Brandon Donnelly

Here is a recent post by Scott Galloway comparing Uber and WeWork. In it, he praises the virtues of asset-light business models:

For most of business history, having assets was good, and having more was even better. However, one of technology’s tectonic unlocks has been elevating information (bits) over objects (atoms). In the information age, owning assets is one business, while operating them is another, and each demands distinct capital structures, management approaches, and operational skills. Businesses offering the greatest return on invested capital don’t have much capital (assets) and can scale up faster, as they don’t bind themselves to cars, apartments, or even inventory.

We know this. Uber doesn't own cars. Airbnb doesn't own rental properties. And most hotels, as Galloway mentions, also don't own their real estate. Generally speaking, hotels are brands that enter into fee-earning management contracts with people who own real estate.

However, WeWork is not this. According to Galloway, WeWork had $47 billion of pre-IPO lease obligations. These ran/run through to 2038. In this regard, WeWork is more bank-like: they have a similar mismatch of short-term assets and long-term liabilities.

Galloway also argues that asset-light businesses offer the greatest ROI because they can scale up faster. And this is certainly one of the virtues of tech businesses. In more asset-heavy businesses like real estate development, each project/asset is largely a discrete effort.

But there are significant advantages to owning real estate; one of them being that, at the end of the day, you own a hard asset.

Venture capitalist Fred Wilson once wrote on his blog that one of his big lessons from the dot-com bubble was that he learned to take his tech wealth and funnel portions of it into hard assets -- namely real estate in New York City.

This, of course, comes with its own set of risks. But clearly there is something to be said about owning real estate.

I was out for brunch last weekend with a few close friends from high school. It’s a “monthly reunion” that happens nowhere close to every month. But the hope is certainly there.

During brunch the topic of my blog came up. And one of my friends asked me how I got started and how the hell I keep up with one blog post every single day. (I get that second question all the time.)

I’ve written about this before, but I think it’s worth revisiting.

Earlier this week venture capitalist Fred Wilson wrote a post on his blog called The Blank Screen. And I really liked how he described the experience of writing a daily blog post:

Sometimes this process produces great insights for me and possibly others. Sometimes it produces garbage. But I’ve come to realize that the daily post, and its quality or lack thereof, is not really the thing. It is the ritual, the practice, the frequency, the habit, and the discipline that matters most to me. And, I would suspect, the same is true of the readers and commenters who frequent this blog.

Fred’s blog was a major source of inspiration for me. I saw him doing it. I saw the value he was getting out of it. And I wanted to do it too. So I did, almost 2 years ago.

But he also inspired me in another way.

Venture capital and real estate development share many similarities in my mind, even down to the way that deals are often structured with preferred returns and promotes.

But the interesting thing about venture capital is that it went from a largely closed and “ivory tower” kind of industry to now one where almost every venture capitalist blogs, tweets, and strives for greater transparency (when possible).

I thought this was a fascinating shift and it made me think that the exact same thing was bound to happen in real estate development. So I am trying to make that happen. Hopefully this blog is helping.

Brandon Donnelly

Brandon Donnelly

There's something to be said about hard assets

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