[00:00:48] Nima Gardideh: Welcome to the Hyper-Growth Experience. This is Nema Garde de your host. Today's guest is Bal vg, president and co-founder of Placemaker, formerly y hotel on the podcast. They've been growing, uh, a hundred percent year over year, which is quite impressive given that their original model, uh, wasn't gonna do well during Covid, and they were able to sort of.

[00:01:10] as part of that, and in fact build a much, much stronger and sort of long term version of their company. and they recently raised 120 million and they've also raised a sort of debt facility, or another sort of fund of 250 million to invest in real estate. It was quite interesting to learn about their business because they effectively use one single sort of formula to drive the growth of the company and, and the way they connect their internal sort of, Business, which manages buildings in these unique ways to investors on real estate side and then to, um, potential renters and, um, short-term stays or hotel guests.

[00:01:53] we've had some experience on, on our end at p with, uh, a company called Saunder. So I understood a little bit of this and so I was, Really ask decent questions and get to know the business a little bit. And um, obviously they're quite thoughtful there at Placemaker and they've done a really good job getting to this stage.

[00:02:11] And, uh, Bao talks about this new asset class they want to create for hospitality living. To bring a different approach to sort of building buildings and building communities. Um, so that was really fun to listen to and, and think through with him. Uh, to start, he shares how he met his co-founder and the original story of how pacemaker and rather formally why hotel came to be.

[00:02:34] Let's get into it.

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[00:02:36] Bao Voung: So my co-founder and I have known each other for, gosh, a little over a decade. We both come from the real estate industry, so institutionalized real estate. He was responsible for a couple billion dollars worth of real estate,  with the Public Beach trade reit. And I worked for one of the largest private developers in Washington, dc.

[00:02:58] And so,  we met each other through an industry association,  called U. and I was a  part of a group called Young Leaders Group. I was a chair of one of their committees and he was one of my folks on the committee. And,  I  asked him one day cuz he was always on top of it, and one day I was like, Hey, do you wanna come work for me?

[00:03:21] and of course he prompted me, rejected me,  and said, no, I'm good from where,  where I'm at. And then I think he talked to a few other of his mentors. And ultimately,  where he wanted to go in his life was around entrepreneurship and working for a real estate developer, you get to see a lot of different things and you get to act like an entrepreneur in many ways.

[00:03:45] so his mentor convinced him to come work for me. I told him I was the best thing for him in his career because he came to me, skipped a level, and then went back and skipped like five levels going back,  actually working for the same company. but we kept in touch over the years,  and. We kind of, it ultimately , the beginning of Why Hotel was his idea.

[00:04:05] and it was started as an entrepreneurship opportunity. so he worked for,  like I said, a publicly traded reit, so, which is a real estate investment trust. It's a way to allow the everyday retail consumer to invest in real estate in the tax advantage ways that real estate provides the really wealthy, quite frankly.

[00:04:30] and so, the company owned a few million square feet of development,  in an area in, in the DC metro called Crystal City. And so they were trying to figure out how to make that area more lively during the nights and weekends, cuz it's really like a suburban office park, even though it was so close to dc.

[00:04:55] And so how do you make it? 24/7, 365 days a year. and so that means there's a bunch of offices there, but there wasn't retail and there wasn't residential. And so to do that, they had to bring in a bunch of residential. And so that's a lot of risk. And so they're trying to figure out how to de-risk that investment.

[00:05:15] And so that's really how, why Hotel was born. Is that why is and that's the precursor to Placemakr is that we were essentially a pop-up hotel operator where when you build three or 400 brand new apartments, it takes anywhere from a year or two to fill up,  the building with long-term residents.

[00:05:36] And so we would come in,  take a hundred units out of the vacancy that would otherwise be empty,  fully furnish those units and operate a hotel out of the vacancy, creating inner income. For the building owner, but also providing great stays right for the guests that stayed with us. And also created a liveliness in the building for those residents who were some of the newest tenants in the building.

[00:06:01] So the building didn't feel so empty, like provided some liveliness,  while also providing them services. So we would do free cleanings for them. we gave them discounted room nights, so it was just kind of a win-win win situation. And so that's how the company originally started. but really,  yeah, and, and so it was done as an internal pilot, as a part of Ren nato.

[00:06:24] luckily for Jason and I, and sometimes better to be, I guess, structurally lucky than, than good. REITs can't operate hotels and so for this thing to grow, it had to spin out of Vernado. And so Jason was able to spin it out of Vernado and that's when I joined him. 

[00:06:41] Nima Gardideh: Oh, interesting. So you were so basically like solving a problem for these funds that were, well, they wanted to deploy all this capital and build all of these residential units, but they are not going to make money for a couple of years, or not going to break even or, or whatever. So you're turn of coming in and helping them get earlier, sort of cash out of the investment, and then you would just be done at some point, right?

[00:07:08] Like two years in these buildings will be filled with actual long-term tenants and you'll, you'll get out,

[00:07:14] Bao Voung: Yep. So two, yeah, really two focused on two things early on. One is risk mitigation for them and. Early cash returns. Right. And so, yeah, so we would start off with a hundred units and they would,  start off with 10 units full, and then as they got fuller and full and fuller, we would get smaller and smaller and smaller.

[00:07:32] Right? but like I said, that's how the, that's how the business started. That, that's, that's the original concept. But we've always believed in,  a better way and a more resilient way to build real estate. So that's how the idea like I said, the pop-up hotel was how it started, but that's ultimately not where,  my partner, I wanted to take the business and we kind of knew that from day one.

[00:07:58] What we're really focused in on though, was how do we sequence that in a thoughtful manner? How do we make that transition over time? Because,  real estate's a it's, it's a really slow moving business. and it's hugely capital intensive. And,  you think about the scale of real estate,  when you hear a startup that hits a billion dollar valuation,  it's a unicorn, right?

[00:08:26] real estate that could be a half a building in New York City,  right? And that's the scale. And,  A lotaround real estate. It's about Wealth preservation, right? And, and it's using it as a financial estimate,  a risk adjusted financial instrent. And so there's just not a lot of innovation in real estate.

[00:08:44] And so we were, we're trying to turn that around a little bit and say, Hey, how do we leverage the platform? that's, that exists today with real estate. How do we innovate on it to create higher returns for owners while al the, at the same time,  create value for those who use the building?

[00:09:07] Nima Gardideh: and as, so walk me through. Yeah. Well you mentioned there is interesting cuz there's like multiple types of personas that you have to sort of like serve. What are the different ones? So like you just mentioned, the owner of the building there is the tenant. I assume there is like some fund and or investor.

[00:09:26] are there like more people that you have to sort of serve? Like what, what are, what are the different entities and what are their different sort of needs that maybe sometimes clash or sometimes are aligned?

[00:09:36] Bao Voung: Yeah. you hit the nail on the head with the three big ones,  quite frankly. and we,  we were, we, it, it's a triangle for us that always have those competing needs, and it really is we're, we are a two-sided market, right? And so we have to. The real estate owners and what they're looking for, which is,  basically risk adjusted returns on their investment.

[00:10:00] Right? and then we have to serve the needs of the ultimate users, right? Who stay in the building, whether those be residents in the building, whether those be hotel customers, or whether those be,  kind of long-term extended state guests to stay with us. and then lastly, we have to serve ultimately,  the investors of our company, right?

[00:10:23] And our employees. And so those three things are in constant competition. And the balance between those three things is, is pretty tough because I think,  they change over time,  where you put the weight depending upon what stage of the company. and so early on,  early on, for us, it, it's all about the real estate owner.

[00:10:51] right? because in many ways if we can't bring on the pipeline and we can't create something that creates value for them, we don't get to create the val the ultimate value for the customer, right? Because they don't allow us access to their apartments. In the long run, though, as we get more and more,  as we get more and more,  hotel units and we're able to evolve the business and we can prove out the value that we create for the real estate owners, then we have more f we have more flexibility to full focus on our end user.

[00:11:27] And ultimately, that customer de demand for whether that's hotel nights or residential nights, will drive the desire for the real estate owners to actually bring us into their building, right? Because that's how you create more income for them, is through that consumer demand. And so it's a little bit of a catch 22.

[00:11:49] Nima Gardideh: people have different phrases for this. It's like a cha catch 22 or like a chicken egg problem or like an atomic network problem. And if you're reading like growth literature, like there's and from the sound of it, it seems like the supply part was extremely important.

[00:12:05] First, you need to like really solve the problem for the owners of these buildings. and then as you have more supply. Having more demand also is,  kind of helps the supply. So you, you, you can kind of do both of these over time. how are you still doing that version? Okay, before, actually I go, go to that.

[00:12:26] What about your investors? Like why,  why would they want or need a different outcome other than like these two other parties, the supply, which is sort of their real estate owners and the demand, which is like the people who are staying there,  why would they want something different than what they both of these parties ultimately won, which is a good experience in returns.

[00:12:52] Bao Voung: Yeah. I mean, I ultimately, our investors want financial returns in, in today's environment,  for startups, really a drive towards profitability, right? And so every dollar that we make, right, as Placemakr, it's a dollar less that the real estate owner gets, and it's potentially a dollar more that we have to charge the consumer, right?

[00:13:19] And so that's really the push and pull is like, Hey, we could charge the building owners zero and provide our product for free. they would make more money, which is more likely they would bring us onto their next building, but we would go bankrupt, right? And so that's really the concept is like the more money that we make as a company, the less money they make as a real estate owner, the less value we can provide to the consumer. So there is, there is a little bit of a push and pull,  on that.

[00:13:50] Nima Gardideh: But,  and, and how much of that is like market forces that are not in your control? Like there's, like, because of the competition in the space for rent, the net renting market in DC let's say, you just cannot push the customer more or push the,  owners more like, is that a lot harsh, like a lot in your control as a company or you're kind of like beholden to the market and you're just kind of letting,  the market help you find the equilibrium where, where you kind of make your money on the landlord side versus the renter side?

[00:14:24]

[00:14:24] Bao Voung: So two, two different equations. on the, on the, and I don't use the landlord side because unlike some of our competitors, we don't actually lease the units. So we manage the units on behalf of the owner. and so we don't sign leases, so it's not. it's not the WeWork model effectively, right? or, or saunder.

[00:14:48] and so we manage on behalf. and so we, in many ways, we get to create a little bit of our own rules because nobody manages buildings the way we manage buildings today. But there are models that do similar things that we have to,  constantly compare ourselves against cuz we have to convince them to bring into our building,  convince them to bring us into their building and to make it worthwhile, right?

[00:15:17] That we're somewhat comparable with what the market's out there. And so the two big groups that we are constantly monitoring and the market forces, as you would say that we were competing against one, are traditional multi-family operators. So think of the gray stars of the world. think of bazuto,  management.

[00:15:37] there are a few other large ones, right? and your mom and pop management companies, right? There's a lot of those small ones that are local to certain markets all over the country. and then on the other side, on the hotel side is that the management fees that we charge,  have, are, are copped up against,  hotel management companies, right?

[00:15:58] so that may be the Marriotts, the Hiltons,  the IHGs of the world, but in many cases it's not. Those are just the brand, the flags and the bodies on the ground actually running those. Hi hotels are with other, they're actually with management companies that all they do is just run hotels on a day-to-day basis.

[00:16:19] And so we compete against them and so therefore our rates that we can charge. Are, or,  have to be comparable. But like I said, nobody runs flexible real estate, which is probably 80% of our business today. and so we do get a little bit of,  leeway in trying to drive,  in trying to drive rates there because we have a differentiated product,  on the consumer side,  the rates that we charge.

[00:16:49] Yeah. They are the, it it's basically driven by the market in most ways. Right. and I think this is actually one of the challenges with real estate in general. We can talk about that when we,  when we get into like how we pivot our business and why we pivoted our business,  and that business.

[00:17:09] But it's,  there's, there's,  there's a plethora of, of information for both residents and hotel stayers right? Alike to cop against other type products, right? Whether that's through apartments.com or whether that's through booking.com or whatever, right? It is like they know what hotel rooms are, are selling for, they know what residential,  apartment units are selling for.

[00:17:29] It's really, at the end of the day, it's, it's somewhat commodity product. and so we can't charge more than them to the extent that our product isn't differentiated. Now, it is a little bit, but when I talk about the competition with our company, it's really about how much do we put into r and d to make the experience that much better, that much simpler, that much cleaner, right?

[00:17:56] for the end user, for the consumer. That then balances against like, hey, the needs of the company. Cuz obviously the more an r and d. the less the lar the longer it takes to get to profitability. Right. And sub balance that piece out. And so that, that's what we're constantly thinking about.

[00:18:12] Nima Gardideh: and this r and d part is like software. consumer facing software that helps me book and then manage my stay while I'm there. Plus, I assume there is like a highly operational aspect of like, there are cleaners coming in, maintaining like the quality of the spaces and all this sort of stuff, right? So like, it's not like a pure tech company. It's like tech plus people, which is really, tech plus processes run extremely well, right?

[00:18:39] Bao Voung: yeah, it's kind of a complex problem cuz also when you, when you think about the tech side, I mean we, we call ourselves a tech enable. Operating platform. Right. and so that's tech enabled both from the consumer side. So we think about, to your point, ease of booking, ease of reservation,  ease of signing a lease right.

[00:19:01] To ease of getting into the building. Yeah. Contactless check-ins. Right. and, and so that there's a there's a tech component on that side, but then to your point, there's also a heavy tech component on,  the building management side. And I'd say there, so that's one of it is that there's a. . Ultimately where we're trying to go is flexing real estate constantly, right?

[00:19:25] To maximize value for those involved in it. and when and when you think about constantly flexing the real estate and switching uses is that there isn't a management platform today that allows you to do that. Right there, there are very focused and specific. There are hotel property management systems, there are residential property management systems.

[00:19:45] There's not a way to manage that inventory any single system today. And so we are building that, we have done that successfully to date. the other piece of that is thinking about the pricing algorithm, right? Is that largely,  hotels are priced really trying to figure out how to pr, how how to price a one night stay.

[00:20:08] and that's really what they're focused in on and they're really focused in on top line for a hotel. They're really just focused on maximizing one year leases. and given our 

[00:20:20] Nima Gardideh: mean, residentials are focused 

[00:20:22] Bao Voung: O on the residential side. Right. And then, but given our flex model where you can take a single unit and it can be a one night hotel stay, it could be a two week extended stay, it could be a three month relocation stay, it could be a six month temporary home, it could be a one year unfurnished day.

[00:20:41] And so as we think about that, it's like how do we price across that? Right? And how, and not only is it focused on top line, but there's different expense models associated with each one of those different stays. So really what we're trying to do is price bottom line profit. Right. 

[00:20:56] It's how do we 

[00:20:57] Nima Gardideh: board what is like, the right mix of these things to make the most money out basically. Right. And so do you have,  

[00:21:03] are you like basically every unit you have because of that model is listed both on booking.com and on apartments.com and on Airbnb and all these different sort of like online travel agency companies all the way to like real estate, property,  listings companies.

[00:21:20] Like you're trying to be everywhere at the right price point for the right sort of like mix that you, you're looking for. Is that what's happening?

[00:21:27] Bao Voung: That is, that is what's happening. And so we may not have every single unit, but what we have is a percentage units or unit types that we list, right? so we will always have one bedrooms and two bedrooms and studios listed on the hotel side, and we,  well, we may or may not always have it on the residential side, depending upon demand.

[00:21:49] So what we're doing is we're think, we're, we're saying, Hey, let's take a look at the world of demand out there. Right? Who's coming in? Why are they coming in? Let's look at what's the demand for,  an apartment. what's the demand for relocation? What's the demand for a hotel stay? And then how should we think about the percentage of our buildings that we allocate to each one of those uses at any given point in time?

[00:22:13] And whether that's both from,  macro demands, right? Where Covid hits and you, right? And there's no longer hotel demand, right? And so that may force you to change to a hundred percent unfurnished to apartment like stays, right? Or whether that's,  micro demand changes where you've got a 500 unit apartment building and somebody builds a brand new 500 unit apartment building next to you and they're trying to fill the building up.

[00:22:44] And so when, when you do that, you generally drop. right? And so now you, as the building owner next door has to decide, do I drop rates with them? Cuz that's what you're gonna have to do. Or do I start flexing more into right hotel-like stays right. Or other different types of stays to help try to,  keep the net operating income, right?

[00:23:05] The income of the building high, right? And so that's the beauty of our model, is it allows you to think about customers differently and pivot the business. and if I,  one of the examples I can give is if you think about Covid and I mentioned earlier, hey,  you would go a hundred percent apartment, well actually for,  the two hotels that we had already stabilized pre covid, right?

[00:23:29] instead of going to back giving, going back to multi-family,  what we did was we pivoted the business instead of going for one and two night stays. like hotel, like stays, we switch to long-term stays because we have an apartment like product, right, where somebody can truly live there for weeks and months and a year at a time.

[00:23:50] And so in DC we,  our, the hotels around us were earning about $20. They call it RevPAR. So it's like, how much do you make,  how much revenue do you make per available room night? Right. So on average, how much money do you make per room, right, that you have in your hotel? DC on average at that time during Covid was I think it was like $20 a night.

[00:24:14] And in our hotel we were averaging over 150 a night because what we did was we pivoted from the one in two nights stays to longer term stays. And we had a nber of groups for a nber of reasons who had to stay in DC for extended amounts of time. same thing with our, our hotel in,  Seattle, where they were also,  low double digits for RevPAR and we were over 200.

[00:24:40] and that's just the ability to go after different types of customers.

[00:24:44] Nima Gardideh: And so when you say like, we pivoted, what you've actually done there is change the pricing slightly and then go on different channels to advertise the inventory or like put the inventory out there, right? So you go to real estate channels instead you're like, Hey, I'm looking for long, longer term stays and so on and so forth.

[00:25:03] So that's really like what you're playing with there. I I  really like this type of business cuz it's just, it's, it's really just mostly math. So you're spending a lot of time on this math part. So is is a lot of,  walk me through your, like, 

[00:25:18] just in terms of investment that you are making as, as, as a founder into teams, right?

[00:25:23] So like, how big is this like, team that cares about this modeling versus a team that is doing the ops portion versus the team that's maybe doing,  software building for,  building software for, for the users on both sides of this, this ecosystem. So like,  where is your money going?

[00:25:41] Bao Voung: you, I think you, you hit the nail in the head where you, you talk about teams and where our money is going is that like we are very, even despite the fact that we do own real estate, and I can tell you how that works,  separately, but, but we're a really, our operating business is really an assumet light model.

[00:25:58] And so,  I'd say 80% of our expenses is all on people, right? And the type of people that we, who do we want to bring in, right? To execute on this model. today we have,  a little over 2000 units under management across,  12 properties. And so that, right now we have a staff running that of,  a little under 300 people.

[00:26:25] I'd say 200 of those people are, are operating, are property operating staff. Right? They're boots on the ground. They are our,  our GMs, our AGMs, our maintenance techs, our,  we call 'em guest experience associates or our front front desk managers. and,  hard of house our housekeeping staff, right.

[00:26:50] and so they're on property, they're execution. the other a hundred is our corporate staff, right? and I'd say about,  we'd probably have 20 or 30 people,  probably 20 or 30 people,  focused in on bringing pipeline into the door, right? So more units, whether 

[00:27:15] that's us just on the inventory side,  whether that's just managing.

[00:27:21] where that's managing real estate on behalf of others or actually us going out to buy the buildings. and then we have a much, I think probably about 20 to about 20 people on our, I'd say tech and product team.

[00:27:39] And then we have some overhead, and then almost everybody else in the corporate team supports the properties in some form or fashion, whether that's through revenue management, whether that's accounting, whether that's,  financial analysis.

[00:27:52] Nima Gardideh: And this, this formula that you talked about, about the mix, is that what you, what you call that revenue management? Is that what you just mentioned? Or

[00:27:58] is that something Okay, gotcha. So it's this, is it done manually? Is there like ML machine learning built into that? Like what, what's going on there?

[00:28:06] Bao Voung: we do it both today. so we run,  a heavy Excel model that needs people intervention, right? but then we also have,  a data scientist and some team members working on building,  a pricing algorithm, right? That can quickly work through how we think about pricing stays and how we think about demands.

[00:28:29] and today, first up is that, is to think about,  it's really a displacement model, right? Because if as soon as we put a one night stay in, we can't put in a one year lease, right? And so what we're thinking about is how do, how do we think about displacing different types of potential guests that stay with us?

[00:28:50] And then what's the best way to. to, to, or to think about percentages of the building, of what types of customers, once again to, to maximize,  income for the real estate owners.

[00:29:04] Nima Gardideh: how often are you changing this type of mix right now? If there is a model there, I assume there is like all these macro things that happen. that shift, maybe like the minuteness of the pricing. Like you might go up and down by X percentage every off, every so often. how often is that happening, first of all?

[00:29:23] And then how often are you like rethinking the Rev model completely on a building or like on a set of inventory?

[00:29:29] Bao Voung: on the pricing side and what the consumer sees, we price every single day. Right. we're, we're daily changing prices and we're not only changing prices for today, but we're changing prices for the next 365 days.

[00:29:47] right. It's a pretty complicated model, which is why.  we are building the algorithm and why we're testing it out and why we, we believe that there's a lot of inherent value in that.

[00:29:58] It's because it's a complex problem and you're constantly changing prices, right? And so you, you need to take into account demand for any given day, right? So,  if we're talking about,  March, let's talk about in April for,  DC cherry blossoms is huge, right? And so even though we don't like, even though people may not be booking quite yet, we know that that particular month is gonna be super strong.

[00:30:27] And so we may hold out inventory or hold out pricing until the very last second cuz we know we can fill it with demand. And so like, we're thinking about how to, how to do that and how, what kind of pricing do we think we need for that? to, to get what we want out of it. on the longer term side of like, or the larger picture of the building, how often do we change the percentage of the building from one use to the other?

[00:30:53] I think it's really driven by, it's, it's could be two different things. One is,  on, on a quarterly basis. Today we're thinking ahead, right? Like six to nine months. Hey, what does the demand look like? Is there anything that's changing? Should we, rethinking uses? It's not to say that we're actually changing the percentage, but like, we're, we're like at least quarterly on a basis in some of those monthly thinking about, Hey, what's coming up?

[00:31:16] Should we be changing? And then I think the other thing is when, when major events happen, something pushes us to change. Like a covid, like something else where we have to react. And so we may change the use of the building. the, I I'd say that there's a there's also. a third reason, which is,  thinking about the rhythm of the building and the rhythm of demand in a particular area right?

[00:31:44] Where we may naturally every springtime think about, Hey, we're gonna push more towards,  hotel, right? And maybe we sign different types of leases, right? Or if you think about, student housing, right? Where a lot of student housing today, they may make students sign for a full year, right? They make, they may make you sign from an August to August lease, but maybe your internship isn't in that city, but you're still forced to pay the rent for, you 

[00:32:18] know, may, June, July.

[00:32:20] Yeah. And so, like, what we can do is then,  instead of making a 12 month lease, right, which really benefits the real estate owner, what we could do is make it a nine month lease. And especially in a market like DC where. tourism is great in the smer, right? A lot of families come, I could turn that student housing right into,  a hotel right?

[00:32:43] For families. And so therefore it drives higher income for, ultimately for the real estate owner. The students get a discount and the travelers get a great place to stay right? For the smer. And so,

[00:32:55] Nima Gardideh: kind of solved for like the actual problems people have there as opposed to some like archaic notion of a lease that's 12 months. Right. That, that makes so much sense to me that,  I, and I f I'm remembering correctly, Saunder, which used to be called Flat Book, started with just that specific part of this business, which was there's all these students that need it to go away for those months, and then they, they filled up the I.

[00:33:19] Bao Voung: Yeah,

[00:33:20] Nima Gardideh: with Airbnb or

[00:33:21] Bao Voung: I basically, I think it started off as like an Airbnb, but yes, I think he was a student at the time when he started it. and yeah,

[00:33:29] Nima Gardideh: Yeah. A lot of the leases he had were just make Yeah. Student leases. makes sense. So 

[00:33:36] how are you test, so like, what's very curious about this for me now is you have all these like different approaches to pricing. So now you have this Excel model, maybe there's an algorithm,  and they're, it seems like very localized.

[00:33:51] So like DC is gonna be different than Seattle versus New York and so on and so forth. So that makes a lot of sense. How are you introducing this new like, tech enabled algorithm versus the Excel model? Like how are you gonna test this? Do you like divide up your inventory and say half of them are gonna be priced with this Excel model?

[00:34:08] Half of them are gonna be priced with this like algorithm. That's my only like assumption. But is that how you're gonna test? How are you gonna test? Super curious about this.

[00:34:18] Bao Voung: One of the things that we focus on as a team always is in, in one of our, what we call our cultural norms, or may others, may call our, our, their, their core values is kind of make it better, right? How do we get better? And one of those things, it's both better, big and small.

[00:34:33] And so the way that we approach this one is like, hey, like let's focus on making it better small, right? So like, let's focus on a particular problem. And we know that the rxl with our, with people involved, we know that that's the ultimate an that's the answer we've been using to get to where we are today.

[00:34:54] And so what we'll do is we'll run that model, right? And then we'll also see what our algorithm spits out. Hey, does it seem right? Does it seem accurate? Does it seem like,  how is it different? And understand, hey, what did the algorithm do versus how would we have, how would that have happened with.

[00:35:16] our, our more, I'd say traditional model of pricing and kind of understand what the differences are and then tweak the model and then tweak the model and then tweak the model. So the whole idea is try to make it 1% better. Cuz I don't think it's one of those things where,  especially with a high risk environment that we are where we would say, Hey, we're gonna split the inventory and hopefully this algorithm works.

[00:35:38] And if it doesn't, those units, it's consu. think about it much like,  we sell rooms like,  airline sell seats is like, once that airplane takes off, an empty seat is an empty seat. You never get to get that revenue back. Right. That seat is gone. Hotels are very much the same way, right?

[00:36:01] Where if there's not a head in that bed that night, there's no way to make up that revenue. Right? And you only have 365 nights to sell for each and every single hotel room. right? And so that's a high risk game if you're gonna say, Hey, we're just gonna let this algorithm price it and we'll see if it works out.

[00:36:22] And so what we're trying to do is mitigate that risk, right? And saying, how would, how does our current model do it? How does this algorithm would do it? What do we think,  what do we think's, right? What do we think's better? And constantly improve upon it until the point where we feel comfortable with what, what ultimately that does.

[00:36:40] And then we'll probably do some sort of split model and see what performs better over time.

[00:36:44] Nima Gardideh: So there is like a han intervention at the tail end of both of these. Like they'll spit up models or nbers. and then someone is looking at it and sort of like using their current intuition of what's worked in the past and understanding of these markets and saying, okay, well I'm gonnadjust it by X percent,  based on what I know about this specific property or this, this model in this city.

[00:37:08] Gotcha. That, that makes sense. So you're, you're sort of like mitigating risk by a han sitting there, but like, how do they do that? That's so in, so there is a person looking at these nbers, but I assume the algorithmic version of it is quite explanatory. It's not just giving you a price, it's giving you a price and explaining why it's giving you a price.

[00:37:31] So then you can like, check its assumptions. Is that what, what's happening? Like how do, how do I like adjust risk against these two things? As, as someone who's looking at the output of the models.

[00:37:41] Bao Voung: with the algorithm side is. What we don't have is years and years worth of data right? To just run regression models and more complicated models to say, Hey, we've got a ton of history. Let's see what's driving all of the assumptions. We're still making those assumptions today cuz we're building that history because there isn't a group today that, or there isn't, data that we can pull today that says, Hey, like we ran this building this way and so therefore we got it.

[00:38:16] We got this amount of income running it this way, this amount of income, running this amount, right? And so then we can figure that out. So we we're still building that data 

[00:38:23] today. and so that, that's the challenge that we face. And so,  it's a it, it doesn't, we are constantly tweaking based upon what we learn.

[00:38:35] So every day we learn something new, right? Every month we're learning something new and we're building that back into the algorithm.

[00:38:41] Nima Gardideh: I I assume this data in itself is going to be extremely valuable. Give it five to 10 more years, or you have one of the only historical data points on like, on this, so you can compete very well,  on this type of sort of,  fulfilling of inventory. let's, let's step back a couple steps.

[00:39:01] So you mentioned, so like 80% of your business, is this where you're managing properties and, and then sort of like filling demand,  for the supply of owners. But you also mentioned that you signed leases. Is that the 20%? Like what is the other party of your business and, and how did you get here? So like you said, you meant, went through like a very major pivot to get here.

[00:39:20] So you went from these, like helping REITs basically make more money on their inventory before,  it was fulfilled properly with long-term tenants. how have you ended up here and what, what, what were the big steps you had to take to get here?

[00:39:38] Bao Voung: the pivot was really around going from primarily focused on,  the pop-up model

[00:39:47] to really building a flexible real estate platform, right? And that's ultimately where we're trying to go, is to build a platform that enables real estate to be more resilient and to create a better financial engineered product for real estate owners and to create value for those who, who stay in it.

[00:40:07] So the 20% of our business today is the pop-up model, and 80% of our business is where we fully manage the entire building and kind of forever,  flexing the units between home and hospitality. And so that was a pretty big pivot. and, and really it was because of c O V. . 

[00:40:31] in March of 2020, we were set to open a popup hotel a month.

[00:40:39] Right? because who wouldn't want that in their building cuz it's just free money effectively. Right? And so we were focused on that, but we knew ultimately we wanted to get to this flexible real estate. when Covid hit and we basically said any hotel that wasn't stabilized, it doesn't make sense to open.

[00:40:58] Right? It's like, let's shut down all the half open hotels. Let's, let's not open any new in 2020. it gave us the space both internally and with our investors to say, Hey, because we're not op, we're not trying to grow, grow, grow because it doesn't make sense to open these hotels. Is it allowed us to rethink the business model?

[00:41:21] And like, let's pivot to where we want to go long term. . And so as bad as Covid was for the hospitality sector, and as bad as it was for us as a company, one of the toughest professional days I've ever had when we went from 106 employees down to 28,  is that it gave us, like I said, the space and the flexibility to really get to ultimately where we wanted to go in the long term with the business.

[00:41:48] Nima Gardideh: Well, that's a big, big change,  that you went through to get there.

[00:41:53] Bao Voung: And it's really, and and, and it's a lot around releasing that pressure of growth, right? Because,  the pop-up side of the business, it's, it was, is a little bit like a drug, right? It's like once you start it, and you have to keep growing it. You have to keep feeding the machine. What's, what's great about the, that business model is that it's basically free money.

[00:42:15] Like you're, you're, you're making money off of what otherwise would be empty product. but the challenge with that on our side is that it's a it's a consed product, right? It's not a r r, there wasn't any annual reoccurring revenue. And so, like as big as we got, we'd have to continue to open more and more hotels close down, more and more open, more and more close down, more and more.

[00:42:39] So it's, it's a challenging, I'd say, business model from that perspective. Not that we couldn't have done it, not that we weren't set to do it, but it, it's just challenging. And so allowing us to, I guess, take the break, put the breaks on the growth for a half a second. When Covid hit,  really allowed us to switch to, to our current business model, which is more annual reoccurring revenue.

[00:43:00] Cause we're signing five and 10 year contracts to manage these buildings.

[00:43:03] Nima Gardideh: Mm. Yeah. And what I don't like about that papa model is that like, if you did extremely well at best, you would basically be at like the deployment of the capital on the new real estate. Cuz like that is your limit, basically, which is a lot of money, I assume, like, as, as many hundreds of millions of dollars,  billions of dollars that are, that are probably being spent on new buildings being built.

[00:43:23] And,  you're sort of helping recoup some of that capital. But,  you're still limited by like how much of that is available, which I assume is still a very big business, but very hard to do.

[00:43:34] Bao Voung: Yeah. I mean, I think they're,  on average the,  the US is built around 400,000 new apartments every year. So that's really the kind of tam that we could go after. in the pop-up model, what, what, what was nice about it is that it was a little bit, it, it is countercyclical meaning.  when apartments are hot and they're leasing up fast and we're more likely to be 12 months in the building versus two years cuz they're leasing up quickly.

[00:44:04] That means that generally that drives more entrance into the market and so we can open up, there's a lot more product to open up our hotels in.

[00:44:13] In the same sense though,  if the economy's not doing great right, and there's, which means people are less likely to build new apartments,  that also means that they're ha probably having a harder time filling the building.

[00:44:29] And so we got to stay in buildings for longer, right? From, so it, it was kind of nice. I was kind of the cyclical, but to your point,  it, it is a capped market and, and, and it's like, like I said, it's a little bit like a drug. You gotta keep consing it. You gotta keep getting more and more and more,  versus our current model where we're managing buildings for five and 10 years and we can just build on top of that different kind of growth.

[00:44:53] Nima Gardideh: Yeah. I  definitely want to address, cuz we're about to, I assume it, you, we would agree with this to enter,  a second recession cuz there was one already this past year and we're probably gonna see another one. And so you think that part of your business is gonnactually become bigger because of it.

[00:45:10] There will be more demand for the popup part of your business,  in, in this end of this year or probably next year. and that, that's kind of awesome because you have this other part of business that probably thrives in high demand environments. and then there's this other part of your business that thrives in low demand environments.

[00:45:29] So you quite de-risk in that way.

[00:45:31] Bao Voung: it, it, it's actually, we, we have gotten,  a bunch of demand from both sides, quite frankly. and we, and to your, the popup was a little bit unexpected,  cuz it. It kind of fell out of favor because people were leasing up their building so fast, right. in 2021 and into 2022. but that leasing has slowed a bunch.

[00:45:58] so that is the riskiest part of a development. One of the riskiest part of the developments is the lease up period. And so we help mitigate that. We help generate that in our income, right? where the building is actually losing money. And so we're, we're one of the few things that actually helps create money from that side.

[00:46:15] So we, we got a bunch of demand on the pop-up side, but,  just like the pop-up side of the business,  our permanent side is that,  real estate owners who were making a certain amount of income with a certain amount of debt on their building, so the mortgage on the building, all of a sudden with floating with interest rates rising, right?

[00:46:42] Even if they thought they were hitting their top line nber. their bottom line nber on free cash flow has shrunk a ton because it's being consed by increased interest rates. Right. And some of these interest rates where they started, especially if they have floating rate debt,  may have started around two and a half, 3% are probably closer to six and 7% today.

[00:47:06] Right. And so they may be underwater, they may not make enough money as a multi-family building to cover their interest payments. Right. Their mortgage payments. And so our financially engineered solution allows them without doing, without structurally changing the building, without changing the infrastructure with minimal investment is to all of a sudden have opportunities to drive higher income business from the hospitality side.

[00:47:35] Right. And that's one of the things that has been resilient,  despite the recession that you mentioned, is that. Travel has been, has been booming. and it's, it's come back really strong and the expectation is that it will continue to do so both on the leisure side and really where the,  world's looking towards is the business travel side.

[00:47:54] but that's starting to come back and so it just gives more diversity of income streams for a property owner to go after, 

[00:48:02] Nima Gardideh: Yeah. And cause most of these owners are not on, they're on variable rates on most of their loans and things like that. So when the Fed changes these roles, they are affected directly almost 

[00:48:12] Bao Voung: They, they are absolutely immediately,  affected by that.

[00:48:16] Nima Gardideh: yeah, that makes a lot of sense. And you're sort of like the vitamin or like the sort of painkiller here.

[00:48:20] You, you're, you're solving that, coming in here and saying, okay, well that margin that you used to have that just went away because the macro environment, we're gonna bring that back for you by filling inventory that would've otherwise been just floating around. So yeah, that just makes a lot of sense in, in this market.

[00:48:37] So I, 

[00:48:38] I'm super curious about,  what is your sort of like,  funding instrent assumet class? Like, are you a venture back company? Are you, are, are like real estate investors coming in and giving you cash, like. because you,  just going back to 2020, you mentioned that there was like expectation of growth that sort of maybe went away to some extent because the market changed.

[00:49:01] so much of that expectation, and correct me if I'm wrong, comes from the assumet class that you're like opting to use as a founder to fund your company and, and your efforts, right? Because they need some level returns and then so you have to run at the pace in which they want you and need you really to run to return their funds.

[00:49:18] So like how have you been thinking about financing the company and has it changed since the beginning? are there multiple types of assumet classumes? I'm super curious about that.

[00:49:27] Bao Voung: we are a venture back company,  but we've tried to be thoughtful about the money that we've gone after and like why we've gone after them and how best can they not just be what I would call,  I don't want to like db money, but, or just providing cash to actually how can they be accretive to the business, right.

[00:49:52] And how could they really help us? So,  our seed round we raised with Cber Creek,  which is a prop tech fund. Right. And so,  they. understand real estate in a very, very deep way. And they also have deep ties into the real estate community, right? So not only,  do, are they aligned with us from our vision perspective of where we wanted to take the company, but they could also help the business grow through their connections, right?

[00:50:24] And they've been absolutely fantastic partners. but also as a part of raising that round,  we tried to raise from as many high net worth real estate investors as we could, right? Because,  we wanted them to be part of our advocacy pool when we went, when we reached out to real estate folks,  to sell the business.

[00:50:46] and so that's, that's what we did. Our original raise on our series a  is as we started to switch from kind of real estate, we knew we had to,  have a strong consumer presence, right? And so I talked,  talked thinking about the triangle, Right. And so,  our series A was led by he Capital Partners.

[00:51:09] and they are big focus. They have, their portfolio is huge on kind of consumer based business and consumer growth business. and so they were a strategic partner for us there. And then our series B we raised with,  Harbor Capital. and they're also,  although they're a venture capital fund,  there's their money backing it is,  is deep in real estate.

[00:51:34] And so another kind of trying to be thoughtful about a strategic partner there that's helpful. that's on the operating side of the business or what we call, I guess opco. We also, we have an Opco propco model and so as I mentioned earlier, we also are buying real.

[00:51:53] And so we create,  SPVs or, or s sps special purpose entities,  a new, a new LLC to buy each individual piece of real estate that we're buying.

[00:52:03] So we've bought over 300 million worth of real estate. and so that's the funding for those individual. property buys are funded through separate vehicles with real estate focused,  money and returns.

[00:52:19] Nima Gardideh: And like a REIT would come in and help buy something like that, or is that

[00:52:23] Bao Voung: well, technically most REITs ca yes, but not just REITs. It'd be most of it's through private. it's mostly pe,  vehicles or hedge fund vehicles, right? So funds that,  they have an allocation with the real estate focus or high net worth individuals.

[00:52:44] Nima Gardideh: gotcha. So you're putting out some like, and that's like a sales problem. I assume you go out there and just like constantly raise for these, these things and, and your models will tell you, Hey, like this building, we can definitely support it from the Propco side. And there was like a very clear return on capital,  over x nber of years.

[00:53:02] So you're, you're sort of like separating that out of this business. VCs are invested in this propco, not in, sorry,  

[00:53:10] Bao Voung: Yes. 

[00:53:11] Nima Gardideh: versus 

[00:53:12] Bao Voung: propco versus Opco.

[00:53:14] Nima Gardideh: Opco. So

[00:53:15] Bao Voung: Yes. It's the operating company and the proper, a company.

[00:53:18] Nima Gardideh: and the VCs are in the operating company or both.

[00:53:21] Bao Voung: the VCs are primarily in the operating 

[00:53:24] company, but we've had investments that have crossed over both. Right? That said, Hey, I'm buying 150 million assumet with you, which I'm gonna have to put 50 million of my own money. I'm creating, I'm creating value in the operating side of the business. So like I want a piece of that also.

[00:53:44] And so they invest in that. And so we've love that model because that really aligns our interests, right? because it goes back to there's decisions that we may make that may hurt the real estate a little bit, meaning we charge higher fees, but benefit the operating company well, as long as they're on both sides of that transaction.

[00:54:06] Or we may help the real estate and hurt the operating side, right? And so if they're on both sides of that transaction, we can do what's best all around for the venture, for everybody involved, right? And so, like we're all aligned on growth and like how we want to, 

[00:54:24] Nima Gardideh: and theses SPS is what you call them. Are they like, are they equity investments into some like L L C that owns it? Are there structured as debt, like how I  assume they're much lower risk than like a venture capitalists coming in and investing. So 

[00:54:41] how, how are these things structured?

[00:54:43] Bao Voung: Yeah. So think of it, it, it's like a traditional,  real estate,  acquisition model where,  I  compared it a little bit like somebody buying a home, right? Where if you're gonna buy a hundred thousand dollars home, right? You can get,  an,  $80,000 of mortgage, right? So 80% and then you have to put 20% down or $20,000 down, right?

[00:55:14] similar in our world. Just take that. Instead of it being a hundred thousand dollars, take it to a hundred million dollars. right? And then instead of getting,  an 80 thou 80% loan, we get more like a 60% loan, right? So we get a 60 million loan. Then we need to come up with effectively a 40 million down payment That doesn't all come from us.

[00:55:35] We, we raise money through a what we call a G P LP structure. So general partner, limited partner structure, where the limited partner,  who are the, what we, we like to call the deep pocketed person, right? They may foot 90% or 95% of the down payment or equity, and then we come up with the rest. And so that's how we're able to buy the real estate.

[00:56:05] and so, but the,  that particular capital stack, they live and die by property, perform.

[00:56:14] right? And what the property can generate in terms of cash flow. So it's, it's much like a rental property at that point, right? Is do I generate enough income to cover my mortgage payment to then allow us to distribute income?

[00:56:26] And then how much do I make money? How much do I make on the ultimate appreciation of the property when I sell it? but that's all in on the appreciation. It's a little bit different than the residential side, or although some of the fundamentals are similar. a lot of it is driven by operating what they call noi, net operating income.

[00:56:48] So how much income do you generate from the operations of the property,  without respect to your financing costs, 

[00:56:57] Nima Gardideh: Without respect to.

[00:56:59] Bao Voung: without respect 

[00:57:00] Nima Gardideh: Okay. Gotcha. Yeah, so you're looking at as just the performance of the thing itself, forgetting what it, what the instrents were to like fund the thing and then, 

[00:57:08] okay, so they're judging the performance of basically like how can, how good are you at making money out of the property?

[00:57:15] And then so then think about how to price it. And so they're are so, they're like banks involved that give you the mortgage as well, or like some funds involved on that 60% or whatever as well. 

[00:57:25] So like there's, okay. Gotcha. 

[00:57:27] and then when you said 10% comes from you, is that like coming from the operating cash of the prop company, the op company?

[00:57:37] Like where is that 10% coming from?

[00:57:40] Bao Voung: we then take that 10% or 5% and we then,  raise, we split that up. We also chop that up 

[00:57:50] into investments and so we bring smaller investors to fill in the GP piece. and, and then eventually the operating company with,  our either profits from deals or our. Venture capital funds. Right.

[00:58:08] Invest into that real estate. But generally it's a it's, it's a pretty, given the size and scale of the building, it's a pretty minimal investment,  to it and similar to not that far off of what we would have to invest into opening a pop-up hotel. Right. to, to get that business going. So it's, it's somewhat akin to 

[00:58:29] Nima Gardideh: it's similar. but you're not in the business of building these buildings, so you're going there and sort of like providing liquidity to existing owners of buildings, like buying them out and then you are managing it and now, or the owners of it.

[00:58:41] But in these two separate entities,  if you, if you were to like fast forward your business five years into the future, would you own a hundred percent of the properties that you're sort of operating? Like, would that be the ideal scenario? Cuz I assume you basically make more money that way, right? That, that you're kind of cutting out a whole part of this triangle.

[00:59:05] Like you become you become one of the points of the, another point in the triangle in that, 

[00:59:09] in 

[00:59:09] Bao Voung: yeah, we are a real estate company today, not because we think that's the fastest way to growth. So back to like how we think about growth, we do it today because it's an easy way to prove out our business model and to prove out the value that we can create in real estate.

[00:59:28] Really what we're trying to do is create a new assumet class called Hospitality Living that is flexible real estate.

[00:59:36] And so we want that to be thought of like,  oh, I can build,  if you have an empty piece of land, I can build an apartment building, I can build an office tower, I can build a hotel, or I can build a hospitality living building. That's ultimately where we're trying to do is that it's just one of the major food groups of real estate that is flexible.

[00:59:57] Right. And in that scenario, we want be the premier platform for that building. Right. And today it's mix, it's mixing home in hospitality, home in a hotel, but eventually, and, and that's cuz that's easy, right? And that's, there's not a lot of structural changes you have to do other than adding furniture in a few other things.

[01:00:19] Right. But eventually we also think that we can flex working space, co-working space, retail space. Right? We think about how to better utilize and,  and take advantage of,  buildings. So, and, and one of the things I think about is,  I we work out of WeWork now, right? . there's beautiful common area spaces, right, that are empty once it hits five o'clock, right?

[01:00:47] And if those common area spaces could double as amenity spaces for residents or hotel guests, all of a sudden building looks exactly the same, but all of a sudden you get a higher utilization of the spaces, right? And that cr once again creates value for everybody. And so,  so, so in as a part of creating that assumet class, what we want to be is the platform for that flexible real estate.

[01:01:10] And so that could, right today, where everything to everybody. But eventually what we think that means is, hey,  we are the management company. The bodies on the ground that actually run the buildings.

[01:01:24] we're also the brand and the flag, the customer acquisition model, right? And then we're also the technology, right?

[01:01:31] The property management system and the pricing algorithm. But if this becomes an assumet class, like we think it will be, and we think it's a little bit of a self, a self-fulfilling prophecy of why it'll become an assumet class. but we don't have to be everything to everybody. Hey,  what? If you want your own bodies, like most Hiltons that you walk into, it's not actually run by Hilton.

[01:01:53] It's run by a management company, right? And so if you want to run your own body, you want to have your own bodies in the, in the building and run it yourself, great. We'll be the customer acquisition and the SaaS platform. Hey, you want to create your own Placemakr brand, great with your own bodies, great.

[01:02:11] We'll be the technology that powers it. And to your point earlier around the pricing algorithm, we think that that's gonna be a huge differentiator for us because as I mentioned earlier, You can't do it without data right? And we're one of the few people that are building that datall that historical data that allows us to then be able to create a much more thoughtful algorithm that then allows you to price more thoughtfully, right?

[01:02:40] And so it'll take years for anybody else to catch up to us on that perspective, even when competitors come along. and our perspective is our growth is a little bit different than I think a typical startup where it's like a first mover win and grow at all costs mentality. There, it it, in our world, there's not gonna be a single winner take all.

[01:03:06] There's not gonna be a Google that everybody goes to. There's not gonna be a Facebook right, that everybody's gonna use because at the end of the day, you have to control the physical product. Only but so much physical product. Right? And so it's discreet and it's hard to control. And so that's why there are a bunch of successful hotel brands.

[01:03:26] There's a bunch of successful residential companies, right? and so like, we're, we're like, the more people that come into this space, the better off because we want to be that myriad of menu items that people can select from as a company.

[01:03:41] Nima Gardideh: Yeah. And have you, because you have this like long-term view of this market, have you already structured everything you're building in that way? That someone can come in and just buy the software piece versus just the operating piece? Or is that something like you will figure out how to decouple the org in a way where they can like sort of have their own customers for every part of this?

[01:04:05] Bao Voung: Yeah. And I  think the way we think about it,  is we, we try to keep our eye on the fut, understand where we're trying to go in the future. Make decisions that benefit us in the next six to nine months, but that don't limit us from getting to where we're ultimately gold or ultimately trying to go.

[01:04:27] Right? and so we don't want to screw ourselves for the future, but like we like decisions around our property management system. The enhancements that we're doing,  in the system that we're building is really to improve our own operations, right? And our own ability to manage the building. We're not building screens that are super pretty that we could sell to others.

[01:04:53] We think we can get to that down the road if we need to, but like, really we're focused on operational efficiency, how to and how to do things in a in a better way, in a smarter way for our team first. And as long as it doesn't hurt us in the future, and that's how we think about the growth is like it's, it's all about.

[01:05:13] Prioritization and sequencing of what we do. And so we don't want to spend the money too early building this beautiful and spend tens of millions of dollars spending this beautiful PMs when the demand is not for five years down the road.

[01:05:26] Nima Gardideh: Yeah, that makes a lot of sense. And it's like, I think a struggle,  for every of these like, tech enabled services businesses or tech enabled businesses in general. I think we've gone through variations of, of that struggle,  over the past couple of years. Cause we're also a tech enabled business, so we could totally spend more time making the interfaces pretty enough for us to sell this thing externally.

[01:05:50] but much more importantly, we wanna make sure we operate our business very well using it so that that's kind of where the effort should go. 

[01:05:59] How, if you were to sort of like, you're raising venture capital, so that means they have to comp you against something and you're in like, it sounds like a fully new business model,  that doesn't exist.

[01:06:13] How do you have these conversations with capital allocators that are hoping that they'll get returns when you I p o and then sort of like, oh, how are people going to like price you when you ipo o and then how am I gonna walk back towards like what I, what valuation I should give you? o obviously there are some like very bad examples in like the adjacent market you're in, right?

[01:06:34] We work completely screwed that up and went and like overvalued themselves by like, seems like a factor of 10. but there are also better examples. I think we've already talked about saunder themes. I I feel like they're decently well. com they were decently well comped and the public markets actually like even brought them lower.

[01:06:56] So there is like an interesting thing going on there. So how are you thinking about your business and then going, so cuz this assumet class wants like a hundred x on the original investment, right? I mean, not, not now. I think now you're in the B and c and D stage, you're not trying to a hundred x the capital, which is great.

[01:07:12] but how are you thinking about that? What am I like completely off? You're not even having those types of conversations cause it's so obvious to comp your company or are you having like, hey, let's talk about like these three different types of companies and how we would fit

[01:07:27] Bao Voung: Yeah. It, it's, it's challenging cuz our business is complicated, right? And it's not a typical VC investment. Model. Right. We're not just a SaaS business. Right. and so it, it is super complicated. I would say that,  we aren't a comp, I don't think we are a good comp to like a WeWork or even a Saunder cuz the way we make money is very different right.

[01:07:54] Than how they make money. And our fundamental beliefs are very different. So,  I'd say that that's actually not a good comp for us. cuz we do not sign leases. We're not the arbitrage model, which is effectively we work and saunder. what we have done to try to,  level set is, and like most others do in in innovation spaces, right, is define comparable industries, right?

[01:08:22] That you can then tweak the valuations they're getting. For, for what we do. And so like, the best way, the best way we've thought to do that is to take a look at the publicly traded hotel companies, right? Is to look at,  a Marriott, a Hilton, a Hyatt,  and take a look at how they trade, apply that to us, but then adjust the factors up and down, right?

[01:08:52] So obviously we've had on average a hundred percent growth every year since we started, right? On average, even if you include Covid, right? And so like, That's not the pace that they're growing, right? So we would expect a higher multiple than what they're getting, right? And so like, that's kind of how we're structuring,  the comp process.

[01:09:16] But as our space matures and,  as the business changes and continues to grow, I think that it'll be, it, it will become more complicated because I think we'll have a SaaS business. We'll have a what is a flag or a franchise business, and we'll have a management company, right? And each one of those has different margins and different multiples depending upon,  kind of what the investor wants.

[01:09:46] And so it, it, I I would say that that's, that's, that is one of the challenges. and it's why we,  as we talked a little bit earlier about kind of aligning interest and making sure that,  the investors that you have,  you're aligned at the.  I think about it from, and, and we, I try to apply this to everything we do as like kind of little Maslow hierarchy of needs, right?

[01:10:08] It's like, Hey, what's their base needs? What's their middle need? And then like, what makes the wow? And so we always try to get up to the wow, which is like,  hey, they believe in the same thing that we're ultimately trying to get to, which is like, we're gonna fundamentally change how real estate is built.

[01:10:25] And if they buy into that, along with the kind of transactional alignment and like the relationship alignment, but they ultimately believe in where we're trying to go there, then, we, try to stay aligned from that perspective.

[01:10:38] Nima Gardideh: Yeah. And that makes, makes a lot of sense. You could be thoughtful about not only your business, but also what they care about, 

[01:10:45] as, as, capital providers. Right. wow. This is super useful and fun for me. . I appreciate you spending this time with me and then going through your business.  we've, we've been in this sort of like general space of, of, on the, on the demand side in the past.

[01:11:02] and when I learned about all these, this pricing thing you talked about, I've heard about it a bunch and like lots of companies have to care about this mix and,  it just, it's an intellectually interesting. Problem space to be in. And I think I  the first time I spoke to some of these pricing managers at, at like similar companies to yours, my mind blue.

[01:11:26] So,  it, it is very fun to hear how important it is to your business and, and where you see the assumet class growing. before I,  we, we wrap it up, I have basically more of a curious question around sort of this, this vision of a  new funding assumet class. 

[01:11:44] Do you think it's like many orders of magnitude better than,  the existing sort of real estate assumet class?

[01:11:53] Do you think it's size is smaller but just higher yield? Like what, how different is it gonna be? And if you, if five years is probably not enough, let's, let's fast forward 20 years,  where you've, you've created this whole assumet class and,  the republic. Vehicles that I can invest in as as a consumer, that that gets, gets,  value from it. What, what are the dynamics, I guess? Like what, how, how do you see it playing out? Do you already have models and examples in your internally where okay, it's just gonna be x x percentage better or X times better? What, what, what are we talking about here?

[01:12:32] Bao Voung: I t depends on the market, so it's all localized. But I can give you an example of,  actually we own, we own a couple of properties in, in Nashville, right? And we are doing three and a half X better

[01:12:52] than. the building as it was before we took over, right? In terms of like on, on a per unit basis, right?

[01:12:59] We're doing three and a half that are on the units that we've converted over, right? To our use and to our flexible model. And so that gives you a little bit of a feel, right? And if you were to then take that three and a half x on income, right, and multiply that times, cuz when a building sells, it sells on, its in, on the basis of its income.

[01:13:24] Anywhere from, in an apartment world, 20 to 25 times. When you 

[01:13:30] think about the 

[01:13:31] Nima Gardideh: line.

[01:13:32] Bao Voung: a bottom line. So you think about the absolute value of wealth that creates and how much money we're talking about, this is a game changer in real estate. And because of that, we actually think that,  all buildings. right? That are multi-family or hotel in nature.

[01:13:56] And to some extent office will be built in this flexible way in the future. and I talked about a little bit earlier about it being a self-fulfilling prophecy in the sense that,  those who believe in our model will be able, because of the higher income on a risk adjusted basis that we can create, will pay more for either the building or the land itself to execute this model, right?

[01:14:24] And so as people lose to the model, right, because they're single use focus, right? And they lose to people who believe in the flexible model. For them to be competitive in the buy, they actually have to adopt the model and start underwriting. And once they underwriting it, you have to actually execute on it.

[01:14:42] You have to use it in the building in that way to generate the income, to make the returns worthwhile. And so we believe that,  almost. real estate should be built this way, day one. Why wouldn't you want flexibility? Why wouldn't you want diversification of income streams when at the end of the day your downside risk?

[01:15:08] Your downside scenario, right to the building is just multi-family, which is most people's upside scenario, right? The best a multi-family provider can do. Where a building owner can do is multi-family, where at the end of the day what we can do is empty the building of furniture and turn it back into a multi-family building.

[01:15:27] That's the downside. That's the worst we'll do is just a straight multi-family building.

[01:15:32] Nima Gardideh: Yeah, I can see the in, so the investment pitch is very clear to me. Right? So there is like more money in. Sorry, more money out. What is the, and you're in a WeWork right now, as you said, and being like, sort of like, I'm quite into like aesthetics and design as a person. and maybe, maybe because you have different, like operators and management companies and, and, and in this future that you have, there will be vary variations, many variations of what you're talking about.

[01:16:04] the part of my brain that like has some like, ooh, I don't like this version of the future that you just explained is like mostly around vibe, right? . I walk into one of these buildings and I think quite a few, even like Airbnbs now because there is like an interface where I have to choose and pick and, and sort of book.

[01:16:25] inherently means that as someone that is providing the Airbnb as the host, I'm going to create a certain aesthetic because that converts better. Right. so you're kind of like, Creating a taste in the economy or like, oh, this, this taste that like,  sells better in that it makes more money, but it maybe is like much more manufactured and less sort of organic.

[01:16:50] that and, and like,  I know the forces of the capital are going to push it and created regardless.  the part that is kind of giving me pause is feeling when I go into a building and create my own sort of space. and I know this is house has been owned by this grandfather who's been here for so long and now they're like moving to the suburbs or whatever and I'm taking over the space.

[01:17:19] There was sort of like inherent value that I put in a place because it's not as cookie cutter because it's kind of unique in its own way cuz someone's kind of like shaped it to,  their liking. Obviously that property type will still be available. It is a massive market. but so much of these newer buildings that are built with this assumption of like, oh, I'm gonna fit two or three people into this place because that is the most, that's the best way to make the most money out of it feels like somewhat, and for the lack of a better word, soulless to me.

[01:17:53] 

[01:17:54] and so how do you think about this and they have like, opinions on this and how do you,  against it?

[01:18:01] Bao Voung: Yeah. So I would say first,  when I talk about, hey, most urban buildings should be built this way. I'm talking about high density urban construction. I'm not talking about,  a row home here or a five unit building there, or a six unit building there, right? Or single family homes or condos, quite frankly, right?

[01:18:24] That that's very, for specific use, I think those will continue to be built. But if you're thinking about building a commercial, Residential property, a multi-family property or a hotel, right? I think that this is the way you'll do it and, and you can still just like hotel owners and apartment owners today, customize the experience.

[01:18:44] But I  would actually turn that thought process around a little bit on you, right? To say what happens today when you walking into,  an apartment building, how long of a lease can you get 12 months, right? And that's, it's no, nothing important, like has no importance in your life other than it's a year and everybody measures everything in year.

[01:19:11] And you have, you sign, you get a 12 month lease today because the apartment. Department building owner wants you to have a 12 month lease because what they're trying to do is time your lease expiration along with every other unit's. Lease expiration is because they don't have any flexibility. They have to sign a one year lease and like, so they only want that so many leases coming out in every given month.

[01:19:33] Once you have flexibility of uses, we can customize and back to like,  the customization and, and really staying the way you wanna stay right, is we can do a six month lease, a seven month lease, an eight month lease, and I'm, because we've got other options, we don't have to try to sign another year lease in December, which is what they don't want because that's low leasing season.

[01:19:57] Right. We have all these flexible options and we can provide that flexibility to you as the consumer. Same thing when you go into an apartment building today, most apartment buildings,  similar is that. you can't, if you want a cleaning service or a dog walking service or linen service or a clean, like,  clothes washing service, none of that's provided by the building because the cost structure of an apartment building doesn't allow that.

[01:20:26] But if we run a part, if we were in hotel use in the building, we already have housekeepers in the building, all of a sudden we can provide a la carte luxury to every single resident in that building. Oh, you want your refrigerator stocked? Well, we've already got people in the building. We can do that for you.

[01:20:44] You want linen service, you want housekeeping service. We've got people already in the building. We can provide that to you. Right. if you think about some of, and especially in today's nomadic environment, where you may have somebody spending 50% of their time in, in New York and 50% of their time in la you, you're 

[01:21:03] you're the case 

[01:21:04] in point, 

[01:21:04] Nima Gardideh: now for context

[01:21:06] Bao Voung: right.

[01:21:06] Nima Gardideh: Yeah.

[01:21:07] Bao Voung: you're probably still paying your New York lease right now, right? You'll probably still have a home that you're paying for on a monthly basis where you're at, where in a more flexible environment, under our, our brand flag is that we can, we can say, Hey,  what? Instead of you having two leases, sign one lease, right?

[01:21:28] And then we can fill in the vacancies with different types of stays cheaper for you, more value for us, flexibility for everybody, right? And that goes back to like, hey, how do we create ultimately value for the consumers and the residents and those that are staying with us? Is that it's a unique value proposition that you cannot get today.

[01:21:52] And so I'd, I'd argue that it's actually a lot less soulless because we can be 

[01:21:57] flexible 

[01:21:58] in a lot of ways that does not exist today.

[01:22:02] Nima Gardideh: Yeah. And it's funny, so the, all the things you just mentioned there, there was a version of me that would've loved hearing that, right? That, oh, I want to sign a lease. I'm willing to pay every month, but I just don't want to be tied to one location because I'm flying a lot. and that my personality has changed.

[01:22:19] I deeply love spending hours and hours thinking about furniture design and interior design and like going into my own space and experimenting and things like that now. And it's like a very different part of me. But there was like a 10 year period where I would've been a customer of yours very clearly.

[01:22:36] Right. So I think that part definitely fits in,  that I appreciate the time. Thank you for, for coming. I'm super grateful for you to be so,  detail oriented, which is exactly what I would've wanted. I'll just get a sense of how you,  think about growth and, and building,  Placemakr. Thank you for showing up.

[01:22:53] And,  Maybe in a few years when the new asset class is over is, sorry, available. I'll invest in it as well. And,  think of this conversation.

[01:23:05] Bao Voung: I love it. I  appreciate the time. Really enjoyed the conversation.

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[01:23:10] Nima Gardideh: All right, and that's a wrap. I'm so grateful for this conversation with pao. It was quite insightful and inspirational to see a founder go through the process of taking. an original vision and bringing it through first, making the first version of it happen and then pivoting to this new version and having sort of even the insight of what's gonna happen over the long term to take this sort of like consolidated version of their business and, uh, decouple it more and more and have, uh, different variations of their business as they grow and become sort of a leader in the industry.

[01:23:47] Um, we've started, uh, at Paramount to create a lot more content. Um, and host events. So if you are curious about growth and um, wanna learn from us or learn with us, you can go to p.com, uh, to learn, uh, about growth at creative production, landing page optimization or attribution modeling. We've created.

[01:24:08] Pieces of content for all of these things in the last couple of weeks alone. Um, and the next episode is gonna be my co-founder, Kareem, coming on to, uh, talk about one of our clients and how we've, uh, done some work there to, to grow them across the us. So hopefully that's gonna be an interesting one for you as well.

[01:24:24] And as always, if you are finding value out of the show, please subscribe and follow on whatever platform you're watching. Thank you very much. Have a good one. 

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