ReSeed Partners Brings Venture Capital to Up-and-Coming Real Estate Investors

David Bergeron of ReSeed Partners - Podcast Transcript

Healy:	Hey, this is Healy Jones, VP of Financial Strategy here at Kruze Consulting, andI want to say thanks to our podcast sponsor, ARC. At Kruze, we’ve got a number of clients successfully using ARC to manage their deposits, payments, access financing, all in one place. One of the things that ARC provides that’s really great is over a quarter of a million dollars in FDIC coverage. Their insurance program goes beyond the standard limit and it secures up to five and a quarter million dollars. So, startups that have even more cash than that can go and access treasury solutions to provide yield and safety. If you’re a startup looking for a secure financial solution that can help you scale, please check out our sponsor ARC at ARC.tech.
Singer:	(Singing) So when your troubles are mounting in tax or accounting, you go to Kruze, From Founders and Friends. It’s Kruze Consulting. Founders and Friends with your host, Scotty Orn.
Scott:	Welcome to Founders and Friends podcast with Scott Orn at Kruze Consulting, and today my very special guest is David Bergeron of ReSeed Partners. Welcome, David.
David:	Thanks for having me, Scott.
Scott:	This is I think our second or third time being on the podcast, which is very exciting. You left a high bar the first time you were on it where everyone thought you were incredibly funny and charming, and I actually had a hard time getting guests for a week or so after that because you set the bar too high. But great to talk to you again, and the super cool thing is you’re onto something new, so maybe just retrace your career a little bit and then tell us about the new project.
David:	Well, thanks for having me on again, Scott. Again, I think it’s very kind and generous of you to describe the bar I set. Fortunately, I think I was guest number five, so there was-
Scott:	Yeah, yeah.
David:	I think you’re up to hundreds and hundreds of guests now, so I think people have certainly flown down that bar.
Scott:	You launched me, you got me on that trajectory. You got it going.
David:	Yeah, so you’ve reached much higher heights since. But yeah, I think this is the third time I’ve been on with you, which has been wonderful. Obviously, we have a history through your days back in Venture Debt and working with my wife at her startup and supporting me and my days at T3, and I think that brings me to a little bit of the journey that we’ve been on to get here today, which is awesome and I’m excited to share more about with you.
Scott:	So T3 was a… How would you describe T3 and then how does the new project ReSeed fit in?
David:	Yeah, T3 was a pretty basic business from the perspective of it was all anchored in supporting the same ecosystem that you guys work in. So, Venture-backed technology and life science companies, we wanted to be their outsourced real estate department for all the important decisions they had to make as their companies progressed. And we tried to do that in a very data-driven way. We tried to be very deep and understanding the industries that each of our clients were in, so getting to understand the people on the boards and the VCs, understanding the bankers and the accountants, understanding the attorneys, and really trying to pull those pieces together with the lens of real estate and office space most notably, to help promote the success and ultimate opportunities these companies had as it pertains to their people. And so, the realestate historically has been a big driver and advocate and supporter of finding and retaining great talent, which as most board members and VCs will tell you is critical to the success of any high growth technology or life science company. And so we wanted to be an important player in that, and someone that could really help scale these businesses on the people side and used real estate as the avenue to make that happen.
Scott:	You guys had a ton of data. You were like before your time on that too. I remember you had these killer reports and I remember you told me, I asked you for some demographic, it might’ve been around accountants or engineers, and you’re like, “Oh, Salt Lake City, somewhere in Idaho, and three other metros are where you would want to locate an office.” And I was like… “And here’s the data,” and I was like, “Oh my God, that’s amazing. That’s really cool.”
David:	There’s a lot to that, and to your point, I think a lot of companies have done a great job of aggregating and pulling those reports together in a really digestible way now, so most companies have access to this. But 15, 20 years ago when we were first getting started on some of these trends and trying to track some of these things, a lot of that was relatively cutting edge. And I think it gave real advantage to our clients in terms of using that data to hopefully drive more informed decisions around why you should choose Salt Lake City versus Boise, Idaho versus Nashville, Tennessee. And I think that led to some great outcomes for those clients.
Scott:	Yeah. So, then the new project is… I got the pitch last week, so that’s why I wanted to have you on, but maybe tell the audience what you’re working on.
David:	Yeah, it’s super exciting. So, after spending the bulk of my career in real estate brokerage and consulting, we’d sold that business to a wonderful company based out of London called Savills. And we sold that company in the summer of ‘21, sold T3, and I spent the next 18 months at Savills helping us transition into a much larger organization. Savills is a publicly traded company, 40,000 plus employees globally, and been around for 160 plus years. So very different than the T3 that we developed that was much newer and much more specifically focused. And so the marriage was great. We got the scale and the opportunity to get more resources and the availability of some incredible people and partners we could work with. I think they got a team of folks that had deep experience in a very niche focus that they didn’t have as much experience, which was tech and life sciences. So, I think that marriage made a lot of sense at the time. But again, likeany entrepreneur or someone that, I think, desires continuing to find ways to be impactful and change, I, about 18 months in, decided, okay, I want to go do something else. I want to go back to building. And I think like a lot of folks that listen to your podcast or a part of your network, one of the things that’s been so incredible about being a part of this ecosystem is you just meet and interact with incredible humans. And I think one of the things that I thought about was who are those humans that I’ve met with and interacted with and had the opportunity to sort of witness their superpowers in action? And which subset of those people do I think I could work well with and would like to work with and respect, not just as an amazing entrepreneur or investor, but respect as a person, as a friend, as a father, as a mother?I mean, I think there’s so many sides to these partnerships and co-founding teams that you really want to be thoughtful about. So, I want to take a really holistic view and approach to finding the right people on the right team. And so, I reached out to the person who was essentially first on the list for me, a guy named Rhett Bennett, and Rhett comes from the allocator world. He was the Chief Investment Officer of hedge funds and family offices and has a very different path than I did. He’s much, much smarter than I am, which is also key. Always got to find people that can outpace you in all the ways that you can’t. And so, I think that was really important. And I got to know Rhett through a common friend of ours who was actually his old roommate at Brown, a guy named Jesse Wood. Jesse and I worked together actually at some point as well. And just, again, developed a deep, deep level of respect for him. And so, when I reached out and said, “Hey, I’m thinking about doing something new, I’d love to bounce some stuff off you and just have a conversation.” And the timing just happened to work up really well. He also had been thinking about doing something new, had this wonderful idea that ultimately became ReSeed. And as he started to describe it to me and talk about the potential and the purpose of the company, and I think the impact and the change it could have on communities and people and folks that don’t come from exceptional wealth or a great background or hit the genetic lottery out of the gate, that they too can be really successful in real estate as a real estate investor. And so I think from a mission perspective, from a team and people perspective and from a growth perspective for me, it was the perfect fit. And so I jumped on board and about plus or minus six months later, we launched publicly with a founding team of five people and we’ve been off to the races ever since.
Scott:	That’s so cool. Yeah, because when we were talking last week, it’s like if you get into real estate, a lot of times you need money to buy your first property or you need to know people who can give you money to buy your first or first many properties. And so, there’s this barrier there to being able to play in the ecosystem. And so, it sounds like what you’re doing is opening it up for a lot of people, which is really cool.
David:	Yeah, no, it’s a huge and very real hurdle that you can be exceptionally capable, have all the right experiences, understand the financial side of real estate investing, and have even wonderful connections and deal flow. But if you don’t have capital, it becomes really hard. And like most entrepreneurs or founders in a variety of industries, people are happy to give you money once you have a track record. You can say, “Oh yeah, no, here are my last three deals and here’s why they work, and here’s why you should give me a bunch of money.” Except how do you get those first two or three deals done? And that’s that gap that I think washes a lot of exceptionally capable and would be successful people out of the game too early. And we thought that was silly. That shouldn’t happen, it doesn’t need to happen, and there’s a way to build a better platform and model that enabled those great people to reach their capabilities.
Scott:	Yeah. And so maybe talk about how you’re doing that because a pretty creative idea.
David:	Yeah. We’ve tried to take the best ofs, if you will, from a lot of businesses that we’ve witnessed and seen be successful before. And real estate is obviously not a new asset class. It’s been around since the beginning of time as one of the original economy items. It continues to be the largest investment class in the world in terms of available market. And what we saw was we could take and learn from a combination of businesses, the first being I think Y Combinator, obviously something that you and I are very familiar with. Exceptionally successful. Paul Graham and the crew did a wonderful job building a generational changing type of company that’s produced some of the biggest, baddest tech companies around. And I think what we saw with that model was if you can build a community and a platform around both education and creating collaborative community and best practices and a sense of sharing culture, you can start to really change the outcome likelihood for some of these companies. And I think as e further research what YC did really well, it was just that. It was bringing people that had all the markers to be exceptional, but still needed support and needed a crew behind them to help enable and grease the skids and make the right connections and open the right doors and partner with the right co-founders to then build something that people didn’t think was possible before. And so we’ve sort of taken a page out of the Y Combinator model, we’ve taken also a page out of Vista Equities, has done a wonderful job of finding ways to centralize a lot of the things that may not be as mission-critical to top line revenue or building businesses, but if you can pull and centralize and consolidate a lot of the components of businesses and then standardize those, use scale to get better pricing, use the ability of a team that’s doing it, rinse and repeating over and over again… Not to do some of your guys’ business, you guys are excellent at what you do because you have somebody at bat.
Scott:	No, we’re the same way, totally the same way. And it works.
David:	Free those folks up to do the things that they’re exceptional at and not the things that are sort of mundane and take up time from the things that really add value to the business. And so we pull the page from that side and then tried to apply this to a world in which we think the best returns are possible, relative to real estate investing, which is not the big public REITs. And really when you get to the private equity world, the standard private equity world, there’s a lot of fees. Obviously that happened there. Some great returns there, but I think from our perspective, we found the most opportunity in the substitutional space. And so, for us to apply what we’ve described to the substitutional category, and for us, we define that as a five to 20 or 25 million dollar type of asset across the country. And we’re starting domestically. We have plans eventually to go internationally and think this model has a lot of legs to it over time.
Scott:	So the mechanics are, you find the next super bright real estate investor and then you coach them up and… Are they submitting funding requests to you? Or how do you… It’s a syndication model, right?
David:	Yeah. So, what we did is after we formulated the business model and got the team to really map out what we want to do and the order of operations to get there, we then had one of our partners and co-founders, who’s critical for what we built, a guy named Moses Kagan. Moses put out a tweet, and there’s a lot of negativity and challenges with social media. This is one of the very positives and bright spots I think, of the power and reach of social media. So Moses, just quick backstory on him. He spent almost a decade curating and leading the conversation on Twitter about what it takes to be a great real estate operator or real estate investor in a very public forum. And as a very brilliant person himself and someone who comes from a family and a background of education, he just loves to share. And this became part of his ethos and talking about the good, the bad, the ugly, the really hard stuff, the simple things, the little things that people overlook. And I think really started to develop a deep following and a real sense of empathy with a lot of folks out there around the way he thought about real estate investing. And so, he sort of put this out there that, “Hey, if you’ve been following me or if ever wanted to work with me, now’s your chance. Here’s this new company I’m launching called ReSeed, and here’s what we’re going to be doing. We’re accepting applications for operators to work with us, so please put your information here, subscribe, and we can process you through accordingly.” And so great story there is, we launched this thing on, I believe it was April 4th, and that same morning, one of our teammates all of a sudden wakes up in a bit of a panic thinking that our website’s being attacked. We’re like, okay, there’s bots attacking us and we need to put a recaption-
Scott:	So much traffic.
David:	Yeah. I mean it was like a brand-new company and we had no one go to our website before that, and all of a sudden now thousands were coming to it in a matter of hours. So, one of those moments you’ll never forget. And I think there’s always those little seminal memories that you’ll always keep when starting new businesses. That was certainly one of them. But what that ws is exactly as you described, people coming to us and wanting to participate. And it’s participate both as potential operators and GPs in their local markets and as investors. And so we had two landing pages. People could opt in for either and through that whole thing had over the course of a handful of weeks and months, we had thousands of people come on and fill out their information. We had hundreds, seven or 800 ultimately formally go through the application process with us to be operators on the ReSeed platform. And we narrowed that down after an incredible amount of due diligence and underwriting exercises and case study evaluations and local market tours and meeting the whole ecosystem around these operators to pick what ultimately was eight groups. And so, cohort one, which we formalized just in the last six weeks, is made up of eight incredible, very capable, really, really interesting folks that we think have a ton of upside.
Healy:	Hey, this is the VP of financial strategy at Kruze jumping in to thank our sponsor of this podcast, ARC. At Kruze, we have a number of clients who are successfully using ARC's FinTech tools to store deposits, manage payments, get financing, earn yield, all in one place. But another thing that’s important about ARC is that they have a heightened security and safety feature. Because they partner with globally recognized banks, they’re able to offer an FDIC coverage over $250,000. In fact, they offer up to $5,250,000 in FDIC coverage. And if you have more cash than that, they have treasury solutions that can provide yield and safety for even more money. So, if you’re looking for a comprehensive financial solution, they can help you scale. Check out ARC. Go to ARC.Tech. Thanks again to our sponsor ARC.
Scott:	It’s super cool you got the investor interest too because you are like a two-sided-
David:	That’s right.
Scott:	… marketplace, for lack of a better word, so getting that signal is pretty neat too. What was the criteria for trimming it down to those eight? Was it their stories are unbelievable or they have a track record or just, what’d you look for?
David:	It’s a great question. And it’s funny, we talked about how to go about this process once you have that kind of volume. And not just volume, but really incredible quality. And what we had to do was essentially spin up our own scorecarding and process around what essentially was running a college admissions department for-
Scott:	Yeah, I was thinking that actually.
David:	That’s really what you’re doing. You’re taking all these incredible people that all have worked hard and deserve to be there, and then now you need to narrow this list and send out a bunch of nos. And I think our acceptance rate ended up being just over 1%. So, it was a really, really high bar.
Scott:	Hard, yeah.
David:	And there were incredible, incredible people that will be very successful and we would’ve loved to have had a part of ReSeed cohort one, but again, we wanted to stay committed to our size and not overextend ourselves as a team. And so it was all the things that you would think about evaluating when… It’s background and experience. It’s what your strategy is and how you think about your market. It was coming up with how you thought about the type of product that you wanted to invest in and why there were either inherent and existing supply barriers to having other competition not spring up and dilute what you wanted to do, along with being considerate about the city and state you were in from a regulatory perspective and these things that you can’t control but will ultimately impact your business. So, we really tok a very broad approach to evaluating the variables. We decided pretty early on that while there were a bunch of cities that made sense to be in overtime, which we will be in, I think, as we have many, many cohorts after this. So, I think ultimately we’ll end up in most markets. But we really thought and put the priority of the person first, the entrepreneur, the GP. That was a thing that we wanted to major in, and then we wanted to minor in the market, and so-
Scott:	That’s smart.
David:	… we needed to be in markets that made sense for us to be doing this, but we weren’t going to let the tail wag the dog, relative to that. It’s again, like any good business I’ve been around or you’ve been around, it’s all about the people. And if you can get the right people in markets that have upside and capacity to do what we want to do in that market, that’s a home run fit for us. And so that’s a little bit of how we went about-
Scott:	Yeah, because their local expertise is probably going to provide most of the alpha or the value. I mean, how many deals can they do a year? Like a couple deals a year or… I don’t even know how it works.
David:	It’s hard to say. I mean, I think some of these folks will prove us to be wrong in some of the assumptions around two or three deals a year. Some will end up doing seven and they’ll all be amazing deals. I’m like, man, the floodgates have opened this market. This person has a crazy access to insights and availability and deals that all make sense in pencil. So yeah, keep them coming, right?
Scott:	Keep them going, yeah.
David:	Yeah, we hope for that to happen. But you’re right. I mean I think that if you think about it from a logical perspective, doing a couple, two or three deals a year, particularly to get started, I think we definitely view as a huge success for them.
Scott:	Yeah. Now, do you have, to borrow the Y Combinator analogy, demo day or how do you do this…? The whole process builds up to demo day and it’s enforcing function. Are you going to do something like that? Because I would love to go. I’d love to be like, “Oh my gosh, the Raleigh Durham person, what a great two buildings they just presented.” It seems like there could be a lot of energy around that.
David:	I think you’re absolutely right. And so, I guess to answer the question, we had a mini version of that, and I’ll describe what that is and I think down the road, I could see this continue to iterate change and be something more like you described. But what we did is we ended up having our launch week, and so after we had selected all the operators, finalized all the legal docs, we brought everyone together for an entire week. This was late summer, and we all flew into Boulder and we spent a bunch of time accomplishing a few things. One was just getting to know each other. I mean, back to so much of business and particularly real estate, it’s so personal, and developing rapport and trust and understanding of strengths and weaknesses and what gets the person motivated and what brings consternation or fear. And all these things I think were going to be really important to have a great partnership. So, we wanted to really develop that connection with the team and with the cohort members with each other thought. That was going to be really important too. So that was numer one. Number two was to talk about and make sure everyone understood really what we were looking for. And by we, I mean ReSeed’s investors are going to be looking for. And I can mention this ‘cause I think this is very important to our model. We think about the world a little differently when it comes to real estate investing. Most traditional real estate, private equity companies, which have done a great job of producing really big returns for a long time, are taking the bulk of their money from non-taxable investors. So endowments, institutions, what have you. And when you’re doing that, the return profile and the conversation around what makes a investment becomes a very IRR focused type of conversation. And what Moses has talked about for years and what Rhett’s always subscribed to, having run a big family office, and what all of us want to, I think, believe that we can have in our own lives is this sense of long-term ownership. And if you look at the 50 wealthiest families in America, it’s not by chance that they never sell real estate. They buy and they hold it forever. And there’s got to be something to that. If it was really fruitful and advantageous to be selling this stuff all the time, you have to imagine they would, but they’re not. And so I think pulling a page out of that book and saying, all right, how can we bring that type of approach, that type of investing sophistication down to a bunch of other folks that we aren’t in the top 50 wealthiest families? But man, I think there’s a lot to that. And if we can offer the opportunity of long-term hold, very cash focused, we think about the world and we think about deals from an unlevered yield on cost perspective. So, we want to eliminate the variables that can make this more challenging down the road in terms of the things we can’t control or can’t predict are going to be exactly what rents are in five years and exactly where interest rates are in five years. Those are two things that we’d be in a very different business if we could predict those two things. So trying to find ways to underwrite and make deals work in a way that don’t rely on that to pencil and don’t hope that appreciation hits and keep our fingers crossed that interest rates don’t spike another 3% in five years. That’s the way we wanted to build the business. And so we think that creates a lot of stability and a great foundation to then buy an asset, make some improvements, do whatever we’re going to do to restabilize it at whatever the run rate would be month over month, and then just buy it and hold it forever. And over time you can cash out, you can refi. Again, that’s all non-taxable income. And so, you can buy in that type of tax treatment with all the depreciation schedules and benefits that come from owning real estate. It just starts to become a really powerful tool as part of an investment portfolio that can really start to, I think, amass generational type wealth over time.
Scott:	Yeah, that’s amazing. I mean, I’ve worked my whole life, ‘cause I was a middle class kid without a ton of money, to just be able to own a house and start building up real estate. So, you’re totally right. I don’t ever want to sell real estate. I’d rather just hand it off to my daughter when I pass away.
David:	Yeah,.
Scott:	That is the way I think about it.
David:	I think that’s the right way to think about it. So, we’re trying to build that.
Scott:	Yeah, that’s really cool. Well, this is awesome. You built something cool. I love the Y Combinator analogy, too, ‘cause I can really visualize that and count me in for demo day when you get there. I love that. And maybe just everyone give them the website and tell them how they can work with you or reach out. And maybe you’re starting to already go for class number two. I don’t know, maybe you’re starting to take applications-
David:	Yeah, no. So, all of the above. So, we still are accepting applications for cohort number two. We are targeting that to launch or start running that process the first half of next year. So we don’t have a formal close date on that yet, but there’s again, a ton of great people, a lot of excitement, and just, again, there’s lots of learnings that we have from running through this now once. We’re going to be better and more efficient and faster. And so, I think there’s a lot of good things that continue to happen post first cohort, which we’re excited about too. The website is just reseedpartners.com and folks can go on there to check us out, both as potential operators or if you’re a GP and want to learn more and participate, we’d love to have… Go, fill in your name and email and we’ll be sure to get back to you. And then also, think the second side of this is, we’re going to be fundraising and we’re going to be running a syndicate process for investors to participate in these deals that these GPs that I’m talking about are going to go identify in their local markets. And having exposure to long-term hyper cash focused type of real estate in that substitutional category, which again, historically has the best return profile in real estate. If that’s of interest, folks, go on, fill out your name and email address that will put you in the system and make sure to reach out to you and have you as a part of our syndicate. And so, I think to have the ability to offer this hopefully to folks in a way that gives them exposure to this, which is again, I think hard to build on your own. It’s hard to find local operators in diverse markets-
Scott:	God yeah. You have to know somebody.
David:	… doing some institutional that you have rapport with and we will actually take your money. So these are all barriers on both sides, both for the operators-
Scott:	Also, it’s like a quality review level with you and your partners above that, which I really like. It’s the Paul Graham, Jessica Livingston thing.
David:	That’s right, that’s right.
Scott:	[inaudible 00:26:42] It’s really, really good.
David:	Yeah. Every deal. They underwrite as the operator and then we also underwrite at ReSeed. It’s got another set of eyes to make sure all the variables are spot on and we feel really good about it. So I think our hope is it creates a ton of optionality for investors. And so, if you imagine, if you fast-forward five years from now and we’ve had seven, eight, nine, 10 cohorts and we’ve got 75 or a hundred of these folks in market, in a variety of locations, all scouring for different asset classes. Right now we’re starting this first cohort, it’s all multifamily. But we’ll eventually do things like industrial and medical office and self storage. And you can imagine us having this entire platform and world that gives people the opportunity to participate in a variety of assets in a variety of markets with a variety of operators. And I think that’s something that doesn’t exist today.
Scott:	It’s a really good idea. I love it. Dave, thanks for coming on. Really appreciate it. Take care, and give my best to your wife too. Tell her I said hi.
David:	I will, Scott. It was great seeing you. Great to connect and yeah, we’ll chat soon again.
Scott:	All right buddy. Take care.
David:	Bye.
Singer:	(Singing) So when your troubles are mounting in tax or accounting, you go to Kruze. From Founders and Friends. It’s Kruze Consulting. Founders and Friends with your host, Scotty Orn.

ReSeed Partners Brings Venture Capital to Up-and-Coming Real Estate Investors

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