Keeping it Real with Real Estate Investing

As an entrepreneur educated and experienced in both Electronic and Electrical Engineering, Sai Mudigonda looks at the world with an eye toward solving problems. To an engineer like Sai, questioning a problem and seeking answers often points to the obvious – so obvious that the problem may not register to the untrained eye.

“I was taking my son around to different after school activities and started observing that there were a number of real estate properties becoming available, perhaps due to bankruptcy or just going out of business,” said Sai. “I started analyzing the details and saw that it was mostly due to the global boom in e-commerce. There was so much real estate already suddenly irrelevant in the market. And I thought, ‘I think I should do something about this.’”

Sai first explored establishing contracts with small business owners to take over the existing real estate spaces large entities were vacating. But the process would drag on.

After a brainstorming session with a friend and fellow engineer and a licensed real estate agent, Sai honed in on the idea that the transaction could be more like a cooperative where multiple “owners” could invest in a real estate property.

“The idea of having a real estate company was really about wanting to see how the real estate deal closing could be expedited. Generally, it takes a long time to close and during that time, the real estate investment is illiquid [meaning not enough cash flow to meet debts]. If someone has a $5 Million property, they cannot just walk away if they need money,” he said.

That thought process led Sai to realize there weren’t many options for non-accredited investors to invest in real estate. To be an accredited investor in the U.S. market requires having a net worth of at least $1 Million, without counting your primary residence, or a minimum $200,000 annual income for each of the previous two years, among other stipulations.

But Sai knew that the passage of the Jumpstart Our Business Startups (JOBS) Act in 2012 eased securities regulations and opened the potential of online crowdfunding for real estate investment. He realized that Blockchain, today’s highly-secure distributed computing system, would enable a faster, more efficient means to facilitate such a real estate crowdfunding initiative.

That’s where his new platform, Real Bit$, comes in. The Real Bit$ prototype is similar to any other crowdfunding campaign except that the investment goes into ownership of a real estate property on offer. And it is built on Blockchain.

Said Sai, “Right now, bitcoin and cryptocurrency get all the attention when you hear about Blockchain. But bitcoin is just one currency. There are millions of dollars changing hands in the crypto market right now. When that market goes bust, there will be many people holding crypto that has little value. The idea is to promote that economic value by diverting your funds into physical, tangible assets, such as crowdfunded real estate.”

He added, “For the Millennial market, in particular, this is an appealing way to get into real estate investing. Millennials don’t do real estate, Baby Boomers invest in real estate. But Millennials do crowdfunding and they do crypto. The idea of Real Bit$ is to give the Millennial a taste of the real estate industry through a channel that is already known to them.”

Another aspect of the appeal for Millennials is the opportunity to assist areas devastated by natural disasters. Sai aims to help rebuild these areas by focusing investments on building energy-efficient, sustainable, near Net-Zero, carbon neutral homes so devastated communities can become self-reliant, resilient and environmentally-friendly.

Putting his prior entrepreneurial, corporate and engineering expertise to work has inspired Sai to pursue the Real Bit$ platform.  He recently presented at 1 Million Cups Charlotte’s think tank gathering, which welcomes startup presenters from concept through their first three years. Sai welcomes the additional feedback.

“The past six months have been a huge learning curve and there is still more to learn. Being an entrepreneur, you realize very quickly that it’s not a cake walk. But there are numerous opportunities to learn. And I want to leave a legacy that makes this world a little better if I can.”

Tech exec turned VC bets on entrepreneur motivations

“I was already CEO of a software startup when the idea of GetApp came up. We were developing a software encryption technology that was pioneering blockchain. I knew we were too early in the market, but there was interest from innovative prospects. My main issue was distribution.

The traditional software distribution channels didn’t work for innovative solutions. Established VARs [value-added resellers] or distributors would not be interested and my prospects were not using them anyway to source new solutions. I realized that this issue would increase because the number of SaaS [software-as-a-service] products and SMB clients would grow exponentially thanks to easy access to the cloud infrastructure and development platform. A new platform was needed to match our offer and demand.”

French-native Christophe Primault turned his intuitive market insight into a successful company which he sold to Gartner in 2015, six years after launch. Today, he is a part-time venture capitalist keeping an eye out for the next high-opportunity B2B technology startup. Getting to this point was a journey that many entrepreneurs dream of, but few realize.

Leaving a successful corporate career, Christophe was ready for a lifestyle change. He moved from high-stress London to the Barcelona seaside. While beautiful Barcelona offered the lifestyle he desired, there were few corporate opportunities. Barcelona did, however, have an embryonic entrepreneurial community.

Still, embracing a full-on startup opportunity is not without its challenges.

“The biggest challenge was to adapt to the startup rules. Even if you have big responsibilities in a corporate environment, it won’t prepare you for startup reality. In a big company, you can rely on the brand, on business inertia, on colleagues from all the different functions needed to run a business. When you start a company for the first time, you are on your own.

Fortunately, I started the business with a very complementary partner. Although he was in a similar situation, at least each of us only had half of the things to learn and we had someone to talk to. I don’t think I could have succeeded without the right business partner.”

Christophe attributes their success, in part, to robust execution by two business partners who understood how to complement each other and successfully hire a strong core team.

“My main strength was the ability to read the market. I did some research to understand how the SaaS market would shape up in the near future and talked to many industry actors to validate my assumptions. Once it was clear that the opportunity was there and it was the right time to build the startup, the next key success factor was execution. This is where my business partner brought a lot of strength to the picture.”

While there are often-told stories of serial entrepreneurs entering the market with the idea to sell and exit, Christophe took a more hybrid approach.

“I am not a serial entrepreneur but I was also not interested in building and holding a company forever. I would more describe myself as a one-off opportunist. I saw an opportunity and decided to take a chance at it. There is no shame in acting this way, in fact I believe we should stop glorifying so-called serial entrepreneurs who go and stop with businesses.

Very few of us are able to do that. Those who can are truly talented people and I admire them but I have also seen many painful situations of people losing everything. The human cost of that is very sad and scary. Novice entrepreneurs should know that it is okay to start a business with the intent of reselling it in a few years and that there is a lot room between unicorns, lifestyle businesses and failures.”

Christophe also offers keen insight on the funding process, acknowledging that what worked for him may or may not work for others. GetApp was primarily bootstrapped, raising a small external round to make an acquisition.

“We had the opportunity to raise a large round with a Silicon Valley VC but we decided that we would turn it down and grow the business until we had an opportunity to make a good exit. Retrospectively, it was the right choice for us due to our motivations. But I understand and respect that many other entrepreneurs would have never turned down such amazing opportunity to be an ever bigger company.

There are some side benefits in having a good professional investor on board. They force you to have a clean legal and financial house, which is critical to grow your company in a healthy way but also to sell, especially if your buyer is listed on a US stock exchange. They also help you make the critical decisions.”

In his role with Elaia Partners, Christophe is resolute about fully understanding the real motivations of the entrepreneurs he supports.

“I have seen a bit of gaming between entrepreneurs and some VCs. I don’t think it is healthy. With frank and honest discussions about real motivations, it prevents stressing the situation with unnecessary misalignment. There are sufficient real stressful issues to deal with at a startup!”

Christophe knows. He hedged a bet on Barcelona for work/life balance and it is now one of the fastest growing startup scenes in Europe. And he hedged a bet on the precise market timing that helped grow a successful tech business.

So if you are a B2B tech startup interested in launching in Spain, you might want to look up Christophe. Odds are, you wouldn’t want to bet against him.