20VC Why Adaptability Is Key To Fundraising, Why Supply Is Always The First Priority In Marketplaces & Why Sometimes You Have To Hire Fast & Fire Fast with Nav Athwal, Founder & CEO @ RealtyShares

In this episode of "20 Minutes VC," host Harry Stebbings interviews Nav Athwal, the founder and CEO of Realty Shares, a platform connecting real estate developers with investors. Realty Shares has recently funded $200 million in deals and raised capital from top-tier investors like Union Square Ventures, General Catalyst, and Menlo Ventures. Athwal, who transitioned from being a real estate attorney to an entrepreneur, discusses the initial focus on supply to attract investors, the importance of adapting to macroeconomic changes, and maintaining compliance in a regulated industry. He also shares insights on fundraising strategies, the significance of hiring beyond IQ, and the potential expansion of Realty Shares into other aspects of real estate transactions over the next five years. The episode also features promotions for Designcrowd and Angel Loop, tools beneficial for entrepreneurs and investors.

• Nav Athwal is the founder and CEO of Realty Shares, a platform connecting real estate developers with investors.
• Realty Shares has funded deals amounting to $200 million and raised funds from top investors like Union Square Ventures, General Catalyst, and Menlo Ventures.
• Prior to Realty Shares, Nav was a real estate and land use attorney.
• The episode also includes promotional information for Designcrowd and Angel Loop.

"I'm delighted to welcome Nav Athwal, founder and CEO at Realty Shares, a curated marketplace connecting real estate developers and operators with investors across the country."

This quote introduces Nav Athwal and his company Realty Shares, highlighting its role as a marketplace for real estate investment.

• Nav Athwal spent over a decade in real estate before founding Realty Shares.
• As a real estate attorney, he noticed a disparity in capital efficiency between large institutional deals and smaller projects.
• The idea for Realty Shares came from the need to create a marketplace for smaller projects to access capital more efficiently, providing investors with more diverse opportunities.

"So seeing this big dichotomy between efficiency of capital for the large institutional deals and inefficiency of capital for the smaller deals is really what first prompted the idea of why not create a marketplace to connect those that have great projects that may not have projects that are big enough for institutional capital to investors that are being restricted to just equities and bonds."

Nav Athwal explains the motivation behind Realty Shares, which was to bridge the gap in capital efficiency for smaller real estate projects.

• Nav Athwal and Realty Shares focused on building supply before demand due to his existing real estate industry relationships.
• The company leveraged the initial supply to attract investor demand, which helped complete the first few transactions.
• The success of initial deals facilitated additional customer acquisition on both sides of the marketplace.

"So we solved for the supply first, and by having the supply on the platform, we were able to leverage that supply to actually put a real product in front of the demand or the investor base."

The quote emphasizes the strategic choice to build up the supply side of the marketplace first to create a tangible product for investors.

• Realty Shares closely monitors the macroeconomic environment, including the impact of a low yield environment and banking regulations.
• The company benefited from the low yield environment, offering better returns to investors and more efficient capital raising for companies.
• Realty Shares considers potential market downturns and employs strong underwriting capabilities to maintain marketplace integrity.

"We have our chief credit officer who came to us from city mortgage, and we have an asset management committee meeting every month where we look at the macro environment and kind of really get a sense of how that could impact our business."

This quote reveals how Realty Shares actively manages risks by assessing the macroeconomic environment and its potential effects on the business.

• Nav Athwal believes that focusing on supply is crucial for marketplace founders since it forms the basis of the product offered to the demand side.
• He suggests that a lack of supply can lead to a poor experience for early buyers, emphasizing the importance of having a product in place.

"I think supply is the area to focus on first, because if you don't have a product for the demand side, that experience is going to be pretty bad and your earliest buyers are."

Nav Athwal argues that supply should be the initial focus when building a marketplace to ensure a positive experience for early users and buyers.## Importance of Supply Side in Marketplaces

• The supply side of a marketplace is crucial for creating a seamless buyer experience.
• Buyers expect a better experience than offline alternatives; otherwise, they won't become loyal users.
• Solving supply side issues is essential for stimulating buyer demand.
• Marketplaces must balance supply and demand, but initially focusing on supply can be a strategic move.

"I think the supply side is very important because the buyers, again, you're trying to create less friction in how those buyers interact with the product, and it has to be a better experience than what they're getting offline, otherwise it won't be a sticky buyer."

This quote highlights the significance of the supply side in ensuring a frictionless experience that surpasses offline alternatives, which is key to retaining buyers.

• Growth necessitates changes in company culture, team dynamics, and communication.
• Regulatory compliance is critical in certain industries and must be integrated into the company's DNA.
• As companies grow, maintaining a common mission and vision becomes essential.
• Innovative communication methods, like show and tell sessions or random lunches, help maintain collaboration.
• The motto "move fast without breaking things" reflects the need to innovate responsibly within regulatory frameworks.

"So I think it's really about breaking down those barriers to communication that don't exist when you're ten people, but will exist when you're 50 people and bigger."

This quote emphasizes the importance of evolving communication strategies to maintain a cohesive team as a company grows and diversifies.

• Different employees may be suited to different stages of a company's growth.
• Some employees thrive in early-stage startups but may not fit into more structured, later-stage companies.
• Others, including CEOs, can adapt and grow with the company from its inception to a large scale.
• It's the responsibility of the employees to demonstrate their ability to adapt and grow with the company.

"But I was going with an eye towards anyone could grow into any role as the company grows from 50 to 100 and beyond."

Nav Athwal expresses his belief in the potential for any employee to develop and fit into evolving roles as the company expands, provided they demonstrate the ability to do so.

• Establishing connections with experienced mentors is vital for navigating a company's scaling process.
• Leveraging the networks of investors and incubators can provide access to valuable mentors.
• Being transparent about one's own knowledge gaps can help in seeking advice and mentorship.
• Incubators like 500 Startups provide a strong network that remains valuable even as companies progress beyond early stages.

"So what I did was I started with our investors. So those folks that invested in the company obviously have alignment with the company and the company's success."

Nav Athwal discusses how he initiated relationships with mentors by reaching out to investors who have a vested interest in the company's success and who could provide or refer him to experienced advisors.## Importance of Mentorship for Founders

• Mentorship is crucial for founders seeking guidance and advice from experienced individuals.
• Mentors can help steer founders in the right direction, contributing to their success.

"are all really good resources for founders that want the advice and mentorship of folks that have executed before and can really help steer them in the right direction."

This quote emphasizes the value of mentorship for founders, suggesting that learning from those with prior experience is beneficial for guiding a company's trajectory.

• Hiring is a challenging aspect of company growth, especially in competitive markets like Silicon Valley.
• The hiring process is multifaceted, requiring more than just assessing a candidate's IQ.
• Importance is placed on finding individuals with a balance of high intelligence and strong collaborative skills.
• The right hires should prioritize the company's vision and mission over personal interests.

"Definitely broader than just IQ. I mean, I think you need smart people that are very capable... But I think the house has to be coupled with the right level of EQ..."

This quote highlights the necessity of considering both intellectual and emotional intelligence when hiring, to ensure a harmonious and effective team dynamic.

• The traditional advice is to hire slow and fire fast, but sometimes hiring quickly is necessary.
• Recognizing and seizing the opportunity to hire good talent when it presents itself is crucial.
• Founders should know what they want in a hire to avoid missing out on ideal candidates.
• Effective hiring contributes significantly to a company's success in a competitive market.

"I think one thing you can't afford to do is not hire good people."

This quote underscores the importance of being decisive in the hiring process to not miss out on strong candidates, reinforcing the idea that timely hiring is sometimes more strategic than a prolonged search.

• Utilizing various networks, including VC, personal, and employee referrals, is a key strategy for hiring.
• Realty Shares has implemented an employee referral program to incentivize staff to recommend potential hires.
• Hiring through referrals can be effective as it assumes the referred individuals share similar positive traits with the current employees.

"So employee referrals has been a big way for us to hire here at realty shares, and we have an employee referral program now where we pay employees to refer."

This quote conveys the practice of incentivizing employees to refer potential hires, indicating the value placed on recommendations from trusted staff members.

• Different funding rounds present unique challenges and opportunities.
• Having reputable VCs involved early can aid in hiring and subsequent fundraising.
• The Series A round was facilitated by favorable market conditions, while the Series B round was more challenging.
• Adapting the fundraising approach based on feedback and maintaining flexibility is essential.
• It's important to start fundraising efforts before the money is urgently needed.

"Adaptability is key to fundraising. So knowing with every communication you have, and we had a lot of them, you've got to pick up both the positive and negative cues from the VCs..."

This quote stresses the significance of being adaptable and responsive to feedback during the fundraising process to improve chances of success.

• Realistic valuations are critical, especially considering the implications for future fundraising rounds.
• Founders must balance optimism with realism to ensure sustainable growth and achievable metrics.
• Unrealistic valuations in earlier rounds can make subsequent fundraising more difficult.

"I think the realism is very important. Right."

This quote emphasizes the necessity for maintaining realistic valuations during fundraising to avoid difficulties in future investment rounds.## Capital Raising and Company Growth

• Companies previously raised capital aggressively to buy growth with the expectation of continuous fundraising and eventual IPO.
• The trend of overraising is now leading to problems as the fundraising climate has changed.
• Companies should prioritize the right investors and board members over high valuations.
• The fit between company and investor is more important than a marginally higher valuation.

"A lot of companies bought growth because they were like, well, money's flowing and look, we just need to get to that next round."

This quote emphasizes the past mindset of companies focusing on rapid capital raising to fuel growth, often at the expense of sustainable business practices.

"Don't optimize for valuation, optimize for the company and the company that's investing in you and the board member that's joining your company."

Nav Athwal advises companies to focus on the quality of investors and board members rather than just the valuation, suggesting that a strong partnership is more valuable than a slightly higher valuation.

• "The Hard Thing About Hard Things" by Ben Horowitz is highly recommended for its insights into managing a company.
• The book is given to every employee at Realty Shares, highlighting its perceived value.
• It covers the challenges of building a company and managing through highs and lows, providing a realistic view of entrepreneurship.

"The Hard Thing About Hard Things by Ben Horowitz, that has been a book that every employee at realty shares gets a copy of."

This quote shows the importance Nav Athwal places on the book, suggesting it offers essential lessons for his team.

• Realty Shares has not experienced a single inflection point but has steadily built a platform loved by customers.
• The company has focused on adding value beyond access to real estate deals, improving cost-effectiveness for investors and fundraisers.
• Organic growth and network effects have been significant in the past year and a half.

"I think over the last year and a half we've done a really good job building a platform that our customers really love and care about."

Nav Athwal reflects on the gradual progress and success of Realty Shares in building a platform that resonates with their customers.

• Nav Athwal reads "ABC" by Fred Wilson and "Both Sides of the Table" by Mark Suster for insights into startups and venture capital.
• Fred Wilson's blog is appreciated for its daily posts and lessons for companies.
• Mark Suster's blog offers perspectives from both a VC and an entrepreneur's viewpoint.

"I love Fred Wilson, obviously because he's part of the USV family, but he has a new post every day."

The quote displays Nav Athwal's admiration for Fred Wilson's consistent blogging and the value it brings, regardless of the topic.

"Mark Suster, right, he was both the VC and an operator. So he has the vision and viewpoints and insights of both sides."

Nav Athwal appreciates Mark Suster's dual perspective, which enriches his blog with insights from both the VC and entrepreneurial experiences.

• Realty Shares aims to disrupt more aspects of the real estate transaction process.
• The focus is currently on financing and investing, but there are plans to expand to other transactional areas like title and escrow.
• Technology is seen as a key enabler to address inefficiencies in the real estate market.
• The five-year mark is acknowledged as both distant and potentially approaching quickly in the startup world.

"In the next five years, I can see us tackling other parts of the transaction process, from title to escrow to purchase and sale."

Nav Athwal outlines the long-term vision for Realty Shares, indicating an ambition to revolutionize various facets of real estate transactions.

"Five years feels like forever, but sometimes it'll creep up on you because time's fast in a startup."

This quote captures the dual nature of time in the startup industry, where long-term planning is essential, but the pace of change can make it feel like time flies.