"It's more about process innovation than tech innovation" - Natasha Terinova - Investor Series #3

Natasha Terinova is a Partner at REACH UK.

Natasha has been on both sides of the table. From selling and promoting Lloyd’s tech platform back when InsurTech wasn’t a word, to founding an emobility company and now investing and mentoring PropTech firms, Natasha has a strong track record of being at the forefront of digital transformation.

REACH UK is a global technology scale-up program backed by the US-based VC Second Century Ventures. SCV is a strategic technology investment fund backed by the National Association of REALTORS®, America’s largest trade association representing more than 1.4 million members involved in all aspects of the residential and commercial real estate industries.

Applications for the 2024 REACH UK cohort are now open. Listen to this podcast to learn more about how REACH UK may support you, as well as Natasha’s personal advise for founders in the early stages of their journey and her view on what makes a successful business in the PropTech industry today.

Interviews with inspiring Founders, Investors, and Real Estate Executives will be shared weekly on this podcast series - follow the PropTech Talks interview series and stay tuned!

Connect with me on LinkedIn: https://www.linkedin.com/in/matthew-maltzoff/

Transcript

00:00:00 Matthew Maltzoff
 Hey everyone, welcome to another edition of PropTech Talks where we talk with successful entrepreneurs, investors and real estate executives to find out about the modern real estate nuances and how to capitalise on them. We're here with Natasha from REACH. It's great to have you. How's it going?
 
 00:00:18 Natasha Terinova
 Thank you. So my name is Natasha Terinova. I'm a Partner at REACH UK. We are a global technology scale up programme that is operated by the venture capital organisation headquartered in the US, like backed by Second Century Ventures. I know it can be a bit of a mouthful, so please allow me to refer to it as SCV in following conversation. We've been around for quite a long time actually. So we were set up back in 2008 in the US by one of the largest trade organisations in the world, which is the National Association of Realtors. IT was set up, as I said, in 2008 when National Association of Realtors was celebrating their hundred years anniversary. They wanted to enter the 2nd century of existence of an AR by clipping their members as well as the larger industry, wider industry with the technology tools, therefore the name. I kind of like this narrative. It puts things in perspective a little bit.
 
 00:01:18 Matthew Maltzoff
 Very cool. That's really interesting. I'm sure a lot of us didn't know that. So before we jump into what REACH is doing and the exciting things that are happening in the industry, I think a lot of people would also like to just hear a little bit about you and how you ended up working with REACH and how you ended up as an investor and, you know, helping so many start-ups. Now we'd love to just learn a little bit more about you.
 
 00:01:43 Natasha Terinova
 Well I hope you'll find it interesting. I moved to the UK 20 years ago to do my MBA and then my first job out of the UNI was for Lloyd’s of London Broker that is, well actually coincides with the launch of Second Century Ventures in the US. So that was year 2008 and the my job was to promote and sell the technology platform. Back then insurer tech was not even the word and practically what that piece of technology looked like. It was like a type form with a bit of a like a calculator at the back end that I had to go to like freight forwarding market and then tell them that all of a sudden they don't need an insurance broker any longer because that piece of tech could automatically arrange their cargo and legal liability insurance cheaper and instantly and their risk will be written on Lloyds. So really, you know, when I think about my career, I actually was like in technology sort of on a corporate side for about a decade. And then very naively in 2015, way before flexible working became a thing, I decided that the best way to manage my time better would be to launch a start up. Naive little thinking, learnt a lot and also sort of dipped my toes and sort of understanding and running a start up. So I've been on both sides of the table in that sense. The company that I started was in electric mobility as a service. We were providing electric mopeds. So that's my own delivery and food delivery services. So if you see like some new mopeds whizzing around in London, that is definitely what I consider being my legacy because when we started that business, we were the best selling bike result 15. I mean, but this is, you know, we talk about tech and we talk about PropTech and the whole excitement, I guess, you know, from both the industry and the investors in that space that it's quite largely considered a laggard in terms of digitalization. But yeah, so it gives me a great opportunity and I guess an insight to what the companies that we invest in going through. It's going to have been that done that. Asked for money, was refused many times by investors. Few said yes. Helped other companies to raise funds. Ran quite cool bespoke sort of more interesting projects on the corporate side, like bioplastic competition for one of London airports. Learnt a lot about plastics. Started talking about scope 3 emissions back in 2017. Typically it was looked at by the industry. The flower child.
 
 00:04:27 Matthew Maltzoff
 That’s really interesting because you've seen all three angles, the those who buy technology, the executive side, you know, founding a company, you know how this quite glamorised industry is. When you peel back the layers, it's not actually glamorous. It's, it's sort of like digging, digging a tunnel with a spoon. So, and now obviously, you know, seeing it from the investor side, it's, I think worth looking a little bit into the real estate industry today. I know, you know, you mentioned Insurtech back when insurtech was the buzzword and that was when, you know, that they at the time felt that they were really behind. And now real estate, you're probably seeing some similar, similar parallels. Now, of course, insurtech's experiments is quite gargantuan sub industry and insurance. And do you see the same sort of avalanche of technology, you know, unfolding in real estate as well? What do you think is happening in the built environment?
 
 00:05:26 Natasha Terinova
 You know, so if you compare it with Insurtech, it's probably not going to be my like massively comfort zone to talk about insurtech versus PropTech. I think where I can sort of parallel is most of on the fintech side. And it was incredibly interesting actually at PropTech Connect on the panel with a good friend of mine. It's probably the panel that had the most fun at when I was interviewing on the Anna Brailsford CEO at Code First Girls on stage and what they are doing sort of and how financial technology actually had both on the AI side and sort of in adoption rate of technology because that's more focused sort of on the client, right. You know, it's all about really knowing your client. We don't have that somehow in sort of in PropTech or real estate or sort of built environment or not as much as I sort of see it right now. There's a lot of solutions that come through our door when like someone moved the house that didn't work. They decided to create a piece of tech and then this type of technologies sort of may reach a certain sort of traction, but why are they going to stall? Is that scaling up and really communicate in this to the industry? I guess because the way I see it that it's almost like a different language, right? You know, we, we articulate very differently. So on the technology side and on the property side, and what some tech companies might consider a problem will not be a problem in the in the market that they're trying to target or the problem will be articulated slightly differently.
 
 00:06:54 Matthew Maltzoff
 Interesting. And so that founders sort of journey of getting in front of their customers and understanding their customers. Do you think uniquely that's a little bit more of a challenge in real estate and do you think that's potentially where an opportunity is?
 
 00:07:11 Natasha Terinova
 You know, I thought I look at it slightly differently, I guess, right. You know, so my excitement is more about sort of how the organisations run, you know, so we, we look sort of more on a probably a newer language sort of buyer side. It's and I'm going to give you a story actually that which is an interesting 1. So our new venture partner Andre Bothma. So he was working with a client who asked them to sort of look at that tech stack. And one day what he realised that 75% of what he was doing, it wasn't anything to do with technology, but it was everything to do with people. It was so really talking about not the sort of tech innovation, but more sort of a process innovation within the company. And I've heard many smart people saying that, you know, it's not about the OR digitalization is is not sort of people innovation. So I think, and it's more about how we think what are the processes within the organisation and what the sort of bigger corporate scrap, I guess to do and to change in order to use the right technology by the right people. Because effectively, if you're not going to do that, what you're going to end up with the feeling that, but that tech doesn't work, does it?
 
 00:08:24 Matthew Maltzoff
 Right, of course. So there's clearly a human component to digital transformation. How, how might a larger real estate organisation that does have an ESG quota, that does need to get data on their assets that all of a sudden has to change the processes that have been using, that have been working for the last 50 years that are now starting to not work as effectively? How might they start? I guess embarking this journey?
 
 00:08:55 Natasha Terinova
 Yeah, but that's a real good question. Thank you very much for that. I probably will not be be able to answer that, but I think it's almost like changing the mindset about how you deploy biotechnology. It's like it's almost like, OK, if you have like a simple quota and you need sort of the data point, you know, I think that's could be a very easy sort of a point solution that would give you just that. But then if you have this mindset, then you have multiple point solutions and then none of the solutions talk to each other again, you're going to end up sort of being exactly the same bucket when you are frustrated. I think it's more about sort of having more holistic view on what is required, what needs to change first. So you know, and, and then sort of you layer technology on the top of that rather than other way around. And The thing is when sort of when the regulator and the stick becomes like so much tougher, they will sort of be more, becoming more reactive rather than proactively thinking about what might happen.
 
 00:09:52 Matthew Maltzoff
 I see, so let's look at it a little bit on the start up founders sides as well. Like you said, there is a lot of noise and I think a skill is coming through that noise and actually, well, you know, we do find there are some amazing solutions by some amazing founders. How can these founders actually get in front of these potentially quite archaic businesses and actually be successful? Well.
 
 00:10:24 Natasha Terinova
 I think it's, you know, it's, it's, it's also like how long is a piece of strain? It depends on the depends on the founder journey, I guess, you know, and might be helpful to sort of take a step back and sort of talk about how we invest on the stage of the companies and sort of the companies that I have access to. Because, you know, I can only sort of answer your questions based on my experience and what I've seen in the last four years of being at REACH and Second Century Ventures. First, I think fundraising should be an Olympic sport, especially if you're a female founder. I mean, this year, actually, I think this year is the worst year for me because I'll just give you like a really scary stat. Typically, I would see like one in 10 companies female founded or with the diverse team coming from my door this year, like I have, like I said, two or three in 50. It's like it's, it's really bad, from the sort of from the initial idea stage, how you get sort of to your first institutional capital is incredibly difficult. And I don't think we will ever be able to cover the how in the whole sort of 20 minutes of this conversation. But the challenges are more about getting the right support in place. And when I talk about support, you know, not only I'm talking about, you know, who is on the Advisory Board, who are your investors, who are your angels who are you speak into how you built your relationship, do you listen? I mean, there's, there's one book actually that very rarely I say that, but has changed the way I behave. And then there's a there's a really simple saying on this. You have two ears and one mouth. Very reasonable.
 
 00:12:07 Matthew Maltzoff
 The ratio.
 
 00:12:08 Natasha Terinova
 Yeah. So the ratio to listen and understanding what your client have to say is incredibly important. And sometimes it's really difficult for the start-ups, especially when they enlighten that situation and they need to raise money and they need to sell, sell, sell. They almost like lose this perspective that you like, know your client understand where the pain points are. And I know it's like super cliche, but it's I don't see enough of that. I don't see enough of sort of listening and collaboration. And maybe there's also, you know, for the industry that's is inundated with technology and the noise and for the start-ups that need to sell, sell, sell. I mean, you know, there's even sort of a cognitive dissonance in this sort of in this setup if you think about it.
 
 00:12:48 Matthew Maltzoff
 It is for. Well, for sure, because if the goal is to sell, IE they're charging for what somebody else wants, you want to know exactly what they want. So it's interesting that, you know, the sort of tunnel vision that actually end up shooting themselves in the fist. Yeah, so let's look at REACH a little bit and how that fits with Second Century Ventures. I know that you know, that relationship is quite interesting and what is the best case scenario with here? We can say that's a hard question as well, but what is the best case you're?
 
 00:13:20 Natasha Terinova
 Doing well with the hard questions today. Thanks for that. And it's nothing like I was given, by the way.
 
 00:13:27 Matthew Maltzoff
 For the, you know, the, the start-ups who are, you know, potentially looking for investment with you, what can they sort of expect? Yeah, when they're, when they're working with.
 
 00:13:37 Natasha Terinova
 You so I want to start with the fact that we're not a traditional VC by heritage and by so by set up. So we have our fund structure is open-ended. So, so we're short to as Evergreen, which basically means that we don't do sort of, you know, don't want to see the go fundraise and they have LP's and then they have announced their fund structures and the size of the fund and then they need to deploy the money straight away to then harvest and distribute the returns to the LP's. We have one LP which is the National Association of Realtors and our fund is Evergreen, which means that when we exit with the founders say whether it's M&A like or an IPO, then we put back the money into the fund. So and that really defines the way we work and the way we look at technology. So you almost want to it's an interesting hybrid between like corporate VC and I guess the traditional venture capital organisation in that sense. But we sort of tend to be more patient and strategic in our approach. When I say strategic is strategic, part of us is actually the REACH programme. So we're not a stand alone accelerator. You know, we are and I just called us an accelerator. Oh dear. We're we work with our companies quite heavily during the programme timeline which typically lasts up to nine months. The the programme itself is more geared towards sort of later stage companies. So, you know, although we are known to back companies that are valued from say, 5 through to 60, there's a lot more value that we can provide for the company at the latest stage of maturity. Because what we're all about when we're talking REACH is 2 key things. It's exposure and access to the industry. So we need the solutions that are ready to be deployed. We need the teams that can potentially accommodate the growth that the programme provides. The programme programme is very heavily industry backed. So this you know the whole NAR relationship and when we launched this in the UK back in 2020, we worked in partnership with Property Mark. Property Mark is the National Association of Estate Agents. It's the equivalent of NAR in the UK. And as a natural progression of this relationship, we recently announced them as a Co investor, which to me or the way I look at the industry, this is so incredibly impactful on both sides, the traditional sort of industry, property industry in the UK as well as the startups because firstly and our check is the largest in the accelerator space. So just to give you an indication, it's probably going to be about 3 times bigger than your standard accelerator. And then it comes with a very structured growth initiatives that we will deliver over the duration of nine months. And we will also work with companies individually. We're not a cookie cutter, we're structured, but we are sort of very hand curated around the needs of each company. The sort of the relationship between, I mean, we're the same organisation effectively, but the relationship between sort of the REACH and the Second Century Ventures. I typically say to start-ups, if if you want to have SCV on your cup table, then you need to do REACH first. Now if you get the follow on funding is not written in blood, you need to do well. I mean you take as much out as you put in, but I'll just give you sort of a stats. So we ran 3 programmes. We've backed seven companies in 2021. We're backed 11 companies in 2022 and seven companies again in 23. So if we sort of take a couple of step backs step steps back into 2021 programme, out of seven companies that we invested with the first initial REACH check, five of them got follow on funding from SCV.
 
 00:17:35 Matthew Maltzoff
 Which is borderline unheard of out of this conversation.
 
 00:17:38 Natasha Terinova
 And two of them, two of them didn't get the money because they didn't ask for it. That is not basically, this is not to say because they're asking for money, this is not how it works. It's success based, right? You know, this company successfully expanded like expanded into the US. One recently completed the reverse merger. They have a great top line doing fantastically well. So that's exactly what I'm saying. You know the later stage you are actually the more value the programme will provide you, which is kind of counterintuitive when you think about accelerators.
 
 00:18:10 Matthew Maltzoff
 No, that's really interesting. And that sort of success rate when you even think, you know the you mentioned you're sort of the semi early stage is unbelievable. So thinking I guess the next few years now you know, obviously increase in I guess the seriousness of decarbonization, how real estate leaders are looking at data, how the obviously the build environment is more technologically advanced than it is every year before. How, you know, I guess what's next for REACH? Where is REACH going and how does that fit in with the moving industry?
 
 00:18:52 Natasha Terinova
 So you know, I always think about as then more than a check and the relationships such as the and Property Markets, Co investors sort of are very much sort of confirming that vision that not only I but our global teams and my wonderful colleague Paolo Rigutto have has. So that's you know, there’s going to be so much to us. We are about to announce another partnership that would allow us to engage with earlier stage companies. So that has not been public yet. So we're announcing that in the beginning of May, just before CREtech. There's also going to be another announcement coming right in the beginning of June. That would be another. So like partnership is just like we have a good partner, we have a partnership mindset. I think, you know, that's probably going to be the right way to say, but we're also going to announce a joint venture with one of the one of the associations that we've been working with. So that's been coming for a long time and that would create an incredible environment for the companies that we back already and for the future participants in REACH UK and potentially REACH Global as well. So that that's a lot coming our way. I mean, I know I've been really cryptic. It's.
 
 00:20:09 Matthew Maltzoff
 Exciting, but.
 
 00:20:10 Natasha Terinova
 I'm sorry, I just, you know, that I just cannot say any more. But yeah, watch the space. That's something incredibly exciting coming up this year. This year is actually really special for us.
 
 00:20:20 Matthew Maltzoff
 Fantastic. And as a sort of last bonus question for all the, you know, I guess inspired founders who are watching right now, what would your advice be to a new founder who does have, you know, does have an idea in mind is maybe starting their first sale or starting to build a team? What would your advice be to a founder in the space at the moment?
 
 00:20:45 Natasha Terinova
 You know I'll give 2 and I love unsolicited advice. By the way, do your research and have a long term view, build relationships. If you have like a sell, sell, sell, you know, that is sometimes it's not sustainable. Really it's and that's I mean, this is what we are. You know, we always talk about longer term view for our founders, because if you don't do your research, like if you don't, if you're not prepared, that's only can backfire. Like know who you're speaking to, understand what's important and reach out to people. Don't be put off by, I don't know, like reputation or whatever. Just reach out, speak to as many people as you can, do your research, listen, and I think that could create a really good baseline for your next move.
 
00:21:36 Matthew Maltzoff
Amazing Natasha, this has been a lot of fun and it's been extremely insightful having you on. We're looking forward to seeing all the exciting things you gonna be doing in the future with REACH.
 
00:21:46 Natasha Terinova
Ohh yeah and you'll see them at PropTech Connect.