VC Investment into Defensible Proptech Companies with Gavin Myers, Partner at Prudence VC

Hosted by
Nate Smoyer

This week's featured guest is Gavin Myers, Managing Partner at Prudence, an early-stage venture capital firm focused on investing in technology companies in the real estate sector. We dig into Gavin's background and transition to proptech, as well as Prudence's investment strategy of backing differentiated and defensible companies. Gavin shares the importance of understanding the sector and the people involved, as well as the challenges of finding talent in proptech—a topic I'm passionate about (collectively, we as an industry need to do more to attract high-caliber talent).

Gavin also provides insights into Prudence's new fund and their focus on AI and construction tech. This is Prudence's third fund at $80 million, bringing their total AUM to $230 million. News of the fund is linked down below.

More about Gavin and Prudence
Prudence is an early-stage venture capital firm investing in technology companies leading the global transformation of the real estate sector. Prudence is an early investor in companies such as Casafari, Compass (COMP), CREXi, Evernest, Hemlane, Maxwell, Propify, Salus, Sundae, and VendorPM. Gavin and his team are investing across Proptech 2.0 – software innovation driving data capabilities to power autonomous business processes in real estate.

Gavin Myers is the Co-Founder and Managing Partner at Prudence. He currently serves on the Board of Directors at AI Clearing, Casafari, Morty, VendorPM and CREXi (observer). Before co-founding Prudence in 2009, Gavin worked at Sun Capital Partners, focused on middle market private equity, as well as Credit Suisse and Goldman Sachs. He received a BA in Political Science from Yale University and an MBA in Finance from Columbia Business School.  

News: Prudence Closes Its $80mm Fund III To Invest In Technology Companies Transforming The Built World

Read Episode Transcript

Nate Smoyer (00:01.171)
Hey Gavin, welcome to the show.

Gavin Myers (00:03.83)
Hey, Nate. Good to see you. Thanks for having me on.

Nate Smoyer (00:06.271)
Yeah, it's a pleasure to have you on. We, you know, I know pre-show we were kind of talking about how our circles overlap quite a bit. And you were even featured in an article that a CEO of our company was featured in like a week or so ago. And I just thought about that. I was like, right before our recording, you know, this is the first time we're having a chance to have a conversation. I was like, what are the chances of all that coming together at the same time, but kind of cool. And I think exciting. We'll use that for some fodder for some conversation here.

Um, but for those listening, I've got Gavin Myers, he's managing partner at Prudence. Prudence is an early stage venture capital firm. They invest in technology companies, leading transformation throughout the real estate sector. They've got some exciting news. Uh, by the time this episode airs, I think this will be live. Cause well, we're going to hold the episode until the news is live, but they've got a new fund and we're going to get into some details.

with that, but before we get into all that jazz, what were you doing before PropTech? What was the transition to make you even go the route? Cause Prudence has been around for some years, but talk me through the, you saw the light and just went all in on PropTech.

Gavin Myers (01:25.982)
Well, Nate, thanks for having me on and happy to share the news of our latest fund. But I think probably a little bit of history is helpful here. And in the case of Prudence, maybe I'll even go back to my early days, coming out of college, working in the technology sector at the tail end of the dot-com bubble. I worked for a guy named Frank Quattrone at what was at the time called the CSFB technology group, which is really at the

the center of the technology world in the late 1990s. Back in those days, you really didn't have later stage growth capital, pre-IPO capital. And so companies with $25, $30 million revenue were going public. And so from my early days as just a professional, if that's what you can call a first and second year investment banking analyst, we were working with

companies that just raised their series A. So we're working with early stage companies, didn't have a lot of infrastructure, had initial products and customers and a deep belief that they could build out an industry defining company. And so my entire career focus has been around that early stage business. And of course, at the time I was a generalist, but I went to business school, I spent five years in middle market private equity.

thought that that's something that I would enjoy. But the truth was the technology ecosystem in New York was starting to evolve then. And from 2005 to 2009, these were really the early days. And I was spending my 19 weekends working with early stage companies. And in 2009, I met a family who wanted to back a new platform.

And so with a single family providing working capital, investment capital, we started making investments. And really we too were generalists. We were investing across industries and made some great investments outside of the PropTech sector as well as had some important learnings as an investor. But it was really in 2012, we were seed investors in Compass, which at the time was actually called Urban Compass. And that was...

Gavin Myers (03:38.786)
kind of a fun initial foray into a sector that wasn't even called PropTech at the time, but just real estate technology. And then I had been friends with Robert Refkin from our days in graduate school, and I happened to be in the same office as Ori Alon, who is the director of engineering of Twitter, who later became Rob's co-founder at Compass. And so Rob would work out of my office on his initial pitch deck for Compass, meeting with Ori when Ori was free. And...

Nate Smoyer (03:45.984)

Gavin Myers (04:08.798)
Of course, he's the type of person that I back for whatever he was doing. And we backed him then. So I would say that we weren't kind of intentionally pivoting into PropTech early on, but it was from that investment that we had this unique vantage point into the real estate sector. And at the time, our vantage point was just into residential. But boy, I mean, when you start looking at the statistics, right, 260 trillion dollars of global asset value.

Nate Smoyer (04:26.283)

Gavin Myers (04:37.034)
largest global contributor to GDP. And having been in the technology sector for my entire career, I'd seen how technology had started to propagate other industry sectors. And once it began, of course, it doesn't reverse. And there was just this fundamental question of kind of why now? And I won't say that the light went off immediately. It took some time, but...

Nate Smoyer (04:58.091)

Gavin Myers (05:02.25)
You know, as we were deeply involved with Compass in the early days, it was, you'd start to look at activities like mortgage, and then you'd go down the mortgage rabbit hole. How is a mortgage manufactured? Holy cow. Are you kidding me? And the more you learned, you know, and it, again, it's like, it wasn't cause like the people were inefficient or ineffective. It's just cause that's what the industry was at the time and great products hadn't been built to solve those inefficiencies.

Nate Smoyer (05:26.816)

Gavin Myers (05:31.286)
But as we started meeting with more and more founders, we would see everything from property management to then we started looking at commercial and we're like, wait, how do you search for commercial? There's one site and that's what it is. It's just like, that's it. And of course that led to an investment in a company called Crexie. And so it was just this first principles mentality towards investing in differentiated defensible companies that led us into real estate. And what we...

Nate Smoyer (05:43.339)

Gavin Myers (06:00.126)
what we really started to appreciate was that you had to understand the sector. You had to understand the sector and the people, how things worked. And it was just hard to drop into and make good decisions on a regular basis. And frankly, we just loved it. I mean, we just were interested in it. And as a child, I took my parents as their side hustle, bought and renovated residential real estate and producing real estate. And I'd spend weekends, you know,

raking leaves and painting fences and doing the move out inspection with my dad and like literally moving out stuff that was left behind. So I saw early on what it meant to buy real estate, hold real estate, invest in real estate. And then it was really fun for me to start to marry that with kind of a more technical approach to investing in early stage companies in a sector that needed a lot of technical transformation. So that's kind of how we got there.

I'll pause there because I've been going for a while.

Nate Smoyer (07:01.235)
I know that's fascinating. I love that. I mean, you know, there's of all the companies you could have picked, I mean, to happen to be friends with a co founder and, you know, and be willing to back them, you know, compasses pretty extraordinary company to have, like, that's your first foray into this industry. And you're right. Even when I got started in PropTech, I was still like trying to figure out is, wait, is it real estate tech? Is there a difference? There's all these different terms. Every once in a while, people ask me to like,

what do you define as PropTech? And I kind of shoot back, because at this point, if a business doesn't have any technology, I'm a little bit more confused as to how that's possible. So I'm not sure what makes it special, but it's just the category. Do you have defined lines for what you draw as like real estate tech or PropTech, and we'll even get into construction tech later on.

Gavin Myers (07:57.294)
Sure, yeah, and you're absolutely right. And I think it is definitionally broad, and really the narrowing is by fund and strategy. And for us, we've narrowed it quite substantially. But it can include every category from residential to commercial to, in our case, construction and increasingly towards climate adaptation. And those are really, I'd say, the four

Gavin Myers (08:26.05)
four sub segments that we would be focused on as a practical matter, we tend to be more focused on the commercial sector notwithstanding our investment in Compass and a handful of other companies, which the residential sector is massive, but there's just been, I think, in the case of residential, the first wave of PropTech, really what we call PropTech 1.0, was a lot of business model innovation that was capital intensive, whether it was lease arbitrage, whether it was obviously...

capital structure arbitrage, whether it was buying and selling, and thus requiring a heck of a lot of capital to achieve the iBuyer model. We didn't participate in any of those, not because we didn't respect the founders and what they hoped to accomplish because they certainly have lofty goals. It just looked for us. The way that we've always defined...

It's really not Proptech, it's just how do we define technology is there has to be underlying technical capabilities that are differentiated and defensible. And that means generally backing more technical founders who are building software and capabilities plus something else. And that plus something else is really important. And we can go very deep into what that plus something else is because that will add to how they maintain their differentiation, how they maintain their defensibility over time.

Nate Smoyer (09:21.056)

Nate Smoyer (09:34.763)

Gavin Myers (09:47.566)
For us, that's important because here we are in this highly risky category of early stage venture investing. And we view our job as kind of multifold. There's the kind of wide-eyed, excited, optimistic, we want to build something that will be a category defining company that will grow and be quite successful and live well past its dependency on venture capital dollars. But we'll be...

a solid stable public company on the one hand. On the other hand, we say, well, how do we de-risk? Because investing is about risk reward. And as much as venture capital has seemed like a purely technology based undertaking, we are investors first and foremost who are using other people's capital. And we need to return it in multiples of what they provided it to us. And so we have to think about risk mitigation. And the way that we de-risk is by just being as certain as we can be.

Nate Smoyer (10:18.816)

Nate Smoyer (10:29.687)

Gavin Myers (10:41.482)
about the differentiated defensible capabilities of our companies. And so that generally leads us to investing into just pure software companies. So we tend to not invest in hardware, anything with capital intensity, anything where you could identify business model innovation over actual technical innovation. And we generally prefer vertical SaaS that serves enterprise-based customers or at, you know.

Nate Smoyer (10:55.508)

Gavin Myers (11:10.646)
Perhaps if it's in the case of like Craxi, we go into Craxi, more of a long tail of customer, but they have this unique high point of distribution from having one of the largest listing sites. So that's the software plus something else. And we actually jokingly call that our special SaaS. Because it really takes a special company to not just be a good idea, but to be durable.

Nate Smoyer (11:30.975)

Gavin Myers (11:38.626)
from just initial ideation, initial growth to ultimate independence from venture capital, meaning cash flow positive, and then pathway towards going public and being category defining.

Nate Smoyer (11:38.74)

Nate Smoyer (11:51.043)
So much in there, a handful of things to, I mean, themes to extract. You talked about, you know, you really have to understand and then could dig into the industry. And I've heard this repeated from founders time and time again. Oftentimes I ask the question of how, you know, where did you get started on this idea, right? And there's usually one founder at least who came from the real estate side.

And, but invariably, this is one of the challenges that even to finding the talent, because you might have the founders have maybe both sides of the coin tech and the real estate experience, but it's really difficult to find that in like putting people on the bus in the right seats to execute the vision, you know, if they're lacking that context or ability to pick up that context. I'm curious from your perspective, and maybe that's, you know, some things that you've heard from...

your portfolio companies, do you think talent is recognizing the opportunity that is PropTech and it's gotten mainstream enough to where, you know, we're only going to continue seeing an acceleration of innovation or are we just still going to kind of suffer from getting second hands on talent to execute visions in PropTech?

Gavin Myers (13:04.862)
No, talents. I mean, I think that the talent across the PropTech ecosystem is fantastic. And there's some very talented people that either have or don't have conventional real estate experience. I think we have both setups, and both can work. There are industries. We have a company called Salus, which is a vertical SaaS platform for managing safety on site in construction locations.

Nate Smoyer (13:21.472)

Gavin Myers (13:33.218)
This was just an acute pain point felt by the founder, Gabe Guetta, who came from the construction sector and who lived with the compliance, the requirements, the 2020 hindsight after an event occurs, what was done in the days and weeks leading up to that event. Can they piece together the historical narrative for insurance claims from pen and paper that's sitting in folders and boxes in the trailer?

And it was really hard and really scary versus this automated, on-demand platform that they can search and keep digital records with and provide transparency throughout the organization to the HR departments, to the legal departments, to the insurance departments in real time with full visibility. And so it took someone like Gabe to see that unique problem and to know how ubiquitous that was across not just actually in their case, the construction sector, the general manufacturing sector as well.

Nate Smoyer (14:29.217)

Gavin Myers (14:29.882)
And so that's an example where somebody lived the experience firsthand. We have another early stage company called Propexo and the founders don't come from the real estate sector. In fact, they, you know, worked at HubSpot and were product managers at HubSpot. And they understood the benefit of open platforms. HubSpot is a great CRM and they're notably a very active app store where you can plug in any.

Nate Smoyer (14:37.887)

Gavin Myers (14:58.178)
best-in-class application to that core CRM product and enhance the capabilities for products or applications that HubSpot doesn't build themselves. In the case of the Perpexo team, they were actually trying to build, this is years ago, a rent payment platform for accepting digital payments, but couldn't get past the fact that you needed to integrate with every PMS, Property Management System, the RDS and real pages and MRIs of the world.

Nate Smoyer (15:08.779)

Nate Smoyer (15:19.539)
Yeah, I remember.

Gavin Myers (15:27.55)
And so their first principles approach to solving this was, wait, we just should build a unified API, for instance, integration with the PMSs and actually solve what is an actual pain point for technology that in of itself is not differentiated. Like if you're celebrating that you've built an integration with Yardi, like that's not, you know, that's not, that doesn't get you points in the like venture capitalist checklist of technical innovation. It's important, but it's not differentiated. And so.

Why commit venture capital dollars, engineering resources, to building something that you could literally pay somebody else to automate and be online in days versus months? And so that's a good example of they have no experience, but they could take a fresh perspective and say, wait, the technology stack in other industry sectors makes more sense and doesn't exist here. There's no middle layer in real estate, in commercial real estate.

And so let's be that middle layer. And we were very attracted to that because for years, we'd been meeting with point applications, point solutions for the commercial real estate sector that it's like, well, yeah, we got a really successful pilot with you name it, X, Y, or Z. And we'll be rolling out nationwide over the next two and a half years. But they run eight different PMSs from acquisitions over the years. And

Nate Smoyer (16:28.32)

Gavin Myers (16:51.15)
just takes a lot of capital and engineering resources to get up to speed. And we just kept hearing that over and over again. And so when we met the team from Perpexo, formerly known as Propify, if I mistakenly call them Propify, it just was an acute pain point that we knew was a problem, that they knew was a problem, and they came about it not as industry insiders.

Nate Smoyer (16:59.019)

Nate Smoyer (17:14.975)
That's good. I mean, sometimes the outside perspective certainly can help. I mean, you're, you're not wrong though. I mean, from the inside, everyone has said the same thing, especially when it comes to commercial real estate and integrating with the legacy PMS is like that's the barrier to growth for every new tool. And you're either looked at as a competitor or you're looked at as a risk to those ecosystems and so then it's really difficult to do those direct integrations, you know, and you can set up, leave it on the customer side to do things like, you know,

Zapier or web hooks, but then you're relying on the customer to be technically savvy to do those things. Whereas, you know, this is a great example of like a plug and play model where you're really solving the pain points to get to the thing that someone wants. It sounds like, and I haven't seen it, the products up, but I've been seeing the name pop up more and more. So good on them. I don't want to.

Gavin Myers (18:06.362)
So some of your guests have been customers and it's great for them, right? I mean, I view it as core infrastructure for the PropTech sector, similar to how, again, in like the late 90s, every startup had to have their own enterprise servers, right? They had to host their own websites, right? Before you had cloud computing, right? That was just an added cost to being a startup. This is yet another solution that you can provision on a month to month basis at a fraction of...

Nate Smoyer (18:23.005)

Gavin Myers (18:34.99)
cost that helps you scale up and put your dollars towards more productive uses like your core product. So I think it's a huge net positive infrastructure component to the PropTech sector. I'm really, really grateful that it exists.

Nate Smoyer (18:50.047)
Very cool. I wanna shift a little bit and talk specifics on fund three. Break it down. Talk to me about what this fund is, what its focus is on. And I'm even curious if you can talk about the type of investors that are coming to you with this confidence and believe in this vision.

Gavin Myers (19:09.678)
Sure. So we were announcing fund three, which is for us, it's actually our second institutional fund. Our first fund was all funded by a single family. So it's our second institutional fund. And really, we raised it pretty close on the back of our fund too, which was a $65 million fund with 10 companies. And then we just closed fund three, which is an $80 million fund. So we were happy to increase the fund size and really

Fund three is a continuation of what we've been doing in all of our history of prudence, which is finding early stage companies really seed to series B, though our sweet spot is, you know, predominantly series A. We do some seeds and then even fewer series Bs is how it generally breaks down. We lead investments or co-lead investments. We have always taken a more concentrated view.

And by that, I mean, Fund 2 had 10 portfolio companies. Fund 3 will have 10 to 12 companies. So we raise what we need to execute our strategy, which is to find the two to four best investable opportunities every year, and then really have the bandwidth to support our companies, both post-closing with their initial company build and go to market, as they go from kind of

generally seed stage to series A stage, which is a heavy lift, if you've been through that. It's a very heavy lift to make that turn.

Nate Smoyer (20:40.439)
It sounds like you guys really are like concentrate, like those investments are, they're bigger investments. Like you're not looking to spray and pray across a whole bunch of, you know, earlier stage, which seems to be over the years, that's become a little bit more of the popular strategy, right? Invest earlier stage, smaller check sizes, reduced risk, but obviously like upside down the line increases. But here it sounds like you're willing to pony up, but you're really only looking for what kind of fits in that buy box and is best of class.

Gavin Myers (21:09.87)
I think, yes, and I think that's absolutely right. And I think it all depends on your view on how you de-risk. Our view on how you de-risk is that you invest in your highest conviction ideas that you can most properly vet for pain points that are the most acute, for the solutions that are the most loved, right? So you end up with products that are built in the hands of customers. You can measure customer engagement.

and ultimately the criticality of the product to the end user, and thus their willingness to pay and to stay. As a consequence, you can start to build out the early stages of figuring out what that company's go to market looks like as they have more capital to invest in that, hopefully based on identifiable metrics that they've achieved from the minimal seed and pre-seed dollars that they've raised.

And those have a early growth case, such that the companies we invest in go through a nice period of hyper growth after we invest, but are doing so with confidence that they've actually answered a lot of important questions. That is hard to find. That is really hard to find. And so you have to have that as your intentional goal and keep the bar incredibly high to make those two to four investments per year. And so we de-risk by finding what is exactly

the type of company, exactly the size of the opportunity, the mentality of the founder. If we can find all of that, then we wanna actually own as much of that as we can and reserve capital to continue investing in that company. And what we found is that our founders really appreciate that approach. We have the time for them, we have the mental bandwidth to be that first call and to help them through tricky questions they're trying to answer.

And I think that has paid off. I mean, one of the things we're really proud of is the number of art, the founders that we've backed in the past that are actually investors in our fund now, which was the second part of your question, which is who's in your fund? And I think this is really important to emphasize. The PropTech sector has evolved quite a bit over the last eight years, from the days where it actually didn't have a name called PropTech.

Gavin Myers (23:26.722)
movers in the category, you know, aggregated a lot of venture capital dollars and really had this view of kind of like corporate venture capital, where you're outsourced corporate venture capital arm, and we're going to aggregate as much capital from the industry. And, you know, we're going to use that to help learn and to, you know, test companies during our due diligence. And I look, I think there's

There's a lot of logic to that. And I think that they're in a category, again, the largest global contributor to GDP. There's room for multiple different approaches. Ours is a bit different. I mean, we take a technical lens through this. And so our investor base is predominantly institutional investors that are solely returns seeking investors. They want us to invest in the highest invest potential returning opportunities with the most differentiated, defensible technology companies that we can find and underwrite.

Nate Smoyer (23:51.222)

Gavin Myers (24:19.202)
We do have a handful of strategic investors as well, and they're fantastic to work with. But what we want is the prudence, if we do our job right here, we want when prudence invest for it to be a strong signal to generalist investors that this is a great technology company. And so we try to keep the bar as high as we can.

And we are investing because we think this is a great company that will be appealing to a wide swath of investors. Because ultimately for our sector to be successful, we have to be able to attract capital from other sectors. It can't just be PropTech only. And that's important. I think it's great when PropTech investors invest early. I think it shows an innate understanding of the pain point and the efficacy of the solution.

Nate Smoyer (24:53.056)

Nate Smoyer (25:03.02)

Gavin Myers (25:16.018)
But for something to be venture scale in returns, there has to be a degree of a generalized capital efficient technology based solution for it to be really kind of industry transforming.

Nate Smoyer (25:28.001)

Nate Smoyer (25:31.211)
People still use the term crossing the chasm because that's what comes to mind here. It's like.

Gavin Myers (25:35.906)
Yeah, for sure.

Nate Smoyer (25:40.472)
We're going a little old school here, but I mean, honestly, it's kind of, it's a, it's a, to me, it's an illustration. I think about still quite a bit. I mean, you have your early adopters who love the novelty or the idea of something. And the more that business demonstrates signs of life, the more, especially if it's consumer facing and becomes more mainstream beyond just early adopters. But for

people who now recognize a category. Like, I mean, there was no category for iBuyers. The only buyers that anyone interacted with that were similar to iBuyers prior to, you know, OfferPad and Open Door was the occasional realtor who said, I'll sell your home. And if not, I'll buy it in 120 days, which was, that used to be a pretty compelling offer. Or wholesalers. Right?

Gavin Myers (26:31.682)
Oh yeah.

Nate Smoyer (26:33.663)
Those are the only two people who said, well, buy your house as is, don't change a thing, right? And now we have a whole category and it's like crossed so many chasms to where it's recognized to the general consumer and anyone can invest in it. It's gone the full gamut. And of course it's a long and arduous path and some have taken easier routes I think than others. I don't think the high buyer route is by any means an easy route of a business. But it certainly seems like

Gavin Myers (27:02.618)
Yeah, I find it's a tough business. There's no question about that. That's, we spent a lot of time on it because as you can imagine, if you're in the sector, everyone's saying like, well, what's your take and what's your angle and what's your situation going to be in the iBuyers sector and respectively, it was just not for us, but for a variety of reasons. But it's like, I'm glad it exists. I think it's innovation was hugely important.

Nate Smoyer (27:20.715)

Gavin Myers (27:29.562)
And I think there's a segment of the economy that the convenience and the speed and certainty is worth it. Now, for most people, it won't be unless you can show that you don't have to take a discount. For most people, and this is probably the problem. And again, we're not like experts on residential. We spend more of our time on more technical challenges across commercial and construction. But I will say this. I mean, I think that there

Nate Smoyer (27:52.311)

Gavin Myers (27:55.842)
for most people, and this is probably the blind spot that the venture capital industry brings to the residential ecosystem. They kind of want to lambast realtors and say, they don't do anything, I could do it myself. And you always kind of want to put your hand on both their shoulders and say, yes, but for most people, the value of their home is their most important asset to you. It might be basis points of your net worth, but for them.

Nate Smoyer (28:20.727)

Gavin Myers (28:21.566)
It's like, it could be 80 to 90% of their net worth and they don't want to screw it up and they don't do it a lot. And how you market a property matters, how you create that kind of competition. And quite frankly, buying the house that's right is important too, right? Cause then you're taking on a massive amount of debt. You could probably quarrel with the amount that agents are paid. I mean, I don't, I don't think that that's sustainable. And I think market forces are starting to drive that down. Actually, when you really look at it, everyone says it's 6%. It's actually closer to five.

Nate Smoyer (28:27.092)
Yeah, yeah, yeah.

Gavin Myers (28:52.311)
And the more valuable the home, the lower the fee is. So there's actually like, there's some market forces at play here, which probably don't get the airtime that they deserve, but.

Nate Smoyer (28:56.395)
Typically, yeah.

Nate Smoyer (29:03.824)
You know that's not how media works, right?

Nate Smoyer (29:08.895)
Let's just be honest about that. We're not here to tell the truth here, Gavin. It's just, you know, I got to run with the headline. I have two more questions I want to get to before we got to move down to the bottom of the show. So with the new fund, you guys are putting a little bit of emphasis into, or at least looking to the AI and construction tech kind of combination. Can you talk a little bit about why that's catching your eye and what you see as the opportunity here?

Gavin Myers (29:09.214)
Yeah. Yes.

Gavin Myers (29:14.677)

Gavin Myers (29:35.758)
Sure. That'll lose you, Nate.

Okay. Yeah, absolutely. So we've been actually Compass rolled out, and I'll just detour. First, Compass rolled out its first AI product about five years ago. And we were actually deeply involved with them in that because we were looking at a company that had a similar capability. We brought them in with the company's knowledge into the due diligence. And so the idea of taking these

massive sets of what were previously unstructured data and trying to derive insights from them is something we've been working on for a long time. And we actually have a company in Europe called Casafari and our fund too that I'd love to talk about at some point, but specifically with construction, construction and AI are, we have found at least in this one instance where we've made an investment recently, an incredible product market fit. And I think in this era, people are thinking a lot about

generative AI and can it do the job of a human? But I think in real estate, particularly in construction, computer vision is the most obvious application, which is what can be seen from the photos across the widest possible surface area that can give you instant real-time feedback that can inform decisions and provide information across a set of constituents in a construction project, which is a very complex ecosystem.

Nate Smoyer (31:07.452)

Gavin Myers (31:07.726)
And it gets more complex, the larger the ecosystem. So we actually invested in a company. We led the series A for AI clearing. It's the company's headquartered in, in Austin, but all of its like technical capabilities and even the founders spend most of their time in Warsaw, Poland, which is interestingly like one of like the hotbeds of AI engineers coming into the Warsaw Institute of Technology. Yeah.

Nate Smoyer (31:31.26)
Oh really?

Gavin Myers (31:33.642)
Yeah, Google has 3,000 engineers in Warsaw. We just actually were in Warsaw three weeks ago, and Google has 3,000 engineers there. The OpenAI, like 40% of the original engineering team, it was all out of Warsaw. It's really impressive. It's worth a visit. But what they were experiencing was the inability of drone data taken over large infrastructure construction sites.

to provide an accurate assessment of the quality of the work completed and to track the progress. And as you can imagine with infrastructure, think roads, railways, bridges, utility scale solar, large LNG terminals, you're talking about a massive amount of surface area that is nearly impossible for an individual to walk, take pictures and take note of, is everything on time and it has everything been built right?

It's a great application for computer vision. And most of the large general contractors are flying drones, which the drones collect images in this context that are called cloud points. But how do you then connect the dots between what is being seen, what was supposed to be built, and has it been built accurately and on time? And that is a massive identification of imagery, as well as a reconciliation of original plans and timelines. And that is something that a computer

But if you had to have a human being overlay some processing to that would take weeks. So it's artificial intelligence because it's the work that a human theoretically might be able to do over a very long time, but you can have it at a fraction of the cost and in real time. And what's impressive about this company, A clearing this, that they've got an adoption by four of the top 20 general contractors globally. And these are firms like Bechtel, Vinci, Larsen Tubro and PCL. The end markets that they're serving are

quite diverse, but their largest end market is actually utility scale solar, which is going through, as I'm sure you're aware, some massive growth as companies are viewing it as an alternative to coal in most cases. Actually, the global installed base of utility scale solar exceeded coal last year. It's like 21% of global industry energy generation.

Nate Smoyer (33:50.963)

Nate Smoyer (33:54.559)
Very cool.

Gavin Myers (33:55.018)
So I think what was particularly interesting about this company though, is the customers loved the product, right? And so I think you'd come at this perhaps with a view, I don't know, general contractors that are old school, do they really want to adopt technology? They want to solve pain points. They care less that it's AI and more that it works. And that it is a massive improvement from what they were doing before. If you were the head of quality,

on a utility scale solar project, covering five square miles with a million different components getting installed that had to all be installed correctly. And somebody said, what's the status? And you said, I'll get back to you in three weeks. That's not a good place to be. And so the fact that they can have a real time view into what's being built is quite impressive. And it speaks to why they've been adopted across so many major projects across the world.

Nate Smoyer (34:53.491)
The tactical takeaway here for founders listening to this is make sure your marketers, uh, are copywriting towards the problem and not, uh, just focusing on the feature of the tech first. I think that sometimes we see that the challenge, uh, is to not just talk about what your technology is, unless that really is the attracting or driving force. But what I hear is that they care about getting the job done, articulating the problem and highlighting the solution, which it sounds like.

They have really developed something really interesting and cutting edge. I've got one more question here for you directly to the fund for. For the founders that are listening, uh, you know, some of them might be seed stage earlier than that. Maybe they're at a, which kind of still within the, that buy box you've identified. What do they need to do to get on your radar, to get a pitch in front of you, show you what they're working on to try and get your attention to take a look at their businesses for potential investment.

Gavin Myers (35:37.654)

Gavin Myers (35:49.714)
Yeah, just reach out. We have a vast ingestion engine. We are tracking over 300 companies for a follow-up. At any point in time, I think our CRM has thousands of companies we've met with in the past. Send us your information. Really lay out what is the pain point you are solving. To the point you just made, Nate, this is so important.

Nate Smoyer (36:05.779)

Gavin Myers (36:19.266)
We are always fixated on the acuteness of the pain point and the quality of the solution, such that you have very, very happy customers. That's a great place to start. And we like to understand that. We like to understand technical differentiation. We understand the defensibility, traction, customer reference ability. So just lay it out. But email us. We review everything. We have twice weekly.

Nate Smoyer (36:23.799)

Gavin Myers (36:46.006)
pipeline calls, we, you know, if a company is just a little bit too early, we know we are known for giving very detailed feedback to why we are not a pass, but a wait and what we're looking for. AI clearing is a good example of the company we met during their seed round. In fact, actually, we should do a little bit of analysis, but so many of our companies we passed after initially meeting them, but stayed in touch with them and invested later. And by later, I mean like we passed in the seed, invested in the A, passed on the A, invested in the B. So

Nate Smoyer (37:14.187)
Very cool.

Gavin Myers (37:16.199)
My email is Gavin at prudence.vc. Don't be shy.

Nate Smoyer (37:19.735)
Of course, we'll be able to give that to people in the notes here. We're gonna move down to the bottom of the show. Last four questions I like to call for the future. This is when I get to ask each guest who comes on the show to give their best predictions based on the following four questions. Gavin, are you ready to play? All right, let's do it. Number one, what does Prudence look like one year from now?

Gavin Myers (37:34.796)
Let's play.

Gavin Myers (37:43.15)
I'm gonna take a variation of the question and answer it this way. What does Prudence look like one fund from now? Because we work in kind of fund increments. And so we are going to continue to invest in our people and our processes. We have our own developed tech stack. We think as investors in technology, we have to be high volume users of technology. So we'll continue to invest in our tech stack and our unique data capabilities.

Nate Smoyer (37:52.171)

Gavin Myers (38:12.854)
You know, for us, it's actually pretty simple. We're going to keep doing what we always do. We try to make one good investment at a time. We try to be very thoughtful with what we invest in the kind of people we work with, the types of founders. We have a type of founder that we really like, you know, the true believers. And we're going to keep doing that and spending our time and energy working with our companies as much as we can. And we're going to be able to do that because we just try to be as focused as possible.

And that means fewer investments, more concentrated ownership, more time with our companies. And I think if we just keep doing that year in, year out, we'll be in a good place.

Nate Smoyer (38:53.427)
Number two, will VC investment be up or down this year compared to last in reference to PropTech?

Gavin Myers (39:01.114)
Oh, no question. We're past the hard part. I mean, now that there's like a somewhat of a sigh of relief that the Fed is not only done raising rates, but they're going to start lowering them over the course of this year. Who knows when, probably May, but it's like if you've survived this hard part, you've done well as a founder. I think the VCs that might've slowed down their pace of investing for fear of A, how would their...

existing companies perform and B, they wanted to kind of put off having to go back to market to raise capital. I think they'll start to see that, you know, there's a little bit of a lightning. It doesn't mean we're out of the woods, so to speak, as a category. Like I think we have to put up great returns or, you know, the sector shouldn't exist. But but this year we'll see more activity. No, no question.

Nate Smoyer (39:34.932)

Nate Smoyer (39:50.959)
Number three here on For the Future, what's one industry trend do you think will continue but you wish would go away?

Gavin Myers (40:01.61)
I don't know, go away is, I don't know that I think there's certain parts of PropTech that probably are over capitalized. And look, I am a believer in climate based technologies. I'm just not sure that all the capital that has been formed to invest is going to find enough investable opportunities. I hope I'm wrong.

But that, I mean, I think when you look at climate change, you think about energy transition. Energy transition is massive. These are actually industrial-based solutions. And so we'll be investing in technologies that solve for efficiencies that face the sector that AI clearance in. So massive amounts of infrastructure investment.

industrial scale infrastructure investment is probably not itself a category for lots of venture capital dollars. That's going to be lots of infrastructure fund dollars. And so, yeah, we're going to try to find those solutions, but I'm just not sure that it's enough of a category to support all the capital that's been formed for it.

Nate Smoyer (41:20.819)
And the last one here, what's one thing you believe will dramatically change or fade away in real estate as a result of tech advances?

Gavin Myers (41:31.682)
So I think the complexity of getting a mortgage is going to be something that's really different. We have a company called Maxwell. If you've never checked them out, they're actually one of the biggest, best, quietest companies that are out there. Maxwell has taken the entire process of manufacturing a mortgage and digitized it from start to end. That's.

loan application, processing, underwriting, closing, and then secondary market syndication, which is where all conforming mortgages go. Because it was such a human capital intensive process, it was super expensive. The cost of manufacturing a mortgage before Maxwell $16,000 is more than Toyota Corolla, right? To manufacture a mortgage, you can manufacture a mortgage. And so, you know, this is inherently the digital information flowing through processes

Nate Smoyer (42:17.18)
That's more than any car anymore.

Gavin Myers (42:26.326)
will probably be augmented by artificial intelligence with perhaps a human in the loop. But the cost of manufacturing a mortgage is gonna drop like literally like tenfold. Like I think it should be like 1500 to $2,000. And so I think within that comes out the timing, the uncertainty, the complexity. And that's something that I think absolutely will change and change for the better.

Nate Smoyer (42:49.631)
Very cool. Gavin, this was a lot of fun. I feel like we got to go a little bit deeper into some of the philosophy and thoughts behind VC funding into PropTech. Congrats on Fund 3. Before we close out, for those who want to get in touch with you or learn more about Prudence, where do they go and how do they do that?

Gavin Myers (43:07.491)
please reach out Ahmed Gavin at prudence.vc.

Nate Smoyer (43:12.091)
Easy enough. Of course, we'll put links in the show notes. You can always find those at tech nest.io. Hopefully we'll get a chance to see you around until then. We'll talk to you later.

Gavin Myers (43:22.57)
Nate, it was great to see you. Thanks so much for having me. Really appreciate it.