Zain is a lifelong entrepreneur who founded his first startup when he was just a teenager. He co-founded mobile advertiser Vungle, which was acquired by Blackstone in 2019 for $780M. Shortly afterward he started Zain Ventures, his family office that boasts a diverse portfolio of real estate investments and proptech startups. He is currently a partner at Blue Field Capital.

Zain’s success as both a founder and investor has made him a leading authority in the realm of startups and venture capital. He has become a respected voice in real estate as well, and can be heard sharing his insights on the PropTech VC podcast.

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Itunes – www.TonyJavier.com/itunes 

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Show Transcription:

Zain: (08:46)
riting, very conservatively, uh, smart leverage. Um, I think those, those are probably the reasons and a lot of luck, you know, being in the right time at the right place. A lot of the places Bluefields invested in, it turned out to be really hot markets.

Zain: (09:00)
Um, you know, a lot of the partners are based in, uh, Utah salt lake city, which has been a very hot market where they disposed a lot of assets to their regret, by the way, to their regret. You know, you talk about a 33% IRR, but you know, if, if we’d held on, we would’ve maintained those Iris if not exceeded them. And it’s, it’s ultimately about, you know, the multiple uninvested capital. I mean, here’s a problem when you’re trying to understand investment. Right. What do you do? Do you focus on the cap rate of the asset? Do you focus on the cash and cash return? Do you focus on the IRI? Are you gonna generate, do you focus on the multiple invested capital? I mean all these things that things to consider, but all things equal. Um, I love the firm because they’re very, uh, very conservative. It hurts us in an environment like this, cuz we’re having a hard time buying assets. It’s kind of crazy out there right now. Uh, what we’ve been buying, but there’s, there’s a lot more, we wish, you know, we wanted to buy, we’ve bought a third of what we wanted to buy, you know, two out of every three deals that we enter into. We, we, we, we’re not able to close on, uh, not close on. We’re not even selected as a bid and we just don’t understand how people are paying what they’re paying.

Tony: (10:06)
Yeah. It’s a crazy market right now. Well, let’s go back to your entrepreneurial, um, uh, journey. Uh, you said it was about 10 year from the time you started some of your businesses to the time you exited a couple years ago. Um, some of the biggest lessons that people can learn, aren’t just successes, but actually failures, you know, things that maybe you did looking back, you either wouldn’t have done or would’ve done differently. What are some things there you can share with our listeners on, uh, what you would’ve done differently going back 10 years ago?

Zain: (10:39)
Um, I’m glad I jumped into it when I did. And I didn’t realize how exhausting it would be, how much I would sacrifice. I wish I had had a better work life balance. Uh, yes, you have to hustle like crazy as a founder, but staring in front of your computer, uh, and just coding away or, or, you know, making calls at some point there’s diminishing returns and you need to rest, you need to sleep. And so I think the impact on my health was, was destructive and it’s taken years and years to recover from that. So I kind of blew my best years. You know, my twenties are spent just working, none stuff up, trying to build companies. And now in my thirties trying to live like I’m in my twenties and you just can’t lift what you used to lift when you go to the gym, you know, um, you just, don’t, you’re getting older.

Zain: (11:29)
Um, so I, I think the timing is everything. And, um, I, I took a lot of risk. I funded the business, literally my co-founder and I, with our credit cards, very dangerous. We, we, that was reckless. We got lucky. We, we look, I felt like I went to Vegas and I, I be on the, I got very lucky doesn’t mean it would work for everyone. Now that I’m on the venture capital side now that I’m, I’m investing in real estate, but also investing in startups. Yeah, it’s true. Nine out of 10 companies will fail, but that one, that succeeds, it’s a home run. It not only pays for the ones you lost out on it, multiplies that. So yeah, there’s a lot of luck involved. I think you either pick the right industry, not just the right industry. You’re passionate about a massive growing industry.

Zain: (12:14)
When an industry is growing very quickly, like the top five companies will all be worth, you know, will all be unicorns almost, which was our case. We weren’t the largest in our industry. We, we were just like the third or fourth largest player and I don’t include Google or Facebook. I just mean other startups. Right. Outperformed us too. And yet, you know, some of my competitive is in our 10,000,000,040 billion companies. Um, that’s what happens when you focus on a big market? The market’s very forgiving. I say that, uh, you know, sometimes it feels like no matter how many mistakes we make, there’s just so much demand for the product. So much demand for what we’re doing. I feel like an incompetent monkey could run the company sometimes. You know, uh, I used to say that to people it’s I guess I asked if we screw it up. Um, so yeah, that, that’s, that’s some lessons I’d say, you know, to share you, you gotta pick a big market though, and ideally a big problem worth solving.

Tony: (13:10)
Yeah. The work life balance is a big thing with, uh, a lot of business owners. You know, I, I work with a lot, we have some pretty highend clients and, um, I just see the worklife balance thing, being a huge issue. I, I had it for the first, probably 10 or 12 years just working late nights, getting up really early. I mean, sometimes I’d get up at two in the morning and start working just cuz my mind was going. And I, I felt like I needed to solve problems, you know, as quickly as possible. And um, you know, I’ve changed that quite a bit. I, you know, sometimes I start work at seven today. I started at seven, which was early. Uh, typically I start at eight and end at five I’m at home every day at pretty much five o’clock and, and try and shut it off for the rest of the night. Sometimes I’ll check some emails here and there, but uh, it’s much better than the 8:00 PM to 10:00 PM times that I would shut off. So that’s a good lesson. Um, so looking back at the, at the sale, are you, is it something you strive to do? Did you know you were gonna sell at some point or just did the opportunity just kind of, uh, peak its head out and you’re like, man, this is just a good opportunity to, to unload and, and be rewarded for, for the, for the many years of hard work.

Zain: (14:16)
No, I, I, I, um, I had investors that had a time horizon and wanted an exit and maybe there are other investments didn’t do very well. So we would multiply their returns and allow them to raise another fund. Um, it’s very hard, you know, when you, when you have a company and you have a, an exit offer, you have to pretend you’re cashing the check, you get giving it to all the employees and all those employees are gonna go and buy. Some of them might buy their dream home. Some of them in San Francisco for gods sake can only put a deposit down on a home. Right. But you’ve gotta imagine giving it to them. And then you’ve gotta imagine saying, you know what, actually, I want it back. I want it back, cuz I want to keep writing with this. And when you have a lot of shareholders, I had hundreds of shareholders, you have this fiduciary duty and you have to just basically be quite logical.

Zain: (15:01)
And of course, what are you gonna do when you get advice from everyone? Oh, you should take this, you know, you can always do it again. And so I, I, you know, it was the right choice, the right thing in, and I wish I didn’t because the business probably would’ve been worth 10 billion by now. And I don’t just say that it probably would’ve been given how multiples have expanded and you know, the industry keeps growing. I was in the app industry, mobile apps. So being in the industry at the right time for mobile apps, it’s like, you know, the internet all over again. You know, huge companies have been born out of the, you know, the way we use our phones. Um, but the itch is still there. I think what stops me is what you said. Like I’ve, I’ve, there’s been periods where I’ve decided to just try to build a prototype for fun.

Zain: (15:42)
And you’re like, okay, I’m working like all day and I’m forgetting to eat. I mean, this is not healthy. And I feel kind of brain foggy now and I can’t sleep. And I, it being quiet and tired. You know, when you said you wake up at 2:00 AM in the morning, right? It’s what happens. You’re wire and tired and it’s not healthy for you. I haven’t figured out how to run a company with, uh, balance. I wanna spend time with my kids and my family. Uh, but I deep side, I, I really want to go back and do it another the company, but I think I still need a bit more time. And I’m, you know, I’m doing things in real estate now and I wanna see those come to fruition and build, you know, the dream, right? Like cashflow keeps coming in at a significant level. I kind of want that to be there and then maybe use some of those cash flows to reinvest into, you know, my own company. Maybe we’ll see.

Tony: (16:28)
Yeah, I build, I build lots of businesses and I think being on the passive side of it, which you are at this point, uh, is the best place to be. You can invest in the business, you might be able to put your 2 cents in and maybe advise and kind of yeah. You know, that kind of thing. But when it comes down to it, someone else is doing the hard work, you know?

Zain: (16:46)
Exactly. And that was a painful lesson too, where even building my own real estate portfolio, I realized investing in other people’s probably might be a better way to go, um, pay the fees, pay the carrier. It’s a good situation, cuz you’re gonna make more ultimately and these people are probably gonna work harder and have been doing it longer than you have. And the other thing is, if you can figure out the lifestyle hack, which is doesn’t matter how much wealth you have, okay. Even if you’re just starting out and you want to live your dreams, live below your wings and make sure that you are always generating more money than you’re spending. And eventually what you wanna do is you wanna reinvest that income into new projects that generate more income. Compounding is one of the most crazy unfair tools that’s ever existed. The rich certainly get richer, right?

Zain: (17:34)
Because of this power of compounding. And there’s nothing like compounding I’ve ever seen, uh, outside of real estate. And you know, you can roll your gains with 10 31 exchanges and you can do all this funky stuff. But people that stay in real estate, long term, those cash flows multiply. And when you reinvest those cash flows, if you can just live on a fraction of your interest, income and reinvest the rest you hacked life, you really have, but it requires modesty and it requires living below your meat. You know, of course, living below your means changes every year. But that’s the difference between investor and someone who just wants to be rich and spend money cuz the full end is money are.

Tony: (18:14)
Yeah, no, I like that. I like that. So tell me about the money raising part of it. So obviously to sell a company for that, uh, amount you had to raise some money. Um, when did you raise that money? So you sold in 2019. When did you raise that money and tell us about the process and somebody who’s looking to raise money for whether it’s real estate or an app or whatever it is. What are some lessons that you learned there?

Zain: (18:39)
I, uh, we raised 25 million in venture capital over numerous rounds. And I think, and I think the applies to real estate and to startups, getting those first checks, getting that vote of confidence that someone believes in you gives you social proof that you can then leverage to go bring in more investors, uh, real estate, especially building a track record with successful returns. And again, same like startups. Sometimes you have to sell early, even though you don’t want to selling your real estate assets early to Booker and turn gives you that incredible track record, every real estate GP tells you later. I wish I never sold. But asking if you hadn’t sold, would you have had the track record? Would you have, would you have, would you have, you know, Gared the trust of your investors, right? Those investors will keep investing with you for the rest of your life and the one scrutinized deals as much anymore.

Zain: (19:30)
It’s usually I trust you, you know what you’re doing? So that’s the parallels to real estate on the startup side. Obviously raising money for a company is extremely different. The raising money for real estate. And by God, you cannot as an investor, look at things the same way. You know, um, when you’re investing in startups, it’s about believing in the founder. Trust me, you do not wanna believe seller selling your real estate deal to you or the agent, right? Big mistake. So you can do that with a founder. You’re believing in their vision of how they wanna see the world. Uh, you’re not really focusing on financial forecasts as much. Uh, and again, real estate, all about the financial forecast and doing extreme underwriting. You know? So that’s probably lessons as an investor lessons as a founder. I mean you just have to try. And sometimes I find when people are saying no to you, that means you’re onto something unique.

Zain: (20:22)
When people say this will never work and you push them, why won’t this work? They can’t answer that question. They’re like, well it just, it doesn’t sound. This doesn’t make sense. Like, okay, this is is good. Cuz the investors aren’t getting it. Maybe competitors aren’t getting it either. And if I’m getting it and my customers are getting it, I’m under something unique. Now I’m doing something that every investor wants, but doesn’t have the guts to invest in category, making companies, if you want an exit that’s gonna return. My investors is, you know, 200 extra returns, right. Which is, which is great for, you know, someone investing the startups. You’ve gotta invest in something. That’s going to be a category maker. If you want a two or three extra return, go put your money in real estate. You know, don’t put it in a startup and there’s plenty of startups that can generate a 2, 3, 5 return.

Zain: (21:07)
Um, when you’re starting a company and people say, no, actually you might be one of those rare companies that might be a hundred X opportunity. If everyone’s saying yes, be worried. I always find like, think about me. I’ve sold my company. I’m itching to do another company. Right? How many ideas have I come up with? And within a few months I’m being pitched that idea like 10 times by and the founders and like, oh wow, like execution is everything. And, and if you think of an idea and it sounds logical and intuitive and everyone’s saying, it’s amazing and you’re waiting for that validation. Chances are, there’s lots of other people working on it already. So when you discover something that’s a little bit weird, like cryptocurrency, you know, people that discover, discover how that works. Right. Or any, anything that’s uh, sort of a breakthrough. I mean, even, even, um, Airbnb was very weird when it started.

Tony: (21:54)
Yeah.

Zain: (21:55)
All these great companies are that’s when you’re into something that’s category making you, you can generate massive

Tony: (21:59)
Returns. Yeah. It’s that blue ocean strategy find something that other people aren’t doing and find, or, or find a way that other people are doing things and just do it a different way. Um, just like Uber, you know, taxis now let’s go on a app and have other people, uh, provide the, the cars and, and we’ll book, we’ll be the third party company. And just like Airbnb, like you said, so I’ve got a couple companies like that, that I started that are taking out pretty substantially cuz no one else is really doing what we’re doing. So we’re good stuff. What else would you like to share with our listeners on your journeys, through um, you know, whether it’s your entrepreneurial journey through your, uh, 10 years in your, in your, you know, previous companies or, um, the new venture with, um, with Bluefield?

Zain: (22:48)
Uh, if you, I mean a lot of this is the, I sound so generic cuz I feel like everyone’s saying it, but it’s, it’s like, it’s just, it’s like, I don’t wanna use a religious metaphor. Right. But it’s like a Bible or a Quran or a Torah, whatever. It’s like, it’s, it’s like the rule book. Like these things are age lessons cuz you know, they pass down from entrepreneurs to entrepreneurs, um, do something you’re passion about focus on a very big market and um, don’t be over analytical when you’re starting out. You know, that’s the advice as a founder, as an investor, know why you are investing in a certain asset class. If you’re investing for cash flow and you want a two or three real estate, right? You’re not gonna get rich quick, but it’s safe. If you wanna have a, you wanna take a risk and you are able to invest.

Zain: (23:34)
A lot of people who invest in startups will invest in one or two, which is a big mistake. Go invest in 10 to 20 minimum. Okay. Spread your bets, invest in 10 to 20 minimum, build a portfolio. And each investment has to have the potential of generating a hundred X return. You’ve gotta look at it that way. Do, do, do you know, aim for the stars, at least you’ll land on the moon. And sometimes you might discover a new star, you know? Um, so that, that’s what I suggest. I, I see too many situations and I’m, I’m a venture capitalist too. Right? Invest in a lot of stuff. I run a VC fund as well. Um, a lot of people will shoot down an idea cuz it’s risky. Okay. Yeah, I get it. There’s a, there’s a, maybe a 70% chance. This will completely fail and lose my money.

Zain: (24:15)
There’s a 30% chance that might work out. But if it works out, this company is gonna be a hundred X company. I, if they do this, it will return the fund. Then I know may any venture capitalists who invested in companies and they’ve returned their fund 10, 20 X and each company has to be potentially a cat that you’re making in company. So if you’re gonna go invest in startups, try to copy that mindset. Don’t invest in things because um, oh, it’s, you know, it’s got good growth on revenue and et cetera, I made mistake early on. And you, you, you want some safe companies too, but why are you investing the startups, man? It’s not for a three extra 10, you know?

Tony: (24:53)
So when you say invest in 10 companies, that’s basically because you know, seven, you said about a 30%, three outta 10 will probably do well. So you’re saying plan on about seven. No, I was.

Zain: (25:04)
Yeah, no. I was giving an example of a, how I might evaluate the risk of one particular company. But on average, nine out of 10 will fail, man. Not, not, not seven outta 10, nine outta 10 will fail.

Tony: (25:13)
And you just want that one company to hit big.

Zain: (25:16)
Yeah. I, I mean, if you wanna be pedantic about it, here’s sort of what I’d say is a rule. Okay. You invest in 10 companies, one hits it really big and should at least be a 10, 20, 30 X. Here’s the thing it’s like, if I tell you it’s gonna be a 10 X right? Or higher than 10 X, what I’m saying is I’m gonna give you a dice. I’m gonna roll it. The worst case outcome is a 10 X. The best case outcome could be a thousand X. So probability curve, more likely you’ll get a 10, 20, 15 X or whatever. It’s like a wild card, right? That one company, another two or three should two or three and they’ll sort of carry, sort of carry the rest of the fund and subsidize your losses. The rest, the complete is on BS and they’re gonna die.

Tony: (25:56)
What’s what’s the typical investment on those types of deals. When someone invests in those companies, what is usually the minimum? Cuz some people are thinking, well, I probably don’t have the money for investing in 10 companies. How much money does someone have, have to invest in companies like those for, um, or have what, what kind of amount of money do they need to have in order to be considered to be an investor in those companies?

Zain: (26:17)
I, I mean, that’s a great question. I, I, I think it needs to be money. You’re willing to lose completely money. You’re not willing to touch and see again for 10 years, a sensible amount to me would be a hundred thousand divided by 10 companies who are starting out. Of course it, the higher the net worth. It just doesn’t make sense. And it’s hard to get a $10,000 check crowdfunding platforms, a really good way to get in. I feel like there’s safety there because there’s been some validation, you know, there’s a fiduciary duty and if there’s any fraud that happens, you’re not the only investor in that company. You’ve got hundreds or tens of others, uh, investors involved. Um, if you’re smart, you can go to angel list and try to invest in syndicates. You have to pay a fee or a carry. Um, what I did is I picked a sector.

Zain: (27:01)
I like, like right now I’m interested real estate. So I’ve set up a fund to invest in real estate startups. I’ve become an expert in that. So now I’m investing in startups that I, I think I can, you know, understand because I have real estate assets myself, you might be medical, you might be in real estate, you might be in, you know, marijuana or whatever, find startups, maybe in those areas that you have a better chance of assessing you that you think you can help, uh, maybe take some advisory shares too. I think that’s a good way to get started as well. Uh, so you gain some, you know, some sort of sense of how startups work, but yeah, that’s, that’s probably a good way. I think, um, if you’re an accredited investor, which means, you know, you need a certain income threshold, those types of folks, usually I see put in 25 K minimums, sometimes 50 K a hundred K minimums, and those folks will build, um, maybe 10% of their entire net worth will be in startups. I don’t really recommend more than 10% to be Frank, you know, unless it’s your full-time job and you’re a VC, then maybe you can be 30, 40% by accident. You might be 99% cuz you hit an Uber and you come on it, but it’s, it’s got all your network. Um, but I think 10 percent’s a smart role.

Tony: (28:09)
Yeah. Okay. Well we got quite a bit off of real estate, but this fascinated me. And I think a lot of people that I know that are high level real estate investors are looking for that next thing, you know, whether it’s investing in other startups or starting another, you know, other companies, I think this is pretty fascinating. Um, just being able to take, um, you know, money that you’ve made in real estate and roll it over into companies that could do some something way more substantial than, you know, just flipping houses or um, you know, buying hold kind of properties. Um, so let’s transition into, into the, the commercial real estate was start wrapping up. Um, the thing that I like about, um, real estate in general is just the, the tax, uh, the tax advantages. So when you look at a 33%, uh, IRR, um, is most of that taxable, um, to the investor or are they able to roll those funds into pro other properties and potentially not have to, uh, pay taxes until down the road?

Zain: (29:11)
Yeah. So what you’re talking commonly is called a 10 31 exchange and the amount of time someone’s like urgent, urgent, I, we just sold this asset and we wanna place it. Do you know what deal we can go in? Well, you and everyone wants to go in there. Uh, no we have deliberately, um, uh, we haven’t had the ability to deploy a lot of that into another asset and the timeframe needed cuz those assets just aren’t worth it. We’re overpaying. And um, we have tried, but it’s never the guiding priority. We’re not willing to overpay simply because we’ve got access to capital that can be rolled over. Um, it’s unfortunate cuz there are tax taxes that LPs will have to, to pay as a result, right? Um, maybe less than half the time we’re able to successfully do that. And if you can do that, you are really onto something magical here because uh, you know, quick, quick case study or made up example, right, you are investing a hundred thousand dollars and let’s just say there’s a, let’s be generous.

Zain: (30:11)
It says it’s a 10% preferred return. Okay. What I love about real estate is it is so tax efficient, a lot of that cash that you’re taking back and the 10% preferred return because of the way depreciation schedules work. A lot of that can be very tax favorable and you know, different brackets of income. And then you are also able to take advantage of the fact that when you eventually distribute proceeds to refinance the investor, doesn’t have, have to pay taxes on that it’s seen as a return of capital or sometimes it’s seen as a loan proceeds as well. So you’ve got all this magic happening with investors, getting this cash back and it’s like, wait a second. I’m getting cashflow back and I’m not having to pay high taxes on this. I’m getting some refinanced money back. Sometimes I’m getting my entire capital back, but I also shares in the building this pretty cool.

Zain: (31:03)
I, I, I just put in, you know, a hundred thousand dollars, I got a hundred thousand dollars back, but I still have shares in that building. Beautiful. Right? Yep. It’s when the building sells ouch, that tax situation is gonna hurt a lot. So commonly people will do a 10 31 exchange. And then if you can successfully roll that into a building and you can go in it twice the basis. Now your 10% preferred return is like a 20% preferred return. You know, another, so tech people, especially when we sell a company, they wanna apply their money into an opportunity zone so that they don’t have to necessarily pay the taxes. Now they can pay the taxes late on, defer it again. It’s like 10 31 exchanges, a lot of projects that are just bad projects. And I don’t like the fact that you’re typically tying up your capital for quite a lengthy period. And it’s, it’s a lot of work to administer and oversee an opportunity zone investment if you are, uh, if you’re an investor yourself and I don’t mean investing in an opportunity zone, I mean, if you’re managing an opportunity zone project, we’ve looked at some of those and we’ve, we’ve done those at blue field and you know, it’s um, that, that there’s a bit more administration involved.

Tony: (32:12)
Yep. Yep. Well, cool. Well Zane, we’re gonna start wrapping this up man. Fascinating story. Um, you know, going from you said, uh, uh, a tough neighborhood in the UK to, you know, hitting a big with selling a big company and um, I’m sure in some aspect, you’re living life, but in the other, on the other side of it, I’m sure there’s something where you’re like, man, there’s still more to do. Right. There’s still still some, some other things to accomplish in life, especially since you’re so young, so congrats to all your success. Um, if someone wants to reach out to you or get ahold of you, is there anything, any, you know, do you wanna send anybody anywhere to, uh, to get more information about you or to, to potentially contact you on, on anything you’ve got going on?

Zain: (32:53)
Yeah. My, my family office website is zain Z a I N dash ventures.com Zane hyphen or, or minus. However, however we say it, you know, Zane ventures.com, uh, on Twitter za, J Z a I N J a F F E R. Um, so, and you know, obviously, uh, I’ve got the prop tech VC podcast as well that I run where I talk about real estate technologies and interview a lot of founders. So that’s prop tech v.com.

Tony: (33:20)
All right, fantastic. So Zane, uh, dash ventures.com, is that mainly for people who want to potentially look at you investing in their, uh, in their company?

Zain: (33:30)
Yeah. That’s got my family office. If you wanna, uh, if you’re a PropTech startup, then it would be Bluefield cap.com. That’s uh, you know, I, I try not to, uh, invest in the things that can be competitive to my fulltime job where, you know, I’m, I’m, I’m at Bluefield capital. So that’s, uh, zane@bluefieldcap.com. That’s probably the best way to reach me if it’s anything related to real estate or startups in real estate.

Tony: (33:54)
All right. Fantastic. Yeah. Well, awesome Zane. Well, I appreciate your time. Love man, and, uh, good luck to you. And, um, hopefully the next venture will be just as successful.

Zain: (34:06)
Thank you so much.

Tony: (34:07)
Thanks for listening. Now. Go to www.remcommunity.com to connect with today’s guest. See your high level masterminds and to get free resources. Don’t forget to share this with a friend and leave us a five star review we’ll you on the next episode.