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Show Notes:
Welcome, everyone, to another episode of Offshoot. Today, I have the pleasure of hosting Ben Miller, the Co-founder and CEO of Fundrise, on the podcast. Fundrise is a real estate, credit, and tech crowdfunding platform. It was founded in 2010 and launched in 2012, making it one of the pioneers in the crowdfunding space. Currently, Fundrise owns $7 billion worth of real estate and manages $3.3 billion in equity from over 400,000 investors and 2 million active users. Fundrise’s mission is to simplify and make the investment into alternative asset classes accessible and cost-effective for traditional, non-institutional investors.
Ben Miller is a seasoned professional in the field. He comes from a real estate family and describes himself as a “deal junky.” However, he has transitioned from a narrow, real estate-centric, deal-focused perspective to lead a tech company that prioritizes processes, specific segments of the real estate market, and scalability. The distinction between being tech-first and real estate-second, something that many, including myself, may overlook, will change your perspective.
Join us as we delve into a wide range of topics, including:
- Prioritizing the investor’s interests, a fundamental principle for Fundrise. Later in our conversation, we discuss how noble intentions often fail to overcome incentive structures.
- The inherent fragility of individual deals and why building a diversified portfolio is a wiser approach for investors.
- Opportunities for institutional investors in the capital markets, such as Yale Endowment, and how they might affect equity inflow into opportunity funds.
- Fundrise’s innovative fee structure in their vertical integration of both fund companies and real estate operating firms, with neither entity taking a carry.
- The rationale behind evergreen funds, and Ben’s insights on managing duration and leverage risk in the face of macroeconomic changes.
- The challenges of transitioning from a deal-focused approach to a fund-centric model, which resulted in a loss of half their investors.
- The art of recognizing good deals, as well as the importance of avoiding bad ones. Also, why great deals are rarely handed to you on a silver platter.
- The value of developing talent internally, as opposed to hiring externally, and the difficulty in identifying talent before they prove their abilities.
- The inevitability of software revolutionizing the real estate industry and Fundrise’s role in this transformation.
- How preferred equity is currently linked to multifamily deals and its implications for common equity.
- The influence of interest rate changes on the flow of capital into real estate and how this impacts real estate values.
- The significance of finding signals in the market and the understanding that what works in practice may not always align with theoretical expectations. The process involves going into the market, learning, and scaling.
- The certainty that A.I. will impact real estate, even if the exact mechanisms remain uncertain.
- The importance for leaders to refrain from transmitting their negative moods to their teams.
- Lastly, the value of determination, perseverance, and fulfilling one’s responsibilities, along with the importance of taking time to recharge.
Transcript
Welcome to Offshoot the Fident Capital podcast with host Kevin Choquette. Offshoot is a curiosity-driven conversation that features a wide range of real estate business professionals. In each episode, we unpack the knowledge, vantage point, and domain expertise of our guests. Then we move beyond the facts and figures and dive into the personal habits and mindset which allow them to be high performers in their respective field. This podcast’s objective is simple, supporting entrepreneurs, fostering relationships, and uncovering meaningful conversations that positively impact business.
Kevin Choquette:
Welcome, everyone, to another episode of Offshoot. Today I have the pleasure of hosting Ben Miller, the co-founder and CEO of Fundrise on the podcast. Fundrise is a real estate credit and tech crowdfunding platform. It was founded in 2010 and launched in 2012, making it one of the pioneers in the crowdfunding space. Currently, Fundrise owns $7 billion worth of real estate and manages 3.3 billion in equity from over 400,000 investors and 2 million active users. Fundrise’s mission is to simplify and make the investment into alternative asset classes accessible and cost-effective for traditional non-institutional investors. Ben Miller is a seasoned professional in the field. He comes from a real estate family and describes himself as a deal junkie. However, he’s transitioned from a narrow real estate-centric deal focus perspective to lead a tech company that prioritize this process, specific segments of the real estate and scalability. This distinction between being tech first and real estate second is something that many including myself, may overlook.
I believe this podcast will change your perspective. There’s a lot in this one. Join us as we delve into a wide range of topics, including prioritizing the investors’ interests, a fundamental principle for Fundrise. Later on in our conversation we’ll discuss how noble intentions often fail to overcome incentive structures, the inherent fragility of individual deals and why building a diversified portfolio is a wiser approach for most investors. Opportunities for institutional investors in the current capital markets such as the Yale Endowment, and how they might affect equity inflow into opportunity funds. Fundrise’s innovative fee structure in their vertical integration of both fund companies and real estate operating firms with neither entity taking a carrier. The rationale behind Evergreen funds and Benz insight on managing duration and leverage risk in the face of macroeconomic changes. The challenges of transitioning from a deal-focused approach to a fund centric model, which resulted in a loss of half of their investors.
The art of recognizing good deals as well as the importance of avoiding bad ones and why great deals are rarely handed to you on a silver platter. The value of developing talent internally as opposed to hiring externally and the difficulty in identifying talent before they prove their abilities. The inevitability of software revolutionizing the real estate industry and Fundrise’s role in this transformation. How preferred equity is currently linked to multifamily deals and its implication for common equity, the influence of interest rate changes on the flow of capital into real estate and how this impacts real estate values.
The significance of finding signal in the marketplace and understanding that what works in practice may not always align with theoretical expectations. The process involves going into the market, learning and scaling. The certainty that AI will impact real estate even if the exact mechanisms remain uncertain. The importance for leaders to refrain from transmitting their negative moods to their teams. And lastly, the value of determination, perseverance, and fulfilling one’s responsibilities along with the importance of taking time to recharge. I hope you enjoy the pod.
Ben, welcome to the podcast. Thanks so much for joining me.
Ben Miller:
Yeah, thanks for having me.
Kevin Choquette:
I think it was Kelly Ren, Ballard Spar that makes this connection possible.
Ben Miller:
Yep. He’s a great lawyer.
Kevin Choquette:
He’s a good dude. I actually haven’t had a lot of legal exposure to him, but skied with him a few times and we have a lot of mutual friends, and he at one point thought it would make sense, so thank you for taking the time. I appreciate.
Ben Miller:
Yeah, my pleasure.
Kevin Choquette:
Look, I’d say Fundrise is a pretty well known enterprise at this point. You guys have been around for 13 years or so, 11 years, I guess. But in your own words, can you just kind of tell me about Fundrise?
Ben Miller:
Yeah, we launched with the mission to democratize investing into real estate. I had a real estate background, and real estate is something that is a big asset class. A lot of people do pretty well in it, but individuals could only really invest like buying a house or something, not the way that professionals do it, which is buying apartment buildings or industrial. And so we sought to democratize it the same way people own stocks and bonds. They should own real estate and other what are called alternatives, and we eventually expanded to alternative credit and venture capital.
Kevin Choquette:
I don’t think it was Kelly, but I’ve certainly heard it along the travels. For any syndicator or person out there raising capital, every investor’s a potential plaintiff. How do you guys think about the risk of… because I believe Fundrise is doing both accredited and non-accredited investors, meaning you can get the real teacher, firefighter, nurse, folks who are just your common working folks, investing in deals that have a risk profile they may or may not understand. How do you guys think about managing the risks of blowback from even 1,000 or 5,000 or $10,000 investor who didn’t realize the risk they’re taking and ends up coming back to the sponsor or the marketplace?
Ben Miller:
Well, so one of our company values is put the investor first. And so I think by doing what’s first and foremost best for the investor, it’s been a good mantra for us, and that most real estate sponsors don’t do that. That’s not really what they’re about. They’re about trying to make as much money as they can. And sometimes the money gets manhandled by the sponsor. So that’s the first thing. And this is a very different value system than real estate, which is just not a customer-centric business. It’s a asset-centric business, transaction-centric. So there’s a lot in the values, there’s a lot in the diversification. People invest in highly diversified strategies rather than… nobody can invest in a single deal. Deals are too risky in my opinion. And so by having very strong control over the whole investment process, I think we’ve been able to manage money for the investor, and that’s been how we should do right by them, to get the outcomes I think that they’re looking for.
Kevin Choquette:
Yeah, look, Ben, you guys have been in the game from the very early days with Obama and the Jobs Act and all of the promise it was there. I think you guys have done a good job of capturing that, but I’ve also witnessed that you’ve pivoted a lot, right? You just talked about deals are too risky, and I think in some of the early… please correct me on all of this, but in some of the early days, I think you guys were doing first deed of trust debt stuff. I know you, I think in the very early days had your own projects and you were doing crowdfunding through that, and then you have definitely transitioned over to investing in fund vehicles, which is what you just mentioned. What’s informed you guys’ trajectory change, the pivots that have been required as you’ve come into the space and learned? Because I think there’s been some pretty significant changes, right?
Ben Miller:
Yeah, we definitely changed and we learned a lot along the way. I conceived of the idea in 2010. And it took me about a year to find an attorney who helped me figure out how to get it done from a regulatory point of view. And so we predate the Jobs Act. We actually possibly helped sort of birth the Jobs Act. Jobs Act comes after what we’re doing. The way we were able to do what we did is we went to the SEC, went in the front door, met with them, “So this is what we want to do.” The SEC is like, “Okay, that sounds interesting.” And we worked with them and they learned a lot from us trying to do it. So when the Jobs Act came, I know it informed a lot of their perspective. They had seen us working on trying to do it.
So that’s from an origin story point of view. Then the Jobs Act amplified what we were doing. And then we used to… I’m a real estate guy originally, so my real estate bias is I have a better understanding of what they are. They’re sort of invisible. Obviously bias is usually invisible to the person who has it. But the real estate person is very deal-centric. Deals are how they think about the world, what motivates people, how they get paid. And so, the initial idea was you raise money for deals. The First three deals were our own real estate deals where we were the sponsor, and then we transitioned to being a lender. I think overall we did 44 separate single deals that we let investors invest into, both accredited and unaccredited. And so over that period, I became more and more disillusioned with single deals and I learned a lot, because I transitioned from being a real estate person or a finance person to becoming slowly but surely a tech or product person.
And that took a long time, that learning process. And I just became more and more worried about one deal going bad. I learned if you do 100 deals, where we did let’s say 44, let’s say 50, you could have one of those deals go bad and people could lose 2% of their money if they were pooled, or 2% of the people could lose all their money if they’re not pooled. And so I thought it was a very brittle structure and back then, which was almost laughable now, in retrospect, I thought in 2014 or ’15 that there was going to be a recession again. So I was scarred from 2008. So I basically spent a lot of time trying to build a platform to be more recession-resilient.
So we departed from individual deals and that was a very contentious decision. There was a lot of the contention internally, people thought that might be wrong or they thought it was wrong. And then we lost a half of our investors. Half of our investors said, “No, no, we want to do deals. We like deals.” So we lost a lot of customers in that process, but I am really glad we did. And we moved to basically being into a fund or pooled strategy, or a diversified investor. And that’s been a giant advantage, especially now.
Kevin Choquette:
And so the business model, as you guys pivot, and I don’t know what it would’ve been on the first iteration where it’s deal-centric, but as you become more of an asset manager fund manager, is your conversation and structure and incentives aligned with the same as any traditional private equity allocator where they’re getting a couple percent on the assets under management and then some sort of a carry after a baseline return to the investors? Or how do you guys think about running that business, getting the oxygen that is revenue?
Ben Miller:
Yeah. Yeah, we went from being really a sponsor to being a private equity fund manager, essentially allowing investors to invest in effectively real estate private equity, and then later private credit and then venture capital. And our model has been take a… regional real estate and our credit is a 1% asset management fee, so half of what is normal in real estate and no carried interest. And so our fee structure is dramatically less than normal real estate, private equity real estate world.
Kevin Choquette:
Yeah, I’m sure they all love that too, huh? Who are these guys doing this?
Ben Miller:
Our investor doesn’t really understand. They look at it. Why are you so much higher than vanguard’s 15 bips? Vanguard is not nothing like what we’re doing, but so the individual customer doesn’t appreciate the difference. And then the real estate industry doesn’t really know. They think of 2 and 20 as normal, but that’s where we were until 2019/20. And then we actually vertically integrated and we took in-house, the real estate part of the business too. And we launched real estate operating platforms where rather than partnering with real estate companies, rather than joint venturing, which we were doing a lot of joint venture equity, we decided to vertically integrate and have our own real estate platforms.
Kevin Choquette:
Right, okay. So then are those operating companies paid? And I don’t mean to get overly-
Ben Miller:
No, it’s fine.
Kevin Choquette:
But I’m a finance guy. I can’t help myself. So the real estate opcos, if you will, are they doing single deals or are they executing on broad strategies across multiple properties? Are there multiple real estate codes? How’s that all look?
Ben Miller:
We formed I think three or four… I’m trying to think how many real estate operating platforms we hired up. We ended up with about 100 people, so we ended up building out a fairly significant real estate operating platform. And each one has… we had a multifamily team, multifamily real estate operating platform team, industrial operating team that basically buys and manages industrial. Then we have a built-for-rent, which is our biggest, and we launched built-for-rent in 2019. And we have a lending platform, and then we have urban development. So we ended up building a fairly sizable real estate operating platform.
And that had sort of, I think two advantages for us. One is it gave us a lot more control over the real estate. And then two, the real estate operator typically gets paid some fees plus a carried interest or a promote of 20%, or you can vary over the hurdle. And we basically took that in-house, kept the fees, we get paid of normal asset management and real estate fees, but no carried interest. So we have no carried interest at the fund level, no carried interest at the real estate level. And so I think we’ve cut the cost of investing in the real estate by a huge, huge, huge amount. More than 50% probably fees. And that I think over time will start to have compounding higher returns than is normal for real estate.
Kevin Choquette:
Well, look at the equivalent of the 121B trailer for your mutual fund and how people will say, “Hey, don’t do mutual funds. Go into the ETFs because over the duration you’re going to lose X, Y, Z.” That’s a basis point conversation. You’re talking about a 20% carry on the fund and then maybe it’s at least a 20% promote to the sponsor. Both of those gone and your fees are below market on the fund company, and probably I’m guessing market on the real estate opcos. A little bit of opportunity there for the investor.
Ben Miller:
Yeah, I mean, most investors don’t know anything about that kind of stuff, and so they don’t see it and understand it yet. But I think we only really got to the scale of it in the last couple of years and then the market turns. So I think it’s not going to be visible and appreciated by the market for a while. Probably half a decade or even 10 years from now, people will look back and be like, “Wait a second, what’s happening here?” But in the near term, fees aren’t what matters. What matters is capital markets, interest rates and cap rates.
Kevin Choquette:
All of which we’ll get into. But then talk to me about what you said just a minute back, which is the tech and product-centric mindset and changing your vantage point away from deal by deal real estate guy into building a platform and a consumable technology product. That seems like a huge shift, but then there’s something underlying that if you are investors. I’m a real estate guy, I’m a deal guy, so I’m going to be all about, okay, what’s the [inaudible 00:18:15] cap on cost? How much leverage are you guys taking? What assumptions are you going into your OpEx and your rent growth? What’s the terminal cap rate? Kind get to like, oh, okay, it seems like a good deal. It sounds like you’re building a product to speak to a different market who doesn’t yet appreciate the fact that you’ve ripped out all of these fees to give them something pretty unique. So how do you think about that tech, that product and that marketing message to be successful on what sounds like a really novel strategy, candidly?
Ben Miller:
Yeah, I mean that was the most difficult part was I had previously had, I don’t know, 12 or some years of experience in real estate and finance, blah, blah, blah. And then I went into tech as… I worked in tech briefly way back, but I was a business analyst. And I had to learn a lot. And actually learning and changing what you’re good at, that’s been the biggest gift really of going into Fundrise has been expanding just my world where I would’ve otherwise been a deal guy. I got to be something different. And that I think has been wonderful. And that was also a very hard learning curve. I tell people it wasn’t the learning that was the hard part. It was the unlearning that was the hardest. A lot of the things in real estate that we take as facts are not true in tech and it’s unintuitive.
So I had to unlearn a lot of things, and that was like you don’t unlearn it at first. You get smacked in the face a lot on the way to finally actually get taught the lessons. And in the tech world, you call it product or product management or product development. That’s mostly what I got decent about. And then digital marketing. And I know a little bit about the tech, but I luckily have good team members that when we get down to the backend builds. But I know I’ve now been doing building fundraising at a scaled level for over a decade, so I know a lot about what it takes to build iOS apps, Android apps and websites and have millions of users and tens of millions of dollars in digital marketing.
So I’ve learned a lot. I know a decent amount at this point, and that’s what gave me the confidence to go into venture capital. Because I feel like I have a pretty good handle on a lot of the key aspects of what it takes to basically build a tech company.
Kevin Choquette:
And we’ll get into… it’s Popularize, right?
Ben Miller:
No, no. That was a concept we came up with way back when that we ended up mothballing. It was-
Kevin Choquette:
Oh, okay. What is the VC platform? Is it also just through Fundrise?
Ben Miller:
It’s through Fundrise. We have the Fundrise Innovation Fund and invest in mid to late stage tech companies. Private tech companies.
Kevin Choquette:
The thing you just admitted to, if you will, some of the hardest learning was the unlearning. Is there anything that you can think of that you particularly needed to be clubbed over the head multiple times to let it sink in?
Ben Miller:
Yes. [inaudible 00:21:44] embarrassing.
Kevin Choquette:
Please share.
Ben Miller:
So all the original deals we did were pretty… I don’t want to say extraordinary real estate deals, but definitely they weren’t garden style apartments in the suburbs. They weren’t boring real estate. They were urban, rejuvenation. This is a different era. So if you go back to the 2010s, it was about urban redevelopment and you were investing and buying these really cool buildings in Bushwick or LA Arts District, or H Street and breathing new life into them. There was architecture, and there was city involvement. I mean, we did a project where there was a tiff, and there was a grant from the city, Rahm Emanuel who was mayor of Chicago at the time, was involved. It was a really complicated project.
We just did all these really jewel box execution real estate deals. I mean, one of the ones that we did was the World Trade Center bond offering. Three World Trade Center, and we did just really special real estate deals, because I thought that’s what mattered because a real estate guy originally. Turns out this is not what matters, total waste of time. Big mistake. It may have taken me literally eight years to unlearn that. I just couldn’t believe how little people who weren’t in real estate cared about the real estate.
Kevin Choquette:
That’s fascinating. I can appreciate that. You’re like, “Wait, my target market doesn’t care that we have beautiful architecture. Only I do.”
Ben Miller:
And then if I do, that’s bad. You shouldn’t do what you want to do, basically. You become a servant to the customer, maybe nicely a steward, but mostly a servant. And whatever you want is irrelevant. It’s irrelevant. And real estate people have a lot… I mean everybody has ego, but real estate people like to do big deals with shiny pictures and shiny names and just none of that stuff matters to our customer. And those things end up getting overvalued by real estate people, because that’s just how real estate people think.
Kevin Choquette:
I’m going to bounce back to the architecture that you laid out for me on the real estate co. taking no carry and having market fees. The fund co. taking no carry and having market fees. And if I marry that with what I think I’m hearing you say is like, “Hey, maybe we should do something that people understand and resonates with them, and in a structure where I don’t have to pay a promote to the fund. And I don’t have to pay a promote to the developer.” Maybe you’ve got a competitive advantage in, call it B2R, just by virtue of the fact that you don’t have to pay all of those historically normal fees to the people at the deal structure, and you can instead pass that through to the investor. Does that show up as a competitive advantage when you go to actually execute in the local markets?
Ben Miller:
I think so. And B2R is so new that it’s actually… I mean this is maybe always true, but what’s mattered most over the last 36 months is the macro. 2020, it was all macro, it was all pandemic. 2021, it was all macro. It was all stimulus. 2022, it was all macro, it was all interest rates. 2023, it’s still interest rates and everything else is so secondary to that. It’s like the tactical alpha you have at the fund level or fee structure, deal level. It just gets swamped. I learned this in 2008, and it’s just like, here it is again. The micro gets swamped by the tsunami that is the macro.
Kevin Choquette:
Well, I was trying to go to macro later, but let’s go there. It’s worth stating it’s 10-10. October 10th, 2023. So Ukraine and Russia, Hamas just went… nuclear is not the right word, but made a big move against Israel. There’s now what appears to be a full-blown war unfolding. There we’re projected to hit 50 trillion of debt up from 26 trillion now by 2030. COVID, we put $9 trillion into the system. Money supplies up what, 29% since then? Inflation at least 9% for a good while, and we’ve still got like $17 trillion of cash in the banks down maybe 700 billion from the peak, but still probably 3 trillion above excess.
Loans aren’t repaying, your best lender is your existing lender. There’s a ton of uncertainty that’s slowing down. All the transactions and bid ask spreads are prevalent. The 10-year, what up 100 basis points from a year ago, up 400 basis points from three years ago. And prime is up what, 500 basis points in 18 months? And oh yeah, we’ve got a couple banks that have failed. So the backdrop is anything but rosy. So what are you guys doing, seeing, thinking about the macro picture in today’s world?
Ben Miller:
Yeah, I mean, I’ve been preaching recession for a long time, and people didn’t believe me. Still don’t believe me. Generally people are still not at consensus. It’s mostly a consensus there won’t be a recession. I think there will be. And it’s going to go from bad to worse. And the backdrop you’re describing mostly hasn’t caused that much pain in the real economy yet, but it will and eventually always does. And so for us, I tell the team, “You have to be able to-”
Ben Miller:
I tell the team, you have to be able to play offense and defense. A great team is a well-rounded team and so part of our business, part of what we’re doing for our investors and on day-to-day is just playing defense. We were lucky because we didn’t have preferred hurdles to hit our 20% incentive profit participation. So our average leverage is 50%. So 50% leverage, we own, I don’t know, 20,000 residential units in the Sunbelt and industrial. We’re positioned well for what I think is coming, which is going to be more of the down and worse. And it’s going to be ugly, it’s going to get way uglier before it gets better.
And the real estate industry, including myself, we kept trying to kick the can, hope it would get better, and it’s just gotten worse and it seems like it’s starting to get… Only in the last few weeks where you’re starting to really see capitulation from the markets. And the long end of the curve is starting to spike and investors are starting to realize that the higher for longer is going to… There’s no escape from it, essentially.
And so, it’s going to be bad. And I always tell people, “Yeah, it’s part of the game.” Things go up, things go down, things go up again. So we’re about to go through a tough time internationally.
Kevin Choquette:
Well, and I know Fundrise, as you just explained, has gone away from deal by deal, but I’ll bet you there’s guys like me that haven’t figured that out so you guys are still inundated with deal flow. Some of the anecdotal stuff that I’ve seen, and I’m putting this out just as perhaps canary in a coal mine and let’s see what you may see in terms of the impending distress or pending distress.
And this goes back to early 2023. There was a group that, and don’t hold me to exact numbers here, but they bought a multifamily value add asset in Houston and got $45 million of debt on it, floating rate debt. And they hit their business plan on time, on budget in terms of just doing a value add renovation to all the units and pushing rents, which effectively doubled the NOI. And they had a $20 million cash in refinance once they came out the other side. And I think that particular group was actually able to pull it off, but there’s a lot of guys out there on floating rate debt that assumed they were going to perm out, let’s just call it a four and half percent rate or maybe even lower, today they’re looking at six and three quarters, six and a half.
And the only way that works is if you were, like you just mentioned on your deals, at 50% leverage going in. And as you and I both know, for the developer who’s deal focused, who’s looking to hit his promote, they tend to play with fire, crank up the leverage to what they think is reasonable. But with 500 basis points shifts in the Fed funds rate, what people think is reasonable has changed quickly. There’s construction loans out there right now, private debt construction loans that are at 12% because they were 700 over when silver was effectively zero.
Ben Miller:
Yeah, it’s really going to be ugly. We were 50% leverage, plus we had a lot of cash. I think it was early 2022 when I started to sounding the alarm. And at that point, we had 30% cash. 30% liquid or liquid including maybe public REITs and stuff. And I wish I was a hundred percent cash.
Most funds, most investors don’t hold that much liquidity. And so, even with 50% leverage or around that, we still had to do some pay downs or we still had to pay a couple of our lenders down by 5 million here, 5 million there. Because it’s like, the debt surface coverage ratios don’t cover when you have your floating rate debt is 200 over 550, 750. [inaudible 00:32:38] 1.2 DSCR, 1.2 coverage, and so you end up having to cover at a 9 or 10. Most sponsors can’t do that.
And so, it’s everybody, basically almost everybody is now just playing the hold them game, just hold it, hold it, hold it, hold it. And what we’re going to start seeing, we’re seeing it some, we’re going to start seeing people not able to. Once that starts happening, that’s going to start a repricing. I don’t know. The action, we don’t really know if there’s going to be a global problem. [inaudible 00:33:28] the thing about macro is that it’s all connected. And things that don’t seem connected can matter.
If you go back to the last time, ’08, you had a European debt crisis, all in the peripheral countries, and that almost caused a serious problem. You can only imagine those countries have a worse problem than they used to have. That could come back and affect US capital markets. China seems to be in a recession. So there’s just so many factors out there that are negative. And yet stock market’s still close to all time highs. I think it seems like there’s trouble to come. And when there’s trouble, best thing you can do, really reality is you can buy, but mostly you need to be prepared for it.
Kevin Choquette:
So your offensive moves now is just get liquid?
Ben Miller:
Yeah, staying liquid, getting liquid and we’re buying a little bit on the edges. We have a couple industrial deals closing end of the year. We have some bill for rent we’re still buying. We’re still buying. I think so far this year, I bet you we’ve bought $400 million of real estate so far this year, I would say. And we’ve done a couple hundred million dollars of lending. So $600 million dollars out the door. That’s probably more offense than most players out there. You wish you could buy the whole world.
Kevin Choquette:
Anything specific that you guys are seeing? I get that’s the rest of what you’re saying at the macro, in terms of the move in the indices and floating rate borrowers and a nine and a half debt yield, 10 debt yield. And the refinance not being feasible, and so you will see capitulation. And when you see capitulation, there’ll be new comps that trend downward and that can set off a negative feedback loop where valuations are dropping, which tests new covenants, which force more liquidations, which sets new covenants. I get all that. Specific deals, have you seen anything that you think’s a really good anecdote for what’s on the horizon?
Ben Miller:
We’ve been doing a lot of lending into that, so people who need cash in [inaudible 00:36:13].
Kevin Choquette:
Perfect.
Ben Miller:
We’ve done, I don’t know how many deals this year. I want to say that-
Kevin Choquette:
Bridge to bridge stuff?
Ben Miller:
Well, mostly pref. Somebody has, [inaudible 00:36:21] trying to think of deals we’ve done, they have a bank loan and they basically need 20% resizing, [inaudible 00:36:31] pay down, whatever you want to call it. Or just there’s a hole, a gap in their capital stack.
So we’ve done, I’m going to say, I don’t know if it’s six or 10 of those deals. And where it’s really good sponsor, really good deal. And there’s a capital need, we fill it, we filled it, and we’ve done that. And that’s actually where we started in 2012, ’13, ’14 is this pref. And I love, it’s always multifamily pref, so we just do residential multifamily B2R, pref, in that gap. And it’s like sponsors who come to us who we know. Say, “We’ve never done pref before.” And they tell us, they mark up the term sheet. I’m like, “Uh-huh. Well, let me know if you have somebody else who will do that.” 60 days later they come back to us, they’re like, “Okay, I did not…” The sponsor thinks pref is equity with a cap return. And pref these days is like a mezzanine loan. A lot of sponsors aren’t used to pref.
Kevin Choquette:
And are you saying, making the distinction there in terms of your rights to cure and take control of the asset?
Ben Miller:
Mm-hmm. Control, rights to step in, rights to pay down, rights to basically protect your interest because the sponsor… I have a pretty skeptical view of sponsors, essentially. Most sponsors will do what they can get away with. And so, I always start with a sponsor assuming they’re going to do the worst thing they can do. And then if they don’t, I’m pleasantly surprised.
Kevin Choquette:
Yeah. So there’s two things that come up there. One, when you get into that position, and I’ll stipulate that you’re attaching it, maybe 80% of the historic basis, and maybe it’s a 14 or so coupon, maybe all accrual, some current pay and some accrual. Feel free to sharpen those up where I might be off, but what’s left for the common equity? Is it basically converting into a hope note?
Ben Miller:
Yeah, so typically, actually, these days you’re attaching lower, I would say around 70. Because the senior lender basically needs to get to around 50. So maybe they’re 55 or 50 or 45, and we’re 20%, so we’re going to 65 or 70 or 72 maybe. And our yield on cost, gosh, where would it be? I would say it was in the low sixes before, like a few months ago, when I thought that values were in the mid fives and we were in the low sixes. And now values are probably closer to six maybe. Depends on what we mean by that. So I don’t know exactly. Now I think pref would be really hard to do. It’s just everything is priced. The recent spike in long end of the curve is a killer. A real deal-
Kevin Choquette:
Well, okay, let’s stay with the first scenario and then I’ll start asking you about the long end of the curve and the relationship between cap rates and interest rates because it’s clear you’re conversant in that. But say you attached at 72 and the common equity’s behind you and you’re in, let’s just say a 14. And then they’re paying their bank, if they got perm, what? They’re 200 over the tenure, at whatever time they locked.
Ben Miller:
Yeah.
Kevin Choquette:
If they’re floating, they’re maybe 300 over SOFR, so it’s still kind of expensive down on the bottom. If you guys run that proforma out and go, “Okay, we’re going to liquidate.” It’s a three-year deal or five year deal, co-terminus with the senior, and you go, “Great, let’s look at the proforma terminal value, pay out the sales commissions and closing costs, pay out the debt, pay us and our accruals.” What’s left for the GP and his partners? Is there anything-
Ben Miller:
Yeah. It’s funny though, so that pref structure you’re describing, that situation, we’ve done 87 pref checks into multifamily over the last 10 years. And a lot of them, the pro forma said, “The sponsor is going to lose half their equity. Sponsor is going to lose a lot of money.” And of course, every single time, the sponsor didn’t.
Kevin Choquette:
Right.
Ben Miller:
And sometimes the sponsor made out like a bandit and we were just getting our 12 or something. So now, on paper, a sponsor is going to lose some of their principle. And how much they lose is really going to depend on where cap rates are in three years.
Kevin Choquette:
You’ve actually got it showing a loss of principle, not even just no return, but they might actually come up a bit short on getting there.
Ben Miller:
Yeah.
Kevin Choquette:
Yeah.
Ben Miller:
That’s [inaudible 00:42:05] our underwriting assumes that. And it’s easy for us to underwrite that. And then typically, in the past, where we’ve had deals where there’s been distress, the sponsor usually shows up and says, “Can I have more time?” And our funds are evergreen funds. We’re not closed-end funds, we don’t take [inaudible 00:42:25] interest, so we don’t have to turn the money. So normally, they would just say, “Yeah, if you’re going to pay us at 14, you have all the time in the world.” As long as we’re in the money, we’re okay with going longer. And then usually with a sponsor, I have this, personally I believe, you have time on your side in real estate, you’ll be okay.
Kevin Choquette:
I agree.
Ben Miller:
And if time’s not on your side, you’re going to get hosed. It’s really rare time works out for you if you have short on time. So my personal belief is we’re not going into super high interest rate environment three years from now. I think that’s not likely. I think we’ll probably roll over within the next few years to a moderate interest rate environment. So cap rates will be, like a five and a half will seem like a fine cap rate. I don’t think we’re going to a world where cap rates are six and a half the long term. If we are, man, most of the real estate industry is going to see, I don’t know.
Kevin Choquette:
Bloodbath.
Ben Miller:
Just do the math. There’s, let’s say $20 trillion of commercial real estate, including multifamily. And at six and a half caps, that means that that’s $10 trillion in losses, something like that. Like half, 50% losses, maybe more. Because if residential is six and a half, office is like double that. Right?
Kevin Choquette:
[inaudible 00:44:08].
Ben Miller:
Office goes to zero, office equity goes to zero, and half the… It’s just $10 trillion in losses in real estate, and that’s just real estate. I don’t don’t know how much you’re in the private equity world and levered loan industry and go down the list. There’s lots of corporate debt, and so you’re talking about such a huge amount of losses in the system. That just drives a recession and that recession will drive down interest rates again. That’s why I just don’t believe in the narrative that we’re going to be in this environment that interest rates stay, the Treasury stay at five in the long term. That’s just, to me, country’s in such a recession at that point because the federal debt and corporate debt, just country is not growing.
Kevin Choquette:
It can’t carry it. It can’t carry it.
Ben Miller:
Yeah, it can’t carry it. Just there’s a down-
Kevin Choquette:
You’re putting up like 12% of GDP to just do debt service.
Ben Miller:
Yeah. And so, that’s a downturn, a recession. And then people say, “Well, that’s stagflation.” Then we have stagflation. And I don’t think so because I don’t think the government’s going to print any more money. I think you can’t have stagflation if the government stops printing money. And then the question is, ” [inaudible 00:45:28] they start printing money again?” And that’s where it’s possible, but I don’t think so.
Kevin Choquette:
Yeah. We’ll go back to the cap rate conversation, and look, I’m no economist and I’m certainly no expert, and if I’ve learned anything from, call it just before 2020 until now, it’s that I really don’t know much. I, for sure, didn’t see Covid spiking residential home values. I, for sure, didn’t see the low mortgage rates actually supporting high home values currently, even in an environment where rates are seven and a half, 8% and you still see limited supply and relatively stable home prices.
But Peter Linneman’s going to be on Willy Walker’s webinar tomorrow and I pretty much watch that one every time it comes out. And he’s got a paper, that I think dates back to 2020, around the correlations between treasuries and cap rates. And just like a 0.68. And his thing is like, look, there’s a lot of things that correlate that loosely and it’s really not that telling.
And the thing that he puts forward as potentially more telling is the relationship between commercial mortgage flows and the growth in GDP. And if commercial mortgage flows are exceeding the rate of growth, it’s likely the change in commercial mortgage flows versus the change in GDP, then you’re going to see cap rate compression. And the alternative, which clearly we are entering a cycle where commercial mortgage flows are declining, is also true, when the flows of commercial mortgage are lesser than the GDP growth, then you’ll see cap rate expansion.
For him, it’s all about flow of funds. And you are on the side of the story where you’re like, “Look, I’m low levered, I’m investing for value, I’m investing for duration.” Sure, you’d love to go out and snap up the six and a half cap. But you’ve got, if we think inflation isn’t yet dead, you’ve got an asset that’s indexed to inflation. You’ve got all the benefits of your interest write-offs and depreciation. And you basically got a bond that if you actually held it for 30 years and watched your two or 3% rent growth, and then came out the other side and said, “Okay, how did this bond due relative to my 30-year US Treasury at 4.6%?” Which the comparison everybody wants to make is that there’s got to be a spread between treasuries and cap rates to justify for the risk premium.
It’s kind of a long-winded thing here, but I’m not sure I buy it. I think that the market’s pretty intelligent and pretty capable of going, “I’m going to buy this because I know in five years, A, replacement cost is going to be way higher. B, my rents are going to be way higher. C, I expect rates are going to revert back down and I’m going to be able to improve my free flow cash.” And the market’s pretty rational.
I place a reasonable amount of equity. And right now, we’re doing two JV equity raises for multifamily development, which you can imagine is difficult. But I’m getting a ton of these guys who are like, “Hey, if the 10 year’s at four eight, you need to be at a six eight cap on costs.” And I can just tell you categorically, there are no six eight cap on costs new developments in Southern California. Unless somebody’s basically paying you for the land and you’re getting your labor and materials at some substantial discount, because maybe you’re vertically integrated or something like that. I don’t know, that’s a bit of a rant, but what are your thoughts around the relationship between cost of debt and cap rates? Do you think it’s linear like some people do?
Ben Miller:
Yes.
Kevin Choquette:
Okay, interesting.
Ben Miller:
I think Linneman is selling what the industry wants to buy and the industry’s in denial.
Kevin Choquette:
I love it.
Ben Miller:
When he describes, also a separate thing, which is, I’m trying to remember the economist, Minsky or something, who talks about flow of funds. But essentially, more debt causes prices to go up and it’s a feedback loop and [inaudible 00:49:52] causes it to go down. That’s a separate problem and related and both are happening right now.
But yeah, if treasury’s at five, nobody’s buying real estate at less than five, and they’re probably wanting it to be at least six. I don’t know in a world if it’s seven, but it’s going to have huge effects on real estate pricing. And anybody who’s saying otherwise, I don’t know exactly why they would think that. It would make no sense.
So we can talk about the math of that, but the flow of funds is only part of the story. It’s a huge part of the story. But the flow of funds is downstream of interest rates. It’s a result of higher interest rates or interest rate changes.
Kevin Choquette:
Yes. That’s a hundred percent accurate. As the rates change, so do the flows. That’s why everybody got these massive cash out refinances after Covid, right? The treasury’s at like 0.3. “Oh, okay. Let’s go get a 40-year fixed rate loan from HUD.” “Oh, look, it’s 118% of costs. Okay, cool. We’ll take that.” Yeah.
Ben Miller:
Yeah. I think the real estate industry is not a good place to look because they’re so biased by their position. So it’s like they’re basically selling their book or talking their book. And I think it’s more likely that for some period, there are no such things as a six and a half or seven cap rate. In almost anywhere in America, that’s not a real thing. With the institutional investors saying that, what they’re really saying is, “I’m not going to do deals, but I’m not going to admit it.”
Kevin Choquette:
That’s right. Thank you. That is exactly it, and that takes a while to figure out. Speaking of being beat over the head enough times to figure out what’s going on. For me, it’s been people give you all kinds of reasons that your deal’s no good, and it’s really not that, they’re just not trading right now.
Ben Miller:
Yeah. And the gist, to be sympathetic to them because I have a little bit understand their [inaudible 00:52:16] too, is that they don’t want to admit it either. If they told their entire team, whatever, take a big shop that’s got hundreds of investment professionals, told them, “We’re not doing deals for two years,” that team would start to lose their mind, they would start freaking out. Everybody’s actually better off pretending, even though it’s not true.
On management, this is something I have, we have almost 300 team members at Fundrise and they hate being told bad news. They hate it. They really would rather me to just tell them everything great is great, great, great, great, great. Because whenever you tell them bad news, they want you then to tell them the conclusion.
Kevin Choquette:
Well, then how’s it go?
Ben Miller:
And what does it mean for me? And you’re like, “Nobody knows what’s going to happen.” We’re going to go through a period of serious turbulence and people want to know the conclusion. And you can’t give them the conclusion and they just get upset. And in a crisis, you’re much better off carrying on, carrying forward than fretting about it.
Kevin Choquette:
That’s interesting. You’re putting a lot on the table and I’m trying to cherry-pick from the things that I think will fit the best. 300 people. I was actually looking for that before, trying to figure out how many people are on the team. And you sort of talked about tech and product fit, and probably to a certain extent, understanding what some of my friends would call product market fit.
You’re also a self-confessed real estate guy, deal guy, right? You’re doing all of these esoteric jewel-box deals and realizing all of that might not work. But in the real estate world, as we’re currently discussing, there are cycles and there are times when you might not transact. There’s a time for risking capital and leaning in, and there’s a time for protecting capital. And those cycles are very natural, everybody has the same data. Everybody’s flying their own individual plane with the same instruments in all the planes, right? “Oh, let’s go now.” That’s why you get these overcorrections and all of that.
But in a real estate business, but for the largest institutions that might be public or really have battleship war chests, a team of 300 people would be insane. I read up a bit on your father’s business. I’m betting he never came anywhere near or currently has nothing near 300 people. How do you think about scale and overhead and managing human resource in a marketplace that inevitably ebbs and flows? Even for you guys, I’m sure that flow of funds in and out has a cyclical effect and it’s a pretty big monster to feed every month. I don’t know what a payroll of 300 people would look like, but it’s rather large.
Ben Miller:
Yeah, we just have enough assets that we’re close to breakeven. But this was something I learned or unlearned going from becoming a real estate person to a tech or product person, was real estate people are not operators, they’re transaction or deal people. So-
Ben Miller:
…they’re transaction or deal people. So a typical real estate operator, even if you’re at a Starwood, I mean you basically do deals. You might do three deals a year. You might do two deals a year. You might do five deals a year, but you’re going to do some number of deals and you’ll have a deal team. And a deal team will have a few people on it, three maybe. Maybe you have some service providers internally who know about construction or capital markets, but it’s a relatively small number of people who are the deal managers or project managers. And then there’s a few support people in the organization that handle leasing or HR or finance. And so it’s typically a 3 to 12 person shop. It’s a small organization. And the way real estate people scale is it’s more or less the same number of people. And instead of doing a 5 million deal, they do a 20 million deal and then they do a 50 million deal and then they do a hundred million deal and you’re Starwood and you want to be doing 500 million deals.
And so it’s the exact same matrix or paradigm with just a bigger denominator. And that’s how real estate people scale. And I saw that as flawed for a bunch of reasons. I mean, it’s fine for them, but it’s not a good fit for us. And if you look at companies that make stuff, whether you’re Intel or some other normal company that’s public, they’re operating businesses and they have a factory and their people on the factory floor moving things along. And so that’s a really different kind of management and real estate people aren’t, typically, they’re not good at that and they’re heavily biased away from it. Because what happens when you have scale with a tech company or any kind of company is you have to focus on process and the process becomes the most important thing. And the real estate guy will always sacrifice process for the deal. They will throw process out the window and design the deal bespoke or custom toolbox or whatever it is, it’s going to be deal driven. It’s not going to be process driven. That’s completely crazy to a real estate person.
And so they’re bad at operating things and management. It’s just both by temperament and by training and then ultimately by how they prioritize their decision making. So that’s a big difference and I had to learn that and people are process oriented. And then the kind of real estate we ended up doing as we scaled was real estate where process mattered more. That’s why we have multifamily and build for rent. Those are more process oriented, efficient, operating businesses rather than big office buildings or any kind of big complex deal is not going to be process driven. But if your invitation homes which, and you own whatever, a hundred thousand homes, that’s a process driven business. Hotels are a process driven business. And so it’s a very different kind of organization. And so that’s the kind of real estate we buy and that’s kind of real estate platform we built. And that’s just one sort of more important point is that software is good at process.
So if you want to say, oh, our main competitive advantage is we have ability to build software, then you want to go where that is useful. And it’s useful in things like single family homes, multifamily, things like that, and how much you’ve been inside the guts of a single family home operator, but they have a hundred times more software than a multifamily operator who basically doesn’t have almost any, and not that those single family platforms have very good software in the software world. It’s a joke compared to what Google’s or those type of companies have built. But you have to have it. It’s a process-driven investment class.
Kevin Choquette:
And so your whole thing here is by focusing on a scalable process driven product and strategy and knowing that you are not going to abandon the strategy and the scale in favor of that boutiquey downtown LA Arts district city council member on your side, you’ve been able to secure the revenue, refine the process, have enough repeatable process, understand the structure that the 300 people, it doesn’t prove to be an impediment, it’s actually an essential feature of being successful on the strategy,
Ben Miller:
Right, so that requires us to say no to deals, which for the first eight years of our business or even longer, we had a hard time doing, because you want to stick to your knitting. And then we have been building software inside the real estate. That’s another reason why we vertically integrated is that the real estate industry just doesn’t know anything about software, almost nothing. And so if we want to build software that replaces people in the process, we have to do that by vertical integrating. You can’t have, if I go to my JV partners that I still have from deals that we did 2017 and they say like, hey, you know the way you do this thing? Do it differently. They’re like, no, go away. But I think software, software is eating the world, it’s going to eat real estate. I’m hoping to be the alligator. I want to be part of the consumption chain that eats up a lot of the inefficiencies that exist in the business.
Kevin Choquette:
Well, that’s interesting. Hang on. So now I’m hearing what you were saying before in a completely different way, right? No, I’m not taking a 20% carry, no, I’m not taking a promote on my real estate opco and my fees are market over there, and they’re one half of what they are on the fund management side. Hey everybody, come on in because we’re focused on a few strategies that we’ve developed repeatable process for. We’ve got a competent team who knows how to do that. And oh, by the way, I’ve got a competitive advantage right out of the gate to get you at least a market level return by virtue of the fact that I’ve blown out all these fees and as I scale, I’m going to just eat the whole thing.
Ben Miller:
That’s the tech playbook. That’s how if you go look at Tesla, that’s what they did. Tesla, Netflix did that. They sort of get their foothold into a new industry and then they go eat the whole thing up with software and that’s how you do it. I’m not doing anything new, but that’s what we’re doing. People don’t see that, they’re obsessed, the real estate people just see all the deals we’re doing. They just think about the deals.
Kevin Choquette:
By the way, that would be me. I am the guy you keep talking about just sort of way more of a real estate mindset. I’m aware of all of the process stuff and we use software just a little for, Asana for our deal processes and Salesforce for managing CRMs and placement efforts and things like that. But nothing like what you’re talking about. So talk to me about saying no, right? You were saying, okay, you stand up a platform Fundrise, everybody’s like, wow, these guys are great. And I can only imagine you just get overrun with a million different transaction opportunities. I’m sure that still happens to this day. What has it taken to develop the skill to just narrow the focus and know how much of this stuff that comes your way is just distraction?
Ben Miller:
Well, it’s changed so much. You’re talking about almost the whole cycle we just went through right from 2011 to now, and so it varied. I mean, where we ended up in the last couple of years was like, we’re going to go out and buy what we want. Don’t bring us transactions, it’s wasting our time. Nobody brings you a good transaction. That’s not how it works.
Kevin Choquette:
I love that. Do you follow the real estate philosopher, the guy out of New York?
Ben Miller:
Yeah, I know him. Yeah, he’s funny.
Kevin Choquette:
He’s super funny. He’s written a couple pieces in his newsletter. You are never going to find another good deal. It’s not going to happen that way. You’re going to make deals, you’re going to create them, right? You’re not going to go on Costar and be like, oh, look, there’s a good deal. Or go on LoopNet, there’s a good deal. Or to your point, just have somebody call you up and say, Hey, I’ve got a really good deal. I’m probably less jaded on that front because I’m that guy who calls you. But the point is well made. Finding the people. How are you doing that? How do you find eight, nine and ten out of the one to ten scale on your team, 300 people? Ideally you want a world-class team, you have world-class people. What’s your thought process around avoiding the twos, threes and fours, maybe weeding out the sixes and sevens over time and ending up with a team of eight, nine, and ten high performers?
Ben Miller:
I mean, the way it is turned out, I had a lot of theories and ended up with a conclusion is that we hired over, probably over the last 10 plus years, we’ve hired 600 people and there’s only 300 people left. And then of the 300 people there are, it’s the Pareto principle. There’s 80/20 and there’s 20%, that 60 people who are just the most productive. And then of the 60 people, there’s another 12 who are like 10x again. And so that Pareto principle is a real, or the 80/20, is a real fact. They call it power law in venture capital. But there’s a bell curve.
And what I’ve found is that those 12 people or those 60 people, I didn’t know, I was not good at predicting who they were going to be. Some of the people who I thought were going to be great ended up not being good, and people who I didn’t even notice ended up being world-class. So it’s like ultimately I’ve come to a conclusion that it’s only by doing, only by execution that you really can know and that the good talkers, the salespeople, that doesn’t mean they’re going to be good at anything else.
Kevin Choquette:
That’s expensive, isn’t it? Bringing somebody on, going through the enculturation process, the training process, getting them familiar with the team, building out systems for them, putting them, onboarding them onto all the systems and then going, okay, now let’s see what you can do.
Ben Miller:
Yeah, I mean definitely we got better at it. I was really bad. I mean, I was thinking back of how many, it was much worse hit ratio than it is now, but I also come to the conclusion it’s much better growing people than trying to go buy people. So the people who are the best people here are people who really grew up. There’s people here who started when they were 22 and they’re 33 and they’re just superheroes now. And they were like kids. So growing is, especially because the way we are is so different than the real estate industry. People show up here from real estate shops and they’re just obsessed with the deal. I’m like, don’t tell me about the deal. I already know the deal. It’s a big waste of time because they’re all the same.
Kevin Choquette:
That’s right. It’s just a deal.
Ben Miller:
Yeah. I mean we’ve looked at, and we have database with full performer, like thousands of deals, like thousands, and you can look at a deal and know it’s a good deal in a hot second. I’m like, it doesn’t take that much. I try to change the deal. I’m like, just get rid of the bad deals. You don’t know what the good deal is. You’ve done probably a lot of deals. The deal that killed it wasn’t always the deal you thought was going to kill it.
Kevin Choquette:
That’s right.
Ben Miller:
And so your job is to not do bad deals and then good deals are driven by, it’s almost like you get a free option, like a call.
Kevin Choquette:
Totally.
Ben Miller:
And you can exit the call to your advantage. All of a sudden the deal is just pricing like crazy. You’re like, okay, I’m selling, but otherwise you can just hang out. And so it’s killing the bad deals. But everybody in the real estate industry is obsessed with trying to pick deals and there is no such thing. Not at scale. There’s no such things picking good deals. It’s only eliminating bad deals.
Kevin Choquette:
And so part of that ties back into the macro, which is when the macros all screwed up, there really isn’t a good deal unless the returns are just exceptional because the water logged, if you will, best word I can come up with right now, nature of the underpinnings of the deal deal are so oppressive to returns that it’s kind of like, yeah, you’re not going to tell your team you’re not doing anything for two years. But avoiding bad deals in that time period is yeah, it’s like borrowings. It’s super low leverage. Values are uncertain. Cap rates are high. The likelihood that this is a bad deal, pretty high. Why don’t we just avoid that one?
Ben Miller:
I think I know what you’re saying, but I might actually be saying slightly different, which is the bad deals were 2021, not now.
Kevin Choquette:
You think there’s some good deals to be had?
Ben Miller:
On a pure macro, right? You’re like, any deal you do now is at a 30% discount to what you would’ve done in 2021. Maybe 50% discount, but a big discount. And if you just get rid of the bad deals, sure they may get worse, but it’s pretty good. And in 2021, you could get rid of the bad deals, but you’re still going to have lost a lot of money or 2022 pick, whatever, it shifted. I would say late 2021 is when it peaked. So the macros, not to state the obvious, but you sell when it’s high and you buy when it’s low and now it’s low. But as you’re seeing, there’s nobody buying, there’s no institutional money. All the smart money, they’re supposed to be so smart. And I raise money from individuals and those, there aren’t as intelligent and sophisticated as the big money. And I watched the big money all lost. They all invested like crazy in 2021 and they’re not investing now. So I don’t believe they’re smart. That’s just the story they have to tell to raise their LP gap.
Kevin Choquette:
Yeah. Yeah, that’s interesting. But on the 30% discount, are you seeing that And look, I’m very San Diego and West Coast centric in my worldview just by virtue of where I spend my time. But we just saw four three cap rate go out probably six weeks ago and they bought the entity. So if you normalized for, they would’ve bought fee and got reassessed is probably a four six. And then another one just came through maybe 10 days ago, smaller deal, full value add rehab, and it sold I think at a four nine cap. We’re still in this, okay, massive supply imbalance, good jobs formation, good diversity of industry clusters, inflection point for San Diego, I’d argue moving towards primary market status, I’m not seeing it, but you’ve got a much more national sort of purview. And I take you at your word, but I just sort of have to ask to make it explicit. Are you guys seeing that 30% drop offs? Because heard it from other people as well.
Ben Miller:
Yeah, I know exactly what you’re talking about. Let me just re-articulate it. So what’s happening, there are some buyers who are willing to pay cap rates in the fours or pay not as low as it was in 2021, not as low, but not as cheap as you would think. And those buyers still in the market, they’re like, maybe one in 10 buyers are like that and nine and 10 are bottom feeders.
But yes, I’m starting to see transactions available. So if they’re paying in the mid fours, I think you’re starting to see transactions in the mid fives and going north. So if you were going to say, okay, I’m just going to hang out until 2024, so I’m just going to go on vacation for three months or four and then come back, you’re going to be able to buy in the high fives, mid to high fives pretty regularly starting next year. And then institutional investors are not going to do it, by the way. They’re going to say, well, we want high sixes, and then they won’t transact. And there’ll be some people who transact mostly when they can get the good deals, they’re going to be on the sidelines because they’re waiting for consensus, they’re herd, they’re a sheep. And so if we have some capital, I’m a buyer and the high fives or low sixes, and I think that’s yes, that’s for real. And then some I think, and even those prices, I think you can get better deals if you were in the credit markets, which is where we’re more active.
Kevin Choquette:
So the private credit market and that door is one I’ve wanted to open for a while because you’ve referenced it a couple of times. I don’t know for you if you’re saying just private debt in the real estate space or if you’re talking about making private credit for operating companies. And then I also know you mentioned the innovation fund. Can you just tell me a little bit about those two sort of aspects of the company?
Ben Miller:
Yeah, I mean the two kinds of credit we like, we still like asset backed credit. So that’s my preference. And there’s two ways you can get credit where you can get it direct, which is by being a direct lender, which is what we do. And we do a lot of direct lending to multifamily like pref in the 12 to 14%, 15% interest rates. And that’s something we’ve done a lot of, as I said, we’ve done 87 or 88 of those transactions actions, we’ve just done a lot. So we know that and it’s great, but the other place you can get it, which is a part of the real estate market that’s funny, the real estate people are obsessed with finance and capital markets, but they actually rarely operate inside capital markets. It’s like opaque to them where their debt comes from. And a lot of debt comes from mutual funds and large insurance companies that are buyers of the paper that gets issued from their direct real estate.
And so we’ve been on the buy side, they call it’s the buy side versus the sell side, and you buy from investment banks like Goldman and Deutsche Bank and Nomura and being on the buy side, super fascinating. And we learned a lot by going, we started buying 14, 15 months ago, we started buying paper and the credit markets were broken. It kind of got better and then they’re probably getting worse again. But you can get, I mean now God knows what we can get, but it was like 9, 10, 12, 14% yields on rated investment grade paper on the real estate deals. If I take multifamily or take build for rent or take those things where you’re, maybe I can buy it out five and a half or six and then I’m going to lever it at a negative leverage, you can literally go in and get that same real estate asset at an attachment point of 60% or 50% of your basis at a 12% yield.
Kevin Choquette:
That’s through CLOs or what’s the vehicle that is pushing that to you guys?
Ben Miller:
Typically, not CLO, no, you may call it RBS. I mean it’s basically-
Kevin Choquette:
Mortgage security.
Ben Miller:
Mortgage backed security, yeah. And so I know there’s very few people in market who buy across all these types of things. So we buy the multifamily buildings and we also buy the paper and you can just see you’re like, wait a second, we did a lot of SFR paper and we were in there at a hundred dollars a square foot, $120 a square foot for, and so it’s like 60% or 62% LT, LTV getting double digit yields. And I’m like-
Kevin Choquette:
All day long.
Ben Miller:
Wow. This is a lot easier. It’s just a paper.
Kevin Choquette:
And you guys are probably big enough that you could also lever that with your own lines of credit if you were so inclined.
Ben Miller:
Yeah. Yeah. I mean, we haven’t levered it, but at some point, if rates came down, you’d be able to lever that into a high teens return, maybe 20 current.
Kevin Choquette:
Totally 20 current.
Ben Miller:
And so that’s why when you say flows and interest rates, that’s why you’re an investor or money generally is going to be there and not on the equity because it’s crazy to be on the equity if you can be in the debt at a higher return.
Kevin Choquette:
But I think you’re right. You guys, look, you’re right. I’m not a participant in the capital markets, so I don’t see that sort of buy-side opportunity that you’re articulating. My sense of it though is that a lot of the different fund vehicles that I reach out to on a regular basis, similarly are not buyers.
Ben Miller:
No.
Kevin Choquette:
Right. So they understand that the cost of borrowing for, let’s say I go to Benefit Street or some other private debt fund that has a backend securitization vehicle or ready capital that’s going to go put that paper out through Goldman to you guys, they understand that the marginal cost of borrowing is higher and so that it has an impact on everything downstream from there, which is to your point of capital flows are downstream from interest rates, but they’re not looking in a sort of risky, they don’t have a window on the left side going, well, here, I could do this LP equity deal and I can get a 1 7x and a 22 IRR, or I could lever up a 14% piece of paper that attaches a 62% LTV and get a 22, a 62 LTV with a little bit of leverage. Thankfully that AB view isn’t in those vehicles.
Ben Miller:
Yeah, yeah. Like the market structure is fragmented and most people in the market are sitting in a piece of the fragmented part. They’re not looking at the hole. There are some at the hole and you’d have to upstream. So in theory, a CalPERS or maybe more like a Yale would be thinking about it that way, and they’re thinking like, well, I’m not going to allocate to the real estate private equity fund because that actually doesn’t look as good as allocating over here. And what’s happening is these funds can’t raise money, and then you can’t get money for your JV deal. So it is happening, just happening further upstream from, multiple steps away from you.
Kevin Choquette:
Yep. That’s interesting. That makes a ton of sense. I’m a little reluctant to bring this up. I know we’ve been going for a while, but I also know it’s something that you’re passionate about based on the pod I just listened to on your guys’ show software eats the world, artificial intelligence, machine learning, pattern recognition was the way that you were speaking of it and the computational powers of these algorithms to kind of take a whole bunch of noise and go, actually that’s A, that’s B, that’s C. And the leverage that’s going to show up for us to be able to do things with an efficiency that we don’t even yet really comprehend. I mean, I keep going, it’s fire, it’s electricity, and then it’s AI. I think it’s that big of a sort of tectonic shift. Take that wherever you want, but I know you got a lot to say about it, and if you want to be brief, that’s fine, I understand it, but where do you see it impacting real estate? Where do you see it impacting Fundrise? What’s your crystal ball in [inaudible 01:23:06]?
Ben Miller:
Yeah, I think there’s a few ways to touch on it. One is, how’s it affecting our investment strategy for our customer, how it affects Fundrise, how it affects real estate? So let me just do it in a quick order. So most people don’t get to invest in these companies, these tech companies, and that in the same way that you should be able to invest in real estate the way a professional does, people invest in tech the way professionals do. I think it’s a very good asset class. It’s a hard one to parse, just like it’s hard to invest in real estate, it’s even harder to invest in good tech, but I think it is a good investment if you can do that. And so far, we have been able to do that, which has been awesome. I think that defies the market expectations of who should be good at it. But we have been, and I can get into that. So anyways, I think that the venture capital fund, especially with the way AI is now breaking…
Ben Miller:
… especially with the way AI is now breaking, or the next wave of breakthroughs is happening, it’s really exciting. Two, how does it effect Fundrise? We’re lucky. We’re sitting at this nexus of capital, real estate and tech, and I think that’s a nexus where we’re one of the few people who can bring those things together and maybe leverage AI in product building to build something that is going to be a great asset for people in your seat. We’re going to build some stuff with it, and it’s a gift. And the reason I want to build stuff with it is that I think it’s going to have huge efficacy for people in real estate. It’s going to make me a better tech investor because I’m actually building with the tech, and then it’s going to have a huge effect on real estate because real estate, as much as real estate people are not tech people, and they are not.
If you look at what has been most consequential for real estate, it’s been basically the cycle, which is 2008 and now 2020 and now ’23, and then tech. So work-from-home’s destroying office, e-commerce destroyed retail, e-commerce built industrial, and AI is going to do something very significant to real estate. And we don’t know exactly what it is yet, but the likely way to know is by being very close to it. And so I’m staying very close to it. I think it’s going to help me be a better real estate investor too. So there’s all these things happening and I get to be right in the middle of it, and that’s such a gift.
Kevin Choquette:
Yeah. Yeah, it’s fantastic. It sounds like a super fun place to play to be honest. So the innovation fund, are you guys going strategically or do you have a mandate to try to get that retail investor into tech that’s also related to AI or the apps that are going to be built on top of it?
Ben Miller:
Yeah, and we have. We’ve already raised a hundred million dollars and it’s, I don’t know, 30,000 investors, something. So good number. And we’ve already invested in some of the best private tech companies in the world, which is incredible. And I can name them, and you’ve never heard of them, but Databricks and dbt, and some of these LLMs. We’re actually getting into these companies that are underneath of all this tech, and that is insane that we got into them. And then our investors are getting into them because of that. So we did the thing the tech people told me, venture people told me, I wouldn’t be able to do. Which is get access to the best companies. We invested in the best. If you look at the list of the top 10 best companies in the world, I think we invested in three to five of them already, which defies market expectations. They sort of said, I wouldn’t be able to do that.
And then the thing about venture capital, which is true with all things, but venture capital particularly, is that winners keep winning. It’s a virtuous cycle. The best companies are signals for the next company. Like, “Oh, you were in Databricks and dbt and ServiceTitan and Canva. Oh, then I’ll take your money too.” And so we leveled up, and then I think as we build with AI, it’s going to make us even more of a credible and useful partner.
Kevin Choquette:
Oh, I got you. You were able to allocate capital into winning companies, and that is a badge of credibility. So when you go to the next winning companies, they’re like, “Hey, these guys know what they’re doing. Look at the other companies they had some influence on.”
Ben Miller:
Yeah. I always hated when venture people did this, is they’re like, “Look, I invested in Facebook. I’m a genius.”
Kevin Choquette:
Or you got lucky.
Ben Miller:
Yeah, you got lucky. And I invested in these great companies and I’m not a genius. I just got into them. And I say it was obvious. It was obvious this is a great company. You’ll have to be a numbskull not to see that. It’s just that because of my capital sources, I could be flexible in getting into them. I didn’t have to do it the old-fashioned way, which basically is inferior. You can understand in real estate, if I’m like, “Oh, here’s a great opportunity. I got to go raise this money. Oh, I have to go raise it from institutional LPs. Well good, come back to me in like a year or two from now.”
Kevin Choquette:
Totally.
Ben Miller:
There’s a moment in time when the venture market collapsed, the real estate market’s collapsing, but the tech market collapsed last year and we showed up and we bought and we invested in it. And that was-
Kevin Choquette:
I think it makes things happen when you have a flag in the air that says, “We have money.”
Ben Miller:
Yeah, I mean we had to go get it, nobody came to us. Nobody that was good. But we did it. And that’s like people don’t know because these names aren’t yet widely known. You never heard [inaudible 01:29:34].
Kevin Choquette:
And are those investors, this is a little self-serving question, but the people who have bought into say data break or data breaks whichever that is, and you’re right, I don’t know the name of that company, are those now in the fund and you can buy shares in the fund?
Ben Miller:
Yes.
Kevin Choquette:
Okay, so if somebody who wants to get access to that and come into the fund now can still get access?
Ben Miller:
Yes. We usually open up access for once a month and there can be a queue because we’re trying to control the flow of funds. But there’s a moment in time, it’s still here, but the window’s starting to close, when there wasn’t enough money in the tech space. The money went to the sidelines in tech and it’s starting to come off the sidelines, but it hasn’t totally come off the sidelines yet, it’s starting to. And putting aside the crazy AI headlines, money is slow. It’s really, really funny. It’s slow. And then it has too much momentum. It’s slow to start, but then it gets too much momentum.
Kevin Choquette:
And then we overshoot.
Ben Miller:
Then we overshoot. And right now, we’re overshooting real estate and techs more or less recovering. On the recovery.
Kevin Choquette:
Let’s shift a little bit to the personal side. It definitely appears that you’re a guy who lets the arrow fly. You’re looking out in the marketplace, you see opportunity and you’re taking the shots. I think there’s some of these ideas of analysis paralysis and just the whole idea of action versus thinking. From my perspective, just on this short conversation, it seems you’re in motion. You guys were early movers in 2010, 2012. You’ve pivoted multiple times. You’ve recognized that, “Hey, if we could do this for real estate, we can do this for tech. Let’s alleviate a lot of the friction.” I wonder how that lands for you. Is it a native, natural thing or do you have to do something in order to just be in motion? How do you think about thought versus action and letting the arrow fly?
Ben Miller:
I learned this the hard way, which is that you learn from doing. And so you go to market first, you learn, and then you scale. So you want to take limited risks in the beginning, but you want to do it by being in motion as you said. I love the saying, “It works in practice, but not in theory.” A lot of things are that way, like Airbnb was unintuitive, and Uber even was unintuitive, but it worked in practice, just not in theory. And so mostly you learn by being in the market and being close to the market. And then you find signal in the market by listening. And some of the investments we made early, they’re small investments and we hired this guy from a tech private equity fund, and he’s great.
And he’s like, “Should we make this investment or not?” And I’m like, “It’s so small.” It’s an option to get into this company, and if the company’s great, we’re in, and if the company’s not good, it’s a rounding error. And so portfolio theory, that’s why don’t focus on the deal, focus on the whole. So it’s a combination of having a large perspective and having a perspective that’s grounded in practice, not in the theory or the institutional biases that exist away from the blood sport in the field.
Kevin Choquette:
What do you mean by that? Away from the blood sport in the field? I was with you until that last little…
Ben Miller:
Well, because institutional investors are there, or most people, are far from what’s happening literally on the ground. Especially the more senior you get, the further away you get from what’s happening in the meeting in the city where the deal is happening. I hate getting it secondhand because I’m like, “The thing that’s important, you didn’t say. And the thing that I don’t believe is the thing you came away from the meeting with.” The skill of listening. That’s something that seems to be, I think maybe it comes with age, but you really want to listen for what the problem the person’s having on the other side. And if you hear that problem from multiple people, that’s really interesting.
Kevin Choquette:
I love the idea of finding signal in there too. That is the signal. Let’s get in the markets and find where there’s a gap between where somebody is and where they want to be. And that’s the place you can step in.
Ben Miller:
And a big organization, like 300 people, if you’re at Blackstone or whatever, it’s actually really hard to… You’re removed from the signal and you hear the signal from people who are like, you’re three steps removed from the market. How much does Jamie Diamond, does he actually know, because he’s not actually in the meetings, but the Fed is so freaking far away from the ground, and that’s like the more successful you are, the more they remove you from the ground. And it’s just the worst, it’s like you’re trying to play music and you’re just so far from the beat.
Kevin Choquette:
That’s a great analogy. Totally lands for me. Daily routines. I’m changing gears here a little bit, but for me it’s like if I can kind of get my day together, I might have a good day. And if I can have a bunch of good days, then I can move towards my vision of what the year and five years and 10 years might look like. What do you have that might be a daily routine that tees you up for performance? You’re clearly a high performer with a lot of agency around your space, but how do you cultivate that?
Ben Miller:
It’s changed so much with, there’s before you have kids and after you have kids.
Kevin Choquette:
Totally.
Ben Miller:
And so before you have kids, it’s about trying to learn, read, and just be obsessed with learning. And once you have kids, and maybe also if you have an extreme career, but I think kids is the most extreme thing. It’s just like grit. It’s pure toughness. And hopefully you prepared yourself and you learned as much as you could before you had kids because you have less time to learn and it’s more about just toughness and continuing to just be… You have to act like nothing bothers you. Even if, I don’t know, if you have multiple kids and everybody’s upset and the world’s falling apart and everybody’s angry and you haven’t slept in three years…
Kevin Choquette:
Three years, I love it. It’s exactly right.
Ben Miller:
You have to basically act like none of that stuff is affecting you, and that’s your job. I feel like that’s my job, and it’s like, I don’t know… I have varying degrees, depending on how little I’ve slept, how good I am that day. But my goal is basically to bring what everyone else needs to the situation and not bring what I need. That’s not their problem.
Kevin Choquette:
That’s cool. Bring what they need and you can kind of fall in second.
Ben Miller:
Yeah, being second or third, and that’s what good manager is. They call servant leadership, whatever, it’s everybody first and you second. If you have kids, you know, you’re like 10th.
Kevin Choquette:
But there’s also another side of that, which I think I can hear in the way you’re speaking of it. It is a bit of a noble endeavor within the construct of the family. And I’m laughing about the three years of no sleep because I get it, but also a gift. You’ve used that word in [inaudible 01:38:34] being able to be at tech and real estate and capital, but also to be like, “That’s cool, put another kid on my back. I haven’t slept in four days, I got to go into this meeting, pitch this guy, see if we can pull in another 15 million. And oh yeah, don’t forget, we got to do this and this and this and this and this.” It’s also a pretty righteous thing, as difficult as it is, it’s a pretty good channel, if you will.
Ben Miller:
It can be righteous. I got really cynical through the 2010s. The definition of cynicism is, you don’t expect people to operate honorably. And I say it slightly differently, I say rarely do people transcend their incentives.
Kevin Choquette:
Totally.
Ben Miller:
If your incentives are to do the deal, you’re going to say it’s a good deal. If your incentives are, you want the promotion, you’re going lean into it. And the incentives get the better… People’s value system or beliefs align with their incentives. And that’s not a coincidence. The incentives came first, not second. And that’s such a depressing thing. Now, I have seen people transcend their incentives, but it is extremely rare. I think that’s the definition of being noble or righteous, is to transcend the incentives. And that’s even when you’re trying to, it can be invisible that you aren’t fully succeeding. But I think that’s a goal. But the path is the heart, is being tough, it’s being beaten down and keep getting back up.
Kevin Choquette:
Well, and that’s it. Maybe that’s what I’m alluding to with the nobility, if you will. The incentive structure isn’t really there, like, “Hey, I’m going to beat you down a little more, beat you down a little more, beat you down.” You’d think you get the message, “Dude, stay down.” You’re like, “Yeah, no, no, we’re going to keep going. This is what I’m doing.”
Ben Miller:
Yeah, well, as a parent you know this, but this happens all the time everywhere, but it’s like, did not give what you got. You get beaten down, you don’t beat down the next person below you. But you see people under stress and they just start lashing out. And then, I don’t know if you’ve talked to people who’ve been whatever founders, if you really get them in a private moment, they’d be like, “Oh yeah, and I got sick. I ended up having all these problems.” And I think that your body can give out first.
Kevin Choquette:
Yeah. How about the growth side? Obviously, you’re having a lot of opportunity to grow just within the walk of Fundraise and all of the different aspects of it. But do you have a business coach? Do you have any coursework you’re doing? It sounds like time is probably one of your scarcest commodities. But are there things that you do to deliberately sharpen the saw?
Ben Miller:
Probably a lot of people who listen to podcasts, my pleasure is learning. And so when I go have free time, I’ll be doing things that are nerdy. So I’ve enjoyed learning about AI, because I’ve enjoyed learning about linear algebra and reading about transformers and trying to understand the tech. And so I feel like synthesis or getting broader is valuable and I enjoy it. And I think a lot of people are trained to instead do the opposite, to specialize, to get narrower. I think that is one way to be successful, but I think that there’s another ways is to know many things. This is Isaiah Berlin, he had this whole thing of the fox and the hedgehog. And the fox knows many thing and the hedgehog knows one thing. And so there’s different approaches, but I really like seeing the patterns across many things.
Kevin Choquette:
You clearly have a knack for it. Message to entrepreneurs. What’s a message you’d send out to, real estate or tech or capital because you’re kind of in all of it, entrepreneurs who might be on the deep scary part of the roller coaster or cresting and having the time of their life or maybe just getting started, what kind of, if you will, words of wisdom, might you pass on to fellow entrepreneurs on the journey?
Ben Miller:
I feel like everybody knows it’s hard. Everybody knows, at time’s pretty miserable. I think most people don’t talk about it because I think showing that weakness or vulnerability is not actually… I mean, in a way, as I said, it’s not your job to show that. That’s your problem. And as a result, people don’t appreciate if they’re suffering how much other people have and, both they’re not alone and that it’s part of the journey and not end up having it undermine yourself and all the self-doubt that comes with it. Suffering and misery, it’s like kids, I mean, it’s part of the package. And if you can hold on, it gets a lot better.
Kevin Choquette:
That’s interesting. So what do you do when you’re down there? Where you’re like, “Okay, this is the full shit sandwich, this sucks.”?
Ben Miller:
Me, I don’t have a formula, I just keep on going.
Kevin Choquette:
Yeah.
Ben Miller:
I try to tell [inaudible 01:45:01], think less, just keep going. Don’t think so much and don’t drink.
Kevin Choquette:
Yeah. I had a guy on the podcast a good while back, and we were kind of doing the Tim Ferriss thing on, if you could buy a billboard, put something on it, what would you put? Or actually, I don’t think it was the billboard question. I think he answered it with the billboard, and it was this question, and he said, “There’s a Johnny Walker billboard that I see every time walking on the way to the gym, and it just says, ‘Walk on.'” Which is exactly what you’re saying, “Hey, keep walking.” Keep walking.
Ben Miller:
Oh, I guess a slightly more constructive version of that is, it’s okay to do things for yourself. To go, we have a thing, the people I’ve gotten them hotel rooms, they come to the office, they tell everybody to go into the office, and then they go to the hotel room and they go to sleep. And they just tell everybody that they were traveling or that they were at work, and they literally go sleep. And they feel really guilty about it. And they feel like they… And I’m like, “No, you have to take… If you don’t take care of yourself, you’re going to burn out.” And so that’s sort of finding those things that you need just to refuel.
Otherwise, turning to drink, I don’t drink, but I just see that a lot of people turn to trying to find artificial ways to find solace. I think they take more than they give. And so finding the thing that replenishes you is an important part of, just as important, as finding signal in the market and managing people well, and being good at underwriting. Whatever the things are, knowing how to replenish yourself, it’s a skill, it’s a piece of work. You have to put work into it, and if you don’t, you’ll suffer for it.
Kevin Choquette:
What is yours? How do you replenish? It’s the geeking out? It’s like getting into linear algebra and figuring out how the processors work and all that, that’s the refresh?
Ben Miller:
Well, for me, it’s to be alone. To go actually off and be alone and not actually have to be… I’m not an extrovert even though I play one.
Kevin Choquette:
Play one in the movies.
Ben Miller:
I need to go off and be alone for a while, and that’s how I replenish.
Kevin Choquette:
Cool. Ben, this has been fantastic. It actually went really fast and we’ve been on for a good bit. I’ll leave it to you for any bits you want to leave behind, including getting… I mean, everybody can Google Fundrise, you’ll find they’ve got tons of content, but anything you want to put out there for how people can get in touch with Fundrise the platform, or anything at all. I’ll leave it to you to wrap it up.
Ben Miller:
Well, I’m on Twitter @BenMillerise and fundrise.com. If you want to reach out to us, we are super responsive. And then maybe I’ll leave some podcast recommendations. If you want to learn about tech, there’s a lot of good podcasts. One I love is called Acquired. I know those guys who are like the podcasters, Acquired. And go listen to one about TSMC or on Sequoia. They do histories of companies, Nvidia, and they’re just absolutely awesome, and they really can give you background. They’re long. They’re four or five hour podcasts, so they’re super geeky.
Kevin Choquette:
Dig it.
Ben Miller:
But those are great podcasts if you’re trying to broaden your knowledge.
Kevin Choquette:
Sequoia Capital, is the one that-
Ben Miller:
Yes, Sequoia Capital. But you have to go find the one that’s the history of Sequoia. That history of Sequoia, Don Valentine, is such an awesome story.
Kevin Choquette:
Ben, thanks for taking the time to talk with me. Thanks for sharing with all the listeners. Anybody who’s listened to the end here, please take the time and go through your app and rate it and give any feedback because all that stuff is super welcome. Ben, again, thank you. Very much appreciate your time.
Ben Miller:
Yeah, onward.
