Q&A w/ Alex Nicoll, Business Insider Pt.1
WeWork, Reporting on Proptech, the future of logistics and more
Hi everyone, John here. I hope you all had a happy holiday and welcome back to Urban Tech. An additional welcome to new subscribers. If you were forwarded this email, you can subscribe, here.
I’m incredibly excited for this week’s edition because it’s Urban Tech’s first Q&A with an industry professional. Feel free to reach out if you know someone who would be a good fit for future installments. Email me at john@urbantechnews.net.
I aim to continue to grow these segments and eventually launch a podcast feed for Urban Tech. This week, I spoke with Alex Nicoll, a reporter at Business Insider, where he covers real estate, logistics and tech. I’ve had the pleasure of working with Alex in my time as a PR consultant. I highly recommend checking out his coverage on Zeus Living, COVID, and the future of the office.
Okay, let's dive in.
A Long Thing: A conversation w/ BI's Alex Nicoll Pt. 1
Alex and I covered a lot of ground in our conversation which is the main reason I split it up into 2 parts. We cover his experience covering the industry, what trends he's seeing, what he's hearing from companies in the space, and more! Our conversation was edited lightly below for clarity and brevity. Part 2 will run next week.
Here is Alex's full bio:
Alex Nicoll covers real estate, proptech, and the wider built world for Business Insider. He recently graduated from Columbia University's Graduate School of Journalism and went to undergrad at Boston College. He's previously worked for Peloton and Bridgewater Associates. He's lived in New York City for 4 years, and his first apartment in East Harlem was just a few blocks away from a family restaurant from the turn of the 20th century. When he's not writing for Business Insider, you can find him reading dense political and economic history and watching, and rewatching, Vanderpump Rules. You can reach him through encrypted messaging app Signal at +1 (646) 768-4772 using a non-work phone, email at anicoll@businessinsider.com, or Twitter DM at @AlexONicoll.
JT, Urban Tech: When we met, you were covering the WeWork beat. It was the fall of last year and obviously everything came out about the impending IPO. So I'd love to hear more about your experience as you've covered that story moving into now, a chaotic time for a sector that's very hot but also super cold in some ways.
Alex Nicoll, Business Insider: Yeah, it's been a wild ride. This is my first-full time reporting gig. The WeWork situation happened right around the time that I was really starting to get comfortable at the job. A theme that was really brought to the forefront with WeWork was this theme of cutting through the hype and thinking about profitability.
I'm not the first person to say this, but the model of growth at all costs had a maybe close-to-fatal blow in that [WeWork] scenario. It’s been really interesting to see how companies are responding to it. My job is to find ways to cut through the hype, and that can sometimes be harder than it seems, or harder to actually do than I'd like.
Like you said, there's such high highs right now. And then there's also such low lows in the industry. It's my job to try to figure out where the hype was in that hype and what is actually backed up by material reality.
This is also where some of the most interesting stories in the future will come out of. That kind of overlap between what companies promise, what consumers are looking for, if they hit that for consumers or not, and how they are treating their employees. These stories have been a big part of the tech beat for a while.
JT: Definitely a lot to unpack there. Interestingly, I think the big company that set the stage, particularly for WeWork in this question about profitability, was Uber. Undoubtedly everyone of the last 10 years has tried to copy that model. It's something you've got with the growth at all cost model. I read Mike Isaac's book on Uber, I've read a lot of the WeWork stuff, great reporting from Eliot Brown at the Journal and the people there but I think they also have a similar kind of approach.
It seems like these companies have always used Amazon as the model for their growth strategy. Profitability just isn't really even a concern for the first decade of a company’s life. I just find it super interesting how Amazon has finally crossed into being profitable while simultaneously this next generation of startups have really tried to, for better or worse, copy it. Obviously, everything in tech and business is somewhat trying to copy what's worked before.
AN: Totally. It's really interesting to have seen that shift happening right before our eyes at least in the flexible office space and any lease arbitrage related business. You definitely are seeing a rejection of that Amazon mindset. Amazon is becoming a more and more physical business every day, as you know. It always has been physical but it's just continuing to expand its physical world. Timing wise, it's doing that and becoming profitable while many other companies are trying to bring a tech approach to physical space and aren't profitable yet.
JT: Amazon just bought Zoox and is increasing their footprint of their warehouses. So I think that's right. At a high level, there's a lot of either hype or denial, even maybe at the investor level for the space. And I know you talk to a lot of people at these companies so I'm curious how they're feeling right now? What kind of sentiments they're having. I'm sure certain companies are feeling better than others.
AN: I kind of hear two things that happen at the same time that are almost in conflict with each other, but I hear them together a lot. One side is just totally persevering, that is the trademark of the tech industry. There is a pretty strong optimism that I hear from people that think that, if we continue on this path, we will change the world. I haven't really heard that die out.
At the same time, there is a little bit more of a somber note to it than previously. I like to ask companies what their plans are in a recession, or at least I did before this all happened now. It's kind of my job to do that and it's an important question. I'll say responses are unsurprisingly, much more robust [now], they're a little bit more realistic, too.
AN: There's also a realization that maybe the Wild West days aren't over. There are so many different people offering so many different products. But right now, the most well-capitalized people are going to probably look to start consolidating some of these products down. It's kind of like that bittersweet growing up feeling. I would say generally people think that their firm, their solution, can be the one that will persevere. I guess that is not unsurprising for anyone that follows tech that closely, but I will say, I definitely have heard a little bit more of a measured approach next to those responses than in times past.
JT: Certainly going into 2020 everyone was expecting some sort of recession. As a comms person, that was a question that we tried to prepare for and come up with an answer that was, “this is why we can't fail.”
Ultimately, I think recessions are extremely complicated. Obviously what we're seeing now is worse than anything we could have imagined. Hindsight is always 2020 and I think particularly for real estate and transportation, it is so expensive to scale. It's really hard to identify what you're gonna do when the wind changes.
I think there are a lot of companies and investors like SoftBank and Fifth Wall and even MetaProp [and some of the more traditional real estate developers] who are involved in this space a lot, and are the repeat players. Or, are there other people who are involved in these financings that you keep seeing coming up?
AN: You kind of hit the big ones right there. Definitely SoftBank for later-stage companies. Fifth Wall for all stages and medium stage and Meta Prop on the early side. Those are some of the biggest names.
I've definitely seen a lot more names but I won’t try to list them all. I will say one thing that is interesting is the beginning of sovereign wealth funds going directly into venture-backed businesses.
Venture capital specifically demands a pretty high rate of return. Some of these sovereign wealth funds might not demand as high of a rate of return. I don't know the details of their deals, but I imagine as more sovereign wealth funds come into the space might see a lot more of an almost traditionally even real-estate-like funding model.
JT: I do think the sovereign wealth funds is a super-interesting point. Obviously, Saudi Arabia was super involved with Uber financing and now finances Travis Kalanick’s new Cloud Kitchens startup which is in this real estate tech space. I think they are certainly looking for some big homerun returns. There is definitely a foreign affairs angle as well to all of this.
JT: So I'm curious. We've kind of covered a little about how this space, that I like to call Urban Tech, has grown and I think it's continuing to grow. With transportation, real estate, and you're seeing more logistics. And then there are other under the hood topics that are a little bit more boring in some ways. For example, better monitoring for environmental standards, and things along that line. I'm curious what areas you are paying the most attention to and maybe thinking are going to be most important in the next year/ a few years?
AN: Thinking about the three main pillars of what we were talking about, like the real estate companies, the transportation companies and the logistics companies, I'm gonna have to say I think logistics will probably have the biggest impact. It's just the ways that material products move around and get to us that almost everything else flows [from].
AN: There's also just been this absolutely wild inciting event for logistics, which is the pandemic, to kickstart what was already one of the hottest parts of Urban Tech, as you call it. I'd say a really good example of this kickstart is my mom who lives in the Connecticut suburbs.
She has an Amazon account to order things every once in a while, but generally does most of her shopping in person, especially when it comes to food. My mom started using, I forget which service, but maybe Instacart. She used the grocery delivery service for the first time during this pandemic at the height of it when she didn't really want to go out. Ever since then she's been continuing to try to find excuses to use it. I think that story is probably happening to a lot of people right now.
Logistics also has the advantage of being maybe a little less regulatory. Real estate has very specific hyper-local regulations. Transportation is even more challenging when you're looking at what the future would look like.
The Hyperloop project is a perfect example to show that these things are so much harder to do than they might seem, especially without a central state power driving it. Logistics probably has the biggest runway. If real-estate is able to push sustainability really strong, which I know is the mission of quite a couple companies in the area, it might give logistics a run for its money. Same for transportation when it comes to energy sustainability, but overall, I think logistics is probably the place to watch just because so much from our world is based on how those products move around.
JT: The story about your mom is perfect. Instacart is doing a lot of things right like allowing grocers across the country to just plug in and use their logistics quickly and easily. That's super powerful. It’s a major change to invest in R&D in this technology and for a platform even to just do online payments and deliveries. Doordash is doing more and more deals allowing stores across the country to deliver super easily. I also think logistics, and particularly in the short run, will thrive. There's just a willingness to do more automation.
JT: Before automation comes to the home, there's a lot more willingness for it to be at work. I think many people like Roombas and that sort of automation, but I think when you advance past that, it's a little bit more to consider.
Part 2 of my conversation with Alex will be in next week’s issue. Subscribe here, so you don’t miss it!
What I'm Reading This Week
Axios: Instacart raises another $100 million
"Grocery delivery company Instacart has raised $100 million in new funding, on top of the $225 million it announced last month, the company tells Axios. This brings its valuation to $13.8 billion. "
"Why it matters: This funding comes at what could be an inflection point for Instacart, as customers it acquired during coronavirus lockdowns decide whether they want to continue with the service or resume in-person grocery shopping."
CityLab: The Dying Mall’s New Lease on Life: Apartments
Patrick Sisson for CityLab explores a new use for malls. "As the pandemic hastens the retail apocalypse, some developers are betting that empty malls can mix housing with stores and community space."
"At the Alderwood Mall in Lynnwood, a suburb north of Seattle, an adaptive reuse project already in progress suggests that America’s vast stock of fading shopping infrastructure could indeed get a second life as places to live. Such transformation could even bring malls closer to the “village square” concept they were initially envisioned to become."
The Wall Street Journal: Apartments Become Silicon Valley’s Hot New Thing
"Juno Residential Inc., a San Francisco-based company co-founded by Apple and Tesla veterans and backed by Khosla Ventures. The firm, which was founded quietly last year and is to be launched officially on Tuesday, hopes to make the building of apartments more efficient by using mass-production techniques such as those employed in automotive and electronics manufacturing."
More efficient building is crucial for building more housing and drastically reducing the cost to build units.
But, construction has proven to be an incredibly difficult sector to improve efficiency, experiencing little improvements over the 20th century.
The San Francisco Chronicle: Bay Area backyard cottages boom as elderly parents and college students flee coronavirus
Some good housing news: Bay Area companies that specialize in backyard cottages are seeing a surge in interest from homeowners who suddenly need to create additional living space for elderly parents or adult children displaced because of the coronavirus.
While this is a small step, and needs to be part of a significant initiative to build more housing in California, the surge for ADUs (accessory dwelling units or cottage homes) shows there is a massive demand for more units. Particularly for vulnerable populations like the elderly.
Advocates like Sen. Scott Wiener are continuing to find creative ways to cut through the red tape in California for building denser housing. Don't forget: while the problem is the worst in California, it is not exclusive to the state.
Crunchbase: Palantir Files Confidentially for IPO
"Big data analytics company Palantir Technologies has confidentially filed to go public, the company said Monday evening.
The company has filed a draft S-1 registration document with the U.S. Securities and Exchange Commission, meaning right now the public can’t get a glimpse at Palantir’s financials or other business information.
But it’s a significant step for the notoriously secretive company, which was founded in 2003 and remained private for so long. Monday’s statement from Palantir confirms a Bloomberg News report last month that the company was aiming to file confidentially to go public in the next few weeks. CEO Alex Karp also said on Axios on HBO in May that the company may go public this year after nearly two decades as a private company."
Thanks for reading. Talk next week.✌🏼
JT