How Agya Ventures Built a Consulting Arm Near $500K Revenue While Raising Its First Proptech VC Fund (Interview with Kunal Lunawat)

Introduction to Agya Ventures and the Fund

Nathan Latka

00:00Hey, folks. My guest today is Kunal Lunawat. He's building a company called Agya Ventures. It's helping it's he's built the fund to invest in the future of the built world. Kunal, you ready to take us to the top?

Kunal Lunawat

00:12>> Awesome. Thanks for having me over, Nathan. You bet.

Nathan Latka

00:14Thanks for coming on. So just to be clear, this is not a SaaS company. You're building a fund. Correct?

Fund Structure: Early Stage VC Focused on Proptech

Kunal Lunawat

00:18>> That's right. It's an early stage VC fund.

Nathan Latka

00:21Okay. And are you investing in any SaaS companies focused on this space or no?

Kunal Lunawat

00:26>> Right. So we're investing in seed and series A stage companies focused on real estate. A part of that could be SaaS business models that we'd look at.

Nathan Latka

00:35And have you deployed any capital to date in SaaS companies focused on real estate?

Portfolio Overview: Five Investments, Two SaaS

Kunal Lunawat

00:39>> Correct. We made five investments so far and two of them are SaaS companies.

Kunal's Background: Blackstone, Business School, and Tokyo

Nathan Latka

00:44Great. Tell me more about the fund. Did you come as a you know, were you an operator? You sold and then you launched the fund or you have always been in sort of on the fund side?

Kunal Lunawat

00:52>> No, it's been an interesting journey to this point, Nathan. So I grew up in India. My dad's a first time entrepreneur. He's a real estate developer back in India. So kind of grew up in that environment. Came Stateside for college, and then my first job out of college was at Blackstone real estate. So I made a bunch of real estate, private equity investments there across different asset classes. Went to business school after that. At that point,

01:15>> I got more interested in product and tech, then helped out a couple of friends with their proptech companies. And then eventually, by happenstance, I I got a call by a Japanese real estate developer to help them run their corporate venture capital arm based off Tokyo. They were looking to do more things in The US. This was in 2019. So I went, visited Tokyo, spoke to this company, and kind of got connected with two more institutions. And

01:42>> they wanted me to do the same thing, which is help their CVCs gain more exposure to US based proptech. So at that point, I kind of built out this consulting business, which is the first iteration of Agya Ventures. As the business kind of kept growing, at that point, I convinced my now co founder and GP in the fund, Nobu, who was my classmate in business school, to join the team. So we kept on building the consulting

Consulting Arm vs. Fund: Time Allocation and Revenue

Kunal Lunawat

02:09>> side of the business, and last year, we went back to some of our Japanese institutional clients and they participated as LPs in the fund. So kind of fast forward to today, we spend, I would say, 75% to 80% of our time as a team on the fund side and the remaining 20% of our time on the consulting side.

Nathan Latka

02:25How large is the consulting business? What was revenue in 2020 just on that part of the company?

Kunal Lunawat

02:30>> It was a little less than $500,000.

Nathan Latka

02:32Okay. Got it. So it's really more of an excuse for you to get connected to these folks while you focus on the fund?

Kunal Lunawat

02:36>> Exactly.

Nathan Latka

02:37Interesting. Now, did you and your partner split? Were you friendly? Did you just split carry fiftyfifty? Or how do you do that? When you launch a fund, how do

Kunal Lunawat

02:44>> you talk about carry splits? Sure. So there are a few things that you need to bear in mind. It's the amount of work that's already been put in. It's the experience in the background that you're bringing to the table. And it's the opportunity cost of each founder for leaving their existing jobs to start something like this. Bear in mind that the carried interest for fund one may not be the same as that for fund two. Because

03:11>> by the time you're looking at fund two, it's more more more of an established vehicle. So, you know, the economics might change at that point.

Nathan Latka

03:17So how much did you guys raise for fund one?

Fund Size, Raise Progress, and Fee Structure

Kunal Lunawat

03:20>> We're still raising, so we are not allowed to disclose. But we're looking at a 45 to $50,000,000 fund. Ballpark, we're 50% of the way there.

Nathan Latka

03:29And are you selling sort of the 2 and 20 model? You're selling sort of a 45% IRR? Is there a fixed hurdle or something unique about it?

Kunal Lunawat

03:35>> It is a 2 and 20 model, and it's pretty market standard from that perspective.

Real Estate Market Outlook and Macro Trends

Nathan Latka

03:41Okay. Let's talk more about Now we understand the fund structure, let's talk more about real estate. And there's a lot of folks saying, obviously, the Fed is printing money, actually, most world banks right now printing money like crazy. And you've got large private equity firms like Blackstone actually sort of buying up the American dream, storing money in real estate. Many people are saying for the consumer, owning a home is dead. Prices are too high because these

03:59funds are bidding it up. You have some experience here. Is the American dream dead owning a home?

Kunal Lunawat

04:03>> Well, what we see is actually quite the opposite. Last year was the best year for residential home sales in the last fifteen odd years or so. Mortgage rates are at an all time low. There is some concern that institutional buyers are crowding out the individual homeowner. But all said and done, we still think that there's space for everyone to operate, and we're seeing homeownership levels go up.

Nathan Latka

04:31You quoted residential home sales, but how do you split out the buyers of those residential homes into cohorts, consumers like you and I, versus big funds, institutional funds buying it? Isn't that a bad proxy to use just pure residential home sales?

Kunal Lunawat

04:46>> True. That's a good point. And really, if you wanna slice and dice it more, Nathan, you know, there's the individual homeowner that's buying a home for the first time. There's an individual homeowner that's buying a vacation rental or a second time home as rental property. And then among the funds, you've got the small to mid sized funds that are buying anywhere between 20 to 100 assets. And then you've got the large private equity funds that are

05:07>> buying 10,000 assets at a time. So you've got the whole spectrum. There are certain markets for sure where the large private equity funds are buying thousands of assets and that's crowding out the market. But even then, if you look at the total volume of residential sales across The US, that's still a fraction of the total market. So to say that large real estate private equity funds are dominating The US home residential market, I think would be

05:32>> factually incorrect.

Nathan Latka

05:33You believe we're in an inflationary environment with so much money floating around and that's why we're seeing these crazy asset prices?

Kunal Lunawat

05:40>> I do believe that you're seeing some indications of inflationary trends, but at the same time, from a macro perspective, you've never seen anything like this before. The rate at which the Fed's printed money, interest rates at an all time low. So, there's something to be said about maybe this is the new normal.

Nathan Latka

05:57Yep. Interesting. Okay. How is all of this funding a thesis, a core belief you have about property? And then how is that determining and how is that guiding you in terms of where are you deploying capital in the proptech companies?

Investment Thesis Across Real Estate Asset Classes

Kunal Lunawat

06:09>> I think last year was kind of a watershed year for us in proptech. Some of the trends that we've been looking at kind of got accelerated by more than ten years. And to give you a sense, we divide real estate across a few different asset classes. So when you look at office, this whole trend around healthy buildings and technology promoting healthy buildings has been accelerated. When you look at residential, the one one underlying theme that we

06:37>> are backing pretty strongly is community and having a sense of community in multifamily properties and any technology that kind of promotes that. When you look at hospitality, I mean, the hotel sector was really badly hit. You had occupancy levels at all time lows across major markets in The US. And usually it's during those points where the propensity to adopt technology is at an all time high among property managers and hotel owners and operators. If you look

07:03>> at retail, brick and mortar retail almost, you know, was again struggling. So anything that brings people back to malls and makes it more experiential and technology that drives it is something we are bullish on. On the flip side of retail struggling, Nathan, was ecommerce was on fire. And as a result, you know, you barely had any spaces in warehouses. So we had warehouse owners and operators come to us asking us for technology product that would make

07:30>> these warehouses more efficient. So that's what we have been looking at across the five to six different asset classes in real estate.

Nathan Latka

07:37Have you made a bet there in the and specifically in the warehouse space, making it more efficient? And if so, what was the company you wrote a check into?

Kunal Lunawat

07:43>> We are actively looking at the space. We haven't made a bet yet.

Nathan Latka

07:46Okay. Where have you placed bets? You've written five checks, I think.

Kunal Lunawat

07:49>> Sure. So we've invested in the hospitality space. We've invested in the senior living space. We've written two checks in the residential space, and then we've written one check-in the retail space.

Nathan Latka

08:03Are any of these public already? Can you share the story of these companies and what they're doing?

Kunal Lunawat

08:06>> Sure.

08:09>> We can share four of the five.

Nathan Latka

08:11Okay. Let's Can you share the senior living one?

Kunal Lunawat

08:14>> Yeah. Sure. So actually, that's the one that's that's on the Stealth. So Okay.

Portfolio Deep Dive: Ruumr and the Home Bidding Platform

Nathan Latka

08:19What about what's about the one of the residential checks? One of the one of the two checks there?

Kunal Lunawat

08:23>> Yeah. Happy to talk about both of them. So one of the companies was star the name of the company is Rumr, r u u m r. Great founder story. The founder's name is Jordan Allen. He was previously the founder of this company called Stay Alfred, which is a short term rental company, scaled it to a $100,000,000 in revenue, and then the business shut down during the pandemic, and he had to stop the business. So this is

08:47>> his second rodeo, and what's what's really interesting and fascinating is, each one of his competitors in the business invested in the new company that he started, which goes on to show the command that he respects in the business. Right? His new company is predicated around bringing more transparency in the home sales process. And the way he's doing that is by building a bidding platform where you as a seller can put your property for sale. And as

09:13>> buyers, you can bid on the property and you can see for live, you know, where the property is currently at and what's the latest bid. And what that kind of solves for is a lack of transparency in the home sales process. And second, if you're a home buyer and if you've set your eyes on your dream home and you're bidding say $250,000 and then your broker comes back and tells you that, hey, we lost the property

09:38>> by two two and a half thousand dollars. You don't wanna be in that situation. Right? So this bidding platform kind of solves for that. So that's a company that we recently invested in.

Nathan Latka

09:48And what was the check size there?

Kunal Lunawat

09:50>> We wrote a $250,000 check-in that company.

Nathan Latka

09:53And that was a traditional sort of seed or series a?

Kunal Lunawat

09:56>> That was a seed stage, safe note.

Nathan Latka

09:58Seed stage, safe. Okay. Got it. Were you guys the lead there? Were you the only investor?

Kunal Lunawat

10:02>> We weren't the lead there. There were a bunch of other investors, pretty high profile names as well. One of them was Adam Neumann, the former founder of WeWork.

Nathan Latka

10:10Yeah. Is that I'm trying to think after the after the documentary came out, is that a good check to have on the cap table or a bad check to have on the cap table?

Kunal Lunawat

10:18>> So I would not, you know, opine much on how WeWork was run as a business. But the fact is that if you think about a proptech business that's been scaled faster than anything, There are a few proof points on WeWork. If you think about a category being created in the office space, I mean, coworking as a concept was introduced and made global by WeWork. So to have, you know, those insights in terms of how to make

10:45>> a business go global and how to scale something that fast, I think there are fewer people better positioned to do that than the current team that we have on the cap table.

Nathan Latka

10:54Yeah. I mean, look, the hit there on WeWork would be anyone can raise $20,600,000,000 spend 10,000,000,000 and have a company worth 10,000,000,000 at the end or less. To your point, what you're basically saying is by getting on the cap table, you get all the lessons learned from spending $20,600,000,000 in the category and hopefully save some money yourself at Ruumr.

Kunal Lunawat

11:15>> I'd have a more positive spin towards that, which is not everyone in the world can raise $20,000,000,000 So you find me five people and I'll speak to all five of them.

Nathan Latka

11:24Totally understand, but I just have to mean, WeWork is worth 8,500,000,000 today, market cap, right? They raised 20,600,000,000. That basically, Adam has lost more money than any other founder almost on earth over the past decade. To your point though, obviously a lot of learnings there as well. I'm only pointing that out because one of the themes on the show is like, we advocate people always going out and trying to raise capital at all costs. And WeWork

11:46is probably an example of one of the most egregious. I mean, Adams is a great storyteller. He raised like crazy. SoftBank pushed the raise obviously, but ultimately didn't create value in terms of market capitalization. But again, highly strategic, makes sense why you guys obviously did that deal with him and makes sense why a lot of proptech folks want him on the cap table. Totally understand that. What about the hospitality space? Can tell us the story there?

Portfolio Deep Dive: Stay Flexi and Hotel Tech

Kunal Lunawat

12:08>> Sure. So we invested in this company called Stay Flexi. It came out of Y Combinator's last cohort. They're building the modern OS for hotel owners and operators.

12:21>> And the way to think about it is, you know, the initial wedge, the foot in the door for them is allow flexible check-in and checkouts. So Nathan, you may have gone to a hotel room, you know, your flight may have landed early and you want to check-in at 9AM, but you could only check-in post 2PM. And then you wanted to say check out late, but you had to check out by 11AM. So what Stayflexi is solving

12:43>> for essentially at the point of sale when you're making a reservation, you get to select the hour that you can you wanna check-in. So it could be 9AM, 09:30AM, 10AM, and then you also get to check out the hour that you want to check out. It could be 3PM, 03:30PM, and 4PM. Turns out to actually have this flexibility is a pretty complex problem at the back end. So they're building software and product for the property managers

13:08>> to kind of still run the ops of the hotel business while solving for this in the front end.

Nathan Latka

13:14Isn't the harder part in that two sided marketplace not lining up the the the hospitality folks, but actually getting consumers to use you to book the reservation over HotelTonight, Expedia, and all the other hundreds of folks in the space?

Kunal Lunawat

13:27>> Excellent question. So that's exactly what they're working on now, which is to integrate this product with the leading OTAs. So if you go to an Airbnb or booking.com or Expedia, you would have that option to book by the hour.

Nathan Latka

13:38I see. So will Stay Flexi be in the background? It will be more of an API running on the back end, or will you see powered by Stay Flexi on

Kunal Lunawat

13:43>> Airbnb? They're trying to figure out both strategies.

Nathan Latka

13:47Interesting. So how do you work with Founder? You write the seed check. I mean, do you get active in product discussions with these founders, do sort of write the check and move on?

How Agya Ventures Works with Founders Post-Investment

Kunal Lunawat

13:54>> We love to get active with the founders. So just with the case of Stay Flexi, one of the things we've been focused on is the go to market strategy. We've been having daily calls with the founding team. We are looking at bringing on board a couple of pretty senior advisors from the hospitality industry because I think there's a lot of progress that we've made on the software and product side. Now we want to understand the nuances

14:15>> of the industry and make sure that we are also focused on the top line and the product market fit. So that's been a lot of things we've been doing. We've been helping them with hiring. We're looking to get on board of VP of sales for the team, and they've been interviewing candidates along with CEO. And also this depends on how much the portfolio companies want us to get involved. There are some times where the founder wants

14:37>> to check-in once a week, and that's fine by us. There are times when the founder wants to check-in once a month, that's also fine by us. Our role is to be available and to be cognizant of what the founder might need and be prepared when he or she reaches out.

Nathan Latka

14:49Let's talk about the flip side. There's a lot of founders listening right now thinking, maybe I want to go raise my seed round, but I don't want to make mistakes. What's the biggest mistake you see founders make when they're pitching you to write their seed check?

Biggest Mistakes Founders Make When Pitching Seed Investors

Kunal Lunawat

15:00>> The biggest thing we've come across, Nathan, is not having focus or clarity of

15:08>> being able to communicate what the value proposition is. If you're confused about your value proposition and where the product's headed, it's way tough to convince that to someone else, be that to an investor or to someone in the sales cycle. And what that also tells me is getting to that level of clarity, which is being brief and concise and punchy actually requires a lot of work. It requires you to have had made like a bunch of

15:32>> iterations with the product and with your pitch. So if you're coming in with a brief, concise, punchy pitch, that tells me that you've put in a lot of thought and effort and work towards this.

Nathan Latka

15:42The flip side to that is a genius engineer that is product engineered his or her way to growth, but can't market herself or shit, but they've got incredible traction metrics. What about a founder like that?

Kunal Lunawat

15:55>> Great question. And you do account for that, right? I mean, on one hand, you want to have a great salesman or saleswoman making the pitch. On the other hand, you also want to look at the metrics, and sometimes the metrics speak for themselves. What we would also often advocate is if we do come across founding teams such as that, where it's like a one side, a unidimensional founding team, at the outset, we would encourage them to

16:21>> kind of build out the team in a more holistic manner if we were to invest in that company. So if you have an engineer, you want to bring on the sales capacity.

Where to Find Agya Ventures Online

Nathan Latka

16:30Very cool. Kunal, this is good stuff. If people want to learn more about you and the fund, where can they find you online?

Kunal Lunawat

16:35>> It's agyaventures.com. That's agyaventures.com.

Nathan Latka

16:39Guys, there you go. Again, a lot of SaaS companies, they start off as an agency. They pivot into SaaS. They take success. It sounds like VC firms also sometimes start as consultancy agencies. They're doing $500,000 a year in consulting in the proptech space, raising their first $45,000,000 fund. More than, we'll call it maybe flirting with about halfway there, already writing checks into hospitality space, senior living, residential, and anything related really proptech there. Kunal, I appreciate you

17:00taking us to the top.

Kunal Lunawat

17:01>> Thanks, Nathan.

Nathan Latka

17:04One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM

17:29Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's an acquisition, a big

17:51fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you wanna take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign up

18:13for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode. And if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We

18:33got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright, I'll be in the comments. See you.