour if I need to. So, the blending of work and life has changed.

Chris Rising (48:42): Yes, I agree. And I think that the thing that we’re going to see as a society is people like yourself, who were younger CEOs are going to continue to put strain and push on those boomer things about what was successful. It’s no longer about turning the light on a 7:00 in the morning, and leaving at 7:00 at night.

Chris Rising (49:03): It’s what you’re doing throughout the day. And really, what you produce is what’s going to matter, especially in the brokerage world. But it’s not going to change. You either get deals done and make money or you don’t. And you’re just trying to give everybody the tools to do it.

Jonathan Wasserstrum (49:18): And by the way, I don’t think the number of hours have changed. And I don’t think FaceTime has changed going back to everything we just talked about earlier. What has changed is the ability to structure your day in a different way.

Chris Rising (49:30): Yeah, I agree.

Jonathan Wasserstrum (49:31): Because when my mom was working, my mom was a banker, so similar, not similar at all, but she worked in an office. And 25 years ago, maybe she had email, but when she plugged in on from home, she had a little card, and she had to enter non-digit code to try and VPN in over a 28A modem. That’s very different from you and I are having like a full video conference right now.

Chris Rising (49:58): Yeah. By the way, 25 years ago, I started as a young lawyer at Pillsbury, and we did not have internet. It started to come from the mid to late 80s… 90s, I mean.

Jonathan Wasserstrum (50:08): For sure. Yeah. Look, when I was 13, I had like an AOL account. It wasn’t being used for… it’s 25 years ago, I was 13. So, I had an AOL account, nobody is using it for business yet.

Chris Rising (50:17): Yeah. That’s right. I remember when I got my iPhone, waited in line in 2007. I was like, “This isn’t going to work until it combines my Blackberry and my personal.”

Jonathan Wasserstrum (50:27): That’s what Mr. Technology was like, they won’t let me get my work emails on this. He was swearing on the office yelling about it.

Chris Rising (50:33): Yeah. Well, it’s been a great conversation, Jon. I’m really excited. I was a broker for several years, was at Cushman Realty. And then, Cushman & Wakefield and left that. And I constantly am watching to see what the brokerage firms was doing. I thought VTS is really evolved in bringing technology to brokers in a way that didn’t exist before.

Chris Rising (50:53): But I also think now, getting clients outside of the big facilities, getting clients, and being at the tip of that spear is really going to be important. So, I have to have in this one question, of all the real estate names out there, I have to say squarefoot.com was one of the great ones. How did you get the URL? How did that happen? Because that’s a big part of your branding.

Jonathan Wasserstrum (51:17): Yeah. So, when we first started the company, we’re trying to come up with a list of names. We came up with a list of potential names, like everything from Space Monkey, which wasn’t going to be it, but a whole bunch of random stuff. And then, we started looking at real estate specific words. Square Foot was taken, but The Square Foot wasn’t. So, we started as The Square Foot.

Jonathan Wasserstrum (51:44): And it costs us I don’t know, like 250-buck like nothing. We use that for a while, and then SquareFoot either became available, or we tried to make it available. And then, for not unreasonable price, we said, “Can we have that?” And then, we paid it off over two years, and now it’s ours.

Chris Rising (52:06): It’s a great thing. I still have somebody in China, who’s sending me emails saying I want to buy rising.com. We’re just talking about you getting squarefoot.com. But I know that you’ve had a great interest in prop tech. And I mentioned briefly, fifth wall. And you’re really a leader for the younger CEO in making some seed investments here and there. Can you talk a little bit about what you’re doing in prop tech?

Jonathan Wasserstrum (52:32): Yeah. So, we’ve gotten addicted to it. So, look, going back a handful of we’ve been doing prop tech at SquareFoot since before prop tech was a word. So, going back a handful of years old, all you see are folks reaching out or like friends of friends saying, “Hey, I’m starting this thing. I’d love to talk to you about it.” And I started writing really small personal checks when I thought something was interesting.

Jonathan Wasserstrum (52:57): Did that a handful times, was having fun learning a lot. Middle of 2018, somebody told that AngelList, and they have this whole Syndicate platform thing, start participating in random deals, write even smaller personal checks, random. Not that I look at the company, but I didn’t know the CEO personally.

Jonathan Wasserstrum (53:17): And then, by the end of the year said, “Wait a minute, the deals that I’m participating in don’t look really different from the deals I’m doing myself direct when I started Syndicate.” So, I started Syndicate the back half of ’18. We’ve now done 60 or 70 deals through that. Yeah, we’ve become more and more active syndicates on the platform.

Jonathan Wasserstrum (53:36): We do two-thirds prop tech one-third other stuff. And then, actually last summer, so almost a year ago now, AngelList started a fun product. So, now I have a fun two that only invest in prop tech. Yeah, it’s been a lot of fun, and the fun was syndicate is open to anybody. We’ll take new LPs for the fun too. But the fund a lot of the LPs are real estate and prop tech execs, which first off, is a lot of fun for us.

Jonathan Wasserstrum (54:03): And secondly is our superpower. It helps with sourcing, it helps the diligence, and then helps with value add to the companies after we invest. And yeah, just through the fund in the last, we’re very high-volume fund. We write relatively small checks, but into a ton of companies. We’ll do 40 deals this quarter out of the fund.

Chris Rising (54:23): With that, have you had any exits of note that you can talk about?

Jonathan Wasserstrum (54:28): No. Well, one, we got our money back. That was a quick one that sold to a more mature space. No exits, a lot of great markups. But as I tell my wife, we can’t eat IRR. But we can eat the result of IRR in a couple of years, knocking with the portfolio is doing great. But yeah, no exits to name. Well, I’ve only been doing it for three years, really. So, you don’t really want to exit yet.

Chris Rising (54:54): Have you seen any technology that you’ve invested because you thought it would be a good fit for SquareFoot?

Jonathan Wasserstrum (55:00): Very little for actually two reasons. I try not to invest in things that could wind up in our sphere. And then, two, I don’t think broker tools are a business worth investing in. I don’t think getting back to everything that I believe very, very strongly that you need a full stack solution there. So, yeah, don’t really mess with any of that.

Chris Rising (55:22): That’s true. Well, this has been a great conversation. We went through how you evolved as a CEO, and as a person, and as a husband, and as a father. Got to ask you, as we’re sitting here to the end of the pandemic, what do you think the next 12 to 18 months are going to mean for your business? And where do you see it growing?

Jonathan Wasserstrum (55:43): Look, we see every week… so I’ll speak anecdotally real quick. Every week, when I get on the train to go into the city, it’s more crowded than the week before, and noticeably different. Slowly then suddenly. There’s now a lot of people on the trains. And that’s more people going back to the office. And this is before, like you’re now starting to see the old calls back.

Jonathan Wasserstrum (56:08): Goldman said, I don’t know, June 14, for like, hope you don’t like the couch too much. Because I think people want to be in the office, by the way. Even if they’re not being forced to. However, I also believe that there’s a lot of people who were correctly scared, and didn’t want to get COVID. So, they stayed home. But as soon as they were vaccinated, got their second shot, waited 14 days or 21 days depending on what shot you get, I’m back in the office, because that’s what you want to do.

Chris Rising (56:39): I agree.

Jonathan Wasserstrum (56:40): So, anyway, we’re seeing demand pick back up a lot in New York. Like I mentioned, we’ve already closed deals on our expansion markets. We’ll start next 12 months, New York will be back for us. And I don’t know, a year from now, we’ll probably in six or seven markets full, and continue building new products. Like I said, and also the interesting thing.

Jonathan Wasserstrum (57:06): You said this earlier, which I agree with, the time of 15-year lease is gone, which actually makes real estate a lot more complicated than it used to be. Because the choice then five years ago was like, okay, you’re going to sign a five-year lease or 10-year lease. And you have one location. Maybe you’re like a regional company, so you have multiple offices, but you have one HQ.

Jonathan Wasserstrum (57:30): Now, you have one HQ, you also are going to start hiring remotely. But I believe if you’re hiring the right people remotely, they want offices. So, how do you solve, I now have four people in Chicago, or three people in Minneapolis, or 17 people in this other city, how do you solve that? That set of real estate solutions just got a whole lot more complicated, by the way.

Jonathan Wasserstrum (57:54): And some of those locations, you want long term, some of them you want short term, some you want dedicated space, some you want shared space. There’s a whole lot more variables that just go into that equation to solve real estate. When that happens, you need a trusted advisor even more so than yesterday. And that’s where we come into play.

Chris Rising (58:14): I think you’ve got a great view on it. And I think the complexity of how people run a national company is, we haven’t even gotten into it yet. You guys are very well positioned to deal with this. So, Jon, I really enjoyed having you on the podcast, Real Market. It’s been great conversation and looking forward to watching you in your success.

Jonathan Wasserstrum (58:34): Thank you so much for having me, Chris.

Chris Rising (58:37): Thank you.