The Strategic Tech Stack for Modern Property Managers: Insights from Grant Drzyzga, Founder and CEO of Revela

Grant Drizzka: You can't really take a knife to a gunfight, or as I like to say, a knife to a nuclear weapons fight. There's no amount of paid search I can do to combat the sort of big incumbency bias in the space.

Jordan: Welcome to the episode of the Profitable Property Management Podcast. I'm here with Grant Drizzka of Revella. Good to be with you, man.

Grant Drizzka: Same here. Jordan, good to see you.

Jordan: Yeah, I appreciate you coming on. For those that don't know, let's start off with just a high level sketch about the company. Tell me what the company does.

Grant Drizzka: Sure. We're an enterprise property management software company with embedded lending and insurance programs. I started the company in 2014 out of my college apartment as a really spiteful response to a maintenance problem I had with my landlord. And the deeper I got, the more, uh, we kind of realized that the property management technology space is incredibly fragmented. But the lift to kind of build a product that everybody wanted is really heavy. So for the first 9.2 years of the business, my co founder John De Silva and I bootstrapped. So if you want to ask me any questions about that, I'm more than happy to dig into how fun that was. But yeah, following that, we raised a Series A last year from FirstMark Capital and a couple other strategic investors and have really started to pour gasoline on the fire. And we've grown basically 120% year over year since then. So it's been really fun. It's been awesome.

Jordan: Awesome.

Grant Drizzka: But yeah, we serve multifamily single family student housing. We do a little bit of commercial over the years of bootstrapping. And this is also something we can get into. We've picked up a bunch of just random stuff like we've got three government contracts, right. That helped us pay the bills while we were kind of building out the entire product footprint that we had to. So.

Jordan: Well, you started there and I'd love to follow through. Bootstrapping. The general perception is that, uh, a property accounting software is very capital intensive to build. It's viewed as there being a significant moat barrier to entry. And yet you bootstrapped. Tell me how that was feasible.

Grant Drizzka: Well, it's either time or money that you spend, so it is very capital intensive. So nine years is a very long time. We probably spent three and a half to four of that really trying to dial into the accounting side of things and do it correctly. And we didn't do it alone and we didn't do it in a vacuum. We worked very closely with early customers with large CPA firms that I won't name because I didn't ask permission to use their brand kind of coming into this. But yeah, we had a lot of I think help from the periphery and sort of what this product needed to look like or how it had to work and that was interesting. We got into the single family rental space on the, on the retail side and got introduced to this concept of trust accounting maybe in like 2019, which a lot of systems I think do but don't do necessarily correctly, which is sort of bled into this, you know, a larger landlord like let's use invitation homes as an example even though they self manage but a group like that has very different accounting needs, financial processes, reporting needs that, you know, the traditional trust accounting model doesn't really fit. And we worked I think another year of that, but another year of that in terms of just sort of getting that mix correctly, doing the back end kind of do tos and do froms on the balance sheet side of things to avoid a lot of the sort of downstream negative effects of setting up the uh, financial processes incorrectly. Which I think a lot of other systems didn't really do. Because you look at where most PMS's start, it's with one kind of slice of the market. Atfolio way back in the day started off with smaller sort of real estate agent type folks that were hey I want to start a property management company and I don't know how and they built really awesome workflow tools sort of around that to help those folks get off the ground. And accounting and sort of the financial process behind the scenes was a bit of an afterthought. Right. And I think now it's a forethought but the damage is sort of already done at this point. You can't really unwind from 1150 operating cash and that's just what the balance of the trust account should be. But it never really reconciles back to that. Right. We do so many implementations from other systems where those two things are out of sync or they aren't like triple tied out which is the industry term for it and there's reasons why but. But yeah. Hope that answers your question.

Jordan: I've heard a lot of entrepreneurs say if I knew how hard it was going to be I wouldn't have done it. You entered what is already somewhat crowded market that has a number of entrants into it. Aside from naivete in hindsight, how did you think about or, or what lessons do you have around and entering a market that already has a Meaningful amount of competition.

Grant Drizzka: Yeah, it's a really good question. It forced us to get creative because you can't really take a knife to a gunfight, or as I like to say, a knife to a nuclear weapons fight. There's no amount of paid search I can do to combat the sort of big incumbency bias in the space. So let's get really deep and look at the businesses that we're serving. Let's get in deep with our earliest customers, sit in their office. I mean, I can't tell you how many afternoons, evenings, whatever, I spent in actual customer offices with their leasing folks, with their accounting folks, talking to their customers, right? So their investors, their landlords, understanding all of their processes. And through that process, you learn a lot about what actually matters to the end user. So I think a big unlock for us was in 2021, we launched our commercial lending division internally. That was really a response to a situation that I ran into at, uh, one of my customers offices in Flint, Michigan. Beautiful place. If you've never been, you should definitely go check it out. But I was sitting at the front desk and one of their investors came in who owned 200 houses. And I'm like, this guy, he just got a, uh, $40,000 owner disbursement. He should be happy. And he was livid, right? Over a $50, like lock set change fee or whatever. They change the locks of the house. And this guy's just pissed.

Jordan: Owns 200 houses and he's, he's on, um, him for a $50 lock set.

Grant Drizzka: Yeah. And I'm like, what's going on? Right. And so I came to find out later on that what we didn't know is he had a 15% hard money loan from a loan shark in Las Vegas that he used to purchase those homes. So every penny counted. So the first deal we ever did with our lending company was refiing that investor out of that loan. He ended up pulling out 750,000 bucks in cash to himself, paid off, the loan shark got into a, uh, 80% LTV, you know, at a below 4% at that time because it was before rates went crazy. So he's doing very well right now. But this interesting thing happened where he took that 750 grand and just put it into more assets, right? Which increased the doors under management for our customer, which really delighted everybody. So we started to think after that a lot more about what the end user, the landlord, the investor, both large and small, really care about and want. And that's, I think, what really has Helped kind of push us through the doldrums of trying to compete with these really big entrenched companies.

Jordan: Differentiation, I haven't heard of anybody else doing that. Can you just, just say a little bit more about the product offering?

Grant Drizzka: Sure, yeah. I mean, so from a PMS perspective, it's leasing, it's maintenance, it's project management, CRM database. The lending products that we have are, you know, that we started off in mortgage. So both the debt service coverage ratio, which would be like the equivalent of a 30 year fixed rate mortgage to a buy in property. We also do a ton of bridge right now. So when the rate environment changed, DSCR pretty much dried up entirely. Um, most of our business when we started it was like 60, 40 DSCR to bridge. Now it's like 80, 20 bridge, right. And DSCR is coming back. But when rates are super high, the only place you can squeeze out any value in an investment is on value add. So fix and flips, fix and holds, things like that. Since then, uh, since we raised our series a year ago, we've gotten into unsecured lending as well. So lending based off of cash flow. One of those products that we're really excited about is working capital lines of credit for both landlords and property management companies that are written or underwritten off of revenue top line. So that can give you 2x, 3x, 4x or 5x of whatever your top line is, depending on the credit quality of the borrower. And that sort of replaces the typical float that property management companies have to deal with. So um, I mean you're obviously in this space and know the business very well, but what ends up happening is, you know, rents collected between the 1st and the 5th, the owner gets their money by the 10th, the 12th, of course, something breaks and instead of asking the owner for the money that they just sent them back, the property management company pays out of pocket for whatever the repair happens to be and they eat that, whatever 20 days of the rest of the month and sort of having a 0% interest short term loan out there. This product eliminates that. Because what we've seen in the data over time is if you do that once, you end up doing that 10 times and 50 times, then 100 times as a management company and it just whittles away at your available cash to actually operate and grow your business. So that we're really excited about. We think it's going to be a game changer for the market. Same thing with landlords. You know, a lot of people put off doing necessary Repairs because they don't want to pay out of pocket because it's going to make the P and L very lumpy. And that's not good for anybody. You've got mortgage payments, insurance payments, all that good stuff. So this, this product really allows you to sort of smooth out those cash, that operating cash flow issue and drive, you know, better results for, for everybody involved.

Jordan: These debt product lines. Was this pure play response to a problem? You see a problem, you try and fix it, or did you guys have any background that disposed you to being more able to figure out how to get the service providers and vendors in place to enable that?

Grant Drizzka: That's problem solution, problem solution. So a lot of time, effort, energy and thought kind of went into how do we put this together in a way that makes sense for the end user. But yeah, I mean, my background, I was a philosophy major in college. So I always say that that's the study of systems. And ultimately this is a system and that happens to be the lifeblood of real estate, right? From the very biggest operators all the way down to the guy that's buying his first asset. Debt is sort of the most important thing to both understand and use correctly in order to build a big real estate portfolio. And you see that, I mean, with the biggest operators, right, they, they buy something, they put a certain amount of equity into it. It might be 20%, it might be 15%, it might be whatever, whatever ratio. And they bank on appreciation kind of continuing to increase in the assets value. So every, you pull cash out, you refi, you do necessary improvements and the asset basically pays for itself over time. As long as your cash flow stays in line, meaning your mortgage rates don't materially change or your PNC insurance doesn't materially change, you stay at around the same place and it sort of takes care of itself, which is why you see, you know, really, really big multifamily companies and the 80 to 100,000 units under management are owned where they don't really have real problems. Right. They're clipping along really nicely because they've got that sort of system down. The last couple years, I think, have been challenging for that, especially for real estate syndicators trying to build a portfolio because the rate environment's been so crazy and asset prices have been equally as high.

Jordan: What are you seeing evolving in the industry? You've been in it long enough to have seen an arc of shift and change. I certainly have and I've seen some acceleration over the last, let's say, four, five years. There's been a little bit more opening up in the ecosystem. There's been more capital coming in, there's been more product offerings and therefore a uh, more fragmented, diverse, urgent tech stack for folks to actually use day to day. What do you see as the biggest trends of shift within the proptech ecosystem that serves this industry?

Grant Drizzka: So I'm going to answer that in two parts. The first is I'm seeing a big change in what the average real estate investor looks like and cares about. There is a uh, professionalization I think happening in folks that are buying particular asset classes that didn't exist before. So an example of that is like the single family rental. Obviously there's been a huge influx of institutional capital into that asset class, specifically in certain regions. But there are a lot more entrants and a lot more professional investors that are coming in that have fundamentally different needs from a data perspective and from a reporting perspective than the retail SFR investors of old. So that's, I think thing one, thing two, from a technology perspective it is still super fragmented and I think with this new sort of AI boom in the space, it's going to continue to be fragmented as a clear winner is determined in what AI is actually going to be and what actually drives value for businesses. I think we're still very much in the early, uh, exploratory phases of what that's going to look like. Some thoughts there. I think that benchmarking and actually looking at data. So the machine learning side of AI. So AI really in my brain collects all of the data or generates a lot of the data. Machine learning really looks at that data and tries to elucidate trends or use benchmarking to figure out sort of what's real and what's not. I think the ML, um side of that is way more valuable especially for larger operations. Operations then the chat bot, back and forth like do you want to see this apartment? Do you not want to see this apartment? When do you want to see it? Blah, blah, blah. So I think that that's one thing that we'll see probably over the next two years. Very clear winners and losers. I mean it's already sort of happening and TRADA just bought Colleen Elise is growing like crazy at the top end in the multifamily space. We work with a couple of really cool up and coming companies, Inspector AI is one of them, that does maintenance triage work. We have an integration with mesa, which is also really cool, that does triage through a chatbot service. So there's lots of cool things in There I think ultimately the market's going to decide first and foremost how they want to be billed for these things. There's a lot of different models out there and I think people are kind of rejecting the per unit per month that has pervaded the space and sort of every other area of technology. They want, uh, simplicity from what we're seeing. They want one group, either the PMS or whatever the core system is that they're using to run their business, to sort of give them a marketplace of options that they can pick from to experiment with all of these different things. They don't necessarily want to go alone and buy whatever the software package is, figure out how to do the integration and then kind of roll from there. Does that make sense?

Jordan: They're certainly looking for a very deep level of integration that absolutely transcends the idea of an API. People don't want API, they want an end state outcome that is simple, easy to use and seamless in nature. That certainly is the trend that I'm seeing. My observation about AI is but for whatever reason it makes me think a lot about what just happened recently with crypto. You had a concept, an idea that somewhat actually quite technical in nature, generate a lot of hysteria, a lot of interest, and it's something that the broader populace was forced to engage with even with a very low level of understanding of the actual underlying technology. That seems to be what's happening with AI. Now the question is what will the actual impact of the technology be? And I would argue that the impact of AI is going to much greater than what was achieved with blockchain. That said, for the everyday consumer that's thinking about a, almost has like a low level guilt trip of like man, AI. I really should be doing something, something with that. What is your take on how practical this is for small business owners that are hearing about it nonstop, but are really unclear to the degree to which they should actually be leveraging this in their business?

Grant Drizzka: Yeah, it's a really good question. I mean, you run a software company, I run a software company. It's impossible to go to any conference right now without there at least being six panels about like the impact, transformative nature of AI in this space. And frankly we haven't seen it yet. Again, we're just scratching the surface on sort of what's possible here. And I believe that every one of these companies and every one of these programs is still so much in their infancy that it's impossible to say what the impact's going to be or what it's not going to be at this point. I think at the end of the day, broadly speaking, we can't continue as software providers in the space to take this sort of consulting view of this is what the business looks like today. If we put AI here, we can eliminate all of these things because transformational change doesn't happen like that. It's not this big bang moment. And all of a sudden every property management company is being run by chatbots, right? There is a learning period, there's a transitional period, there's an implementation period. And generally speaking, the more thoughtful the implementation of any kind of technology, the better the results are going to be. So I think this mad rush into we have to do something with AI, we have to slap AI on everything. I mean, there was that story from a few years ago, I don't know if you caught it, but there was a Lemonade company that was trying to go public during COVID I and they just like changed their domain name to Lemonade AI or something like that and a bunch of people just ran to invest money into it.

Jordan: I heard that story about blockchain, about a company that slapped block. I mean, that's what I'm getting at, right? Like there's some hysteria around it right now. It's unclear what the actual impact will be, but it is creating some paranoia, uh, in the marketplace. There's not a lot of nuance or segmentation in the conversation. As I think about what's at play here, one of the questions is who will own the data that the models will be built on? Top of assumption is that the data will be the differentiator, that the models are broadly available. There's a lot of models that can be used, but the training on the data is supposed to be the alpha, right? The idea is that if you have a high enough quality of data and you're focused on a narrow enough use case that will allow you to achieve some kind of incremental gain over generic model. The question is, who does that data belong to? What are your thoughts on data ownership, data privacy?

Grant Drizzka: I'm actually really glad you brought this up because I have a lot of thoughts on this and I think especially in the wake of the RealPage settlement with the government over price fixing allegations and all of that stuff, what these big companies or what companies like us, even that are not quite as big as RealPage, we have I think a, uh, responsibility to be stewards of that data. And your customer data is your customer data, end of sentence, period. Done. They can do whatever they want with that. Data AI in general needs to be siloed customer by customer and not used to extrapolate anything further than that beyond just what's possible within each one of these managed portfolios. There is an argument to be made that benchmarking expenses with AI across different customers in the same market is of value. But it'd have to be massively anonymized for it to not get super corrupt super quickly in the same way that the price fixing happened with all of the different folks that were using Real Page's revenue management software. Right. It's easy to collude when you're the single source of data in a market. You don't even know you're doing it

Jordan: and you do it for those that don't know. Could you just unpack the Real Manage price fixing story?

Grant Drizzka: Sure, yeah. So there was a revenue management product that RealPage came out with that was, uh, largely thought of as sort of the best in the business. Um, and what it did was it priced apartment units in real time against market data. Now the challenge or the issue that ended up being uncovered was a lot of that data was generated by RealPage, owned by RealPage. And all of a sudden all of these big operators in Atlanta as an example, were just getting incrementally more and more and more price increases because RealPage was the only voice in the room setting those prices. So it just kind of got out of control really quickly. I think from an operations perspective, you can't really blame the property management companies for doing what the system told them to do. But that's just an example of where again, algorithmic pricing or market based pricing when you're the market is a challenge. Does that make sense?

Jordan: Yeah. Yeah. The idea of the market involves disparate actors that don't have a common interest pursuing their own interest that in general benefits everybody. But when you have one central entity acting as the market, it kind of breaks that fundamental definition.

Grant Drizzka: That's why monopolies are generally a bad idea.

Speaker C: Mhm.

Grant Drizzka: Right.

Jordan: Yeah, I could see that this is

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Jordan: more relating that to the AI uh conversation. This question of ownership and who owns the data set, the bigger the data set, the more leverage there is to be gained to actually train the model on. And that's what seems opaque to me, is who really owns the data. They say possession is 9/10 of the law. And, and most SMB owners in terms of owning their data. If you said ownership was like having it, they're having it is very ethereal. There's no data lake, there's no etl. I mean it is owned by another entity that may or may or may not have a terms of service agreement. That feels satisfactory, but it seems murky to me at best.

Grant Drizzka: No, you're totally right. I think in all of our implementations of AI, uh, or partnerships with different companies that are providing this, we've been very, very, very, very thoughtful about how we structure those agreements and what data can be used for and what it can't be. So for example, like we ask as Revella for audit rights to whatever the data is so we can see it on a customer by customer basis. We're trying to sit in the middle of that. I don't want to use it for anything in particular, but I want to make sure that this, that my customer's data or the data that we're helping these companies aggregate to train these models isn't being used to build this big brick wall between everyone that's in the market and all of these AI companies that are then going to take that and use it for something else. So all we can do I think at this point as an industry is watch it, be as careful as we possibly can be, really kind of hang on those. We need to make sure that whatever you're doing with this isn't nefarious, I think is the wrong word because I think everyone's heart's in the right spot. But this stuff can get really out of control really quickly if we as an industry don't kind of keep our eyes on, on it.

Jordan: Let's Talk a little bit about how property management software makes money. There's obviously a subscription component, there's a variety of other components. If you look at the publicly traded entities, you can see quite clearly that the subscription revenue that uh, a uh, property manager is paying them is a minority of where revenues are coming from. If you were going to talk a little bit and kind of slice out in general as a category how property management softwares make money, how would you break that out?

Grant Drizzka: Yeah, I think that there's, there's obviously the per unit per month software licensing fee. I think if I know the company you're talking about, most of their revenue comes from payments and insurance at this point. That's not uncommon. Uh, there's a lot of, I think short term profit in selling insurance. I mean we do that as well. Our mix is a little bit different because of the lending component of what we do. So we're still probably a 50% software licensing revenue shop with different kind of lines within that. Uh, so tenant screening might be a piece of that. Uh, payments we would consider a piece of that. We uh, have other sort of enabled services like collections automation, tenant follow up automation, all that kind of good stuff which you can add to kind of the base package if you don't want to do all of that extra work or hire more people to do all that extra work. I think the gap currently is a lot of these, you know, services that are embedded into these larger packages aren't really accretive uh, in any way to the property manager. Meaning there's not like a win win there. Right? Oh, you want to accept payments, it's another $1.50 per unit per month. Which I think is a little bit, you know, know, crazy at this point. Which is why we like the lending space, you know, lending money. I mean we certainly make our fees on that. We tend to share those fees with the property management companies back as another kind of revenue line for them because there's plenty of margin to go around. I mean lending in General is a 60% gross margin business. I don't have to make all of that. In fact, I'd rather give it back or give a portion of it back to our customer base to allow them to go and again grow their business.

Jordan: So that's helpful. This is a good segue. I'd love to talk a little bit about the concept of capture. Capture is basically just the idea that um, you have a captive audience capture. The idea of $10 airport water.

Grant Drizzka: Right.

Jordan: Why is it $10? Because you don't have any alternatives. That's it. Now, I chose to go to the airport, I chose to get on that plane flight, and I knew that the water was going to be $10. And so it's absolutely volitional. Nonetheless, I see two interesting areas related to capture. One is the tax tenant fees related to the tenant. There's capture there. Innovation in that space has largely been piggybacking off of the lease. It would be a, uh, completely different picture if you were talking about deconstructed purely voluntary offerings. That's a different category. Innovation in tenant facing fees has been a function of the fact that it's built and baked into the lease. That's one example. The other example, um, is with the property managers in the property management software ecosystem. In general, this ecosystem has been very resistant to opening up. It's taken a long time. My recollection was that, let's say 2022 was the year where there was like a lot of innovation and openness, which is crazy that it took that long. However, um, what I notice is that larger players have gravity and they leverage that gravity in a way that advantages them and in theory is beneficial to their clients. What do you see in terms of how this concept of capture plays itself out? And obviously none of this is unique to property management, but what do you see in that area?

Grant Drizzka: Yeah, I think it's a good question and I'll answer it in a paragraph as opposed to a, uh, straight up answer, because that's what I like to do, apparently. But the way we think about this, and you're spot on with the resident side of the equation, there's been a lot of products and companies that have come into the space and done a great job of monetizing resident benefits. Renters, insurance, pest control, all of these great things that are very value added for the resident and I would say, like, are accretive, right? The owner has largely been ignored in all of that. There's no such thing as an owner benefits package that trails off from a management contract or anything like that. But I think the reason for that is typical property management companies are responsible for like noi, right? They know about the opex, they know about the top line, they know about kind of that entire universe. And when you get into anything below the line, it's sort of a mystery. It's a black box. Now, some management companies pay insurance premiums for their owners, so they know what that expense line is. But generally speaking, to go back to something I said earlier about debt being the lifeblood of real estate, most PMCs don't know what the monthly carrying cost of these assets is. So in that example I gave about the gentleman in flint with the 200 houses, we had no idea it was actually 45k a month in interest he had to pay. Right. So we thought sending 40 was a great win for him. Right. So a lot of what we've tried to focus over the last three years on doing is how do we complete the picture of how each of these owners is operating marketing intelligently and accretively. I keep saying the word accretive. It's just, you know, win, win, right? So we built this little, uh, tool in the owner portal that we call the Property and Analyzer. Basically. So you type in all the information about how you purchased it, when you purchased, what the rate on your mortgage is, all that good stuff. We take that data and then if we can get you a better deal in the software, we offer it to you. It's like, okay, cool, you're paying 8% on, um, this home. Um, I can get you 6, 3, 4. Do you want to do this, yes or no? And then someone from our team reaches out. So it's little things like that. And that actually, like, adds this sort of. You know, there's always been this conversation in the space about, you know, the transition from property management to asset management. Since I've been in the space, that's been like the last six years. And everyone says that, you know, we have to become asset managers, but I don't think anyone's ever really dug into what that means or what that functional shift in thinking looks like. And the way I like to describe it to people is like, when you're a property manager, yes, you're responsible for that noi number and that's super, super important. But at the end of the day, that's half the picture, right? When you transition to being an asset manager, you're really talking about being an investment advisor for your customers. Looking at the below the line things, looking at the balance sheet, which is something most PMCs really don't want to do because it's accounting. It's scary, it's stupid, I hate it. I'd rather go out and do something else. But that's really where this game is won and lost is in those big expense lines. Generally, 40% of all of the expense that you pay for an asset, uh, goes into debt service and insurance. And most of the time PMCs don't know what those two numbers are. Long way of answering the question, but I hope that's Helpful.

Jordan: Yeah, it is helpful because it does make me think a lot about the degree to which property managers are attuned to NOI and the bottom line outcomes that you're articulating. And I think there's a lot of improvement for the room, particularly on the retail side. When you're catering to a customer that is not fully attuned to that, you may not be fully attuned to it. When you're catering to an enterprise and institutional, you are obviously attuned to it. It's their bread and butter. So I see a lot of room for growth there. My question about, uh, back to my question about capture. One of the things I wanted to ask was how Rivella is or is not different than the broad trend to be less open, more protectionist in nature. Like what are you guys doing to kind of advance the broad need for integrations and openness to kind of foster the ecosystem long term?

Grant Drizzka: Yeah, that's a good question. I mean we like most other systems have an API. I'd say the difference between us and others is it's totally open and free. So if you as another marketplace vendor wants to come in and integrate with us, we have a forward data engineer. You work with our team directly. We build an integration. I like to call it like running a relay race. Every software integration is running a relay race. It starts someplace. The baton is handed off at someplace else and then whoever carries it across the finish line, line everyone has to mutually agree on. I think where integrations are won and lost is in responsibility and planning. If you've got, for example, Salesforce you're using to underwrite, you know, new investment opportunities and ultimately all that data gets collected in Salesforce gets sent to a system like us. We have to decide at what point like those two things like who's the single source of truth. Right. We don't want to fight with Salesforce about the square footage number back on forth because our API is just going to say it's, it's 1,200. They're going to say it's 1205 and it's not really productive for anybody. Right. But yeah, in terms of the, in the openness component, if you want to work with us, reach out to us. I mean we have a list about a mile and a half long of integrations we're planning on doing. But if there's technical capacity on the other side, we'll just give you our docs and then check it and you can kind of go from there. So right now we're working on five different things concurrently. The other side of capture that I forgot to mention that you might find interesting is we actually just launched an embedded banking product, meaning you can use Revella as your bank account now. So for both property management companies and owners, we're not doing the tenant side of things. It's an entirely different side of licensing and regulation. But getting everybody on the same sort of banking platform is really, really interesting from a data perspective. And we just rolled this out in July. But the PMC can basically frictionlessly transfer money to their owner. So instead of it actually hitting the ACH network, IT bank or uh, IT book transfers from one account to the other. So it's instant and you get access to that money immediately with what kind of transaction fee? 0. Totally free. Which like we think is pretty game changing in the space considering everyone else is going in the other direction. There's ways that we make money off of that outside, uh, of just charging for a payment processing fee. It's mainly holding those deposits like the same way a bank makes money. Right, right. So then the flip side of that is also embedded spend management. So I have in my pocket one of our charge cards which you can get, which is basically like an integrated credit card to the Revella ecosystem. So think of it like RAMP for property management companies. If you're familiar with ramp or any of those sort of spend management companies. Yeah. So we built that into the experience for both PMCs and the owners themselves. So now management companies can see, hey, my owner has this much in cash. Not just the cash I think he has. Right. Or he has this much in credit and the owner can decide how he wants to pay for whatever repairs come up, et cetera, et cetera.

Jordan: So I love that you're taking a full stack approach here. That's really interesting. Going straight to the metal, solving problems. Back to what you said about the integration ecosystem. Um, here's my observation. I see basically a ladder or a hierarchy that is typically missed when people talk about integrations. As I said before, people say they want to API, they don't want an API, they just want to uh. It works. Integration, back and forth. The latter I see is no integration. Calling a. Picking a couple of vendors and building an integration. But there's no openness. You just, you pick these three vendors and you integrated with them. Above that, a really locked down ecosystem where you're still picking the vendors, but in theory they can apply. But the endpoint coverage is very limited and it's a very protectionist stance. Above that A fully open ecosystem that's not very well documented. You have access to everything but you ain't really supported in it. Above that is a fully open, well documented partnership where the two entities are working together to work through the integration issues. My observation is we have integrations with multiple vendors. It is not as easy as hooking it up. This is a highly interactive environment. You have data going back and forth and on the basis of the data transfer, emails, automations are happening, going to tenants, going to um, owners. The margin for error here is very low and there's a fair bit of work required. There really has to be dual mutual investment. Am I missing anything? Do you see something similar on this kind of ladder of optionality?

Grant Drizzka: No, I think you're spot on. And it goes back to that relay race analogy I like to give. Everyone has to play their role and do their part as well as it's the same thing as a football team. Right. If the blockers don't block. Right? Right. You're not going to get very far down the field. Right. If the quarterback can't throw the ball or has no time to throw the ball, you're not going to score any points. So yes, it has to be a mutual kind of partnership in the sense that we have to agree on how this is going to work between the two companies and what problem we're trying to solve for the end user and be very, very clear about that from kind of the jump. Right. So this is my universe, this is your universe. This is where we intersect and this is where we think we can add the most value in working together together for our uh, shared set of clients. And I think that what you said at the top of that ladder is absolutely correct. As you do have to work together as in a partnership. It kind of goes back to the, the old like anarchy versus order type thing. Right. And perfect anarchy is perfectly imperfect and perfect order is also perfectly imperfect. They're the worst. It's fascism and you know, whatever the other communism or whatever, they're, you know, totally opposite ends of the spectrum. From a command control perspective, we have to land I think someplace in the middle. And I think my bias is someplace more towards openness because again, like I don't want to crow out as a soft, like we have a little over 200,000 units on our platform right now. It took a very long time for us to get to that level. It's a grind, it's a ground and pound type game. I don't want to cut out smaller participants from working with Us, especially if they have new and innovative products because they don't have XYZ type thing or they're not going to pay us to play or anything like that that you see kind of at the upper end of the market with property management software systems. So. So like I said, if you want to integrate with us, we're certainly going to approve the integration. From a security perspective, I's have to be dotted, D's have to be crossed, boxes have to be checked in order to make sure that we're not a leaky sieve of data for our customers or uh, that we avoid all of those sort of downstream issues that we talked about before with who owns the data. With AI, all of that has to be clearly spelled out. But if you want to work with us, I think that ultimately we have this Revella Labs concept internally where that's all of the sort of frontier stuff that we're working on. And most of that right now is integration work with other companies. While we get to the point where we feel comfortable allowing this to go to market or getting it in front of our customers, it sort of sits in the sort of Labs concept where we go back and forth, we work through it together and that's why we invested in that forward data engineer that I mentioned. So that's an entire practice that's being built out at our company right now. It's been great so far and we plan on investing on it more into the future.

Jordan: I love that that's a really progressive take back to the question of data ownership. What do you see when folks are moving between one PAs than another? When somebody is coming to work in your ecosystem? What is the quality and fidelity of the data they're able to bring with them from wherever they're leaving?

Grant Drizzka: That is a system by system thing. Some are certainly better than others. I think if you asked my implementation team, which softwares do you like converting folks from the most, they would probably say Yardi, because our data structure is, I think, more in line with Yardi's understanding and worldview, especially from an accounting perspective. The worst are kind of these smaller, more direct to landlord style companies. I'm not going to name any names because I said the worst in front of that. Right. But there's always some kind of a data problem and usually it's something that people don't know or that they know exists but don't really know how to diagnose or triage. So part of the implementation process for us is let's clean that up, let's get to good, let's figure out out a good starting point where everyone agrees that this is the current state of the world and then we build on top of that. Right? So the data in and of itself, like yes, in most cases, nine times out of 10, it's terrible and incorrect because of bad business processes or bad sort of software configuration from the jump, like really like year two of any kind of software rollout is won or lost based on what you do in the implementation phase and how you understand that business. So we take a lot of time on a client by client basis to really get to know sort of what they're doing, who their customers are, what the customer's expectations are of the property management company. And if we have to make within the environment multiple configurations, uh, depending on the needs of those customers, either from a reporting perspective, from an operations perspective, we have some owners that work with some of our clients that want to approve every bill before it gets paid. We have other ones that don't care. We have some that want to use our data infrastructure and reporting to pull down own operational data and financial data in real time on a daily basis to their power BI or their domo or whatever system that they have. We have others that are like, just send me my check and I don't care, I don't want to hear from you. Right. So there's this broad mix of people and especially kind of going back to that professionalization of the real estate investor comment I made earlier, it's becoming more and more prevalent that the landlord or the owner in this ecosystem wants to be more involved, wants a deeper level of understanding. So finding that that right mix from the jump is incredibly important because it's really hard to go backwards. It's really hard to take an operating business and then kind of siphon off or slice off pieces of it to work differently. If you don't start with kind of the entire landscape of what you're going to have to do downstream, that makes sense.

Jordan: It does make sense. Thinking now about with the momentum that you've had, can you talk to me about the decision to take institutional capital? What led up to that and what made it obvious that that was the right next step for you guys?

Grant Drizzka: The simple answer to that is we got a contract that was too big for us to service, so we just had to bite the bullet and do it and kind of build a company around a product. So I think from the jump we've had a good product because we spent a long time building it. We had really like one Foundational engineer work on most of it. So this is really like, not, this guy wrote this part, this guy wrote this part, this guy wrote this part. And we have to sort of figure out where all these things came together. We were sort of in the opposite boat. And in that way our story is really strange because not a lot of companies kind of build and kind of grow like that. So we started with this good foundation and product. Then we had to build a company and infrastructure around it. And so big part of that is getting finance folks in place, a sales team that's not just me kind of running to conferences and sitting at the bar and doing what I do best, a support infrastructure, implementation infrastructure. We knew what we had to build because we'd spent so much time building it, and there were just so many clear gaps. And the baton passes internally between, hey, we signed a customer. What happens next? So traditionally, when you're bootstrapping to go back into that whole line of conversation, you boom and bust a lot. So you'll go and you'll sign a bunch of contracts, then you get into fulfillment mode. So you get behind on set. Exactly. So having that infrastructure, kind of building that kind of machinery around the product was really what all of that money was used for. And then also investing in these newer embedded financial products. Those are not cheap to build. Earlier this year, there was a huge regulatory kind of collapse on the, uh, banking as a service industry. And I think we got in while the getting was good and we're able to build. We were still three months behind on delivery because of the regulatory issues and all that good stuff. Having a bunch of money on the balance sheet is really helpful, especially when you're making those big bets and you're trying to build, I think, innovative and new products in the space. So, yeah, that was why. And that was been the results of the capital raise.

Jordan: How did you think about finding the right capital partners?

Speaker C: Partner?

Grant Drizzka: That's a really good question. So for anyone that's out there, that's in an active fundraising process, who you choose to let into your cap table is like where the business is ultimately made or broken. If you have one bad investor or one bad board member, it can crush your entire business and you'll be dead before you even launch. So we met firstmark Capital, who led our Series A very organically. So I was reaching out. We were talking to fellow Brown alumni, and I called this guy that I knew and he was roommates with Adam Nelson, who was a partner at firstmark and eventually led our Series A and Joined our board. So it was very organic. We went through eight months of due diligence with them. They flew out to Detroit twice, we flew to New York twice, pitched to their ic. Once we had the term sheet signed, then it was filling out the rest of the round. So the way that these transactions tend to work is you've got a lead investor but then there's going to be follow on investors that all have some sort of nice little strategic additive value. Right. So in our series A first Mark let it second largest check was Detroit Venture Partners which is Dan Gilbert's family office. So to augment sort of our lending practice, working with Rocket Mortgage is sort of the best group that you can work with on that side of things. Third was Metaprop, so you've probably heard of them in the space. Zach Aarons and Aaron Block wrote the book on PropTech, literally. So PropTech101. So they've been great to work with. And then from an institutional side, Assurant Ventures, part of the big Assurant insurance company rounded out our round. But again they help us on our insurance strategy. Metaprop helps us kind of on the general prop tech zeitgeist and ethos and what's going on in the market. Rocket's there for lending and then first Mark's there because they've hit multiple home runs over time and that's the kind of group you want advising you on whatever you want the outcome to be. For us we've always wanted to be a publicly traded company. Getting on the pathway to do that and finding the right capital partners to help you do that is a paramount importance. So don't just take the check, right? Um, take the check from reputable people that have done it before or that have the backing to do it before that genuinely understand the business and are looking for something beyond a financial return.

Jordan: Eight months of due diligence. I'm surprised you don't have more gray hair.

Grant Drizzka: Well thanks mom and dad good genes on that one.

Jordan: This has been great. I've enjoyed this conversation. I want to end it with this one question. If you could ask every self managing landlord in America one question, what would it be?

Grant Drizzka: Why? No, I think that the big thing that I really want to understand about that sort of new entrant market or first time investor market is really where do you want to take this? Is this just sort of a side project? Do you want to turn this into an actual business? Right. And I think a lot of folks that are sort of sitting in that chair are kind of in between those two pathways, right? Is this a side hustle? Is this my full time thing? How do I turn this into my full time thing? So the question I would ask ask is what's stopping you from taking that full leap into making this your full time thing?

Jordan: Dig it. Dig it man. Hey, this has been great rooting for you brother.

Grant Drizzka: Appreciate it man. You too.

Jordan: Until next time.

Grant Drizzka: Sounds good.

Jordan: That's it for this episode. Hope you enjoyed it. You can check out other episodes along the way. If you're watching this on YouTube, appreciate a subscribe Any comments? I'm always here to engage. If you're listening on an audio platform, we really appreciate a review. It's a great way to help other people find out about the show.