The following interview is a conversation we had with Cameron Steele, CEO & Co-Founder at Prophia, on our podcast Category Visionaries. You can view the full episode here: $16 Million Raised to Power the Future of CRE Data
Cameron Steele
Great to be here, Brett, thanks for having me on your show.
Brett
Not a problem. I’m super excited and I would love to just kick off with a quick summary of who you are and a bit more about your background.
Cameron Steele
Sure. So I have had a career in and around software for about 30 years. I’ve worked both in operating roles and also as an investor, both in private equity and growth equity. And i’ve also worked on Wall street. So I think my background really is kind of diversified from operating running businesses, but also thinking about things from an investment perspective. So the last 15 years, a co founder and running software companies, but prior to that I spent quite a bit of time actively managing capital and I started my career at Oracle in an operating role way back in the nineties. So diversified set of background for me.
Brett
Take us back to Oracle in the nineties. What was it like to be part of the tech ecosystem back then?
Cameron Steele
It was great. The company was hiring, gosh, tons and tons of people. So I was of course in my twenties and it was a great social scene as well as fun to work. We were growing really quickly. A couple of years prior to me joining had an accounting issue and so they had to restate results. The stock got killed. But when I was there, they’d hired essentially a new group of managers to come in and we grew just incredibly fast over the next decade or so. I was there for about just under four years and it was a lot of fun. There’s a lot of people my age there. It was fun. Socially, you learned a lot, you grew quickly, and the market was very different. The tech ecosystem’s gotten a lot bigger since then. But back then it was interesting.
Cameron Steele
We were using email, but there was really no Internet. The Netscape browser hadn’t come out yet. All that was really new and were arguing internally about application software needing to be having GUI interfaces or graphical use interfaces, or whether just data entry through more character based modes was better. And so anyway, really kind of old school stuff when you think about it today, but it was fun. It was a lot of fun at the time.
Brett
And then what about your time as a capital allocator? What was that like and what made you want to leave that behind to go back to software startups or software companies, I should say.
Cameron Steele
Yeah. So I went to business school and after that I became an equity research analyst. I worked for the Royal bank of Canada, RBC, and I covered enterprise software, which was basically it’s an advisory role or large institutional investors. And it was back during the.com boom. And so it was a very crazy time to be on that side of the business. I left and joined an asset management firm, did that for a little while, and then joined a growth equity private equity firm. And I did that for about six or seven years. We were investing internet and consumer companies, and that corresponded with the great financial crisis in 2008 and nine.
Cameron Steele
And so I spent a lot of time in our portfolio working directly with our operators, and I just felt like at that stage of my career, that was really where I was most interested and where I wanted to be, and it just felt like it was the right place for me to be. So I left that fund when were finished investing with that first fund, and then I joined a startup as a late co founder to a startup with several good friends of mine. And yeah, my startup journey kind of really continued from there. So it’s been, and I really kind of feel at home operating and running companies, building products, hopefully delighting customers, all those things, and then seeing our teams grow within our company, all of which are really meaningful to me.
Cameron Steele
So that’s really kept me excited and engaged in what we’re working on.
Brett
It’s a perfect segue to talk about what you’re building and what you’re working on today. So what does the company do?
Cameron Steele
So we’re an AI driven data management platform for commercial real estate, and just to give a little context of what that actually means. So commercial real estate is the world’s largest asset class. So it’s the biggest market you can invest in the world today. If you look at just commercial, when we talk about commercial, that means offices, medical offices, retail establishments, industrial buildings, that type of thing. It’s about the third, the total size. And investors and asset allocators in this category have some of the worst quality data and some of the worst tools for helping them make decisions about how to optimize or maximize both the operating of these assets as well as the capital allocation. There’s a lot of reasons for this, but it’s a big problem.
Cameron Steele
So we’re helping them by using natural language processing and machine learning to pull data out of documents that are in PDF’s and things like that, and get them into a structured format. So in a database then we have a set of tools and workflows that they use to interact with their data, but we link back to the source data so it’s trusted, and we focus on tenant and lease data. And that is all about revenue to a building. So 99% of a commercial building’s revenue comes from leasing. But the complexity of that relationship between the tenant and the owner of that building is, it’s very complex, the agreement. So we help pull that data out so it can be managed effectively and that drives the value of these buildings. Nothing else does.
Cameron Steele
It’s very different than residential real estate where somebody may think you have a wonderful house and willing to pay up for it. Building commercial buildings are different. They have to generate cash flow, they have to have capital return rates and they have risk associated with them. And so it’s a very analytical way to manage buildings and the people that do this, highly analytical, but they just don’t have the data or tools to do it well. So we help with that for them.
Brett
Whats going on with commercial real estate.
Cameron Steele
In San Francisco in general? So lets take a step back and ill answer about San Francisco in a second. So in the last 18 months, the cost structure for commercial property owners has changed dramatically. Obviously, interest rates have gone up a lot. Pretty much most every commercial building has some sort of credit facility associated with it. The cost of financing buildings has changed a lot, and typically they’ll finance buildings for a period of time and then refinance them. And thats gotten really hard lately. The second is inflation. And so the normal things that are in place to sort of help cover the maintenance and costs of the building and ti costs, things like that, have gone up dramatically over the last couple of years. And so all of that has created kind of a problem, right.
Cameron Steele
For commercial property owners, their cost structures have changed pretty dramatically and very quickly. The second thing, and this is really related to your question about San Francisco, is the office market. Theres a supply and demand imbalance, right post pandemic. A lot of white collar workers, IP based workers, can do their jobs just as effectively at home as they can in the office. Maybe not all the time, but most of the time, a lot of the build out office space that catered to people being in office is not being utilized today. So this is a supply and demand imbalance in real estate. It just is slower to resolve than it would be in other markets. So thats what we have in San Francisco. We have people that are not going to the office as much, leases rolling off.
Cameron Steele
And so the owners are having, their buildings are underutilized. And at the end of the day, im a big believer. In longer term, these buildings are in place because people like to work together and collaborate and be together. People like to be among others. And so theres being a reset of how that happens. And so I think it’ll kind of normalize itself over time. But right now, San Francisco is kind of ground, actually all the west coast, particularly, like in the Pacific Northwest, too, there’s just a real imbalance between people going into their offices and the available space. And that takes a few years to kind of work through. But I think we’re maybe in the fifth or 6th inning of the process. So I would expect things to get better over the next year or two.
Brett
So you started in January 2018, it looks like. When did you first start shipping product and taking on paying customers?
Cameron Steele
Our first we ship product, I believe it was November of that year. We actually officially started the company in May. We incorporated in March. And I raised a little friends and family pre seed money to support paying our team, a small group of us, we interviewed a bunch of customers about what their needs were and came up with the framework and structure of what the product were to build. And then we built it. And so we launched the customers that November of that year. And our first paying customer, which is, I’m proud to say, is still a paying customer of ours, started paying us in February of 2019.
Brett
How did you get those first paying customers?
Cameron Steele
So we did what was called the design partner program. And there’s a couple different frameworks out there about how to do this, but it’s really good for kind of b, two b products, which is some entrepreneurs have a great vision of what they want to build, and they build it, and then they go find a problem to address. We sort of did the opposite where I saw the problem, which I described earlier, which is a data problem that our customers have, and then we thought about different ways we could address that problem. And we fake built it into PowerPoint, and we found about a dozen prospective customers.
Cameron Steele
We scrounged around and leveraged resources to get in front of people that would be good prospective customers pitched them a few different ideas and they gave us very direct feedback on what they thought they would buy. And then went and built that thing. Thankfully, when you do that, it really reduces the risk of, is this going to work? Because you’ve already done that work without spending any money on engineering and code. We did that in advance and then it gave us a very clear vision what we needed to go build, and we’ve been adding to that ever since. But that’s the process we used to start. And a lot of what I did, since I’m not a coder, I don’t code.
Cameron Steele
So I helped tracked down dozen or so of these customers, along with some of our other folks on our team, and really dug into what their needs were. But that really was the genesis of how we got going.
Brett
From a marketing perspective, how would you summarize the marketing strategy and maybe at a deeper level, the marketing philosophy?
Cameron Steele
The marketing approach, yeah. And it’s changed pretty dramatically just in our six year lifespan recall. So we’ve had two material challenges to our end markets since we started the company. The first was Covid, and unlike a lot of businesses, the commercial real estate industry was very negatively impacted by Covid and continues to reverberate. So our customers literally went dark on us. Our prospective customers went dark on us really March of 2020, and we had just shipped our product a couple of months prior, so commercially available. So we hired our first salesperson at that point too. So we grew through that. But it was really hard and there was really no way to meet people in person or to directly engage.
Cameron Steele
There are some good outcomes of this, which is people got really comfortable by seeing product demos over the computer, so over Zoom and other tools, and they also got comfortable signing contracts electronically, which wasnt necessarily the case prior to that. So were really limited by the channels we could use at that point. But as weve opened up since then, our end market is very old school in terms of how they do things. A lot of in person, a lot of direct engagement. So we try and meet people, we try and get a personal relationship going with many of our important prospects. We can do that through conferences or through going directly to their offices, and then we can do a lot of the follow up marketing and selling activity via online tools like Zoom and teams and other things.
Cameron Steele
So I would say those are the things that we’re doing. We’re also building awareness about very specific pain points that our customers know about through building online awareness through content. So there’s a lot of pre Internet services like lease abstraction is one of them that have been around forever, but it’s essentially referencing a manual process of summarizing a lease document that people do. So think about this. This is common in the industry that people are actually going through reading leases and essentially typing in summary information into a digital form. I can’t believe this is still happening, but it is. So we eliminate that. But it’s a standard practice in the industry to do this. And so a lot of people are struggling with these types of things.
Cameron Steele
That’s one way that we build awareness around a very specific problem point that helps us get involved in the discussion about how we can be helpful for them.
Brett
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Brett
How do you think about market category that? Is this a category creation play or this taking from or just evolving those existing categories?
Cameron Steele
Steven, I think its a category defining play. I talked about the investor perspective, which is investors need quality data and they need tools to help them measure and manage and react and utilize quality data to help allocate capital and resources in this category. In every other industry i’ve been in or looked at, theres usually a system of record for customer data. Theres some system that owns customer data. In commercial real estate, theres no such thing, at least not until we got involved. And we are trying to become that system of record for essentially their tenant data. So anything they’d ever want to know about their tenants is captured here, about their agreements and a lot of the existing so called solutions, or they think their accounting software is their solution to this, which is nothing.
Cameron Steele
Accounting is the first thing that gets automated in any kind of category. Just because it’s very rigid and workflow based. It’s not something that people really want to utilize more broadly. So we’re trying to become the system of record for the customer data in this industry, and if we’re able to do that, we can build on top of that. So that’s kind of the way we think about it. And so far, our customers have reacted really well to that. And it reflects a really strong retention metrics for the business.
Brett
Are there any metrics that you can share that demonstrate some of that growth traction and adoption that you’re seeing? Trey?
Cameron Steele
Yeah. So in terms of growth, I think of us as we’ve been a compounding business. We’ve been compounding year after year, which is great. And I think id like to grow the business faster. But im also, were also dealing with these headwinds. And so we don’t want to overinvest into a market thats just very cautious in terms of how they’re investing. But we’ve done a great job of growing. The other way I would think about it is we look at growth in rentable square feet. So we’ve got about 270 million rentable square feet hosted on our platform. And the way to think about that, just to put that in context, if you think about downtown Chicago, theres about 250 million sqft in downtown Chicago.
Cameron Steele
So we have a larger footprint of rentable square feet hosted on our platform than downtown Chicago, which is a good metric for us to think about. The other metrics that I think are good to know if we’ve had one customer leave us since we have launched, essentially launched commercially, and that was due to an acquisition where they couldn’t stay with us. We’ve done a really good job of building a good product. But also, I think more importantly, our customers don’t want to go back to the way they used to do things after they start using us, because the way they used to do things is highly manual and tough and boring. They like the flexibility and acuity they get from our platform. All those things, I think are things I really care about as a SaaS company. Retention is the most important metric.
Cameron Steele
And so were balancing. How do we grow aggressively in this market without overspending and then really keeping our customers delighted and engaged in our core product. And so the metrics that we have today show that were doing those things.
Brett
Trey, whats it like selling to the commercial real estate community? Are they open to new technologies?
Brett
What is that like?
Cameron Steele
Yeah, I think they are. They Are getting more so, but they are cautious. And its funny because, as I kind of indicated earlier, we use AI, particularly natural language processing and machine learning, to search for, identify, and then annotate data in unstructured in documents. Right. Unstructured environments. And we’ve done that using open source LLMs. We built on top of open source LLMs since really 2019. And it’s funny, we didn’t really talk about that at all with our customers because they didn’t really trust that it made them nervous. And so we didn’t talk about it at all. Then 18 months ago, or give or take chat, GPT hit the mainstream and a lot of things changed. Our customers started asking us, what are you guys doing in AI?
Cameron Steele
And it was funny because it’s like, well, if we’ve been here all along, we’ve using AI in a certain way. And so we’ve been asked to explain more and more about that. So I think that’s a good anecdote that I think the industry, while very conservative, it attracts people. It’s a fixed asset business. So when you have a set of buildings, you don’t want to lose those you want to maintain and have them generate income for you. So it’s a more conservative industry than others. But I think as things change and as everyone is asking everybody else like what is your AI strategy? Our end market customers are trying to figure out how they can use this technology to get better.
Cameron Steele
And I think the thing one of our customers told me that really resonated was if you have a growth mindset and most companies out there are trying to grow, they’re trying to figure out ways how do I grow my business without having this and decouple the expense of that growth. So how do I get more efficient and get more profitable? So they need help with that. And AI and tools like ours can really be helpful for them in doing that. So I think theres increasing interest and warming up to new things and innovation. The prop tech market has had its fits and starts, but it feels like as we go through this process, the opportunity is absolutely massive.
Cameron Steele
I mean literally if you look out your window, every building that’s not wholly owned by somebody is, there’s some leasing activity happening and that’s an opportunity for us. It’s just a massive market. So we’re excited to continue our journey and continue our focus. And as a founder and entrepreneur, it’s like you always wonder, is the timing right for us? And during the middle of COVID I was asking myself that, is the timing rights for us or when the Fed started raising interest rates aggressively and our customers started freaking out about this, its the time right for us. But I think we just have to keep our heads down. And I think about it is every day, if we do just make a little incremental progress every day that compounds and that ends up becoming. Compounding is a beautiful thing investing and for companies.
Cameron Steele
And if you’re able to do that, you can get to a very big company quickly, but you got to stay focused and diligent.
Brett
Let’s imagine a founder comes to you and they say, Cameron, I want to build a prop tech company. I want to sell it to commercial real estate. It’s not a competitor. But based on everything you learned so far, what’s like the number one piece of advice that you’d have to give that founder?
Cameron Steele
Find a cohort of forward thinking customers that believe in you and believe in your vision and they want to invest behind you. I don’t care what business you’re in, if you don’t have dedicated customers supporting you’re not going to get anywhere. And so we’ve been able to do that. We found really good, strong cohort of customers that believe in us, that give us advice, that are really supportive. And I think every time I talk to one of our customers or a prospective customer, I’ve learned something. And it’s part of what I love about my job is I get to learn every day about these things. So I would say spend the time and get those really good customers and treat them well. They’re one of those kind of assets that pays over and over again for you.
Cameron Steele
And don’t take your customers for granted because there’s going to be competitors and they’re going to have opportunities to go elsewhere. So really treat them well and learn from them. Yeah, thats the best thing I recommend.
Brett
As I mentioned there in the intro, you raised over 16 million to date. What would you say you’ve learned about fundraising throughout this journey?
Cameron Steele
Yeah, fundraising is a lot like product market fit with an end customer. Unlike 20, 25, 30 years ago, theres just a real diversity of different ways to raise capital to support businesses. And I think founders need to do their research on who is the right fit. And it’s not just what firm is the right fit, but who within the firm is the right fit. What evidence do they have that they understand your business? I think there’s sort of a brand bias in the industry and venture and there’s just firms that have done really well and have great brands, but they may not have a clue about your business or your end market.
Cameron Steele
For me, I don’t waste time with people that don’t have, if people are asking about my market size, it’s a good indication for me they’re not going to underwrite to my end market. They just don’t have the time or willingness or effort to do that. So I want to focus on people that really get what we do and are interested in what we do and have some sort of association. And the market for capital is big enough for all those people out there. So whatever you’re doing, do your research and get to know the people that really matter and that really care and are interested, and it saves you a lot of time and pain on just pitching everybody to see who kind of what fits you wouldn’t go do that with a customer. You’re not just going to go pitch anybody your product.
Cameron Steele
You do your research on who is the right fit, who’s going to buy, who sees the benefits of. And it’s true with investors, too. It’s a big enough market out there where you can find people that really care about what you’re doing, that are interested, have relevant experience, and are going to get it more quickly. And it just saves you a lot of time and effort.
Brett
Final question for you. Let’s zoom out three to five years into the future. What’s the big picture vision here?
Cameron Steele
So I’m excited about a few things, the first of which is when I started in software, and this is still true today. Software companies, particularly application software companies or Internet companies, will roll out new products and it’s like here it is now pay me. And there’s no data in them. And it’s dependent on you to sort of populate that with your data. We have an exact opposite model where we roll it out and all your data is populated in our system as part of our offering. So I’m excited about that. It’s a time to value an immediacy that like, just hasn’t been the case with software companies to date. The other thing I’m excited about is this kind of difference between reporting and intelligence.
Cameron Steele
So a lot of data and companies that are particularly investors or our customers that are reporting to investors will show retroactively what’s happened in their business. Here’s what happened last quarter. You hear this with public companies reporting, and it’s like data that happened three months ago or even sometimes longer. And most companies don’t have the ability to share that information real time with people that actually matter, that are actually managing the business and making decisions about how to run the business as quickly the opportunity to get data into our system and others real time and get it down to a operating level. So its intelligence, not just reporting, is what Im excited about. So literally, real time benefits to changes information about your business that can impact how you operate and how you manage your assets and frankly, your business.
Cameron Steele
And thats what were trying to do for our customers, give them real time, trusted information so they can make immediate decisions and just move more quickly. And the people that understand this are going to be successful its happened in other asset classes and other capital markets. It’s going to happen in our end market and I’m excited to really give our customers a set of tools they’ve never even dreamed they could have. We’re nicely on our way to be able to do that.
Brett
Amazing. I love the vision and I really love this conversation, and I know the audience is going to really enjoy it as well. We are up on time, so we’re going to have to wrap here. Before we do, if there’s any founders that are listening in that want to follow along with what you’re doing, where should they go?
Cameron Steele
Yeah, I think the best place is go to our website. So prophia.com p r o or look me up on LinkedIn. I’m Cameron Steele, CEO, co co-founder, Prophia, and I’m pretty active on LinkedIn. I like to interact with people there.
Brett
Amazing. Cameron, thanks so much for taking the time.
Cameron Steele
Thanks, Brett. I appreciate it.
Brett
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