The Real Market with Chris Rising – Ep. 70 Gregory Dewerpe
The Real Market with Chris Rising – Ep. 70 Gregory Dewerpe
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Speaker 1 (00:02):
Welcome to The Real Market with Chris Rising, the only podcast that brings the real estate conference panel to your headphones. You’ll hear from superstars from every realm of commercial real estate, the biggest brokers, the most well known architects, the largest investors and the most visionary developers. We’ll learn what they do, how they do it and what drives their success. We’ll discuss the latest trends across regional markets, capital flows both national and global and we’ll explore technology’s role in shaping all of them. We’ll take a clear eyed look at where we’ve been, where we are now and what’s to come. Real conversations, real experts, real insights, this is The Real Market.
Chris Rising (00:49):
Welcome to The Real Market with Chris Rising. I’m very excited today to have Gregory Dewerpe with me today. Gregory’s got a great background for those of us who are very interested in PropTech but also have a real estate background, Greg has one of the more detailed backgrounds I’ve seen from iBanking to investing, and now as a VC in PropTech. Greg, welcome to The Real Market.
Gregory Dewerpe (01:12):
Thank you so much for having me, it’s great to be here.
Chris Rising (01:15):
Well, I’m excited to have you, over the last month been doing a little research and seeing what things you have been doing and have to be honest, most people that I have interviewed do not have a real estate background but yet they’re in PropTech. I think it’s a unique combination that you’ve really been involved with raising money, investing it and harvesting it, and now moved over to the VC side. So, why don’t you tell us a little bit about your company A/O PropTech? And tell us a little bit about your background?
Gregory Dewerpe (01:45):
Awesome. So, look A/O PropTech is a venture capital firm focusing on the transformation of the built world and we look at the entire life cycle of the built environment as an investing landscape. So, from the supply chain of raw materials to design architecture, constructions, building operation and so forth, with a very strong focus on climate change and on decarbonization of the industry, which can be done at every step of the way, which needs to be done in a meaningful way and we’ve been leading that effort out of Europe. A/O is the largest PropTech fund in Europe, which was launched in January, 2020 so, it’s two years old, which started from a blank piece of paper and a lot of passion, a lot of vision and willingness to do something at a certain stage of my life that makes me feel that I’m able to make a positive difference in the world.
Gregory Dewerpe (02:49):
And I’ve never been more convinced that through the lens of the built environment or the built world, we can achieve a lot in resolving some of the most painful issues of our society, whether they are in the EO, the ESG or the [S 00:03:02], actually. And that’s been a big focus of what we do. So, we’re not a climate fund but we are mostly focused on the climate as part of our specialist lens or through our specialist lens of PropTech. The firm is headquartered in Europe with an office in London where most of the team is. We invest in 65%, 70% of our fund in Europe, the balances in the U.S. or North America. We were the first vehicle in the space that launched as an evergreen fund so, we don’t have an end date, the first vehicle and that was very important to me what I launched because although I had absolutely no doubt about the direction of travel in terms of technology adoption in the sector, I was still unsure about the pace at which technology adoption would happen.
Gregory Dewerpe (04:01):
And bear in mind, this was pre-pandemic. Of course, today we have no doubt either about the pace but when we did launch, we had. So, it was important to be equipped with capital that allows us that flexibility to deploy as fast or as slow as we deem necessary or opportunistic but also being able to stay as long as we need to in some of those businesses that might be late bloomers but will be extraordinary businesses and not having to exit too early. Right? So, that’s us in a nutshell, that’s the firm, which I founded and launched again through 2019 and officially in 2020.
Chris Rising (04:50):
It’s a really interesting perspective. You’re getting more competition I know in the space, I know that Fifth Wall has moved over into Europe as well, competitive years, also with the theme on carbon reduction. We’re in an interesting economy right now, where oil has gone up, you see the largest money asset manager in the world, BlackRock, who has been very vocal about carbon reduction and climate change now coming up publicly and saying they’re buying oil and things like that. What’s your take? Do you think in Europe, you have a little bit of a different lens than here in the United States? I know I was just in Texas and Kansas and in Missouri, we’re not much concerned about carbon reduction in those markets. Give me your take on with BlackRock going back in and buying oil again and where do you see investment in carbon reduction given the pandemic and the changes in the economy?
Gregory Dewerpe (05:54):
So, I start by saying that we don’t believe that there is competition in what we do because the market is so big and we’re just looking at it, everyone just has a different lens, whether it’s Fifth Wall or other great players in the market, they’re all great firms but they just look at it in a different way. Two things, as a venture capital investors, I should not be listening to the daily noise or the short-term noise, I shouldn’t care about where the price of oil is going to be tomorrow or three months from now or even a year from now, I should be caring about what happens five to 10 years from now. That is what should be driving my investment thesis, how I apply capital, the pace at which I apply capital.
Gregory Dewerpe (06:46):
There is undoubtedly a lot of noise in the market right now about where the price of oil is going to be or inflation is or interest rates are going to be. And there is an undeniable impact on valuations and on allocation of capital and you can see that very clearly in the public markets. And if you look at the performance of high growth, small to meet gap technology companies in a public markets in the last three to six months, they’ve absolutely been destroyed, right? All the specs and all that pocket of the market that was, I mean, very clearly overheated has been punished. Is it a reversion to the mean, is it something else?
Gregory Dewerpe (07:38):
Time will tell but at the end of the day, we’re investing in a risky business where we have to have high conviction, we have to believe that every single business that we back can be a category defining business that will make a significant impact in the world. And so, we try to think and go past the short-term noise. What is sure for me is that there is no doubt about where we’re headed in terms of climate, in terms of carbon emissions, in terms of finding alternative sources of energy, simply because we don’t have a choice, it’s not an option, I know that in the U.S. it’s, and up until recently it was still debated whether there was such thing as climate change-
Chris Rising (08:25):
Gregory Dewerpe (08:26):
Hopefully that’s not the case anymore but actually what really drove my inspiration to build a European leader in what we do is that when I looked at it, when I launched the fund, there was very few well capitalized venture firms in built world technologies. Fifth Wall is obviously the poster child of it and they’re obviously huge and very successful. I couldn’t quite understand why we didn’t have any in Europe, simply because the real estate market is bigger in Europe than it is in U.S. and people never really actually realized that.
Gregory Dewerpe (09:02):
We are miles ahead in Europe on climate change and ESG, at least we’re not questioning whether climate change was a thing. And governments were super proactive in Europe on pushing regulations and initiatives around ESG. We have great academia, amazing entrepreneurs and so, why shouldn’t we have a big market? Why shouldn’t we have big capital allocators in the space? So, I always said that when I launched the firm, I wanted to launch a firm which had American ambition in Europe. In Europe, we spend too much time thinking about the downside of things and sometimes we lack ambition. What I love in the U.S. is that people are extremely enthusiastic, extremely positive, they think about what is the upside of that particular company, as opposed to what is my downside.
Gregory Dewerpe (09:57):
And I think that’s a mindset that’s allowed the venture capital landscape and ecosystem in the U.S. to be so, so, so successful, right. To be beyond belief. And I think we’re getting there in Europe, we’re a few years behind but we’re definitely catching up and proof of that is you see American or U.S. based fund coming into Europe because they understand that there is an opportunity there. So, it’s all great, the more players, the more well capitalized players coming into what we do, the better it is for our ecosystem because it needs a lot more capital than what it has right now.
Chris Rising (10:34):
So, when you started your firm, I really liked that you pointed out the size of the European market, but especially for real estate, but what I’m not clear on and I don’t know if the audience would be, what about VC in general? Not just a PropTech, how big is the VC market in Europe and was it really going out on a limb to try to do one focused on PropTech or you just think the market was ready for it?
Gregory Dewerpe (11:00):
So, I mean, there is a general misconception that Europe is decades behind the U.S. on venture, which is not the case. Europe has been behind because there was just more capital, the ecosystem in the U.S. is more powerful, the legislation is simpler than Europe obviously you have each country, which is its own market. And so, sometimes it’s been harder to scale across Europe, but also the power of the ecosystem in the U.S. what I mean by that is in the U.S. you fail and you succeed historically much faster than you did in Europe. And therefore you have entrepreneurs and capital that gets recycled much faster because of this velocity and so, the ecosystem just grows faster. In Europe, we’ve historically been a bit slower to get the upside or the downside and therefore this recycling mechanism was slower.
Gregory Dewerpe (12:02):
I think that’s changed, I think if you look in the last 3, 4, 5 years, the European VC landscape has really exploded. Actually, I don’t have the numbers on top of my head but I was reading recently that performance wise Europe has actually outperformed the U.S. on the venture side in the last few years and that’s why you see the likes of the Sequoia of this world leading generalist firms and others coming into Europe, setting up shop in Europe. And I think we’ve now pass this stage where people are armed with the belief that Europe has nothing to be shy about, might be a late bloomer but it’s never too late. Right? And so, I thought that the timing was right, but I also wanted to be a firm that’s a specialist firm, that has a very specific USP that it can leverage to create value.
Gregory Dewerpe (13:00):
I don’t necessarily think that the market needed more generalist firms and I probably didn’t have much to bring as a generalist but we have a lot to bring as specialists with a level of expertise that few firms have, so that we can look at companies that are relevant to our field. We can look at more complex companies, especially as you try and tackle technologies that potentially will help solve climate change or will look at decarbonization, they are not straightforward businesses to back, they’re not trivial business to back. Some of them have been existing already for a decade, but the market wasn’t ready for them and this tends to not be necessarily obvious for most VC firms and so, having this specialist ability to look at deep tech, to look at hardware and to look at artificial intelligence in the fields that are relevant to us, allows us to create a niche that is not overcrowded, that is not overfunded, that is not overheated.
Gregory Dewerpe (13:57):
And that’s how we believe we can create value of the long-term, right? Which is own your niche, stay the course, follow your North star, be aware of what you have in terms of capabilities, be aware of what you don’t have and try to build your unique positioning with the tools that you have, as opposed to just try and spray and spray everywhere, trying to invest based on market momentum, which is a strategy that works when it works but it also can be pretty dramatic when it doesn’t. So, we try to be away from the noise and focus on what we know.
Chris Rising (14:35):
I really want to get into some of the companies that you’ve invested in but I want to, I think everyone would be very interested to understand your decision to go with an evergreen fund. Most real estate funds and most VC funds that venture capital funds that I know are close ended. They have a defined period of time, usually five to seven years and two or three years to invest. What drove you towards an evergreen and in an evergreen, how do you get compensated for your wins if you’re never closing out a fund?
Gregory Dewerpe (15:06):
Yeah. So, I think evergreen is the best capital one could ever dream for because it allows you to remove timing or time from your investment considerations. And historically, if I look at every single mistake I’ve made in the past as an investor, whether privately or in the course of my professional career, every single one of them has been or most of them has been linked to time. Getting the timing wrong, being too early, too late, selling too early or selling too late. I mean, most of my mistakes have been selling too early. So, when I looked at this, I thought if I could be equipped with that kind of capital, that allows me to remove time from the consideration, in a market that is very nascent, I built more technologies at a time where, although I’m sure that it’s going to be transformed in a way that represents a generational opportunity, I just don’t know how quickly it’s going to happen.
Gregory Dewerpe (16:15):
Is it going to happen in a period of three year, five year, 10 year or more? And so, I’m doing this for the long-term, I’m generally trying to back the transformation of the largest industry in the world. And so, that’s going to take time. This is an industry that hasn’t innovated historically, that hasn’t been known to embrace technology so, there’s a lot of cultural change, mentality change that need to happen for this acceleration to happen. So, it just felt it was the best thing to do to be able to invest without timing pressure but also being able to stay longer if we needed to. Now, if you ask me the question today, I have absolutely no doubt about the pace at which its happening and most likely our next fund won’t be an evergreen, it will be a traditional structure simply because evergreen is not for everyone and a lot of LPs just don’t know or cannot do evergreen.
Gregory Dewerpe (17:14):
And so, in a world where we’re expanding and we are growing our LP base, I think we probably have a normal fund as well on the side of it but we thought evergreen was the best thing to do. And look, if you look at firms like Sequoia now that are launching evergreen, this will become more mainstream and so, from the compensation side, actually we’ve built a very innovative structure which allows us to replicate exactly the same economics as a fund. So, it makes no difference to us how it’s constructed. I don’t think we have enough time to go into the detail of that but we’re perfectly well incentivized in the same manner that a traditional fund would be. And we have the ability to reinvest in our proceeds so, it’s actually great for us. And we feel very good and it’s been a great differentiating factor for us because evergreen is more founder friendly. And so, in the world where deals are more competitive, we’ve been able to really gain the trust of a lot of entrepreneurs because we had this different approaches, innovative approach to capital deployment.
Chris Rising (18:27):
Just a quick follow-up on the evergreen structure. My experience has been an evergreen usually your LPs are people who want a current return so, obviously that’s not the case in venture. So, are your investors really just such long-term players that they can go a period of time without current returns?
Gregory Dewerpe (18:46):
My investors are investors who have themselves long-term capital, who are looking at this as a transformation almost like a mega trend of transformation of such a big industry and that I also, for a lot of them strategic. They own a lot of real estate, they believe that the transformation will affect them and impact them. And if they can leverage the technologies that we invest in and the knowledge that we accumulate as an investor to potentially integrate into their portfolios, they will have so much value creation much beyond the actual capital in the fund that this makes sense as a very long-term approach.
Chris Rising (19:36):
You mentioned that several of your investors are in real estate so, I have to imagine that there’s a self-interest trying to find technologies that they can implement in their investments. Can you talk a little bit about some of the investments you’ve made and why it works with your investors?
Gregory Dewerpe (19:52):
So, I’ll say that not everything we do has to be relevant for our strategic real estate LPs. I would say it’s the cherry on the cake. We help our LPs or real estate LPs in different ways, either through the direct investments that we do in technologies that are relevant to them but we all also help them on their own digital transformation journey. We have a data science team here and that helps those large LPs in how they approach technology themselves. Now, we’ve backed a bunch of different companies that are relevant to LPs, some are not, I give you different examples. We backed a company in Europe called Plentific, which is a B2B and SaaS marketplace for property management. What do I mean by that is they chose to digitize through software products and the entire process of repair maintenance, procurement, CapEx, allocation and compliance that are very analog processes in property management for residential real estate.
Gregory Dewerpe (21:04):
And not only do they plug their software, they also curated and automated marketplaces of service providers that service all those different issues, whether they’re plumbers, electricians, et cetera, so that you digitize the entire process. What that does is you create a much better experience for the end user or either tenant, things get resolved in a matter of hours in a very transparent way, the whole process is automated so, it improves the user journey. But on the landlord side, you’re digitizing a very black box process where there’s a number of inefficiencies and that creates tremendous cost savings. Let’s call it 15% to 20% cost savings at scale for a portfolio. So, when we met the company they were closing our series A, they were in a few thousand units.
Gregory Dewerpe (22:00):
We take them immediately to do a pilot for one of LPs in another country so, we wanted to validate, they were able to replicate what they were doing in the UK to another country, another language, another infrastructure that worked really well. We went on to lead their series B. Rolled them out into over 70,000 units of [RIPs 00:22:21]. They grew to over 500,000 units across other markets in UK and Germany and most recently raised a hundred million round from Brookfield and [inaudible 00:22:34], and other large investors.
Gregory Dewerpe (22:37):
This was great for us because we implemented that technology into one of our ideas across two countries. This was great to help and execute and show that we are able to connect the dots between technology and the real estate, more traditional mindset. This is creating significant efficiencies for the landlord that will eventually generate multiples of that in shareholder value because in a world where cap rates are trading at sub 3% in Europe, especially for residential real estate, every Euro you save to the bottom line is 33 to 40 euros of enterprise value that you create given the multiplying effect of cap rates.
Gregory Dewerpe (23:27):
So, there is so much value to extract or to create through the integration of technology that it goes much beyond the fund itself and the return on the fund. But we’ve backed many other companies that are enabling some of our LPs that our customers to reduce their carbon emission or to map out their carbon emission, calculate them, benchmark them and have the right level of insight to address them and then measure it. So, I can go on for a lot of time, but we have docked some pretty incredible companies also that are not being integrated in our LP portfolio now, because we want to be able to be at the forefront innovation without having to rely on the immediate needs of real estate LPs because you also have to remember that, and I said it in a very respectful way that this is not an industry that’s known for innovating.
Gregory Dewerpe (24:25):
So, we also shouldn’t be relying on their vision for innovation to pick the investments that we do because I think if you do that, you’re limiting yourself tremendously because it’s going to be baby steps. And I said that with utmost respect because they never had to innovate so, I’m not saying they should have and it was just not something they had to do. But so for us as a venture capital investor, who’s trying to back long-term innovation, we have to get beyond what just is the immediate issue of some of those real estate players because, I think we’re trying to back game changing companies that are going to change the face of the industry. So, it might not be something that’s obvious to the traditional eye for now. And so, that’s why for us, as we expand our firm, we won’t only have real estate LPs because we want climate align LPs, we want institutional LPs that understand the opportunity at stake that goes much beyond the industry itself.
Chris Rising (25:23):
How do you look at your investments in terms of asset class where obviously with the pandemic and work from anywhere, there’s a great concern about office in this place in the world today, but how do you look at whether it’s office, industrial, multifamily, maybe data centers, how do you from a venture perspective, look at the different asset classes when you’re making an investment?
Gregory Dewerpe (25:45):
Yeah, it’s a great question. I would say that one of the very interesting shifts that we’ve seen in industry in the last few years was we went from real estate as a whole being a landlord centric industry to a customer centric industry. As a matter of fact, it’s only a few years ago that we started using a word customer instead of tenant.
Chris Rising (26:08):
Gregory Dewerpe (26:08):
But they are your customers. And today as a landlord, you have to find the best ways to service those customers so that you can create maximum value on the rent they pay, you can create a stickiness and retention, customer retention. And this is only possible through the implementation of technologies that can help serve all our different needs, whether that’s flexibility, transparency, carbon emissions, et cetera. And so, we look at the entire ecosystem, we do a lot of research in the trends and in the different way capital is allocated within those different asset classes.
Gregory Dewerpe (26:47):
Obviously you’ve seen the last few years money coming out of retail, pre-pandemic and going into the next best thing, which is logistics or data centers. And then when you had the pandemic wave, a lot of money came out of hospitality again to go into data centers, logistics, cell towers and whatnot. And what’s interesting is some of those new industries like data centers of logistics are more, let’s say innovative because they’re more recent. So, the mindset is slightly different than residential, which has been there for hundreds of years or decades, which is more traditional. The new wave is more forward thinking and so, there’s innovation happening at a faster pace. And so, we’ve been active across the board. For us, it was we trying to identify real pain points, real problems that must be fixed, right.
Gregory Dewerpe (27:45):
Must have versus nice to have and on which the end customer can apply concrete ROIs. And the ROI is a mix of a number of different things, which is financial, which is operational inefficiencies, which is also related to carbon emission. And I think people have to also calculate ROI in a different way. So, we used to calculate ROI saying, okay, if I invest X in this technology, it’s going to allow me to increase my revenue, it’s going to allow me to expand my margin. Now, a lot of those technologies that we back also have a climate angle, which is reducing carbon emissions. And so, when you calculate the ROI around some of those technologies, you have to calculate the ROI based on implementing this technology but you also have to factor into the equation, what is the cost of not doing it?
Gregory Dewerpe (28:39):
And that changes dramatically the ROI. When you put that into perspective, into the equation and you factor in the cost of not doing certain things versus the benefit of doing it, when you join the tool, your ROI discussion becomes a lot simpler. You have no choice, certain things have to be done, otherwise you will not attract tenants anymore, you will not attract the right level of funding or financing, your CapEx cycle will be much bigger. And so, at the end real estate is the collection of different cash flow streams and discount rates and whatnot. If you start changing some of those parameters, you reduce your rent, you increase your financing costs, you reduce your LTV, that becomes exponential in the terminal value of an asset. And so, technology is the only way a to safeguard the value and to actually create value for real estate over the long-term from now on because the old school notion of value add, I think doesn’t apply anymore. Value add now is very much a function of technology adoption and integration into the assets and their operations.
Chris Rising (29:46):
You had a thesis in coming to the end of 2019 and into 2020, and then we get hit by this pandemic and some very longstanding work habits were disrupted, people all of a sudden are working from their home or from an apartment. How have these major societal shifts affected your thesis that came to market right before the pandemic hit and how has it evolved to today?
Gregory Dewerpe (30:18):
Sure. And it’s a great question. Look, first of all our thesis is based on the fact that there’s a number of growing pains in the industry that I’ve been there for a long time independently from the pandemic. And so, those problem are still there and if anything, they’ve been exposed, all the shortcomings of the industry have been exposed during this pandemic. So, what was maybe just obvious to us or few people in the industry three years ago is obvious to everyone now, which makes it much easier for us to create the pace and the velocity for portfolio companies to scale because there’s no more doubt or question about whether this needs to be done or that should be done. Everyone is aligned.
Gregory Dewerpe (30:59):
Now, when it comes to obvious themes that have been grabbing the headlines about, is anybody going to go back to the office? Is the office market dead? I think it’ll be very presumptuous of me to have certainty about what’s going on because we don’t have enough data to draw conclusions over the long-term. We’ve had certain pattern over of behavior over the last two years, which was the result of a shock, right? And so, are we going back to the old ways? Is there going to be a reversion to the mean now that we out of this pandemic, the answer is not yes or no, I think it’s somewhere in the middle. I think that the pandemic has caused people to re-think a little bit about the things they want, their priorities in life and clearly commute is becoming the enemy of the people.
Gregory Dewerpe (31:52):
And so, when you think about going to work every day, commute gets in the way, right? So, we believe in a hybrid model where people are going to be few days a week in the headquarters and the headquarters need to just reinvent themselves a little bit so that they become a destination that provides things that you cannot replicate at home, collaboration and community and all those things. The spaces will change a little bit. At the same time, I am not necessarily sure that work from home as we call it is the long-term solution, I think work closer to home is probably the solution. If you speak to anybody who’s living alone in a small apartment, they don’t want to work from home.
Gregory Dewerpe (32:39):
If you speak to someone who has five kids at home, they might not be wanting to work from home either. Do they not want to commute an hour anymore? Absolutely. So, I think you find this hybrid where people will still commute few days a week and the days they’re not, they’ll either work from home if that’s something that is feasible for them, given where they live, et cetera, and their personal circumstances or if not, they’ll have access to more proximity hubs where they can work. What that means is I’m not there to bet on the direction of the office market, I’m there to bet on what is going to change no matter what. What is going to a change no matter what is the need to be able to manage your workforce in a very different way, in a dynamic way, both from a time standpoint i.e. people are going to come on different days, how to actually manage that workforce from a time standpoint and from a space standpoint.
Gregory Dewerpe (33:35):
So, you will have an office, how do you actually allocate the space? And you make optimal use of your space, given that you actually never need 100% and you need artificial intelligence, you need software to help you allocate those resources in a dynamic way. I think that’s the trends that we will want to be backing coming out of the pandemic, as opposed to try to take a view that, hey, nobody’s going to go back to the office so, we should be investing in some other completely different thing. We try to really draw longer-term conclusion from, again, I’ll say the limited data that we have, I don’t think we can draw long-term conclusion about productivity and so on, yet, because again, we’ve just come out of a surreal two years and everyone is trying to make sense of what happened.
Chris Rising (34:24):
I think your [inaudible 00:34:25], from anywhere is the same one I have, I think there’s just this human connection and you look at the companies that are developing the software like Microsoft and Google, they’re just gobbling up office space right now. So, the clearly their expectation is they will have some hybrid model that people will come back to. And I can see a day when Microsoft is making acquisitions of PropTech firms to integrate into Microsoft Teams or Google doing the same.
Gregory Dewerpe (34:54):
Chris Rising (34:55):
But, let’s take a quick detour and we’ve talked a lot about real estate and investment from a venture perspective but let me just ask you, so how does somebody get to where you’re at? Tell us a little about yourself? I know that you are you’re Swiss, you were born in Switzerland but you live in London now and the company based in London. So, tell us a little bit about your background?
Gregory Dewerpe (35:19):
Sure. I mean, my background is a bit unusual, I didn’t have the traditional route into venture capital and I started my career investment banking in hindsight was not [inaudible 00:35:32], the best decision, this was pre 2008, but there’s a lot of great takeaways from it, you learn certain way of doing things, your work ethic and although I didn’t like it, I think it was a great school. I also went through the crisis, which was incredible few years, I mean, surreal. So, the financial crisis being in a bank during the financial crisis was quite a shock and I think it helps also build character and resilience, but also knew that this wasn’t what I wanted to do for the rest of my life. So, when I turned 30, I left not because I knew what was next, because I knew what I didn’t want to do next, which was stay an investment banker for the next five decades.
Gregory Dewerpe (36:19):
And I took me a while to figure things out. It was a tough period, I had to build myself up in a world where I had no credentials aside from having been in the bank for many years. And so, I ended up after a couple of years, setting up a real estate advisory practice around direct transactions and capital markets, which ended up really being extremely successful and overseeing billions of transaction and which really put me on the map and allowed me to create a lot of credibility in the real estate space and a real knowledge and expertise in the field that few people have. And that allowed me to be able to start focusing on what’s next and I was seated to launch a special situations fund around real estate, which I did, where I focused most of the strategies in taking stakes in public and listed real estate companies.
Gregory Dewerpe (37:19):
I thought that there was a great discrepancy between real estate in the private world and really estate in the public markets and that still is the case, but developed a strategy there where we’ve been very, very successful. But I also, helped me continue to build my understanding of the industry and so, I had like front raw seat to understand the industry in a way that allowed me to grasp the scale of the inefficiencies, the scale of the industry and the opportunity at hand. And I just realized that frankly speaking, what I’m doing now is the single biggest opportunity of my lifetime. It trumps anything else that I’ve ever done before and I don’t think it’s going away, but also, and more importantly, I’ve done that at the stage of my career where I didn’t set this up out of necessity, I set this up because I wanted to, because I was inspired and because I genuinely think that we can make a positive difference to the world through the lens of the built world.
Gregory Dewerpe (38:20):
So, this notion that we can do well by doing good or mix profit and purpose under one umbrella, I think is great because it allows us to be mission and vision aligned. Allows me to be able to hire amazing people who are mission driven as much as they are vision driven and that’s how we’ve been building the firm is really around this strong culture and this sense of wanting to make a difference and being able to make a difference, however, meaningful it is but we just feel and I feel we’re in the right place at the right time with the right tools. And I think it’s a great feeling when you can get that.
Chris Rising (39:01):
Is your advisory business still an active business? And are you involved in that at all?
Gregory Dewerpe (39:07):
I obviously don’t have time to do it. It has its own legacy, things that are ongoing, but 100% of my time is focused on the technology now. So, it’s running on it own.
Chris Rising (39:20):
So, then let’s talk a little bit about just being an owner of a business and being an entrepreneur. How have you structured your company and do you guys have an office? How do you meet? What kind of technology do you use to grow and how big is the firm?
Gregory Dewerpe (39:38):
Yeah. So, the firm we’re 14, 13 or 14 people, we’ve always been very tech focused so, we were one of the first firms to have a data science team, we have a chief data officer Othmane, who’s really leveraging their expertise to support our portfolio companies, support some of our LPs but also, drive the way we do business as a firm. We are very much centered on technology and that’s why the pandemic was not a shock to us, we were going to continue functioning business as usual. And we have an office. I’m actually mostly in the office because we want to, because we enjoy this sense of collaboration, but there are some days where we don’t go to the office, we have actually always had a flexible policy, much before COVID where I’m always trying to get the best out of the people in the firm.
Gregory Dewerpe (40:37):
I want every person to be able to be the best version of themselves and everyone is different. Some people have their own personal circumstances so, in the end you have to set the context for people to thrive and not be there to micromanage. I don’t have time to micromanage it, I don’t think it’s a good use of time and I don’t think it’s the type of people I want to have. I want to have people that don’t need to be micromanaged, that are driving themselves. And that I’m almost, I see myself as a resource for the people in the firm as opposed to the opposite. And so, with that mindset, we have a very flat structure. I don’t believe in [inaudible 00:41:17], I believe in everyone being able to make an impact in how we operate as a firm, how we make decisions.
Gregory Dewerpe (41:24):
I don’t claim to know it all or better far from that, I’m learning every day, I’m out of my comfort zone every day and I learn every day from every single person in the firm. So, that’s also what’s very exciting and I think the day you stop learning is the day you should do something else with your life. And I certainly don’t think that day is going to come ever because we are exposed to amazing entrepreneurs that are much more smart than we ever be, and we’re learning from them and I think we have an amazing job where we’re supposed to make decisions on investing on amazing people and exceptional entrepreneurs and it’s a privilege. It’s a privilege.
Chris Rising (42:09):
Let me ask you, we were talking earlier, you guys used Microsoft Teams and how do you look at using software like that to manage people? And how do you, I mean, are you big users of the project management and the Slack equivalent they have on Microsoft Teams? Or how do you integrate it to instill your culture in a world that isn’t 9:00 to 5:00 or 7:00 to 7:00, five days a week?
Gregory Dewerpe (42:39):
So look, I think digital means of communication or collaboration are great because allows us to be horizontally distributed as a firm, as opposed to vertically integrated, which usually creates bottlenecks and I think disability that we have to be connected to be able to share and collaborate at any time from anywhere is great. And it’s just an extra tool in the toolbox. You have the physical collaboration interactions, you have the digital ones and within the digital ones, you have the phones, the Teams of this world, the emails, I think different work streams work better with different types of communications. Different circumstances will lead specific solutions to be of better use. And so, we learn as a firm to use the best tools in the most appropriate situations. And so, for us it’s been great, we’ve really been very good at leveraging technology and that’s kudos to Othmane here, that’s really helped us build this in a way that allows us to be extremely agile as a firm thanks to technology.
Chris Rising (43:54):
So, after your day, whenever it starts or whenever it ends, tell us a little bit about when you shut off that phone and you shut off the computer, what are the things that drive you in life?
Gregory Dewerpe (44:03):
So, unfortunately my bloody phone never shuts off but I’ve accepted the fact that thanks to technology, I can be a lot more mobile, I can be on holidays with my family on a beach and still be able to do the work I need to do and without sometimes nobody even noticing, right? So, I don’t think it affects the quality, but the flip side is you’re never disconnected. So, I think what I’ve learned is to try to create a space. My life outside the office is very simple. It’s my family, it’s my wife and my newborn two years old son and it’s my safe place, it’s the place where I can recharge the batteries. And so, being able to create a space where I’m present, if my wife was listening to this, she would say that I’m hardly ever present in the moment, but I try, I work on it.
Gregory Dewerpe (45:03):
And so, you’ll see that, for example, I am not on any of the Facebook or Instagram of this world because I think it’s a big waste of time and it’s hours in the day that you spend where you’re not present. And so, if I’m going to be on my phone has to serve a real purpose, that’s going to be work, that’s going to be urgent situations, that’s going to be the stuff that I need to attend to. But at least also for the people around me that know that I’m on my phone it’s because it’s important, I’m not just browsing Instagram or whatnot, right. So, I think that’s helped me save a few hours in the day or in the week that was one of the best decisions that I’ve made a while ago, in 2016. And so, I tried to do stuff that helps just recharge my battery, change my mind and just expand my mind into other things so that it’s not always about work, but it’s hard when you’re an entrepreneur, you can’t switch on and off.
Gregory Dewerpe (46:00):
If you’re an employee, you go home, whatever happens, it’s not really your problem, right? When you’re an entrepreneur, when it’s your own business and when you actually care about what you do, you don’t switch off. But it also means that this, in my case that I don’t work. What I do is an inspiration, I believe it’s a privilege and so, it never feels like a burden. We work hard, but we know why we do it and we feel like we’re on a great journey and nothing makes me more happy than the day my son will be old enough to understand more things that he’ll be proud of what I’ve been doing and hopefully will have been able to move the needle and the world is a marginally better place for the next generation thanks to what I’ve been doing and what we do in this space collectively as investors.
Chris Rising (46:59):
That’s terrific. Let me ask you just a question about Brexit and keeping it into the real estate or the PropTech world, how has Brexit affected raising money, investing money between the EU and the UK? And has it been frustrating or you saw a lane and it’s okay. What’s your take on it?
Gregory Dewerpe (47:26):
Yeah. So, I’ll answer in two different parts. So, from a regulatory admin standpoint, it’s adding a lot of hurdles and I’m going through them right now as we launch a new fund, which is you need to be regulated in, let’s say we are Luxembourg firm so, we’re European firm, but you need to be regulated in Europe but before you could just have passport and enter into the UK, because UK was Europe. UK is not Europe anymore so, now you have to be regulated in the UK also if you have a presence in the UK and I think it’s been confusing for a lot of people because I don’t think the rules were clear. I don’t think anybody knew what Brexit meant and I thought this through all the way. And so, we’re still in discovery mode and I think the lawmakers and the regulators and people in the various government bodies that are involved into this are still figuring it out.
Gregory Dewerpe (48:29):
And I don’t think we even know what the impact of Brexit is going to be because a lot of it hasn’t been figured out. I am of the view being a citizen of the world with a Italian mom, I’m born in Switzerland, my dad is French, I live in the UK, I embrace the diversity and what Europe has to offer. So, intrinsically I don’t understand the concept of Brexit but it was voted and there are reasons why it was voted for and we have to respect that. And so, hopefully that they will be able to figure it out. The problem is that right after the vote of Brexit or Brexit being executed upon, we had the pandemic. So, the country has to deal with a whole bunch of other problems at the same time. So, I think it’s just slowing down, it’s going to be more of a slow burn than not because everything has been delayed.
Chris Rising (49:31):
Yeah. Well, this has been a great conversation as we wrap up, there’s two things I want to ask you the first is, we didn’t get much into it, but one of the things I always ask people is what do they do in terms of just their commitment to their communities and all, something that struck me was you’re very passionate about anti-bullying. Can you talk a little bit about that? I just think it’s unique and it says a lot about your personality as an investor, I imagine as well as just as a human being, but I just didn’t want to end this without bringing that up because I thought it was a unique thing that you wrote.
Gregory Dewerpe (50:03):
I appreciate you bringing that up. I mean, I’ve suffered tremendously as a kid from bullying for many, many, many years and I was very ill with cancer as a kid, and then it was a time where it was a taboo thing and kids can be very mean, and I suffered more from the bullying than I suffered from the illness. And I know that it has such an impact on one’s life and I’ve gone through this journey where I wish I knew back then that what life had in store for me because I would have helped me go through this very tough few years with light at the end of tunnel kind of thing. And so, I stand firmly against any form of bullying, I think we live in a world where bullying is actually even getting worse because of social media and the digitalization of our lives. And so, that’s one thing where I’m not doing anywhere near as much as I would want to because it’s not a trivial issue that you can fix just like you can throw money at finding a vaccine or a cure for a certain illness.
Gregory Dewerpe (51:23):
Bullying is much more complicated and the root cause of it is, you have to treat the root cause of it and it takes decades to happen. But I feel and I would always feel as a result of that as an underdog and I would always feel the need to stand for people who are bullied, disrespected, undervalued, underappreciated, and so everything I can do in my day to day for people around me and not that I’m in a position where nobody can ever even try to bully me, I can stand for anybody who’s in a situation of weakness, and I will always do it when I can. And that’s [inaudible 00:52:04], driving a lot of the things that I do in my life, because it’s just so important.
Chris Rising (52:08):
That’s wonderful. I really appreciate that and I think we’re seeing on the global stage bullying going on full force, but as we wrap up here, let me ask, at least my view is you can’t be in real estate if you’re not an optimist, I don’t know how you can be in venture and not be an optimist. Why don’t you leave us with a thought or two about what you’re optimistic about around your business, but your venture business, but more about maybe the companies, what really drives your optimism and allows you to be an investor in ventures?
Gregory Dewerpe (52:45):
Yeah, you’re absolutely right. If you’re not an optimist, you should just find yourself another job for what we do. And I’ll tell you something. Look, I think that the world is in a challenging spot at the moment, I think there are a lot of issues, social issues, economic issues, which we can’t ignore and we shouldn’t ignore. We should absolutely acknowledge them, that doesn’t mean we’re not optimistic about the future. I think what makes me optimistic is we have the tools, we have the capacity and the capability, and we have the willingness of some of the most brilliant minds on this planet to go after some of those important issues, whether they’re climate related or social impact related. And so, I genuinely believe that the next decade we’ll see more positive change in the world that we’ve ever seen before because technology is exponential and we’re changing at a pace never seen before.
Gregory Dewerpe (53:52):
And I’m of the view that we will make good use of all those tools that we have, not the bad use of it to go and solve important problems. And so, I don’t think there’s ever been a better time to be an entrepreneur. I think we live in a world where there’s been complete democratization of access to knowledge, access to capital, access to networks. And so today, regardless of who you are, regardless of where you are, if you have a vision, if you have the willingness to do the work and if you are willing to sacrifice to get things done, nothing can stop you. And so, I think I will see amazing entrepreneurs and we’re seeing now a huge influx of exceptional entrepreneurs coming into our field to tackle those important problems. So, for me the future is bright and I’ll keep saying it until I’m proven otherwise, but we have to be sensible that technology can also be used too in a negative way.
Gregory Dewerpe (54:55):
And there are pockets of the world in the market and the ecosystem that worry me, this excessive digitization of everything. And I’m not necessarily a huge fan of this whole metaverse thing because I just believe that we have plenty of things to worry about that are in the real world so, we should maybe try to spend our time to do that. I’m excited about the future and as I told you before, I became a dad two years ago, right. At the beginning of the pandemic and so, I feel like it’s very important to think about what we’re going to leave behind as a world for the next generation and it has its own challenges and its own opportunities but I think there will be great things coming out of the next decade.
Chris Rising (55:40):
Wonderful. Well, Greg, this has been a great conversation, I mean, you’re unbelievably impressive. You’ve had great success, but you’re very grounded. I think that helps any investor and I wish you nothing but luck and my wife is British so, we get to London pre-COVID, we get there quite often, but post-COVID, we’re setting ourselves up. So, I hope I can buy a cup of coffee or a drink next time I’m in London.
Gregory Dewerpe (56:10):
As long as you bring an umbrella, you’re good.
Chris Rising (56:13):
Yeah. Terrific. Well, thank you so much.
Gregory Dewerpe (56:16):
Thank you for having me. Take care.
Speaker 1 (56:18):
And please don’t forget to follow us, we’d really appreciate it if you subscribe to the podcast, you can do that on Apple iTunes or any of the other podcasting services. It’s The Real Market with Chris Rising and follow us on Twitter @Chrisrising or @risingRP. And please follow our blog, chrisrising.com or risingrp.com. Thanks so much.
Speaker 4 (56:43):
This episode of The Real Market is brought to you by Rising Investor Platform. The platform provides accredited investors with exclusive real estate investment opportunities on a deal by deal basis across various asset classes, including office, industrial, hospitality, multifamily and data. The platform also provides an inside look at deals in our pipeline while giving the chance to indicate interest before it’s too late. We recently funded our acquisition of 9320 Telstar, a mixed use office industrial property in El Monte, California using our investor platform. To learn more about how accredited investors can join the Rising Investor Platform, Please visit risinginvestorplatform.com.