Ep. 534 w/ Michael Colacino CEO at SquareFoot
Welcome back to the show.
Kevin Horek: have Michael Kohler Chino.
He's the c e o at Square Foot.
Michael Colacino: welcome to the show.
Uh, thanks Kevin.
Nice to be here.
Kevin Horek: Yeah.
I'm excited to have you on the show.
I think what you guys are doing
at Square Foot is actually really
innovative and cool, and I'm also
curious to get your thoughts on how
you handled the, the pandemic and,
and coming out of the pandemic.
But maybe before we get into all
of that, let's get to know you a
little bit better and start off with
Michael Colacino: where you grew up.
I'm a New Yorker, born
and bred, as they say.
I've lived here my entire life, except
for the six years that I went to college.
Kevin Horek: cool.
Uh, so what did you take in college
Michael Colacino: and why?
Uh, well, that's a good question.
I, I majored in James Joyce.
I was an English major.
And, uh, I thought at the time that I
would be a writer and, uh, I loved Joyce.
I had read him in high school,
and so I spent my entire college
obsessing about him, uh, until I
got to the end and realized that
there weren't a whole lot of job
opportunities for James Joyce Scholars.
Kevin Horek: Interesting.
So what got you passionate
about writing at an early age?
Michael Colacino: Um, I was a big
science fiction fan, actually.
I, I really enjoyed science fiction.
I was an only child and, uh, you
know, if you're an only child,
you have to make your own fun.
Um, and what I would do is I would read
like two books a day over a period.
Many, many years.
Kevin Horek: Okay.
So walk us through.
, you, you get outta school, you, you
know, kind of went back to school.
Walk us through that and your
career, maybe some highlights
along the way, and then we'll dive
Michael Colacino: into, uh, square foot.
So I, um, as an English major, I, I
wasn't really sure what I was gonna do.
I thought I'd go to law school,
but both my girlfriend and my
best friend went to Harvard Law
School in Stanford, respectively.
And they both hated it and they told
me that I would hate it, and they
also told me that they would hate me.
Um, and so I did exactly what
George Costanza did, which is I
said, uh, I'll be an architect.
And my concept of architecture was
just about like, George is that
you get a T-Square and, and work
for Vandalay Industries, I guess.
Uh, so I did actually one smart
thing, which is I went to work for an
architectural firm in New York, came
back to New York and I had one, uh,
marketable skill, which is that I had
taken a year long programming course.
At, at Harvard, which was
essentially a, uh, a full
undergraduate program in a year.
And so I got a job as a programmer
in an architectural firm, and
I realized very quickly that I
did not wanna be an architect.
It's a very, um, it's a tough business.
And the company had an interesting idea,
which was to bring computer technology,
software to, uh, architecture and to,
uh, real estate and space planning.
And it was a tad ahead of its time, 1981.
Um, um, and then what happened is
we spun off the company and there's
many, many chapters along the way,
but I ended up being the president
of that company in the mid 1980s.
And then when we busted, because, uh,
lots of startups bused, you only hear
about the ones that are successful.
But we were one of the ones
that was not successful.
We were ahead of our time.
And so I did management consulting
for five years, from 87 to 90.
In a small, uh, consulting firm,
mostly advising, uh, landlords, large
landlords on how to use systems and
technology for, for their business.
And so all of this is kind of
the dark ages of technology.
I mean, there was no internet, there
was no, uh, there was no nothing.
You know, basically we, uh, we
had local area networks and Max
and, and it was pretty primitive.
So I got sick of that.
And in 1991 I went to a brokerage
company called Studley, which had been
around since the fifties, specializing
in representing tenants exclusively.
And I was there for a decade and
I became a pretty good broker.
Pretty, pretty good as, um, Larry
David would say . And at the end
of that, um, in 2001, we bought the
company from the founder, a guy named
Julian Studley since passed away.
And it was a really good, uh,
transaction because the company was
a terrific group of people that, uh,
I had worked with for a decade and,
uh, that I really enjoyed being with.
And I did that until 2014.
We were the, I was the president
of that company till, uh, 14, and
then we sold it to a large British,
uh, sorry, large, publicly traded
British company called sabs.
Kevin Horek: Got it.
So what made you come
to Square Foot and what
Michael Colacino: exactly is.
So, um, at the end of my contract
in 2018, I realized that this large
amount of PropTech, uh, venture money
had flowed into the PropTech space.
And so I decided, you know, if I was
gonna do this marriage of technology
and real estate, I had to do it now.
So, uh, I spent a year shopping
for companies and, uh, talked to
a lot of CEOs, talked to a lot
of, so a lot of business plans.
And the one that I liked the best
was square foot because it was as
close to what I had been doing.
Uh, um, as, as any of the companies
that I looked at, excepted at a
couple of fundamental differences.
The first, it was a purely technical,
technologically driven company.
It was based on the technology and it had
therefore much younger, uh, workforce that
had been built kind of from the ground up.
And I found it very
refreshing to be around them.
And I thought that it was exciting
to finally get the chance to bring,
uh, the real estate business into
the 20th century, much less the 21st.
Kevin Horek: Very cool.
So walk us through, because
you were president and then
you became c e o, correct?
Michael Colacino: Yes.
So every comp Go ahead.
No, no, you go ahead.
Well, every company evolves and, uh,
the founder of the company, Jonathan
Wasserstrom, was a brilliant guy who had
a brilliant idea and, uh, he brought the
company to a, to a certain level, but
at a point, uh, of growing the company
nationally and maybe internationally.
Uh, it's useful to have done that before.
So Jonathan hired me as president
initially here in November of 2019.
Uh, not great timing, by the way,
because Covid was right on the horizon.
Uh, and then as we grew the business,
uh, over time it became more and
more apparent that my skills would
be useful being in the c e o slot.
And so Jonathan moved up to chairman,
uh, and I slid over and, uh, took over
as the c e O at the end of the summer.
Kevin Horek: Got it.
A and actually I think that's really
good advice that like sometimes you
need to, you know, make a change
based on getting like somebody like
yourself that's been through kind
of the next evolution of a company.
I think that's actually
Michael Colacino: really
good advice in itself.
Well Jonathan is a high, is a
very high character person, and
so his interest is in the idea
and the company and the people.
And sometimes, you know, that means
leading the charge and sometimes it
means, you know, bring in somebody who,
uh, has done it before, as you said.
And I don't like to make analogies with
Steve Jobs, but, uh, the fact of the
matter was, you know, Steve Jobs had
that same idea, uh, too he was wrong.
It turned out he really was the
right person to, uh, to do it.
So who knows that at the end of the
day, maybe Jonathan will be doing
the job and I'll be doing something.
Kevin Horek: right.
Yeah, no, that's interesting.
So before we dive into kind of the
transition and, and you know, your
thoughts and how you got through the
pandemic, let's dive into what exactly
Square Foot was maybe when you joined, and
how has it changed to what it is today?
Or, or how has it stayed the
Michael Colacino: same?
So the, the basic, one of the basic
problems with the industry is a lack
of transparency about the product
that people are interested in.
So a tenant cannot really find, uh,
office space on the internet very
different from residential, where you
can go on Street Easy or Zillow and
see pretty much the entire market.
Um, the industry in the commercial
and the office side has been
essentially, You know, non-transparent.
So the first thing that square foot is,
is it's a listings platform that allows,
uh, a user to look at the space in the
market that they're interested in, and
both see it, you know, in the sense
of understanding its basic terms and
economics, and also understand it, uh,
by getting in contact with a square foot
broker because we're a brokerage as well.
So the first thing that, the, that the
company is, is it's a listings platform,
square foot.com that, uh, brings in
people who are interested in office.
. And uh, the second thing it is,
as I said, is a brokerage company
where if you need advice in figuring
out what to do, we have brokers on
staff that will help you do that.
And, uh, that's pretty much
the core of the business.
Uh, when I started, there had been an idea
that the company could use very junior
people directly outta college because
the platform, uh, for implementation
of the transaction was sophisticated
and would guide people through.
But at the end of the day, there's
something about being a real estate
broker and understanding how to execute
transactions and serve clients that
really required more senior people.
So one of the first things I did with
Jonathan is I said, Hey, you know,
you have an engine here for creating
leads and opportunities that no
other major brokerage company has.
Why don't we go out and hire a bunch
of, you know, mid and scenery level
people and use that as an inducement
and produce a much more high revenue
better, more successful company.
And we decided to do that
right at the beginning of 2020.
And, uh, you know, in March of
2020, uh, many businesses were,
were harmed, but our business was
absolutely stopped in its tracks.
Uh, there was nothing that we could do.
We couldn't show space.
Um, we can't do transactions.
And so we spend most of
2020 doing a couple things.
One is surviving, sure.
And the second is, uh, applying focus
towards the product and the strategy so
that when things turned around, which
they started to do initially at the end
of 2020, um, and then slowly through
2021, that we would be prepared to grow.
And so in 2021, we expanded from
New York, which is where we started.
Uh, and we had offices set
up offices in Los Angeles,
Houston, Atlanta, and Nashville.
So we're now kind of a, a small
scale national brokerage company.
Kevin Horek: Got you.
So walk us through some of the
decisions that you made in during
the pandemic to basically survive.
Like did you, were you, are you
guys venture funded, self-funded?
A bit of both.
Walk us through.
Uh, where you are with
that or where with that
Michael Colacino: at the time?
So at that time, the company
was exclusively venture backed.
And he just com completed a
fundraising round at the end of 2019
and 20, at the beginning of 2020.
Which was extraordinarily good timing.
Because that provide us,
provided us with the capital to,
to survive, uh, as as we did.
And, uh, so that was what we did there.
I, I'd say there's two lessons that I, I
kind of have learned over my career and
some research that I've done that I think
is, is useful for people to hear about.
The first lesson is that when
something bad happens, you
have to take immediate action.
And the tendency, uh, especially
if you're, uh, a human being
and you, and you care about your
people, is to sort of freeze in
your tracks and hope for the best.
And so I had been down in
downturns in the late 1980s and
early nineties, in 2000 and 2008.
And in each of those situations, the,
the people who had took immediate
action survived and did well.
In fact, in, in oh eight, as soon as the
crisis began to manifest itself, I started
immediately, uh, reorganizing the company.
And we did that immediately.
And so we did the same thing here.
Now, the thing is that the second
lesson, which is one I've learned more
from the academic side, from like the
Harvard Business Review side of things,
is that companies that cut sharp.
Um, do very poorly when they
come out of a recession.
And companies that are in denial and
don't do anything, do very poorly.
And the companies that do well are the
ones in the middle that do two things.
One is become more operationally
efficient, which means doing the
same stuff, but for less money
and, and in more efficient way.
And, That invest in growth in, in spite of
the fact that the recession is happening.
And there was a survey done once of CEOs
and, and they said, you know how many CEOs
in this survey, it was like 60 of them.
How many of you think that it's a great
idea to invest heavily in a recession?
And like, you know, 58 outta 60 said yes.
And then the follow up question was, well,
how many of you have actually done that?
And the answer was like, 12 . So it takes
a lot of, uh, combination of, you know,
will audacity and uh, and good financial
backers in order to be able to actually
invest when, when things are looking grim.
But that's what we did.
That's how we built out
those offices, uh, in 2021.
And we made ourselves operationally
efficient by going and looking
at every expense that we had
and saying, if we wanna do this,
can we do it for half the price?
And that's exactly what we did.
Kevin Horek: Okay.
So walk us through what's
similar and what's different.
Pre and post pandemic because your
industry's really taken a hit.
And obviously with some people staying
remote, a little bit of a hybrid approach
or even being fully back in the office,
what have you seen, because you're in
Michael Colacino: the thick of it, really?
Well, uh, that's a very,
very complicated question.
And, um, it also suffers from, you
know, strong tendency towards bias.
Um, because obviously I'm in the business
of providing, um, real estate for people.
And so I'm gonna think of
it in, in, in those terms.
What I would say is the following,
uh, number one is that, um, hybrid has
been around for a long time, and remote
work has been around for a long time.
And if you look at the history of it,
organizations that have tried to do it
have been almost uniformly unsuccessful.
And this goes back to the
1990s when at and t tried it.
Yahoo tried it, i b m
tried it, they all failed.
And so I think we have
to, uh, think about.
You know, George Santiana who
said, if we don't study the
past, we're gonna repeat it.
So that's, that's number one is
I'm, I'm a little skeptical overall
about the ability to completely
have a remote, uh, workforce.
Um, I think another point that's a
little bit contrarian is that, In terms
of demand, office demand, it's not a
linear function, it's a step function.
And by that I mean that if I decide
that people are gonna work at home two
days a week, that does not directly
translate into a 40% reduction in
demand, uh, in my need for office space.
Um, and I could actually make the
argument that Covid and all of
the challenges that has brought.
It's brought about means that people
should actually take more office space
in order to be able to make the space
more accommodating for their employees.
Um, and so I think there's a
lot of confusion about that.
People say, oh, well, people are
gonna work at home two days a week.
Everybody should get rid of,
uh, uh, 40% of their space.
But the problem is that people are not.
, you know, they're not fungible.
They can't just be moved around.
Like they need a place
to actually come to work.
And if you have a system that's set
up to do hoteling or hot desking,
those are two sort of term terms
of art about having people make
reservations to, to get a space.
It works very, very poorly.
Imagine if you have all the challenges
that you'd have w at work, and also
you have to figure out where you're
gonna be in a given day and on Friday.
Um, when a lot of people are not
there, it's easy, but on Tuesday you've
gotta make a reservation and turns
out the space isn't available for you.
So I think it's very penny wise
and p pound foolish to think about
this kind of linearity of something
that's essentially a step function.
And I think it remains to be seen
what the effect of, of work from
home and remote work is gonna be on.
I should also say that, you know,
the, the CEOs, this is another
contrarian perspective of which, like
with Elon Musk out today, I think
it's very interesting because CEOs
have been very quiet about trying to
get people back to work generally.
I mean, there have been a few,
like David Solomon of Goldman
that have been out there.
Um, but I think that the theory is that.
, you don't wanna look like
a jerk if you're a c e o.
And if you're demanding people to come
back too soon, when a pandemic has
been raging and killing people, um,
you really are gonna look pretty bad.
So I think you haven't really heard a
lot from the CEO e o side of things.
Um, and I think that what you'd
find if you really poll CEOs or
generally managers, that they would
tell you it's a whole lot harder
to manage a business remotely.
Uh, that's, that's largely remote.
And I think that they've been
quiet about this in large measure.
I mean, Musk has been very forward,
but a lot of people have kind of
kept their mouth shut because they
don't wanna look like that guy.
Uh, but at the end of the day,
I'm telling you, it's a hard job.
Running a large enterprise and not know
where people are at any given moment
makes it a whole heck of a lot harder.
And so I think there's gonna be some, um,
movement and a pendulum on the part of
CEOs basically telling people, look, you
know, we, we love the idea that you're
have some flexibility built into your
life, and we wanna accommodate that, but
at the end of the day, we've all gotta
be in the office a significant portion of
the time or else we're not gonna function.
Kevin Horek: Interesting.
So then how is like with you being
c e O now, how is your team kind
of in the office, outta the office?
Or how are you kind of being
accommodating to that coming outta the
Michael Colacino: pandemic?
Um, so I guess, you know,
this is a startup, which means
it has a startup culture.
And as I said, there's a lot of young
people in the company, uh, and just
my style is such that, you know,
I wasn't laying out down edicts.
I'm, I'm not Elon Musk.
I'm not an edict guy.
And so what we did is initially,
uh, we allowed people to come in
whatever they, they wanted during the
course of the, um, of the pandemic.
And then we gently put in a three
day a week, uh, requirement,
uh, and said that we expected
people in three days a week and.
A month ago, we went to four days a week
and, and we said, really, it should be
Monday through Thursday and people can
work, uh, wherever they want on Friday.
And I think that's a, a pretty
good compromise cuz it gives a
full day for people to be able to
do all the personal things that
they like having flexibility to do.
Um, but by the same token, and you
know, the, the energy and the dynamic
of the company is back to where it
was pre covid because four days a
week, pretty much everybody's here.
So I think that's our solution.
Uh, I think everybody's gonna have
to find their own path with that.
Uh, but I do know something which is that
it's, uh, it's just a much better vibe.
The culture has to do with action.
Like culture is action.
It's what people do every
day that makes a culture.
And if you're not here, it's
very hard to have a culture.
Um, and so that's, that's
my, where I come down on it.
Kevin Horek: Interesting.
Like as somebody that's worked at
home, for a number of years and
kind of, sometimes I'd have to go
in the office a few days a week
or a few times a month, whatever.
I've kind of done it.
It's, you're right, the, the culture
stuff, it really sucks if you
haven't worked with the people for a
number of years in an office before
and know each other really well.
Michael Colacino: But if you join a team
Kevin Horek: remote and you don't know
the other people, there is no culture,
like you barely know each other.
It's kind of quick small talk and
it's, it's, and I haven't seen
it work personally to be like
a new person on a team and kind
of feel like you're a part of a.
Like a part of a culture.
I feel like there is no culture,
and people could argue that
with me, but it sounds like you
would probably agree with that.
Michael Colacino: No, I, I
definitely agree with it.
As I said, culture is action, you know?
There's a lot of discussion.
What, what is culture?
Culture is what you do.
And so the thing is, is that if I
wanna take care of somebody or help
them or be there for them, , it's
just a lot harder to do it on Zoom.
I mean, it's not impossible, but at
the end of the day, the, the moments
where you create a culture is where
someone says, look, I'm having a
really serious problem right here.
Can someone help me?
And then someone jumps in
and says, I can help you.
And you know, again, it cannot be
done via Zoom, but it's just a lot
better when you can walk over to
somebody's desk and, and drop your
problem on their desk and get help.
So, um, I think, I think over the
long haul, there's been a reason
why people work in an office.
Uh, it's not for everybody.
I mean, there's lots, there's lots of
heterogeneity, as the economists say.
You know, different strokes
for different folks.
I mean, highly, um, highly introverted
people probably thrive, you know,
when they're, when they're at home.
And highly extroverted people suffer
when, when no one's in the office.
Uh, and it's, so it's gonna
be different, different, uh,
accommodations for different.
But one thing I will say is that what
we haven't heard a lot of discussion of,
we've heard a lot of the discussion of the
impact of trying to force people back into
the office, but we haven't heard a lot
about the effect on people who are wanting
to come back in the office on not having
their partners and their peers with them.
And I think over a gradual period
of time, people begin to realize
that there's an externality here.
And the externality is that when
someone chooses to stay home, there's
someone else that's getting affected.
Kevin Horek: Yeah.
I've heard that from a few people
that like going into the office
and they feel like they're one
of the very few people there.
So they're like, well, now I'm sitting
at my desk, or I'm in the boardroom
at the office having Zoom calls
with people that are at home . Yeah.
So it's like, yeah, it's, I'm, I'm
curious to see how it plays out.
Michael Colacino: Yeah.
What the pandemic proved
is, is really two things.
One is it proved that we could
all work at home and that the
world wouldn't come to an.
And that's an interesting thing, but it,
it's different from saying that, you know,
remote work is, is the way of the future.
And the second thing improved is that
a lot of people really like working
at home and they say that their
productivity is improved by being at home.
And I'm not sure exactly how I feel
about that because, uh, if you like it,
you know, maybe you're a little biased
yourself about how you think about it.
So those are the only two
things we really know for sure.
We don't know if people are
more or less productive at home.
There's been a ton of
studies that have been done.
They're all over the map in
terms of their conclusions.
Um, and so yet it remains to be
seen whether or not businesses can
be competitive and effective with
workforces that are largely, uh, remote
as opposed to largely in the office.
And I, it'll be interesting
over the next couple years.
Uh, one thing I will say this, which is.
We as real estate people and architects
out there, if there're any architects
listening, we should do a lot of soul
searching because part of the reason
why people are reluctant to come back
to work is that people hate the office.
They just dislike their offices a lot.
Uh, I'm in an office right now, which
is a benching type office where people
are kind of crammed together, which was
very dega you know, a few years ago.
Everybody thought, okay, let's, you
know, put everybody side by side
and get 'em as close as possible,
and then it'll collaborate.
Well, more recent studies have shown
that that is actually a terrible way
to, to work, and that people tend to
communicate more via email when they're
all benched together than they would if
they were in a more typical environment.
So, other than the cost benefits of
cramming people together into into
Carols and into benches, I'm not really
sure there's a lot of utility for it,
and I, I think that we should all look
at ourselves and say, is this the way
we should really have people work?
Or should we try to think
about what their needs are?
And maybe being jammed together
and having 80 square feed per
person is not the correct answer.
Kevin Horek: Interesting.
No, I, I agree with you.
That's, that's interesting.
So I want to get back to square foot.
So walk me through, I'm a business
owner and I wanna rent some space.
Walk me through me coming to the
platform, using the platform, and
then kind of what happens ongoing
Michael Colacino: as well.
That's a, that's a question
I'm happy to answer.
Um, well, so first of all, I have to
ask you a question, which is, sure.
I always ask people this question,
which is, do you believe that in the
future everybody is going to start their
search for an office on the internet?
Now think about it.
Um, I, I think the answer
is yes for me anyway.
And, and, uh, I'll ask you whether,
what you think about it in a second.
But the point is, is that we've learned to
shop for everything and to get everything
of importance to us through the internet.
Over a period of a decade, but most
specifically over the last two years.
So what do you think of that thesis?
Yeah, I agree.
I start everything on the internet, right?
So the first premise of our business
is it maybe now only a small percentage
of people start on the internet,
but eventually everybody will.
And that means little companies, startups,
intermediate size creatives, law.
And General Motors, everybody is gonna
start their search on the internet.
And um, and if nothing else, just
to get informed about what the
reality of the market is before
you go out and start engaging, you
know, your big brokerage company.
So if you believe that, then the
question is where are they gonna
end up when they do that search?
And our mission is to make sure
that they end up on square foot.com.
So if you go to the internet, uh, and
you type in, I need 5,000 square feet
of space in the Flatiron District in
New York City, you are gonna end up
on a Google page that's gonna have
us at the top or close to the top.
And so the first thing that someone
does is they click on that and they,
they end up going on a site which
actually shows them things that are
5,000 square feet of space in Chelsea.
And it's got pictures and it's got
descriptions, and it's got information.
And so they look at that and, and they
say, oh, I get a sense of what's going on.
And then they're asked to engage, uh,
with the system and type in their,
uh, email address and phone number.
And that's step, step two.
And step three is they'll get a call
from, from one of our, what we call
business development representatives.
They're not brokers.
Their entire mission is to call someone
and say, Hey, I just saw that you're
looking at some space on the internet.
Can I help you?
Like, what is it that you need to know?
And the person on the other end usually
says, well, I'm not really quite sure
how much square footage I'm gonna need.
Or they say, I don't know what the rents
are really gonna be, or, you know, are
there other places I should be looking?
They have a whole series of, of
questions that they ask, which are
not what typical broker calls are.
Most broker calls are trying to get
somebody who has no interest in space,
um, to have a meeting with them, you
know, when their lease doesn't come up
for four years, which is a very, very
miserable, you know, existence by the way,
Yeah, I can imagine.
That's how I started anyway, so it's,
it's not fun to call someone who has no
interest in talking to you about space
and trying to get a meeting with them.
But we do instead, as we give you some
information that's useful, uh, that you're
looking for at the, at the given moment.
Uh, and so after this conversation, the
business development person says, well,
would you like to talk to a broker who
has a much more comprehensive knowledge
of your market and can put together a
report of all the available space in
that market for you to talk through?
And would you like to do it
on next Thursday, for example?
And you'd be surprised, a very
large percentage of people
say, sure, I'd love to do that.
And so next Thursday, uh, they get a,
an email, uh, with a link in it and
the link brings them onto our site
into a different place, which has,
uh, the space report that shows all
the available space that's available.
Uh, that they asked about, and then
they'll go through it with a broker
and if they see something that's
interesting or several things, they'll
arrange to go look at the space, like,
let's say the next Thursday after that.
So within a couple weeks, they've
gone from searching on the internet
to actually physically looking
at space with one of our brokers.
Um, and so one of the key things
about what we do is speed to market.
Uh, our goal is to get these things done
quickly and efficiently so that executives
don't have to waste their time or
anybody doesn't have to waste their time.
Uh, going through a lot of
process that's not necessary.
We try to get them to the space as
quickly as possible so they can see what
the market is and, and go from there.
And then from that point forward,
the platform essentially guides you
through the transaction process.
So you issue proposals, you mark them
up, you do all the stuff that, uh, that
you do as a typical real estate broker.
Uh, and at the end of
the day you sign a lease.
And, um, and that's, that's
sort of where you finish.
Kevin Horek: Interesting.
The one thing that I
thought was interesting.
and I, obviously, I don't know
much about the space, but what I
thought was interesting about what
you provide is I can type in how
many employees kind of, right?
Uh, average like space, rough space
per employee, but then you actually
recommend additional things to me that.
From my perspective may or may not
dawn on me that I actually need.
Is that fair to say?
Michael Colacino: maybe elaborate on that?
Well, I think it goes to the overall
mission statement, which is the idea is
that we want to give people help, uh,
and figure out their space search in any
way that we can through the internet.
So we're not demanding that someone
come in and have a meeting with us in
order to kind of find out about stuff.
We'd like to push as much information
and knowledge out onto the internet as
possible, uh, with the theory being that
if you help somebody, uh, it builds trust
and then that makes it more likely for
them to wanna work with you down the road.
So we have a whole series of projects
of, uh, what I would call sort of
educational, uh, projects to help
people figure out their needs when
they've got, uh, when they've got a
space requirement that's coming up on.
So, for example, one of the
things that's very okura, right?
As people are looking at, uh, at
booths, like the one that I'm in
right now, I'm, I'm in an office,
but I'm also inside of a booth.
And that's something that has a
lot of benefits in terms of privacy
and in terms of acoustic isolation.
And so figuring out how to
incorporate those into a space
plan is an important thing to do.
And we're working on software to be
able to help people figure out how many
of these they would need, uh, how much
they would cost, and how to enhance a
typical layout with this kind of post
covid useful tool in the design of space.
Kevin Horek: Yeah, interesting.
Because I think that's
the challenge with just.
Me seeing a driving by a building and
being like, Hey, I like that building.
It's in a good location.
I should reach out and see if
I can just go check up a space.
Right, right, right.
And it, it, it's just a
complete stab in the dark.
And then when I wander through,
I need to envision like, well,
I need to, is there a kitchen?
Do I need a kitchen?
Do I need some of these pods?
Do I not need these pods?
Like how many conference or
meeting spaces do I need?
Like some people envision that,
some people can't vi envision that.
And so the fact that you help kind of
that whole process where somebody knows
what they're from, somebody that knows
exactly what they need to somebody
like me that would need a lot more
Michael Colacino: guidance.
You know, it's interesting
when I first came.
I had worked in a traditional
brokerage company for 26 years
before, before I came here.
Um, I would've said that the most
useful thing for a, uh, for prospective
tenant would be a floor plan that
shows that the plan and the space.
And there's no question that a floor
plan is important, but when I got here,
I realized that for our users, it's
much more important to have high quality
photographs of the interior of the space.
And in fact, and, and
so that's what we do.
We have lots of good quality pictures
so that you can actually see what the
configuration of the space is today.
Uh, and then as we evolve, the next
step up is gonna be Matterport and
video, so that people are gonna be
able to visualize the space more
than just as a group of pictures,
but actually in, in three dimensions.
And while we are not, you know,
we're not a Matterport providers,
like there's other people that
have to do the actual video work.
We do have the space in our database to
be able to incorporate that going forward.
And so, my vision of the product, you
know, a year or two down the road is
gonna be one where you can do a lot
of reviewing of the space visually.
Economically, uh, you know, sort of
texturally, uh, before you actually have
to go out and look at it physically.
Kevin Horek: Nope.
Makes a lot of sense.
The other thing that I thought was
helpful, and that is you provide a market
report based on the location that I'm
looking at, because like, like I said
earlier, like I think obviously like
there's areas that I would want to be in,
but there might be adjacent areas that
are maybe a little bit more expensive,
and I'm saying, yep, that's fine.
I'm willing to spend a little bit more.
Or, you know, if I go a block
or two over, I can save, you
know, X amount of dollars, right?
And so, The fact that you've provided that
research and about the area, I think is
Michael Colacino: actually
really useful too.
I mean, you can draw a, a, a polygon
around a particular area and find
everything that's in it, which seems
like a perfectly intuitive way.
That's the way people think
about neighborhoods, right?
You think about them in terms of their,
of their borders, of their delineation,
and, uh, You know, it's so strange
that our industry has this very basic
ideas of how people would cognitively
engage with a search like this.
And yet that's not how we do it.
Because if you called a traditional
brokerage, including the one I used
to work for, their first approach
would be like, well, we don't
want you to really look at space.
Let's have a meeting first.
Let's sit down and talk about
your requirements and get to know
you and so forth, which is really
very focused on the broker's needs
and not on the tenant's needs.
You know, that's about me getting
something from you, which is your
attention and your physical presence.
In my space, what we do instead is we sort
of say, okay, you're thinking about this.
How can we help you think about it
and what you're saying, which is the
ability to define a poly line and say,
okay, show me everything that's in here.
Uh, is a really basic tool that
you'd think everybody would
provide as a first step in the
process, but nobody does except us.
Kevin Horek: Sure.
No, that makes a lot of sense.
The other thing that I think a lot
of people like about one of the.
Very few pros things that came out
of kind of the working from home
thing is not having to commute.
But you guys actually have a
commute calculator, which I
thought was kind of interesting.
I, and just as like, when you're doing
research, right, I, I think that's
actually quite, quite fascinating.
Do you wanna maybe elaborate
Michael Colacino: on that as well?
Well, yeah, I'll say, I'll say
sort of two things about it.
One is that, as we really are,
as we are realistic about what's
happened with working from home.
We realized a couple things.
One is what I said before, which
is that people really don't like
the way that their space works.
But the other thing is we realize is
that people really hate their commute.
And I don't, I don't know that,
that, that's sort of a genie that's
been let out of the bottle, and I
don't really have an answer for it.
Like, if you have an hour and 15
minute commute, commute from New
Jersey into New York City, I, I just
can't imagine how miserable that is.
First of all, . Fair enough.
So, you know, and if you don't have
the money to be able to move into the
city and be close to your job, like I
really understand that as a motivation
for people not wanting to, uh, being
more interested in working from home.
And I don't know quite what we're
gonna do about that because it's, it's
a weird thing because the less money
that's spent on public transportation,
you know, less fairs that people
do, the worse it's gonna get.
So we have, we're kind of trapped
in a little bit of a, you know, a
macroeconomic box here, which is as
people flee the city and they stop.
Uh, paying tax, you know, supporting
businesses that pay taxes and they
stop taking rides on, on the subway,
you're gonna find that the subway's
gonna get a lot worse, not a lot better.
So I don't know how that all
works itself out for big cities,
but it's definitely a challenge.
But the other thing about the commute
that's important is that it's really
heterogeneous in the sense that different
people have different reactions to it.
Some people kind of like being on a train.
It was a, a way of putting, um, a sort
of a period on the end of your day.
Uh, and, but the thing is that
that's sort of a, a man in the gray
flannel suit, which is a movie about.
People in 1950s that worked
for big corporations.
It's sort of a way of thinking
about it that I don't think
the millennials really share.
So the idea of the commute as a, as a
valid and a, and a life-affirming part
of your day, I don't see that people in
their twenties really look at it that way.
And so I think we really are gonna have a
serious challenge, uh, sort of a, an urban
geography challenge about where people
are gonna live and how they're gonna work.
Because I just don't think anybody
that's gotten used to not having that
commute is gonna be easily drawn back
into an office no matter how nice.
Kevin Horek: Yeah.
No, that's, that's fair.
That's, yeah, that's something
I've been wondering as well.
Um, no, it, and I'm, I'm sure you
guys will figure something out.
Michael Colacino: Well, at the minimum,
it's good to be able to know how long
it's gonna take and be able to do your
planning and, and look at your employees
and say, well, how long is it gonna be for
our Brooklyn employees to get to the west
side versus the east side of Manhattan?
Or, how long is it gonna take for our
LA employees to get to, uh, Westwood
from, from Hollywood and, and so forth?
It's, it's very useful to be able to
have at least the data so that you
can make an informed choice, because
it's gonna become a flashpoint between
management and employees over time.
So I think we're a little
ahead of the curve on that.
Kevin Horek: totally.
So if I own a building or multiple
buildings, how do I actually get
my properties onto square foot?
Michael Colacino: Yeah.
It's a little bit of a, an inverse
question, which is it's how does square
foot get the information about your
building to, to onto our database.
I would love it if every landlord said,
that question that you just asked.
Uh, unfortunately, landlords
are very successful.
They make lots of money, and their core
business is not database management.
It's, uh, renting space and, and
improving their, their building.
So the industry has been extremely slow
in developing any kind of standards
for transmitting, listing information.
To the individual companies that use it,
to the brokerage companies that use it.
There's a company called CoStar, which
is a, uh, a publicly traded company
whose exclusive business is in, uh,
is getting the data from landlords
and putting it onto a system that is
proprietary that they will license to
you, whether you're a broker or whomever.
So the issue for us is, given that
CoStar is what it is, landlords
haven't really figured out how to
provide a publicly accessible feed
for how their, uh, space looks.
So that will happen over time.
That's another one of my, my do you
believe this in the future questions,
which is eventually every landlord will
realize that having an a p I that allows
people to tap into the database of their
buildings and get all the available space
out of it is in their interest to do that.
Unfortunately, in today's world,
it's, uh, it's not quite that.
So we have three tools that we use.
In order to gather that data.
The first is we have a series of scrapers
that go out on the internet and scrape
information off of any publicly available
site, uh, that has data about a building.
So a lot of big landlords have already got
websites that have all their listings on
it, like, uh, SL Green here in New York.
The second thing that, that we do is
that there are, there's a whole sort
of, kind of primitive industry of
creating p d f flyers that describes
space and that are sent out via email
to, uh, to various brokerage firms.
It's crazy that we're still doing it
this way, but the fact of the matter
is that these things get sent out every
time a space is put on the market.
And we receive them just like everybody.
We send them off to a business process
outsourcing group in the Philippines,
uh, and they input the data and, uh, help
build out the database with that as well.
And then the third thing we do is we
call people on the phone just like, uh,
CoStar, just like, you know, brokers do.
We call landlords and we say, Hey,
what's available in your building?
Any movement been going on
since the last time we spoke?
And that's a traditional task, uh, for
a researcher inside of a big company.
And we do that as well.
And between those two, those three
things, we get a pretty, uh, high
percentage of the space, like 90
something percent of the space in the
market located on, uh, on our system.
That was a little geeky.
I hope, I hope I didn't
geek out too much there.
But, uh, no,
Kevin Horek: I actually happy that
you said that because in the startup
community, I find a lot of people think
that they need to build everything with
software and that nothing could be manual.
And I get that sometimes.
In your case in point,
you don't have a choice.
There is no a p i to connect
to every building on the
planet and pull their listings,
Michael Colacino: right?
That you have to
Kevin Horek: do this stuff manually.
And yes, you are trying to use
technology to automate as much of this
as possible, but I think that's such
good advice that you as a company that
have been around a number of years
and have built a bunch of technology,
still have to do some manual things.
And I, I think that's,
Michael Colacino: that's amazing.
One of the things we did though is we,
we did learn, uh, some stuff from, from
other companies, which is that if you
think about calling these buildings
and getting data, it's sort of like
a call center type activity, right?
So one of the things that our tech geeks
did early on is they, uh, developed
an internal call center product, which
essentially allows the researchers
to scroll through all of the listings
that they need to validate and do a
lot of them in the course of a day.
The same way that a call center person
would, uh, would make a lot of calls, and
it's not a particularly glamorous job,
but we do use some level of automation
so that it's, it's done efficiently as
opposed to just like literally pulling
out, uh, you know, going on the internet
and trying to look for telephone numbers.
Oh, that's smart.
Kevin Horek: Interesting.
I think that's really good advice.
So then how do you monetize square foot?
Michael Colacino: Well, it's, it's
really pretty traditional brokerage.
Uh, at the end of the day, um,
commissions are paid, uh, their
percentage of the rent and, uh,
the industry's a little odd because
it's paid typically by the landlord.
And there's a whole series of reasons
for why that's been a tradition
and, and the way that things work.
Uh, and so, um, it's really an, in some
ways on the, on the revenue side, it's
like a traditional brokerage company.
The only difference between us and a,
and a traditional brokerage company
in that regard is around a third
of the revenue that our brokers
generate is generated by the website
is generated by square foot.com.
So they bring their own business and
their own methods of, of finding,
uh, clients and opportunities.
But we also provide them about a third of,
of their business through the platform.
Um, but generally speaking, it's a
brokerage company that is tech enabled.
Kevin Horek: Interesting.
No, I, I think that's, that's fascinating.
So you quickly covered it,
but I wanna cover it again.
, maybe do you want to give us the
locations of where people can actually
use square foot.com to actually
find office space, uh, these days?
Michael Colacino: Sure.
So, uh, as I said, we have five offices.
We're in Los Angeles.
Uh, we are in Houston, Texas, and
we are in Nashville, Atlanta, and
our largest offices in New York.
And our plan over the course of the
next year is to open about half a dozen
additional offices and to really begin
to become a national brokerage company.
And the theory of where we open is any
place that has an N F L team, , we,
we find to be a good place to open.
So if you've got an F NFL franchise,
where on our way to open, you
know, in a, in a city near you.
And, uh, because all of those
cities are large enough to have a
significant amount of, um, of real
estate transactional activity go on.
So I don't know which ones
they're gonna be because we
drive everything off of people.
Uh, so what we'll do first
is we'll find a, a human who
is good and does a good job.
And then the beauty of the way
that Jonathan built the platform
here is that we can expand into a
new market in a matter of months.
And my old company, it took us almost
two years, 18 months to two years
to get started in a new market.
And here we can be generating
revenue and, and, um, and up and
operational in about 60 days.
So that's an advantage of the platform
and the technology because we build the
database first and then we start handing
leads off to the people in the office.
Uh, the second, you know,
that they start basically.
And also we are pretty new age in how
we think about office space, which
is that, you know, it's inexpensive.
We don't have a lot of
Uh, we're very lean and mean like a
typical startup, uh, which means that
we can create profitable offices without
having to go through a lot of build up.
Kevin Horek: No, and I, I actually
think that's really good advice in
Michael Colacino: itself, right?
Well, I mean, you, you know, the
dogs have to eat the dog food.
That's one of the things that Microsoft,
uh, that when I used to work, uh, at
Microsoft, I had a, a relationship with
them as a broker for many years, and
they would say, you know, you gotta use
Microsoft products to do this stuff.
It's like, we want it as a PowerPoint
presentation, not as a book.
And so, uh, they would always say
the dogs have to eat the dog food.
Kevin Horek: Oh, that's,
that's really good advice.
Is there any other advice that you
would give a startup or an entrepreneur
or, you know, whether they're in
the real estate space or not, that
you've learned over the years?
Michael Colacino: Whew.
That's a, that's a broad question.
Um, what I'd say to the PropTech industry,
my advice is this too shall pass.
Everybody's gotta buckle their seatbelt
because the next couple years are
gonna, are gonna be tough because of the
recession and the capital markets, uh,
and the shortfall and available capital.
So everybody's gotta realize that the
future is gonna be in PropTech and
not every company's gonna make it.
But at the end of the day, in 10
years, the entire industry will
be technologically sophisticated.
Maybe not like Wall Street, but it'll be
a hell of a lot more sophisticated than
it's been over the last couple decades.
So I would say keep your chin up.
Um, PropTech will rule.
It's just gonna take, uh, it's gonna take
a couple more years before we get there.
That would be one piece of advice.
Uh, in terms of people who are
starting their own business, um, you
know, I'm gonna give very contrary
advice to what a lot of brokers
would do, which is, I say, I would
say that flexibility is everything.
It's got an optionality
that's of incalculable value.
So you should press your real estate
provider, your broker, and say, how
much flexibility can I build into this
lease and how much is it gonna cost?
And if you don't have answers to
those two questions, then you're
really missing the point, in my view.
Um, because what the broker will
say is, well, you know, landlords
really like to do five year leases
or 10 year leases or, or whatever.
And my perspective on
that is I don't care.
I mean, I care what's useful for
the tenants that we represent.
And I don't really care if a
landlord has a bank that'd like
them to have a 10 year lease.
What I care about is what is the
optionality that I can build into a
transaction that'll make a company
that doesn't quite know where it's
gonna be in a year or two successful.
Kevin Horek: I, I think
that's really good advice.
So how about we close the show with
mentioning where people can get more
information about yourself, square foot,
and any other links you wanna mention?
Michael Colacino: Sure.
Well, square foot.com, that's, uh, that's
the heart and the soul of the whole thing.
Uh, I'm on LinkedIn, so if anybody wants
to find me, they can find me on LinkedIn.
And, uh, I have many, many,
many LinkedIn contacts.
I'm happy to have more,
especially if you're in our space.
Um, and I'm out there on Twitter,
although I mostly talk about the
New York Rangers, a big hockey fan.
I'm sure coming from Alberta, you are too.
Um, I've been a lifelong Ranger fan, so
most of my Twitter feed has to do with,
uh, criticizing other hockey teams.
Um, but uh, I'm not there on,
on social media, so people
can find me pretty readily.
They look for me.
Michael, well, I really appreciate
Kevin Horek: you taking the time
and your day to be on the show, and
I look forward to keeping in touch
with you and have a good rest of your
Michael Colacino: day.
Same to you, Kev.
Kevin Horek: bye