Henry Talamantes: If I save $1 per unit for the world, that's trillions of dollars. 

If you're running the REIT and all of a sudden your mall blows up and you're not getting any more rent, the whole cookie kind of crumbles. 

Without them, we would've died our first year. Without a doubt. 

What they're creating is a microcosm of the walkable neighborhood.

If we just sell one of these to every apartment in America, we'd all be billionaires.

The problem with that is everyone else in America is also saying that right?

She's like, Hey everyone, I brought in these guys because I just love their logo. 

The reason startups exist is because corporations don't know how to innovate.

They're never gonna put themselves in that situation again. So the entire landscape of office will change. 

Andrew Kazlow: Welcome to the Diligent Observer, the first podcast exclusively focused on helping angels see what others miss. I'm your host, Andrew, and every week we explore what works, what doesn't, and why through conversations with experienced startup investors and [00:01:00] operators.

My guest today is Henry Talamantes, a PropTech growth specialist and active angel investor who's helped scale multiple seed to series B startups in this sector, collectively raising over $200 million in venture capital. In this episode, Henry shares his perspective on the commercial real estate crisis.

Explains why a stupid level of customer discovery is actually the key to growth in the PropTech market, and offers his thoughts on identifying winning PropTech founders based on his extensive field experience. I hope you enjoy learning from Henry as much as I did. Henry, thanks for being with me 

today. 

Henry Talamantes: Hey man. Thanks for having me. 

Andrew Kazlow: Okay. So Henry, I'd love to start with just what's exciting right now in your world?

Henry Talamantes: Well, I just got engaged, so that's a lot of fun.

Andrew Kazlow: Congratulations. 

Henry Talamantes: Thank you. And, planning the wedding and all that 

is a lot. 

Andrew Kazlow: Are you the planner? Like are you deeply involved in the weeds or are you hands up?[00:02:00] 

Henry Talamantes: I could be, but she's even the next level planner, so, I'm just letting her run the boat. I'm just passenger,

Andrew Kazlow: Well speaking from mistakes that I made, if you are assigned a task do it and do it quickly. 

Number one way to stress out your new bride is, don't do the thing that they asked, and or don't 

do it quickly, because that's a story for another time, but I may have made that mistake. 

Henry Talamantes: Okay. Yeah, that's good advice.   

So just diving in, I've been in PropTech for a long time and in general, you know, my dad was an engineer. I'm very hands-on. I immediately get in the weeds and fix the problem myself. And so recently, probably even just, I don't know, past six months-ish, I've been trying to expand my mental models and frameworks to have a, a, a bigger picture. By my own personal nature, I always get dragged into the friction of the [00:03:00] actual problem and solution.

And sometimes I miss the forest for the trees. And so, I've been trying to expand my way of thinking about the overall industry and how it overlays into macro trends. And so something I've been thinking about a lot recently is return to work stuff. And really It's an echo of malls, right? So malls are just like dead, dead zones and they still are, right? And now it's, they're so sad and no one knows what to do with 'em, 'cause they're wrapped in REITs. And REITs make it even like crazier to do anything with 'em. And so whatever this, lip service about returning to work is like they've opened the can of worms.

Like there will be a lot of office space that remains unleased. What do we do with that office space? No one ever capitalized on the empty mall space. I think there's gonna be a lot of very cool, interesting redevelopment stuff that you can do with this empty office space. And that's just extremely interesting to me.

Because I think instead of narrowing in on like, how do we improve [00:04:00] WeWork, make WeWork 3.0? I'm thinking of like, okay, it could be anything. It could be a spa inside of a apartment, inside of an office. It's kind of an example of how I've been trying to change my thinking.

But that, that for me is one of the most exciting things happening in the economy and in real estate.

Andrew Kazlow: Why do you think malls have failed to be capitalized on? 

Henry Talamantes: Why did no one figure it out? Dude, I mean, back in the day I was in logistics and, there were some crazy patents, Google patents. You could search all the patents, right? There were some insane patents for malls. Amazon had one where it was like drones coming up, ramps, like automated fulfillment centers. Because the beauty of malls from a location perspective, which real estate is location, location, location. From a location perspective, they're like, well spread out. So perfect distro centers, right? Versus now they'll go two hours north to Euless. And there'll be like all eight of them.

So now you're not getting the right [00:05:00] coverage. So they were trying to do distribution centers because of the great placement that malls already have. Part of the problem is the REIT wrapper. So REITs are always straight in at a, as a, at a discount. So REITs are not liquid at all, not like a mutual fund where there's an active market for it.

REITs like you buy 'em. You're okay with a coupon and you hold it forever and you're getting like, you know, 8% coupon 20% if you got like a banger from the 90s. I was in banking in my previous life, which is I sell REITs and so that's how I know all this stuff. So the REIT wrapper, once you put the assets in, you're kinda stuck.

You can buy more with some of the profits, but mostly you're beholden to the investors for that coupon because, they bought an illiquid asset, they want that coupon. And if you ever wanna make another REIT, you better pay that coupon or else no one's gonna trust you. So, it doesn't provide a lot of liquidity to do anything inside of the REIT because you have to pay most of your liquidity for the coupon or else investors' not gonna trust you going forward. And [00:06:00] two, I think that, a lot of times like with a big building like that to demo it and reno it and do something else, it's just so expensive. It's easier to go across the street where it's still raw land, which is more of a, like a US suburban problem. Malls are not urban,

they're suburban. So, two streets down there's a huge lot, which is the opposite of office. Office is super urban, super concentrated, like all the empty lots already done. 

Andrew Kazlow: It's fascinating that your first response to why haven't we figured out malls is speaking to misaligned incentive structures.

A step back from the actual asset itself. Like, that's fascinating to me, and I think it makes a lot of sense. 

Henry Talamantes: Yeah, and I mean, honestly, I only know that 'cause of my banking background. Otherwise, like, I say REIT to someone, they know what a REIT is, but they don't know what a REIT is.

Andrew Kazlow: Say more about that. Like, where's the common misconception about REITs. Because I think I would put myself in the first category of, Yeah, I could tell you notionally what it is, but I don't really know what a REIT is.

Henry Talamantes: [00:07:00] Yeah, I mean, first you gotta realize how REITs are structured as far as how to sell them. When I was a financial advisor, all financial advisors, we get huge commissions on rips, rips on REITs. And so, that gets taken off the top. It's very hard to ever make up that commission.

But even more so, REITs are assigned a coupon, and that's what you're buying the REIT for. There's some that have some tax advantages, et cetera, or they do all REITs tax advantages. But the main thing about the REIT is the steady coupon that has a better tax advantage because it's a REIT. Because there's no trading of the assets.

So because it's not an actively traded portfolio, because of the set portfolio, the taxes are different. That works really good if you're using it as a coupon and you're gonna get rent from those forever. But then if you're running the REIT and all of a sudden your mall blows up and you're not getting any more rent, the whole cookie kind of crumbles.

Andrew Kazlow: So do you have any magic solutions, like [00:08:00] any, anything in your mind that could actually work to transition and kind of save our malls? Right, Because I think it's an interesting use case because they're in your face, right? Everybody that's listening to this knows their nearest mall and they probably never go there. 

Henry Talamantes: Yeah, I think that, the parking is one of the big things. Like what would need that much parking? So that way you're not having to build a bunch of new stuff. And so I was talking with a partner at a16z the other day, and we were talking about the blend of shopping and playing. Reimagining the mall as an entertainment center, but not like the silly putt putt that was like really bad, but we just went 'cause it was next to the movies. Think of top golf level or main event level or in Dallas we has a thing called Cosm, which is like this huge dome thing. and these things they're nowhere.

Like, we went to an awesome birthday party for my [00:09:00] buddy. This thing called Chicken N Pickle had to be at least 50 million buildout, like this huge pickleball thing and like all kinds of games and, but in the middle of nowhere. So that, if they put that in the mall, then other retailers are gonna want to be around those people because they're bringing the traffic in. So more of a symbiotic versus, Hey, we're gonna go to the movies at the mall, or, Hey, I'm gonna go shopping to the mall. 

Andrew Kazlow: So essentially evolving the anchor tenant, right? Like changing the draw. Cause it used to be the Sears or the Dillards or whatever, that would get people to come and they're like, Oh, okay. I'll go to this other place or two while I'm here. 

Henry Talamantes: Yeah. But now you have, Topgolf and a VR place and like cool LED lights on top and okay, now it's an experience.

Andrew Kazlow: Okay. So I want to talk more about office space. And I know there's a lot happening there before we get to that, could you walk me through your mental model on the world of PropTech. I don't think all of our listeners will be familiar with what that [00:10:00] means. So I'd love just in a few words, what is PropTech and how would you break down the world within the PropTech

market?

Henry Talamantes: PropTech is tiny and then it's huge at the same time. So the number of funds and investors that pay attention to PropTech is pretty small, like extremely small and, kind of live and die by the whims of rent markets. But real estate is far and away the largest asset class in the world, like by a multiple.

So there's not many people paying attention to it. But, the reason I love it is, one, the complexity of it, like the layers, the capital structures, and the operating partners and the way the properties flip every few years and you got the brokers and the op, you know, like it's so interesting to me how complex it is. But also, we make a slight change and, the portfolio is worth billions if not trillions.

One thing people forget to understand about PropTech is like, yes, maybe there's not [00:11:00] that much venture fund money slushing around compared to another asset class, like even consumer call it. But the stuff that we impact, there's much more opportunities for savings, and whatever savings or value add, whichever way you're going with it.

Because if I save $1 per unit for the world, that's trillions of dollars. If I sell two more rubber duckies, next year they're gonna want a bouncy ball. No more rubber duckies. So, and in the US part of that is because insurers, and pensions and other large institutions have capital requirements from the federal government where they have to be in some kind of liquid assets.

And then stable assets. And so the stable part for large insurance, insurers and banks even, and pensions, that is the check mark is real estate. So because of [00:12:00] banking guidelines and regulations, by nature feeds real estate.

Andrew Kazlow: So let's say you were explaining to somebody that had never even heard the word PropTech. They know real estate, but what does property technology mean? What does that look like?  

Henry Talamantes: So the way I explain it is any kind of operational software that helps real estate. So that could be very straightforward to someone's been in an elevator with cool new touchscreens now where you touch the floor instead of the button, something like that.

But it also can be as dynamic as IOT sensors that are embedded throughout the HVAC system in a commercial building to where it's telling you there's no one on this floor. They all went home, turn off all HVAC, and then at the end of the month it tells you how much you saved by doing that. So can take a lot of forms, but

it's some kind of software that's helping any kind of real estate run. So whether that be a family home, a track home, a tower of condos, a [00:13:00] multifamily building, a warehouse, any type of real estate.

Andrew Kazlow: Can you give me an example or two of recent startups or recent companies that you've seen getting a lot of attention in this space that you would characterize as PropTech? 

Henry Talamantes: The big ones are obvious, Airbnb is PropTech, Vrbo, WeWork raise money as PropTech is probably more of a blended experience layer on top of the real estate assets, but that's just because of the way they built the company. Like the actual thought process of adding software and little gizmos to make it more enjoyable to go to the office.

That's PropTech. Icon is a big one which is a modular construction of homes. so when you hear about, a huge startup by some Aggies. They were doing just offsite construction and trying to like, consolidate the manufacturing process and then ship them after they were done. [00:14:00] that's PropTech. So anything that has to do with improving a process or operations for real estate.

Andrew Kazlow: It's really interesting space because of your previous point about how it's this layer on top of the biggest asset class in the world. And so micro changes, micro evolutions to either add value or reduce cost have massive implications. I think the opposite is also true. Any screw ups or failures to roll out effectively can cost an investor or a company a massive amount of dollars as well. 

Henry Talamantes: I gotta get, sorry to interrupt, but I have a great example of that. So I, again, coming from banking crash course in real estate, right? And my first startup now, I've done most real estate verticals. But my first startup, we were multifamily. So I would go to, beyond selling, like I would go to these developer conferences, banker conferences, just to learn

the [00:15:00] industry really. So I got to know some of the, like the big developers and stuff. And one time we're talking about, I don't know, I was big into Google Home things at the time. I still am, but I was like, oh, have you guys heard about these things? I'll roll their eyes. They're like, Henry, let me tell you about those things.

So there's like inset things that they put into the walls and apartments, and so they buy the connector, right? So you can put your little phone in there, your iPhone, and then it sends it to the Bose speakers and all that. By the time they build that, 'cause it takes about two years to build a large multifamily complex.

By the time they build it, there's a new phone and it doesn't fit anymore, or the power isn't sufficient, so it's not fast charging. so they're using the $30 speaker instead of the Bose, you know, $500 speaker. That was hilarious to me. I was like, wow, I never thought about that. Like, by the time you build it, technology's already changed. And, and so, they hate them 'cause it's so much money they're wasting. 

Andrew Kazlow: It's brutal. It's a scale that I think the average investor doesn't [00:16:00] think about. Can you give like one to three questions or one to three focus areas that you feel are important for an investor to focus on when evaluating 

opportunities in this space that would be distinct from just your traditional business diligence? Like you're sitting down with somebody over coffee and they're like, Hey, I want to get 

into this space.

I want to get smarter about investing in PropTech. What are the one to three areas that I need to really get smart on and think about when somebody

comes up to me with the next innovation in multifamily, for example? 

Henry Talamantes: I think the two biggest ones I hear a lot from generalists, either operators trying to use this as a go-to market or investors dip in into PropTech is if we just sell one of these to every apartment in America, we'd all be billionaires. And then the flip side to that is, if we just get into Coldwell [00:17:00] Bankers, then we'll all be billionaires. 

Andrew Kazlow: I've heard that pitch a few times. 

Henry Talamantes: And the problem with that is everyone else in America is also saying

that right? And so, being in startups we're all like, oh, we're on the cutting edge. We have the most interesting things, but at the end of the day, we're a distraction. Like what they really need to do is figure out the roofing and cut the landscaping and other things that they actually have to do.

Right? So one word distraction. So it's added work and two, if you add up all the roofers and all the smart lock people, and all the landscaping people, and all the software people that are all having this idea, you can just imagine how many emails, multifamily operators and brokers are getting.

It's in the thousands. It's really cool if you can do it, but you better know the industry down cold.

Andrew Kazlow: Well, it's interesting you say that because your story is one of, I mean, I look at your background and you've taken [00:18:00] multiple businesses from not a whole lot to a lot more, and you've really doubled, doubled down into this growth stage. Talk me through, like, what are some of the key lessons or key strategies that you used to grow, like, multiple businesses in this space during your career?  

Henry Talamantes: When I first started my first business, my first startup, actually not my first business, my first startup was what got me into PropTech. Me and my co-founder we're losing a lot of packages. And we were paying crazy rent in Uptown Dallas, and we're like, why are we paying so much money to get our packages stolen?

Went to the staff. No one wanted to help us. So we're like, okay, let's figure this out ourselves, applied to an incubator. I was a go-to market guy, right? And so we had, I don't know. 25,000 bucks, 50,000 bucks from a few angels and the incubator at this dirty warehouse, old [00:19:00] used desk, two chairs.

And we're like, okay, we've got about six months to figure this out. 

Andrew Kazlow: The start of a dynasty, man. That's the way every good story starts. Nasty desk in a gross warehouse 

somewhere. 

else. 

Henry Talamantes: Yeah. And so, just like any sales thing, like especially people from outside that, because I was, I'm go-to market like that's my jam. I love early stage, go-to market and figure this stuff out. But non-sales people are always like, that's easy. Just sprinkle the sauce. There are no silver bullets, like you gotta do everything, all the sales tricks and they're all so straightforward.

You gotta call, you gotta email, you gotta write them letters, you gotta send them trinkets. You gotta research them and see what their causes are and all that kind of silly stuff. I mean, our first client man who is like top 10 manager in the nation, and the Executive Director of the entire Eastern region.

So half of the United States brought us into her entire team meeting because she has a deep love for [00:20:00] Labradors and our logo was a lab. And so we go into this meeting,

we don't even have a client yet. She's like, Hey everyone, I brought in these guys because I just love their logo. You guys know how much I love labs and, I don't know, they do something with packages. Take it away guys. And that was our first client. You never know how you're gonna get the first client or what's gonna work.

What you need to do beforehand, before you try any of those tricks, is make sure that you understand the industry and the problem. We must have done at least 500 cold walks to distinct buildings. So not more than 500 visits, but 500 different buildings where we just walked in the door, said we're working on this package thing.

Tell us about the problem, not selling you anything. We don't have a product yet. And that was pre-work before we even started selling. By the time I went into that meeting, this dog meeting, I knew more about their portfolio than they did. I know who had the biggest package problem. I had quotes, I [00:21:00] had the manager's names. Some of them had my cell phone, like, I wanna be first. And so that's the difference between building the shiny product and then mashing it into the industry like, I'm smarter than you. I built the best software. You need to try it, and then you'll fall in love with it. No, that's so backwards and that's how most guys do it.

You have to figure out the problem first, solve their problem, and then everyone's gonna buy it.

Andrew Kazlow: I think that is such a powerful point. I mean, I'm over here laughing about the story, but I appreciate that you the good, funny story. That's like, yeah, it's because of a lab. It doesn't matter what the "in" is, right? You got in, but at that point you then had to pitch and present a good business case.

Which was only doable because you had the 500 site walks, which is, I think, where a lot of founders, in my experience, skip right? You can tell when they don't really get it. They haven't done the work. They haven't done the discovery calls themselves,

and they're pushing some patent they developed 

Henry Talamantes: Yeah, 

Andrew Kazlow: closet somewhere.

Henry Talamantes: And especially I'm [00:22:00] mostly a B2B guy. If not B2C. And a lot of times the decision maker is so far removed from the end user, in this case, in this business, like probably five levels, if not more. So you also have to encapsulate the problem for the executive because at the beginning there's some kind of pilot, right?

And some kind of executive has to sign off on the pilot. The executive doesn't even know, they didn't even know there's a package problem really. They're like, well, I kind of heard of it. But coming in with pictures and stories and names of, I'll give you another one. Like, in, we're working on this project in HOAs where the regional managers, for whatever reason, they give them 10 neighborhoods, but it's spread out throughout a metro super far.

So they always have to be driving. The problem is like residents will call them while they're traveling and they can't take notes, et cetera. And at corporate, no one knows the number of calls they're getting, the number of community, requests they're [00:23:00] getting, stuff like that, right?

So when pitching to the executives at the HOA company, we had to go talk to the community leaders, managers, whatever they call them, and encapsulate their problem and then help them pitch it to their bosses because they're scared of being the lazy one. Or being dinged. Or getting fired because, you know, like, just shut up and go do your job is most jobs.

Right? And So we go pitch to the entire team, the two owners, the executives they've hired, and I'm highlighting stories and the owner's like Carlos. Is that true? And like Carlos is like, yeah, I mean, that, that's our day to day. So the Ivory Castle, they don't, not that they don't care, they're doing their own thing, right? They're doing business planning and forward planning. But the Ivory T ower thing is real. They lose

the purview of the day-to-day ops. Especially in B2B enterprise, you have to encapsulate the [00:24:00] problem and then remind the decision maker, what their own people are dealing with day-to-day. And then that starts, their wheels turn in like, okay, then, there's some hidden revenue or hidden costs in here. And then you help them do the math because by that time you're doing the math too, but you want them to start thinking that way.  

Andrew Kazlow: I mean, it sounds like, right, if there is a silver bullet here, it's go do a crazy amount of discovery, understand the problem better than your client, and come in with data to help them educate around the breadth of that problem, and then, oh, by the way, we can help you with this. 

Henry Talamantes: Yeah, exactly. 

Andrew Kazlow: And you've done that several times now, which proves the validity of the strategy. What other elements would you say contributed to this basically nothing to, you know, massive contracts on a recurring basis in the space? 

Henry Talamantes: I think after that, we were both on our friend, Ben's service podcast, "shout out, Ben". And [00:25:00] once you get cooking, there's a strong fallacy in any startup to say, I'm a genius. Like this is working. You can only be the hot kid at school for so long until someone younger and sexier comes along.

The reason startups exist is because corporations don't know how to innovate. They suck at it. You can't fall into that same trap of like keeping, taking your eye off the ball. And to me, at the early stage, the most important metrics are centered, all centered around customer satisfaction. You can dig into retention and churn and NPS and stuff like that.

But in my mind, until you're probably at like 5 million or above in ARR, you're over-engineering. Really it's just, again, research. But on the user side, what's wrong, fix it at scale. And if the users are happy, then you'll continue to grow. It's not extra little widgets that you're inventing in your own head.

It's keeping everybody happy with the base product that [00:26:00] they bought originally and just expanding with other people on that same bitch product.

Andrew Kazlow: So when you meet a new entrepreneur working in this space, right, you're obviously getting a ton of deal flow in this category and you've got a pretty strong BS detector to see through a lot of this, because you've been there, done that. What are some of the common yellow flags or BS comments that you hear that maybe the less

experienced PropTech investor might not catch.

Henry Talamantes: Part of the reason I get so much deal flow and, my only real leg up because, you know, if I was at a fund, I'd have my own team, math guys to model into the fifth dimension. And my only leg up in all of this is that I've already done it in the industry they want to do it in.

So, again, never been a VC or not yet, knock on wood. Wanna get there someday. But, you know, I've never had a team. I'm kind of like fell into angel investing after I sold my first company. [00:27:00] Like, just was bored. And, uh, was getting a ton of deal flow and kids were just finding me on Crunchbase and saw how much we raised and we're reaching out.

And so the first thing I look at is do they really understand the industry? Because what I was going with is, if you're an angel, you have to know the space you're investing in. I will die on that hill all day. Because when we were starting our first company, there are some angels and even mentors that put into it.

I don't even know how much. I forget, 5 grand, 10 grand, 50 grand. Not that much money, but without them, we would've died our first year. Without a doubt. Either them holding us up so we don't like give up or the key intros to like the decision makers in the city, et cetera. They really, really made us.

And so, was it the 10 grand they gave us? No. Look, that was, that barely kicked the lights on. But was it the intros and the support and the validity of having them on the [00:28:00] team? Yeah. 

And that's twofold. One, if you invest in them and get involved, then you can actually help, whether that's from a strategy perspective or a customer intros.

And two, then your BSD detector is perfect because if they're coming from a different industry, they haven't done their research. Then I can tell right away. I am like, dude, this just, that's not how that works. Or they'll try to give me statements of facts that they pulled from some journal article. Real estate agent commissions are 6% and we're gonna cut it in half and

no one else does that. I was like, dude, 10 other people do that already. You know? Actually there was one in Dallas that raised 20 million and they're not here anymore. You can't come to me with this silly stuff. So the only way you can do that is if you live and breathe that industry.

Andrew Kazlow: So the best way to build a BS detector and to watch for yellow flags is to know the space

cold. 

Henry Talamantes: Yeah. And again, that's our only advantage as angel investors. Because we don't have the team. [00:29:00] But at the flip side, VCs have already made it in a sense, like they're not out there in the weeds talking to operators as much. And especially, they're not talking to like super early stage founders.

They're like, cool, nice to meet you. Gimme a call when you hit a 100k in MRR or whatever. It's fine. We all have our place in the ecosystem. But, you gotta out hustle those guys and more super angels. And the way you will hustle them is by staying way more connected to the industry that you love and the industry that you're involved in than everybody else.

It's not hard, like you just gotta read the blogs and stuff, but as an angel you probably have more freedom, more disposable income. You don't want to be reading that stuff, but. It keeps the tool sharp.

Andrew Kazlow: So, let's come back to what we started at the beginning, talking about a lot's happening right now in the office space world, right? It's been a crazy. I don't know, five, six years since COVID killed the space. And now people are like, okay, we could do something different with this return to work.

Talk me through [00:30:00] what's happening right now, and maybe double click into some of the things as specific as you can be that are interesting or

exciting within the return to work and within the office

market.   

Henry Talamantes: Part of the reason why I'm obsessed with this I'm sure, is that during COVID, after I had left the package company, I had joined a database company where we were, aggregating corporate data for occupiers. So, occupiers being the industry term for large lease holders.

So, Microsoft's Salesforce has an office here in downtown Dallas. They have probably 10 floors or whatever, right? That's their Dallas headquarters. They're known as an occupier in the industry. I was joining as head of sales. My founder was coming from, he was a big corporate broker and he had seen this problem in the industry and the problem was, if Salesforce is in that building.

And Microsoft is downstairs, they have two different tenant reps, which is another name for [00:31:00] broker. Those tenant reps have their own internal data so that tenant rep knows, okay, well at least another guy who's kind of in tech across the highway, similar square foot. So you're kind, we're kind of in the range, but that tenant rep doesn't talk to the Microsoft tenant rep, so they don't really have like true zillow style openness of data. There's huge discrepancies on whether you're getting a good deal, because none of the brokers wanna share data obviously, because it's kind of proprietary. But it's hard for people to understand because it's completely different from the single home market.

So we found all these anonymized data sources. We slurped them up and we mashed 'em together and made a report in scoring, blah, blah, blah. It was awesome.   

Andrew Kazlow: I gotta interrupt you say that description of slurping up data just stresses me out so much, 

Henry Talamantes: Yeah, I told you I'm the go-to market guy, dude.   

Sprinkle some sauce on it.

 Yeah, I, I'm the guy, but the opposite of the [00:32:00] sales stereotype. So it was going great. Like we had Facebook and Instagram before they emerged and DHL, the largest land occupier in the world was our client. I mean, we had everybody, HP going great. And then COVID hits. And our entire business model is giving you insights into your office data. We had just raised round right before COVID. The check came in, like 3 million bucks, I think. The check came in two weeks before the country shut down. 

Andrew Kazlow: No way! 

Henry Talamantes: Yeah, man. The roadmap was to hire like six salespeople and a full-time marketer and that's where we're gonna spend the money all on.

 I was gonna build out my team. That's why I went to this company. all of a sudden we're like, oh crap. Probably not good. So we hired one person and we kind of sat around waiting to see like, is this gonna go away? At the very beginning, like no one knew how long it was gonna last. And then people stopped going to work completely. [00:33:00] And so we pivoted to this like COVID tracker and we were trying to keep up with like municipal mandates and helping companies manage, all that stuff. It was a mess. It was a complete mess. Like I said, we had huge F 500 clients and these are the directors of real estate, like the end all be all for the real estate portfolio.

And, you know, across the board, most of them were saying like, Henry, we're gonna walk these leases. What be way it may. It's not news by this point. There's journal articles out about it. Like I'll walk away and I'll duke it outta court. And we're about the same size, so we can duke it out in court for as long as we need to because corporate leases are 10 years, 20 years. So it's a lot of money you're talking about. And they don't know how it's gonna shake out.

So one, it did end up happening. A lot of companies closed lease, closed buildings and consolidated offices, and most people [00:34:00] just never went back to work. But the unsung story of that whole thing is that the occupiers, as they call them, you know the name, the names that we all know, walked the lease and just gave the bag

to the owners, which in most cases is the American public because it's a REIT or it's, you know, some other big institution that owns it. I was there when it happened and I know the, the mindset that the occupiers have. They're never going to get, they're, I mean, they're smart.

This is a Fortune 500. They're never gonna put themselves in that situation again. So the entire landscape of office will change. Whether that's renovations like I was alluding to earlier or something else. They're not dumb enough to put themselves in that same position again. So the entire landscape is gonna change, and there's gonna be a lot of upheaval overall.

Andrew Kazlow: Well, you know, it's an interesting moment because if COVID would have happened 50 years ago, [00:35:00] this wouldn't be a conversation because technology was nowhere near where it is now, right? There was no video conferencing. There was no email. There was no possibility of virtual work for most white collar tasks.

But because of the timing, I think it's just really interesting that remote is even an option. 

Henry Talamantes: Sure. 

Andrew Kazlow: That this, you know, non return to office and never coming back concept could even be a thing. I'm curious, like, help me understand more about the directions you think this could go. In terms of next steps, what changes, you know, you talked about some renovations potentially. What are the after effects in this current moment as we're pushing through this return to work season, whether it's a

forever kind of a season or it's a short season. 

Henry Talamantes: Oh, it's forever. It's not going back in the bank. Cat's outta the bag. The first hack, which you'll see if you look at like real estate [00:36:00] blogs are. I don't know who's reading them besides me, but other real estate guys. The first hack at this is very, very selective deals where it's like, this is prime corner.

The building's already really nice. We just built it four years ago, so we just gotta move the walls, right? And then they move from office to hotel or office to multifamily, or office to condom. Those are easy because it's like the best location. There's a whole foods down below, blah, blah, blah, blah. And so everyone thinks. Well outside the industry

people think like, oh, that's all you gotta do. You just gotta change all these offices to this. It only works in certain scenarios because the building itself costs $200 million. That renovation costs $20 million. Like the math is not mathing on most of those buildings. Now what people are exploring, and not many people have done it yet, but people are exploring now, is a very blended live-work environment [00:37:00] where there's offices, apartments, condos, maybe some entertainment on the top level, like some kind of social club.

Top golf, pickle ball, something like that. And so really what they're creating is a microcosm of the walkable neighborhood. So in a lot of cities they don't have that awesome, or even in a lot of neighborhoods, they don't have that awesome walkable, like everything in one that I can walk to, right? But you can create that in a building.

You can have the grocery store on the bottom floor, some restaurants on the top floors, above the grocery store. Maybe you open a rotunda with a farmer's market. And then above that, live-work. And I think that blendedness is capturing more consumer dollars is really, I mean the game plan there, right?

The entire building is live-work and you just never leave your building. 

Do you think this is going to be almost exclusively in the kind of major metro spaces? Or like where does this happen? 

Probably. Yeah. Because [00:38:00] we're talking huge office towers, right? Like the mid-rise offices. Any Aggies on the call, like the Via Maria stuff or anything like that? Like if you're a mid-rise, five story on Via Maria, I got no answers for you. That is hard. I don't even know what you do with that. That's tough. But same thing like Addison or like any burbs, high rises like that, that's a whole different, I don't know. You probably gotta go full hotel with Cuban Casino on it or something. I don't know. So yeah, this idea is purely for urban. 

Andrew Kazlow: Henry, final thoughts for our listeners? Anything we didn't get to or that you're thinking about?  

Henry Talamantes: I think as an angel being an operator, multi-time operator as an angel, we can be a little kinder to the people pitching and whether that be an angel group or whatever. A lot of times I still run an operator trickles a lot, and a lot of times they're like, man, they just beat me down. [00:39:00] And that's not fair because it a lot, I guess it was going back to like our expertise. If there's some CPG brand talking about some fizzy soda, I'm not gonna say like, I bet that tastes like crap. I don't know anything about CPG. If you're not gonna be helpful, then don't crap on the guy, you know, putting his hard and soul on his sleeve.

If you're gonna be helpful and you can, be helpful, be helpful. But if not, just say like, this is not my wheelhouse. I pitched almost every group in Texas and a bunch outside of Texas and a lot of times angels, you know, they make time to go to those groups and they feel like they have to give feedback 'cause that's their job.

No, it's not your job. 'cause most of those concepts, you have no idea what the heck they're talking about. By saying stuff, you're giving them bad advice, you don't understand what technology they're talking about. So unless you know it, don't say anything. Unless you can be helpful, don't say anything because it's a grind.

I mean, being there and pitching week after week and just getting, crapped on so many times. It's the hardest thing I've ever done as an [00:40:00] entrepreneur. It's probably the hardest thing I've ever done in life. Pitching sucks. Be kind, be helpful.

If not, just say, I don't have anything constructive to say.

Andrew Kazlow: Well, Henry, with that, we will wrap. Thanks so much for joining me today and sharing your experience and wisdom with our community. I look forward very much to our 

next conversation. Thanks for listening to this episode of The Diligent Observer. I'm your host, Andrew, and if you're an angel investor looking for essential angel intel in five minutes every week, I think you'd enjoy my newsletter. I send my best stuff, interesting deals, and more straight to your inbox so you never miss a thing.

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