Jake Marmulstein 0:00
I would say that the big aha moment for groups is when they can put a deal out to investors. And each person has their own account, or they can log in. And you’ll see that the deal fills up pretty quickly with offers. And it’s something that happens automatically, because the people that invest can go in themselves see the deal and make an investment and choose the account that they want to use. But the traditional way would be that you’d have to sit by the phone or email and you’d be spending hours with your investors one on one, having calls and getting them in or out, figuring out the amounts that they would invest and booking that in your Excel spreadsheet.
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J Darrin Gross 1:05
Welcome to Commercial Real Estate Pro Networks CREPN Radio. Thanks for joining us. My name is J Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.
Today my guest is Jake Mermulstein. Before grant before founding his company Groundbreaker, Jake held a number of roles involving real estate and technology, supporting the growth of early stage digital technology ventures, while working with the government on foreign direct investment by Fortune 500 companies. In 2011, he started his career in real estate underwriting hotel investments for Watermark Capital Partners. He graduated from Cornell University with a major In Hospitality Management and minor in Real Estate. And at Groundbreaker Jake owns the company strategic vision and execution. He is responsible for sales, management of the departments and people leading them. And Jake also manages the company finances and capitalization as well as the board. And in just a minute, we’re going to speak with Jake about software automation, for real estate, fundraising, fundraising, and how it can be an asset to you. But first, a quick reminder, if you like our show, CREPN Radio, there are a couple things you can do to help us. You can like, share and subscribe. And as always, we encourage you to leave a comment we’d love to hear from our listeners. And also if you’d like to see our handsome our guests are, be sure to check out our YouTube channel. And you can find this on the YouTube at Commercial Real Estate Pro Network. And again, we we would love to have you consider subscribing to the channel. With that I want to welcome my guest, Jake, welcome to CREPN Radio.
Jake Marmulstein 3:13
Thanks so much, Darrin.
J Darrin Gross 3:15
Well, Jake, I am looking forward to our conversation today. But before we get started, if you could take just a minute and share a little bit more with your of your background with the listeners.
Jake Marmulstein 3:28
Yeah, absolutely. So I started really growing up in a restaurant family, went to school to learn Hospitality Management. And I got very interested in real estate investment and spent some time going and working in a few different countries and getting exposure to what’s out there in the world. And real estate was very fascinating to me. I got involved in investing in hotels. And when I was working in that, that field, I also had some experience in technology and was pretty pretty tech savvy just from being the default de facto nerd in the house to fix everything that was broken as I was growing up, so I looked at this problem the same way. You know, raising money and managing investors, using the current systems that we have available as investment management professionals, is is very manual and time consuming. And so I just thought there had to be a better way to do it. And then that seated the idea to form groundbreaker and we’ve been going six years in this business.
J Darrin Gross 4:52
Awesome. You mentioned your your background, or kind of, were you you saw or you were recognized the hurdles that real estate investors face when trying to raise capital. Can you elaborate a little bit on what it was that you saw that that the cumbersome challenges that you saw that there was a better way?
Jake Marmulstein 5:20
Sure. So I spent a lot of my time formatting PowerPoint presentations and printing them out and making sure that everything looked good. When you’re pitching to investors. You can’t have anything really stand out as an error formatting error, grammar, punctuation issue, or just the way that the information looks. It says a lot about your reputation and how well you’re going to possibly manage an asset, how detail oriented you are. So everything really reflects on on what you present to your investors. And so I wanted to find a better way to be able to package materials and present to investors, and I didn’t find any solutions that really could do that everyone relies on, you know, one to one email communication and phone calls.
But what we ended up doing was creating an online system so people can log in, see your deal. Its format into a beautiful looking online page where you have all the photos and documents and information you typically see in an offering memorandum. And then we take the friction out of the investment process so that it’s easier on the investor to be able to subscribe to a deal. And the solution that I run and groundbreaker automates a lot of the process that goes above and beyond why I was initially frustrated. But as you continue in real estate investing, the more investors you got, the more people you have to answer to and report to. And so on the servicing side, it gets cumbersome and quite complicated when it’s being managed an email and excel there’s A lot of ways to lose data and just have to resend things again. And that’s kind of just a high level overview, but I could definitely get into more details and specifics.
J Darrin Gross 7:16
Yeah, before we, before we go forward, I’d love to just go back a little bit. Now, were you directly involved with raising capital? You mentioned you’d invested in hotels, and I wasn’t exactly clear. Can you share a little bit about what was what your experience or your exposure was there?
Jake Marmulstein 7:36
Yeah, so we would get, we would get offer offerings from brokerage firms and different sources of deals that might meet our investment thesis. And then I would do all the underwriting and research to package the materials up for that deal. If it’s something that meant the back of the envelope calculations, which would hit our threshold for the returns. And then we would assess the risk and decide if we wanted to put something together. And I would be putting all the materials that would go in front of the Investment Committee. So I would sit on the Investment Committee calls, and, you know, get feedback from people. But before I even got on those calls, there was a long process of the due diligence, and the review of all the materials to make sure that it was appropriate to be able to share with Investment Committee. At in the actual capital raising, I was more administrative support and handling the stuff that we needed to do to get people subscribed. But I didn’t necessarily have to call investors directly during those times and, you know, get them to invest that was more than managing partner of the firm.
J Darrin Gross 8:40
Gotcha. And so you mentioned you were doing some administrative as far as the fundraising. So were you in charge of basically the tech that was facing the investors or was it primarily phone calls, emails or?
Jake Marmulstein 8:55
Yeah, a lot of it was just doing emails and sending information out and then using Excel to track that we had sent things. And we were waiting to get information back.
J Darrin Gross 9:09
Gotcha. Yeah. No, it’s amazing. And I’m really frustrated when I when I say this, but my dad was a banker and for years and years and years, I avoided online banking. Just because like it was something that was, you know, foolish kind of thing you needed to grind through, you know, the, balancing your checkbook as I was taught kind of thing. I mean, it was like, Holy moly, just to see that there was this it was effective. I mean, I could, I could balance my checkbook, but it was painful and I hated it. I put it off kind of thing, but just that, that recognizing there was an easier way and now switching to the online banking and it just all, you know, downloads and just to is your describing to, you know, the process that you were engaged in, because it kind of reminds me of the banking scenario of just, you know, you being tech savvy and and seeing whatever he’s going through with the emails and trying to track them in a spreadsheet and and i’m assuming that that you get a couple of iterations going and and possibly you can’t you know, distinguish one from the other kind of thing and, and maybe some redundancy kind of stuff when a lot of frustration that that compounds The situation was that my is any of that true or is that just me and the systems I create and recreate?
Jake Marmulstein 10:36
Now you’re you’re right, there’s a ton of redundancy. I mean, if you had to get access to what each investor invested across all of your deals, it would be really hard to find that because it’s logged in different spreadsheets in different folders. So just finding the deals is takes you time and then opening the store. spreadsheets. And then you’ve got to have one spreadsheet that links across all the different spreadsheets and gives you the data. And it just becomes very cumbersome. having to manually update things and know all the locations of all of your data as well. As you grow it, it just becomes more work and instead of the tool actually providing you efficiency, you’re kind of working for the tool to maintain it.
J Darrin Gross 11:29
Yeah, you are the tool, right?
Jake Marmulstein 11:30
J Darrin Gross 11:34
So let me ask you when when you set out to start Groundbreaker, it sounds like there’s obviously record keeping, you know, is kind of a broad, broad topic as far as all of the different moving parts, but is there any one of the many tasks that groundbreaker takes care of that you identified as the the primary, or was it all kind of like this a global, more of like, there’s got to be a better way?
Jake Marmulstein 12:02
The different workflows that we have feed into each other. But I would say that the big aha moment for groups is when they can put a deal out to investors. And each person has their own account where they can log in. And you’ll see that the deal fills up pretty quickly with offers. And it’s something that happens automatically, because the people that invest can go in themselves see the deal and make an investment and choose the account that they want to use. But the traditional way would be that you’d have to sit by the phone or email and you’d be spending hours with your investors one on one, having calls and getting them in or out, figuring out the amounts that they would invest and booking that in your Excel spreadsheet. And when somebody can just put a deal out say at you know 6:30 at the end of the day, and then they wake up the next morning have dinner with their family wake up the next morning it’s fully subscribed and waiting for wires to hit. That’s an amazing feeling.
J Darrin Gross 13:14
Yeah, certainly wouldn’t make somebody miss the, the anxiety producing waiting by the phone and, and or outbound calls, knowing you’re missing calls. All that kind of thing. That’s, that’s, that’s pretty cool. So, let’s, let’s, I guess, give some I don’t know some right word I’m saying but can you describe kind of what Groundbreaker what all it does, I mean, we’ve talked a little bit about the, the the ability to track deals and investors and stuff but, but if you were saying Darrin, here’s, here’s, here’s what it here’s who it’s for, and here’s how it works. This is what Give me your your, your kind of description there if you would.
Jake Marmulstein 14:05
Yeah, sure, Darrin. So, if you’re investing in real estate as a deal sponsor, and you need to raise outside equity. Then using Groundbreaker automates and streamlines many of the processes you’ll have to go through putting your deal together, getting it out to investors, and then raising the money and service. Our clientele are mainly small to medium sized real estate investment firms that have a core team of five to 10 people and, or they could just be one guy, you know, on his own doing deals and growing the business. And the common denominator is they all raise capital from investors and they usually have a handful of investors in each deal. like five to 10 investors in each deal, sometimes hundreds of investors in each deal. And the more investors you have, the more work you have to do for each individual. So looking at groundbreaker using our tools, you increase your capacity, from a one to one relationship to a one to many relationship among all of the workflows; fundraising, collecting subscription agreements, processing them, keeping the data organized, being able to upload reports and disseminate information to investors, writing emails, and being able to pay your investors. So previously, each of those tasks you’d have to do. With you doing one task for one investor? Now you can do the one task but you can affect all of your investors in that deal at the same time.
J Darrin Gross 15:57
Nope, sounds pretty compelling. Especially if anybody’s had any experience with just the manual task of doing all these things and trying to keep it straight and a lot of excitement when you’re raising capital and trying to get a deal closed. But if you are pulling your hair out, you know trying to keep up with it all and I’m assuming frustrating investors. You know, if somebody is excited to invest with you and they can’t get get hold of you are missing opportunities that probably doesn’t speak well. Or probably turns them off too. You know, like you mentioned earlier about your, your style or your ability to manage the the project or the investment. You mentioned in the beginning that that your primary task when you were working with the hotel investment company that doing a lot of the PowerPoint presentations does the Does the groundbreaker platform does it? Does it have basically some formatted presentations? Whether it be raising capital or the deal or the you know, when the investors log in? Are there certain things that are formatted to make it a whole lot easier for the user?
Jake Marmulstein 17:22
Yeah, it looks really professional. When you go to the login page, it has your brand and photo of your assets and the investor can log in. So there’s a nice place where they can go to from your website, kind of seamlessly bolts on. And then once they’re in, there’s a dashboard that they can see and it shows how much capital they’ve contributed and how much capital they’ve just gotten, gotten back in terms of distributions and their return multiple.
And then there’s a place in there where they can track their investments, and they see a photo of the investment, what they have in it and their ownership and they can see any distributions that they’ve gotten out. And for new deals, they could see the deal cards summarized on a page that just gives high level information on the minimum investment amount, the return structure and the amount that they’re raising. And there’s photos, so looks visually appealing, it’s organized and clean and the way that it looks. And then you can click on a deal and look at the detail and, you know, specifically evaluate the information on that deal. And it is formatted in a way that makes it easy for the deal sponsor to put together a presentation quickly in the same consistent format. They’re sections that they can use to personalize it in whatever way they want for their specific offering. And it’s going to come out the same every single time and it’s going to look look the same. So there’s a lot less work that has to be done on creating those deals and formatting them to look good. We’re we’re not necessarily a offering memorandum builder. You still need to know what you’re going to put in there. But we make the process easier by providing somewhat of a template and a structure that’s consistent every time.
J Darrin Gross 19:07
So you do have that branding look and feel so it’s people see it, they’ve seen it before they know it you. Let’s talk a little bit about security online and and as an insurance broker, I know that that’s, that’s a big, big issue. How do you address the online security issues?
Jake Marmulstein 19:32
Well, we take security very seriously because our solution handles personally identifiable information and we have to store that in order to provide service to our clients. There’s investor account information and Groundbreaker that is reused to be able to invest in deals, and we want to make sure that it’s secure from the outside and the inside. So we use sock One, two and three compliant data centers for storing all the information There’s passwords for investors. And there’s a backup two factor authentication where your phone gets a text message to determine it’s really you in order to get access, and that’s available for both sponsors and investors. And then there’s encryption practices when data is stored and when it’s sent. So it’s encrypted end to end. And then internally, we have certain processes to make sure that only certain people are accessing the data in our client base, and we can isolate isolate problems. So
J Darrin Gross 20:37
Nope, sounds like you’ve you stay on top of that. It’s crazy similar schemes that I’ve I’ve heard you know, and had clients fall prey to and they seem crazy. But yet, you know, there’s a there’s a way a lot of people have You know, gotten uber creative on the digital with the digital capabilities to where they can make something look and and you know people think it’s something they know and they click on and all of a sudden they’ve got problems so I’m sure that your investors and your deal sponsors can appreciate your commitment to security.
Jake Marmulstein 21:25
Yeah, I wanted to say that with that there’s a lot of wire fraud in the real estate investment space. So we have all of the instructions in the portal you have to be logged in to get access to them. There’s creative ways that sponsors have come up with to be able to verify an investor is looking at the right instructions, such as sending them a text message and making sure that you know when they’re about to wire they have the right instructions and verifying they are indeed you know, the person Looking at it, but our software actually takes all that out of the equation because you have the login and you have the two factor authentication and it’s not like it’s in an email that can easily be spoofed and changed where a lot of wire fraud does occur.
J Darrin Gross 22:18
Yeah, that’s exactly where I’ve seen it and heard and talked to people about it. You know, the the email spoof you know, somebody you get an email and in even, it used to be that it was like an email that looked like us from somebody, but if you held your mouse over the, the address, you’d see that it was, you know, some crazy email address. But even now, I think they’re, they’re hacking into your email, waiting for a communication that they recognize as an opportunity and then sending instructions from you or to you or you know, that that are Actually from your, your email, but the the instructions are, you know, bogus and people there’s a link and and, you know, people lost. I mean, I know one account was over a million bucks and you know somebody they had worked with regularly they knew them and they did the instructions because if a million was not like an you know, it was an ordinary amount for what they do and but it’s it’s crazy. S`o it’s yeah i think that’s that’s something that I would think that users whether it be the deal sponsor or the investors would be of most interest in just the security of it because it’s one thing to have all the marketing pretty stuff but the you know when you’re putting in your social security number in your accounts and dates of birth and and all that identifiable information You’re basically given the keys for somebody that has some, you know, bad, bad ideas to create a lot of havoc. So that’s good.
Jake Marmulstein 24:11
Yeah, that security aspect is really important to people. That’s one of the main reasons they come to us.
J Darrin Gross 24:18
Got it. So in the field of this, that you that Groundbreaker, is it? Are there a lot of competitors? Or is this kind of are you like one of the few?
Jake Marmulstein 24:32
There’s a handful of solutions that compete and some of them are not specific to real estate. Some are pretty legacy and kind of have adapted or were not over the years to offer solutions for real estate. But it’s it’s a fairly new space. I think the reason why is because real estate people aren’t really that tech savvy and they’re not equipped to shift their business. So There’s not a lot of people who know the real estate space well enough to build a strong, powerful platform to mirror the workflows the way that they should be done. But I don’t know, there’s probably a lot of competitors that are gonna be chasing after and joining. As soon as something gets hot and has traction, you usually see a lot of folks come in so.
J Darrin Gross 25:27
Well, I mean, that’s, that’s kind of the nature of the business. If it’s if it’s an opportunity, there will be competitors, which just kind of reinforces the fact that it is an opportunity, if there’s no competitors might not be an opportunity. So
Jake Marmulstein 25:39
J Darrin Gross 25:40
That’s good. Talk about some of the feedback you’ve received from users.
Jake Marmulstein 25:48
So on the on the feedback I’ll give like, positive and and constructive feedback, because I can’t say everything is always on You know, rainbows and pots of gold. So Groundbreaker does a good job at making things professional, adding that level of security and peace of mind. And giving sponsors the ability to automate their transfers, their ACH transfers, that’s one of the features they really love. It’s fast, it’s reliable, it’s intuitive, I got those comments the other day from somebody looking at the software, who’s gonna sign on, and, and that’s all great, like our basis really be easy to use, and easy to understand, and also to be affordable.
On the constructive feedback, we really in order for us to accomplish more, we need to keep building into the solution. And some people want to be able to automate statement generation. So we’re we don’t currently offer that if you’re reporting and you want to give personalized reports to investors. Something that people have to do manually if they want to add that personal touch above what’s in our investor portal and what’s, you know, already being reported on for very complex distributions. We’re not at that point where we can fully automate end to end, a waterfall calculation. But we’re working on it. So there’s definitely things that people want us to be able to do when they store all their data with us. And just because software takes so long to build it, it’s just a work in progress. But yeah, but I think we’re doing pretty well as it is just with some of the functionality that we have.
J Darrin Gross 27:43
Yeah, I would think that that’s a challenge that any software developer faces, I know their platforms that I’m utilizing, and, you know, you run into a situation where like, this would be nice if it just would, you know, let me do this. And, you know, you raise your hand, but depending on their, their queue of problems that are on fire or things that they really want to solve may not happen for a while, but you know, I guess that’s the good news is is that, you know, people have have some ideas that are, you know, potentially helpful and could potentially help you develop the product, I guess, to make it more user friendly, or, or even that much more, you know, better than then potentially, you know, competitors for, or however that is that’s, that’s, you know, part of the, I think that’s part of your process and part of what you what you have to stay attuned to as a software developer just to make sure that you stay they’ve, you know, viable and, you know, you are the solution as opposed to not the solution kinda thing.
Jake Marmulstein 28:59
Yeah. It’s hard to just keep up with all the things that we could do. I mean, priorities are, the hardest part is picking the right thing to focus on at the right time.
J Darrin Gross 29:10
Got it? I want to touch real quick. I looked on the website a little bit. And I saw the pricing in that you, you do it, I believe it’s under assets under management. I’m just kind of curious how you chose that as opposed to like number of, of records, user Records, which is what I’ve seen on not not in this type of software, but other software, CRM that I’ve dealt with, it’s priced on the number of of users or do the to kind of be equate if you’ve got more assets under management, you’ve presumably got more users?
Jake Marmulstein 29:50
Yeah, that’s a good question. It took us a while to figure out what pricing would be both fair for the market and also fair for us. We’ve tinkered with many different models throughout the years. So one thing is we want people to be able to come on board and really grow with us wherever they start. If they’re just starting on their first deal, or if they’re managing a portfolio of, you know, 20 deals, we want to be able to fit with them. And it’s very hard to do that. There are weaknesses in this pricing model. But it does cover more bases than most other pricing that we tried to come up with. We like to be able to offer people the all you can eat option, which is you can do as many deals as you want. You can have as many investors as you want, and there’s no limits to your usage. So you can really adopt the solution fully and completely into your business without being concerned about cutoff points. Our pricing goes up as more equity is raised, so that as the company grows, they’re doing bigger size deals. with larger average investment amounts with more investors, they’re growing and we should be growing too. So it’s an easier way to see how well somebody is growing and what impact the solution might be having on their ability to scale to do it based on the equity under management, and also the way that it is, is done.
We only increase the price when capital is really contributed. So if you’re a fund and you’re raising $20 million to start the fund, you’re only going to be paying for the equity that’s actually contributed not committed in a signed agreement, but not in a bank account, collecting interest. And we just determined that in the software, so there’s tools that you know, show you how much capital is contributed and we’re using the same information to base the pricing off of
J Darrin Gross 31:59
Got it. Well I just see It when I saw that, uh huh. That’s kind of interesting, just the way that you you came up with that. But I would assume that, you know, if if, you know, you meet all the criteria and it helps investors really grow, it’s not limiting their growth because they’re no longer doing the spreadsheets and the emails and all that stuff that they’re used to doing that the tool is there’s value in the tool and that, you know, it’s helping them grow their assets under management, which would be a win for everybody. So I would assume that’s your, I’m assuming you don’t get any pushback on.
Jake Marmulstein 32:37
We we don’t right now, the pricing is really, at the very low, reasonable point for people who are just starting out because it, it goes all the way down to zero to 1 million in equity.
J Darrin Gross 32:51
Right, right. Hey, I want to ask you real quick about COVID-19 it’s it’s kind of shuffled most of our sense of work with time and space, has this affected Groundbreaker at all? Have you guys is it? How’s it affected you guys?
Jake Marmulstein 33:14
Well, as a company, we had to make swift moves to adjust our expectations on business and internal processes. And we address those very early in March. So we were, we were ahead of many companies that dealt with this, but it ended up being, I think, a net positive for us, because we’re working remotely and people are working remotely having more time to be able to focus on how to improve their business. And they’ve reached out to us and we’ve gotten a lot of interest in our solution. While people have been figuring out the deals that they were working on, whether they’re going to move forward or not. And having to deal with with Property Management situations, I think, you know, that was initially what people were occupied with. And so we saw a dip in an activity then. But then as soon as deals started to continue going, people were very interested in using this time to focus on how they can make their business more streamlined.
J Darrin Gross 34:21
Gotcha. Jake, I’d like to shift gears here for a minute. So I mentioned to you before we started recording by day, I’m an insurance broker. And I work with real estate investor clients. And we assess risk and determine what to do with the risk. And there’s three different strategies we typically consider. We we look and ask, can we avoid the risk? If we can’t avoid it and we look to see can we minimize the risk and if we cannot minimize or avoid the risk, we look to transfer risk. And that’s what an insurance policy is. And I like to ask my CREPN Radio guests, if they can take a look at their business and their clients to identify what they consider to be the BIGGEST RISK. And again, for clarity, I’m not necessarily looking for an insurance related answer to risk is far and wide. But if you’re willing, I’d like to ask you, Jake Marmulstein, what is the BIGGEST RISK?
Jake Marmulstein 35:38
So Darrin, the BIGGEST RISK for Groundbreaker in as I as I look at our business, and what we’re doing is really managing expectations with people. Software is a living, breathing thing. And it is very challenging for people to evaluate. who aren’t typically Software buyers and a lot of people in real estate aren’t. So our job is to be good stewards of the, you know, good stewards to other people, treat them with respect and give them the most transparent access to what’s really going on and what really our product provides when they’re evaluating it, and trying to understand how they can improve their business. And that’s how we mitigate that risk of mismanaged expectations and somebody getting something that they think does “x” when it really does “y”. And so it’s about just education, mainly.
J Darrin Gross 36:41
No, it’s that’s a it’s a risk that I think everybody faces daily. Managing expectations you know, and, and how much easier it is if you can, you know, start and stay on the on the straight and narrow as opposed to letting somebody their expectations get ahead of them or, or, you know, fall from reality is that’s good. Jake, before we wrap up, where can listeners go if they would like to learn more or connect with you?
Jake Marmulstein 37:13
Yeah, everyone, feel free to connect with me on LinkedIn if you want and also go to Groundbreaker. co. And if you’re interested in finding out more about our solution, you can go to the instant demo button, fill out a form and there’s ways to get in touch from there.
J Darrin Gross 37:33
Jake, I can’t say thanks enough for taking the time to talk. I’ve enjoyed talking with you and learned a lot. And I hope we can do it again soon.
Jake Marmulstein 37:45
Same here Darrin, thank you for having me.
J Darrin Gross 37:47
All right. For our listeners, if you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow. That’s all we’ve got this week. Until next time, Thanks for listening to Commercial Real Estate Pro Networks, CREPN Radio.
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