“How to Thrive on Complexity”
Interview with Prophia Co-Founder & CEO Cameron Steele.
Anyone who’s involved in commercial real estate knows that it’s a big industry with an even bigger data problem. Fortunately, Cameron Steele and his startup Prophia are working to solve that problem. Even though Cameron hasn’t spent much time in the real industry, he’s built software to access and structure critical data, helping those who work in real estate and ultimately helping to lower real estate prices.
Cameron joined the Midstage Startup Momentum Podcast with Roland Siebelink this week to talk about how and why Prophia is making a difference.
- The need to build trust and prove your value proposition with potential customers.
- The best way to acquire domain knowledge when you come from outside a particular industry.
- The advantages of coming from the outside of an industry when it comes to solving problems.
- Why, as a software company, Prophia thrives on complexity.
- The importance of talking to customers in a language they understand.
- How Prophia strives to attract customers without a strong brand within the industry.
Roland Siebelink: Hello and welcome to the Silicon Valley Startup Momentum Podcast. This is Roland Siebelink and I’m a startup coach and helper for all the fast growing startups out there. And today, we have as our guest - it’s such an honor - Cameron Steele, the co-founder and CEO of Prophia. Hello, Cameron.
Cameron Steele: Roland. How are you? It’s great to be here.
Roland Siebelink: Thank you so much for joining us, Cameron. That’s a big honor. We always start with the key question. What is Prophia? What is unique about your product and what impact are you looking to make in the world?
Cameron Steele: That’s a big one. We have focused on commercial real estate as our target industry, and there’s a data problem in the industry. Building data that helps people understand how to operate, buy, sell, and value buildings is very hard to get at. We’re applying machine learning, AI machine learning, and NLP technology to get data out of critical documents into a structured format. This Allows our customers to report, analyze, drive decision-making, manage risk in a way they’ve never had to before.
Today, as an asset class, commercial real estate is one of the world’s largest. It has probably the worst data in terms of quality and comprehensiveness. And the worst set of investment tools to support investors and operators and debt holders in the market. We just think there’s a massive opportunity to solve this problem, to be the caretaker and the trusted resource for building data. And over time we help to lower the cost of real estate in general for commercial property owners and tenants through providing technology and leverage.
Roland Siebelink: Excellent. Quite a few questions coming up from that already. But my first question is how did you get to this problem? How did you discover it and decide to want to do something about it?
Cameron Steele: I’ve been in software my whole career in different capacities. I have always been especially interested in vertical market software, especially where there’s very large markets involved. You can design around a specific use case or problem. And you can build defensibility in a competitive mode around that by tailoring your design and solution to the needs of the end customers.
I co-founded another company in 2010 with some friends. And that was in the travel space. We had a successful run with that company, eventually pulling it to booking.com. And then I had another two years there. Then I jumped over and was at sister company OpenTable, a lot about the restaurant business. And when I decided to leave and start another company, I had been made aware of some of the challenges that some of the slow to adopt innovation market segments, specifically real estate, we’re having. There was just a lot of frustration.
As we looked at the problems in the industry and looked at what people were doing, it became immediately obvious to me that this was a massive problem. There’s a variety of reasons. The people were putting up with really poor tools and processes. There wasn’t someone stepping up to solve the core problem, which is good, clean, accessible, structured data that’s trusted. The challenge here, Roland, is the data that we’re capturing is private. If I’m Google or some other startup founder, I can’t just tap into this public data; it’s private contracts that are guarded very closely.
And so we have to build up the trust and value proposition with our customers to get access to that data, so that we can apply our technology to helping them. There’s some of these built in barriers to entry and it’s caused us to go a little more slowly than if we were selling into the software industry, for example. But I think we’re starting to see the momentum pickup and we’re really understanding the needs and the buying principles. Roland, our customers don’t even know how to buy software. We are teaching them how to buy software as part of this process. It just requires diligence, persistence, and patience. And we’re seeing the fruits of that, having been around for about three and a half years.
Roland Siebelink: Okay. Excellent. When I asked you the question about what made you get interested in this space, the most common answer I get from founders is I’ve been in this space forever and I just wanted to make it work better. But you come more with experience of software development and of how to run a successful, disruptive startup. How did you obtain the domain knowledge?
Cameron Steele: Yeah, it’s a good question. My prior company, we came in without any travel knowledge. This is my opinion, and there may be some different approaches here, but my approach with these things is it’s great to start a business where you have a fresh mind, where you’re not encumbered by existing processes or existing things that are already in place. And then you complement that fresh mind, that openness, with industry expertise to help guide you in the right direction.
That’s what we did. We had a team, initially, that was new to the space but really good at building software and listening to customers and listening to problems. And we surrounded ourselves with a set of advisors that really helped direct us. I would say in our category, there’s been a lot of entrepreneurship from existing industry participants. However, what I see from these entrepreneurs is incremental change, not something that looks holistically at the problem as an outsider would and thinks about it from - not this process is inefficient, but we actually have a data problem here. We need action.
We think about the IT ecosystem and the stack so that we can actually do everything we want to do with that from here. That’s been my view. And I think my prior success and exposure in alternative markets has given me personally the confidence to go do this without the prior knowledge and expertise. But I’d say having done this for three and a half years, I feel like I’ve gained a lot of that. When we can engage with sophisticated customers, I think we hold our own very well and we’ve seen enough to know if they tell us something, we can check that pretty quickly because we’ve seen a lot.
Roland Siebelink: Yeah. Excellent. You’re almost saying, Cameron, that too much domain knowledge will make it difficult to really disrupt the industry that you’re in or that you’re targeting.
Cameron Steele: Yeah, I think so. And it’s not true for everybody. I think there are some existing people that have what I call a fresh mind or a very open or a change-oriented mindset that can come in and do this. But I do think it’s hard when you’ve grown up in an industry and you’ve done it a certain way, it’s very hard to think from a very different perspective. I would use the example of when we talk to our customers, they don’t have the context of what we could do for them. Because they’re thinking about the built world and physical assets. With software, we can go build whatever we want. We’re not encumbered in any way. Our job is to listen to their problems and not try and solve it the way they express it. But think about a different way we can solve a problem that may not be in their construct of thinking.
That’s the way we approach things. And that makes it fun. That’s the product-market-fit dynamic. That’s also how do we go to market? I think there’s two art forms with doing a startup. It’s figuring out the right product to build. Then it’s figuring out how to take it to market. And I think the first piece is just hard work and listening. The second piece is learning the language of the industry and learning the pain points or pressure points that really allow people to give you a chance, even though they’ve never heard of it before.
Cameron Steele: Yeah, we have targeted the owners of the building data. That is typically equity owner/operators. They have ownership in the building and they’re typically responsible for operating it, and so they own the data. We wanted to go after the owners of the data, not the stakeholders that may have access to the data, but the actual true owners. That has been our customers. And so what that ends up looking like for us is we have private equity firms, we have advisory firms, we have family owned businesses, and public REITs are typically the folks that we’re targeting.
We’ve tended to focus on slightly large, say one million square feet and up owners. But I think our sweet spot is going to be a little bit larger than that. But we have customers that have 500,000 square feet. We have customers that have 15 million square feet they’re managing. And we’ll have customers that are going to be much larger than that. We’ve developed a solution that I think is multi-category, which we feel really good about.
The other thing I would say too, Roland, that I didn’t specify earlier was we focus on office, retail, and industrial. We have not focused on multi-family, largely because the contracting and leasing process is fairly standard. There’s less complexity differentiation. As a software company, we thrive on complexity, so we lean a little bit more heavily to the retail, industrial, and office segments of the market.
Roland Siebelink: Can you expand on that particular side thought, as a software company, you thrive on complexity. I think a lot of founders would like to hear more about that.
Cameron Steele: Yeah. Our customers are solving the use of data and management of that data for decision-making and operations and risk management, et cetera. They don’t necessarily know it’s very inefficient. They probably feel it, but they don’t know it nor do they really understand what they could do differently. We have to be exponentially better than what they’re currently doing, or why would they change? As a strategy, we’ve decided to handle as much complexity as we can.
And so for us, being able to handle that complexity, being able to capture it within our platform adds significant value that is a very severe pain point for our current customers. And so, when we talk about complexity, we as a software company need to handle that complexity through technology, and we need to come in with a value proposition that is exponentially better than their current manual process. Or why would they change? It’s a burden of entry for us. We have to deliver upon that value proposition. But once we start doing that, we have a very good response to that.
Roland Siebelink: I like that way of thinking. It’s a little bit opposed to the typical Silicon Valley startup. Build your minimum value proposition and try to get traction with that. How do you react to that?
Cameron Steele: We subscribe to that. It’s really a prioritization exercise, which is we need to identify what is most important and most meaningful and critical for our customers. That’s what would fall under this umbrella of minimum viable products. We can identify those things and put those into a package that actually has a meaningful impact. Then we’re in business. Using a football analogy, the goal line moves with us. We think we’re there and then we continue to have to continue to move things out. I think when you have limited resources, limited time, and you don’t have forever capital, you have to be good at prioritization. You’re going to make mistakes. But if we do generally a good job around prioritization, then we’ve very much subscribed to the MVP.
Roland Siebelink: Famously, COVID has had a huge impact on commercial real estate with all the working from home and tons of insecurity there. How has that impacted Prophia?
Cameron Steele: That’s a great question. Ironically, we had hired our first salesperson and were starting to move much more aggressively in early 2020. We had our baseline with beta our design partner customers up and running. A couple were paying us, so it felt like it was the right time to push forward and really go to market. And the lockdowns hit and COVID hit. We knew our market was going to be materially impacted. When our customers’ customers aren’t using their product, that’s a huge disruption and is very distracting for them. We were very aware of that.
What I would describe as what we did is, the term is turtling, which means we decided to maintain our current staff - I think we were about 15 people at the time. We decided not to let anybody go. But we decided to focus on our current customers, continuing to build out the product and take feedback. And we were going to go to market and do our best to sign up as many customers as we could. But the knowledge that the timelines and distractions for our customers were going to be material.
And we ended up having a slow but a good year. We signed up seven or eight new customers. Nobody huge but we had good forward progress. Our product really got solid. And since that time, I’m proud to say that we’ve had no customer churn. We’ve been able to maintain all of our customers. And all of them are very happy and we’re very proud of that. But I think that’s one of the silver linings of COVID is we’re able to take a little more time to really understand and develop a core foundation for our product and with our customers, get closer to our customers. And I think sometimes you aren’t able to do that in a higher growth environment. And then I think it set us up well for last year and then moving into this year. I think we’re starting to see a lot of expansion opportunities that we’re excited to move forward with.
Roland Siebelink: As somebody who basically built a second - maybe even third - business in a vertical you were not necessarily familiar with before, how would you advise founders to figure out their go-to market for a B2B product?
Cameron Steele: Yeah. First of all, I think going in with an open mind, but I think there’s common sense. You can look at the way people are doing things and say, “There’s a real opportunity to improve this process.” And then the next thing is to listen carefully to what people say and prioritize and try to understand meaningful and impactful problems that you can address that would cause someone to change.
The thing we’ve wrestled with a little bit is the product market fit equation. I’ll use the football analogy again. It’s a little bit of a move. It feels like it’s moving a little bit. The goal lines are moving. But I think we’ve identified finally after a few years, what that complete package looks like. We’re investing in completing some of the product work to really get there, which is simply integrations. People want the data lifecycle taken care of. They want our data. But they want it pushed into an existing system where they have investments, processes, and it saves them a ton of time and money and effort.
And because in our industry, those departmental systems are usually companies that have been around for a long time and tend to have duopolies or monopolies, they’re not as easy to work with. It just takes time for us to get in there. I think it’s just listening and communicating with customers and understanding the holistic problem.
And then I would say the next thing is to - and this would bring in some people that know the lingo and language - being able to express that value proposition in a set of language and terms that is well understood by your customers. Because we all expertise and use language. I think the technology industry is probably front and center at abusing acronyms, expertise in what they do.
We have to talk to our customers in a language they understand, not make them feel dumb or not uneducated but also being very specific. Technology is just a path to help you. It’s not something you need to be afraid of. I would say do your work, listen carefully, understand the holistic problem set and then prioritize accordingly. And then learn the language. And if you can do all those things, I think it sets you up well to start moving forward more quickly and then eventually scaling.
Roland Siebelink: What’s your approach in actually reaching those customers? Is it more outbound, getting salespeople in with a Rolodex or do you believe a lot more in air cover, doing a lot of marketing and trying to count on inbound interests?
Cameron Steele: Yeah, we’ve tested both. And I think today, we’ve got a little over 30 customers. We are not at a point where we’re a strong brand in the industry. We need to work on that. I think the most effective way for us to describe our value proposition is to use outbound sales and business development. With slightly larger customers who are tastemakers, who are innovation leaders in the market, if we get those folks to adopt us, then it’s upon us to create that content and that messaging and storytelling that helps people understand what we’re doing. I’d say we’re in the mid-phase of phase one of doing that. And then I think this year we’re going to be doing a lot more content building so that people can get educated about what we’re doing by just going to our website or reading a case study. And we’ll be doing a little more active marketing activities in there.
Roland Siebelink: How big could this become, Cameron? How big do you see Prohia grow? How much impact do you anticipate or strive for?
Cameron Steele: I think that there’s two ways to think about our business. I think the phase one part of our businesses is - the best analogy is Carta for us. Carta takes the underlying capital structure of private companies and creates a system of record for that. We’re doing the same thing for buildings with the underlying contractual obligations. I feel like that’s our first phase. The way we think about it, we charge on a per square foot basis. If we were just to get a reasonable percentage of the market in the US and North America, it’s a billion dollar business, so that’s great.
I think the bigger opportunity and one that I’m more compelled to follow is as we get scale, the underlying dataset that we’re capturing ,the metadata we’ll be able to use, can help answer problems that today can not be answered across this as an asset class. There are very large businesses today, like CoStar and others, that are using survey data that is very shallow but reasonably comprehensive. It’s like Nielsen was in the eighties versus today. It’s fine, but when you have Netflix, you would never use the Nielsen survey data. It’s just orders of magnitude better.
And because we’re able to capture so much data, we keep it current, all we need is the scale and then there’s certain things that we can do that I think are very compelling to investors in this asset class that we couldn’t do previously. That’s where I’d like to take the business longer term. Right now, we’re about a hundred million square feet on our platform today. I think 250 to 300 million, about triple our size. There are some initial products that we’re interested in. Some of our customers have already expressed interest in us building for them that are insights products.
We’re excited about doing that. We have our hands full today doing the basics, having a two-pronged ML, AI data onboarding, as well as a set of analytical applications. But the bigger idea is a set of investment products around this, and tools to help inform investors about how to make decisions. Because today it’s a very laborious, hard process for them to get data to help drive decision-making about investing, monetizing, and making decisions about how to allocate resources in this category.
Roland Siebelink: It sounds like a very compelling value proposition. Cameron, the people listening to this podcast, they may be looking for a job, they may be looking for a business development corporation, they may just be owning a building or be involved in commercial real estate themselves, how can they help you and Prophia be the best?
Cameron Steele: Yeah. The two things that I think are most interesting for us are hiring - it is a challenging environment to hire. We have several critical job posts that are up now and that we’re trying to get filled, and there’ll be more coming.
Roland Siebelink: In what fields are you hiring, if I may just quickly ask. What are the key fields that you are looking to fill more?
Cameron Steele: We’re looking for a marketing professional. We’re looking for business development help. We’re looking for product management help. We’re always looking for data science and engineers. We are looking for a director of finance. We need a lot of help; we’re growing nicely.
Roland Siebelink: It’s a great indirect answer to the question how fast are things growing. I always like to hear the open job posts; they say a lot.
Cameron Steele: I was going to say, Roland, I’m about to start going out to raise our Series A financing. My time today is going to start being on that. But also, I usually have one or two interviews a day. It is just a very competitive job market today. We have to work really hard to find great candidates, have them convince us they’re a good fit but also convince them they can have a great career with us. That ends up being a lot of work. That’s the one area.
The second piece is finding like-minded professionals in commercial real estate that want to learn more. We are always looking for people that want to be on the front end of the innovation curve; not everybody does. Folks that want to learn more about how they can better use data to drive alpha in terms of their investments, incremental value on top of a benchmark return. We want to be helpful in that. And we want to be part of that journey. People that are interested in learning more, we are always open to talking to folks that want to be on that front end of the innovation curve.
Roland Siebelink: Yeah. I like the positioning also to try and target the early adopters and visionaries that I think is totally appropriate at this stage. And then more can follow from that, of course.
Thank you so much, Cameron Steele, the co-founder and CEO of Prophia. This was an amazing interview. Thank you for all your insight. I’ve learned a lot today. I really appreciate your time.
Cameron Steele: Roland. I really appreciate the time. It was fun. Great questions. And it was fun to talk to you today.
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