In this episode of the Driving Alpha podcast, Brian Smiga sits down with Jeffrey Berman, a partner at Camber Creek, to discuss the intricacies of investing in real estate tech. Jeffrey brings his unique background as a venture capitalist and former real estate professional to the table, sharing insights into what sets top-performing VC firms apart, how to identify venture-scale opportunities, and the importance of domain expertise in the built world.
The conversation kicks off with Jeffrey explaining Camber Creek’s investment strategy, which is built on the firm’s deep real estate roots and its network of over 300 real estate developers and owners. He shares how this access provides a competitive advantage when evaluating potential investments, offering insights that generalist VCs might overlook. Jeffrey also discusses the power of the “network effect” in real estate tech, where leveraging connections can dramatically impact the success of portfolio companies.
Brian and Jeffrey further explore the concept of geographic singularity, highlighting the challenges of scaling a solution that works in one market, such as New York, but may not easily translate to other locations. They also touch on the role of alternative materials, AI, and financial wellness in shaping the future of the real estate tech landscape. Throughout the episode, Jeffrey provides practical advice for both investors and founders on navigating market cycles and overcoming the hurdles of selling into the real estate sector.
Transcript
Brian Smiga
Hi, this is Brian Smiga, co-founding partner of Alpha Partners. And this is the Driving Alpha podcast where we interview great VCs on how they get outperforming returns. What’s their secret sauce? And today I’m honored to have Jeffrey Berman who I met back when we were founding Alpha in 2014. You remember that, Jeff?
Jeffrey Berman
I remember meeting Steve Brotman. And I just want to say Driving Alpha is a fabulous name for a podcast.
Brian Smiga
Awesome, thank you. Well, it’s really about having the audience understand how you make money. Because every general partner and every firm has a unique outlook that’s very, very valuable to understand. We don’t want to give away any secret sauce, but that’s our goal is to share out-performance stories.
Jeffrey Berman
So I’m gonna share with you something that somebody told me, they attributed to Warren Buffett and I love it, which is that if you have a great product or a great company or a great thesis, if it’s so good, you should be able to hand the playbook to somebody else, and they still couldn’t replicate it. And I firmly believe that we have that and part of that is, the experience that my partners and I have, but I’m happy to give an introduction into that briefly so we can get to the meat of the discussion.
Brian Smiga
Let’s unpack that a bit. No matter how good your Playbook is for a great product or service, it’s difficult to hand off to someone else because of the X factor in the founder, entrepreneur, or general partner.
Jeffrey Berman
This is true for our most successful companies, which is, sure, you can copy the idea, but the execution of that idea is and remains the most difficult piece of the puzzle. What I mean by that is that Camber Creek was founded by real estate professionals that became venture capital professionals.
We’ve been doing this for, depending on how you count, almost 16 years. And our real estate background allows us to have an insight into every company that we look at that otherwise generalists wouldn’t have. Our playbook is very simple. Our investor base is comprised of institutions, pension funds, endowments, ultra high net worths that like the alt.
But the secret sauce is our 300 plus real estate developers and owners that own billions of square feet of property around the globe that help us determine whether or not a particular company has the return, has a, as a venture return path as a potential. That’s the secret sauce. So anybody could do that. But then also being able to take that infrastructure and then be able to make the right decisions as investors, that’s pretty hard to replicate. When we started doing this, we were the first. Now there are a number of firms in our sphere, one that is much larger than us, but copying that exact strategy doesn’t mean you’re necessarily gonna be a successful investor.
Brian Smiga
Yeah, I’m hearing two things that LP should look for: an unmatched, unmatchable domain expertise, maybe a family, multi -generational family lifetime of real estate investing, which you can’t buy, can’t learn, you just have to be that. And that’s you and your five partners. But then the second thing, and there’s data, I’ll share it with you and with the audience to show that VC firms that have extraordinary expert networks, or extraordinary advocate and or founder networks, they outperform. And you’re definitely in that class because you have 300 real estate developers, operators who can help you evaluate, help you diligence, help you look at product market fit and so forth. That sounds really, really great.
Jeffrey Berman
I mean, I’ll distill our investment thesis down to its bare bones. Again, anyone can copy this, but it’s our intrinsic ability, I would say with my three other venture partners, plus our real estate partner, that we have an understanding beyond most other VCs. And so our investment thesis is very simple. It’s two questions. The first is, can we use this product software service within our portfolio matrix, which I define as the buildings that our limited partners own, the tenants, the residents and guests who work, live and stay in those buildings and the vendors who serve all three. And if you think about that permutation, over billions of square feet, you have potentially hundreds of thousands to millions of relationships that can be leveraged for the benefit of both the portfolio companies and the limited partners. But that’s only the first part. The second question is arguably the more important one. We started this conversation by you asking, how do you make money? So we make money when our LPs make money. How do our LPs make money? When we invest in companies that have a venture return. So the second question is, can we get conviction behind the ability of a particular company to drive the potential for a venture return, commensurate with the risk we are taking at the stage we are taking it. In other words… Can we make a lot of money? And I think this sets us apart from everybody else in our industry, which is that over almost 16 years, we’ve done less than 50 deals. That tells you something. Almost every company we see answers question number one in the affirmative, but almost none of them answer question number two. And the reason is: it’s hard to sell into real estate. And if you don’t understand the idiosyncrasies of our industry, it’s gonna be very difficult for you to succeed. There are a lot of great businesses that have unfortunately gotten venture funding that should have been more like lifestyle businesses. We’re not saying these businesses that we see that we don’t invest in aren’t great. Some are. But they’re not necessarily going to get that venture multiple which is the reason why investors invest with us.
Brian Smiga
It’s the third learning here that I’d like to tease out, which is you want to be in a VC firm whose partners know how to sell into its chosen market. It could be health, could be real estate tech in the built world. It could be government tech, defense tech, dual use, even enterprise software. I think what’s more important than “Do you know SaaS?” but really, do you know how to assess product market fit and get SaaS penetrated into the enterprise market?
Jeffrey Berman
Exactly. We had a colleague who was with us for a bit, and he wanted to spin out and do his own VC firm, and he had public sector experience. He created a firm, small firm that is focused entirely on businesses that have to sell into regulatory environments. And he and his partners excel at that because they understand it.
CamberCreek wouldn’t look at most of the deals he’s looking at because that’s not what I’m good at, but he is. So I agree with that proposition entirely.
Brian Smiga
Let’s talk about geography as well. I think when I met you, you were a little bit more DC based and now are you a New York resident and a New York bull?
Jeffrey Berman
No, so our firm was founded in the DC area. We still have our headquarters there. However, we have an office in New York. I’m in Florida, and we also have a presence in Switzerland. And so what we have found, and by the way, even when we were in DC proper, everyone was in DC, we still invested internationally. We’re agnostic to geography provided that we can answer those two questions affirmatively. So for instance, in our third fund, we have a company that started in Norway, but they were selling in the States as well as Europe. But as long as we can be accretive and we can add value, it doesn’t matter where we are from a geographic sense.
Brian Smiga
That’s fantastic and that widens your funnel because obviously your criteria via those two questions and others eliminates companies very, very quickly, and you get down to the set that you really want to spend time on.
Jeffrey Berman
And there’s another interesting aspect about this, specific to real estate technology, which is in the early iteration of when real estate technology started having a proper ecosystem, New York was the epicenter. Some would argue it still is, but New York in particular was the epicenter. And I think that was a function of the amount of forward thinking real estate companies that are headquartered in New York City. But interestingly enough, what we found is the opposite of the song, “if you can make it here, you can make it anywhere”. New York is such a singularity that what we have found is saying, hey, we’ve built something for New York. It
does not mean it’s gonna work in Boise, Idaho. So when we talk about geography, that is something that has been particularly intriguing for us over the years, not to diminish New York’s importance. It is certainly a critical locus of the real estate technology ecosystem. But we’ve found we have a disparate geography of limited partners. We’re global at this point. And that’s pretty important when we’re looking at a company that’s trying to sell into a region. Is there the potential for virality? Will more than one property manager use a particular product software service? That’s been an interesting insight for us as we continue to.
Brian Smiga
Right. So local and cultural virality is another thing you’re seeking, and your 300 experts help you detect that. Interesting. Now, does that mean I have to come down to Miami to get a helicopter ride with you?
Jeffrey Berman
Well, I live in Palm Beach, so if you went to Miami, you’d miss me. But yes, although I don’t think I’m recent at the moment, so I’d have to grab my recency and then we could hop in the chopper and go see some buildings.
Brian Smiga
Not so far away. So I look forward to that day. I’m gonna hold you to it.
Jeffrey Berman
I don’t think you want to, by the way. I’m a great pilot. Let me be very clear. I’m an awesome pilot. I just fly very, very seldom. I just don’t have the time, unfortunately, but I would absolutely love to.
Brian Smiga
Yeah, I hope so. Your LPs want to keep you. You’re a key man. So how do you keep fit? You look great. I met you 10 years ago. You’re very fit. You lost the ponytail. And you and I were in the trenches raising funds back in 2015, 2016 at the conference circuit. Remember it well. How do you keep fit with family, venture, all these companies’ boards? What’s your secret for both keeping fit and clear thinking?
Jeffrey Berman
At the risk of having someone throw a stone at the computer, I’m gonna say, I’m gonna regurgitate a quote that I think has been attributed to Donald Trump. I’m not sure whether or not this is accurate, which is that if you find something that you love, if you’re doing something you love, it’s not really work. I love what I do. So I don’t consider what I do “work”. I’m lucky to be able to think about investing in companies and helping run companies and being on the boards of companies that are changing the fabric of our industry. As far as fitness, I want to be around for my kids. So to me, there’s no choice. I make a lot of time for wellness. And actually, I’ll plug a company I have nothing to do with. I just got an eight sleep and it’s transformative. I’ve had the best two nights of sleep in my life the past two nights. I just got this thing. It is glorious. Worth the investment.
Brian Smiga
Now that we’re talking about companies, you’re in some great companies and we’ve talked about a few of them because our model is to follow on in growth rounds coming from investors like yourself. You don’t need our capital as much because you now have a billion under management, you’ve got reserve and have LPs who work with you, and yet you still show deals to Alpha which is fantastic. Any upcoming companies you want to talk about that are exceeding expectations, crushing it, that you feel really match those three criteria we talked about at the beginning?
Jeffrey Berman
Well, what’s interesting is when we got into this business, and I can only speak for myself, I do not speak for my partners in this regard, because I do not know that they would agree with what I’m about to say. But I think the numbers bear out. So if you’re familiar with venture, you’re familiar with the power law. And when we started out, that wasn’t something that we were… I shouldn’t say overly concerned with. I don’t think we gave it much thought. We were looking at building a portfolio, and I’m talking about Fund One and Fund Two, where the companies would have demonstrable impacts to the real estate industry and provide that venture return potential. And we did that. We’ve invested in Fund One, Fund Two have some great companies like VTS or Pet Screening or Placemaker, which are measurable, et cetera. But the pattern that’s emerged follows the power law, which is that some subset of your companies, usually a minority, are gonna be the ones that are the potential fund returners. And then the remainder in the ordinary venture world and generalist world, they just go out of business, you stop funding them, whatever, and they die. In our paradigm, that can’t work. Why? Because we have real estate owners and operators that utilize these companies. And so while a suboptimal outcome is tolerated and tolerable, going out of business and just disappearing, it’s not. Because whatever these people might have invested in our funds, if you have to pull software out, if you have to pull some kind of business innovation that you placed into your business, that’s potentially more destructive financially than losing money. So when we think about our portfolio, we have the blockbusters that everyone knows. Actually two that nobody knows about yet. Well, you’ll be hearing about them. And…
Brian Smiga
We’ll talk we’ll talk offline…
Jeffrey Berman
We can talk offline. Well, one of them, they’ve never announced a single round, and we’re not going to talk about that here. But our other companies are singles, doubles or even triples, but they’re not growing at that crazy venture scale. And I love your model, Alpha Partners model, because that ability to say, hey, you’re an “out of a reserves GP”, we’re gonna come in and step into your shoes and incentivize you. That’s brilliant, frankly.
Brian Smiga
Thank you.
I think at the moment, and I don’t know if you’re finding this to be similar, but I think we were fortunate in that many of our companies had large financings in 2021. And that’s a double edged sword, right? Because some of them, I think, achieved valuations that they’re going to have to work really hard to grow into. And others are great. They’ve got enough capital. They don’t have to worry about this for another few years. It’ll be really interesting to see what happens across our portfolio with that cohort.
Brian Smiga
Yeah, constraint works in our favor, ironically. So if you do a look back in history, venture investments made at or coming out of a recession outperform. Let’s look at Israel. Investments made when there’s been conflict outperform. And those companies that raise at large valuations in 2021, if they’ve earned the right to come back to market in an up round, they are the echelon that you want to be in. So what we’re finding is the companies we do get shots on goal with are rationally priced, but they are the exemplars. And they face less competition, can scale more efficiently, because their competitors can’t raise a round.
Jeffrey Berman
I think of the company that we’re not gonna talk about, but that you know of, they raised a massive round in 2021. They had plenty of cash. They got an inbound in 2024. The multiple in 2021 was 100X. The multiple in 2024 was 10. And that’s fair.
Brian Smiga
Yeah.
Jeffrey Berman
Now the company has grown exponentially since then, going from 10 million to almost 200 million in ARR. We’re not gonna mention the company, but it’s amazing the difference in price that was achieved. And actually, I agree with you. I think it’s much better to have prices tethered to reality versus just an explosion of hedge fund money that distorted all valuations.
Brian Smiga
Yeah, and this gives LP is another thing to think about, is, you know, first of all, does an investor invest in an asset class that can’t fail or can’t afford to fail? Because in the built environment, you can’t have these tools and systems not work. I think that’s true in healthcare. And that’s true in GovTech, in defense tech and dual use. But it takes longer. However, the dispersion of outcomes is going to be different then in a shoot from the hip, generalist, or Silicon Valley fund perhaps. And you probably have a lower failure rate at Camber Creek as do we at Alpha, so I think you can sleep at night.
Jeffrey Berman
Yeah, and our investors like that. We tell people, if you’re looking for the folks that are doing consistently crazy moonshot investments, adding us, our DNA is real estate. Our risk profile looks more like that. There’s nothing wrong with that. The returns could be massive. It’s just we are focused on adding value to the real estate industry, looking for a venture return, which is still a healthy multiple, but also being able to triangulate risk in a way that we can actually understand versus just, “hey, we’re gonna have to fund this thing forever.”
Brian Smiga
Now let’s go out on an up note. Two big questions. I’ll start with the first one. For our audience, how big is the opportunity in the built world? It’s very big, but I don’t think people equate how much of a technology return opportunity there is. Can you kind of paint a picture in terms of numbers and change vectors that create a big opportunity?
Jeffrey Berman
Yes, this is a complicated question. And the reason it’s complicated is at the moment there’s both way too much and way too little capital chasing investments in the space. What I mean by that is I don’t know what the actual global value of the real estate ecosystem is. I’ve seen it at 10 trillion, 44 trillion, and 380 trillion. I don’t know what the global real estate market is worth. But what I do know is the vast majority of the commercial building and residential building stock in the world is not, let’s say, carbon neutral or even carbon climate positive. So there’s a massive opportunity there. But then you’re talking infrastructure. And when you think about what is the appropriate cap stack and who are the appropriate capital partners for infrastructure costs, is that necessarily venture? On the flip side, a lot of the companies that we see that believe that they’re venture appropriate, but are actually point solutions. And so there’s two questions actually in your question. Digitization of our the built world, that opportunity I would say is worth trillions. But the venture specificity for that type of cap stack, I actually think that is quite, that’s an order of magnitude smaller currently. And that’s primarily because of how fragmented and physical the assets are. But I do believe that over the next decade or so, you will start to see billion dollar companies emerge at a more rapid clip, than we’ve seen in the past.
Brian Smiga
Okay, and so then you have a podcast, Tangent PropTech, that you share with some other real estate experts. I heard the Rudin family speak in your most recent one, amazing. And so if anyone’s interested in both real estate investing or owns real estate assets, I highly recommend Tangent PropTech. It’s a great lesson. However, let’s talk about what’s just over the horizon. Like we know about things like the commercial real estate overhang, the difficulty of class B and C buildings attracting tenants and lease filling. But beyond that, what is just over the horizon that’s an investable theme? And let’s end on that.
Jeffrey Berman
What is over the horizon that is an investment?
Brian Smiga
I mean, is it something … AI? Is it a particular type of digitization? Is it climate? I mean, you’ve mentioned some things, but I wonder, where are you looking? Because you know changes that are coming.
Jeffrey Berman
Sure. So the things that I’m specifically interested are alternative materials. Really interested in that. Alternative building materials. I am interested in financial wellness companies. Like when we think about, and of course we have a big investment in that space, but when I think about how we change the rubric of housing and the societal underpinnings, financial health and wellness and education is a big piece of that because how people pay for their homes and how that charts them on a trajectory of financial freedom is really important. AI, I don’t think is, I wouldn’t call that a theme, AI is, and specifically today, ML, to me is the evolution of software. So all of these businesses that are currently trying to digitize the real estate world are now adding AI or ML in the way they’re continuing to engineer their products, which is enhancing their products. The productivity is pretty amazing. So I think it’s the same opportunity set from a digitization like we have a company called Jones, does certificate of insurance compliance software. AI isn’t going to disrupt them. Their usage of AI is going to make what they do even faster, better, stronger. So really excited about that. But really, I’m excited about almost everything that can touch the built world. You can get me excited about a lot of stuff if it can answer those two questions that we talked about at the top of the hour.
Brian Smiga
Fantastic. Well, I think we covered what we needed to cover today, Jeff. This is Brian Smiga, co -founding partner at Alpha Partners. We fund growth rounds for early stage VCs when they lack reserve in their best companies. And Jeff and I and our team got started around the same time. And it’s great to see you make all this progress with your partners, Jeff. It’s great to see you. Good health to you. And I hope to see you in person. And if not for a helicopter ride, maybe we’ll go for a run or a bike ride.
Jeffrey Berman
Okay, deal.