There was a moment where our industry was star struck by the outside capital pouring in to fund VC-Backed property management companies.

Now those companies are going under one by one.

Yesterday the most well funded player in the category announced it was acquired by RoofStock.

Mynd raised over $200M at close to a billion dollar valuation.

Their thesis was pure play tech augmented by people:

Here are my speculations:

1. This is not a merger - After 3 rounds of layoffs it was clear Mynd was already in trouble and unable to raise further funds without wiping out existing shareholders. It was time to get out.
2. This was not a positive outcome for Mynd's investors and shareholders - This was presumably a stock swap at a valuation that almost certainly wiped out all but the very earliest investors.
3. This is a smart move for RoofStock - They've acquired the assets of other failed tech enabled PMC's previously. It allows them to bolster their portfolio and acquire some tech for very little cash outlay.

​

My main takeaway is this.

Property management is a service business.

Tech can improve it - but will not replace it.

Which means tech valuations in property management are a trap.

There is no easy pivot for the tech players left in the space.

Best case scenario is profitability.

And profit means existing shareholders get crushed.

Why?

Because profits shatter the idea of a tech play and clarifies that it's actually a cashflowing service business.

This means existing investors overpaid by 5-10x and any future capital raises will require a significant down round further crushing existing shareholders.

Can this be overcome?

With enough time, yes.

Example: Assume a 10x revenue valuation corrects to a 2x revenue valuation. This 80% haircut would require roughly 7 years of 25% annual revenue growth to get back to the original valuation, i.e. A 7 year hold time to generate a 0% return on the original investment.

Can cashflows and distributions make up for this?

Not really.

Example: Assume a 20% annual distribution to shareholders (wildly generous). If the biz was valued at $100 but was really worth $20 and is actually generating $10 in annual revenues, it would take 50 years to get the original investment back.

In summary - cash is still king.

I'll leave it there for now, for more thoughts see my previous coverage below.

​

- JAAM​​

P.S. - I've paused the podcast for the moment after a bit of a creative dry spell. I'd love any feedback on 1) whether you'd like to see more episodes and 2) if so what you'd love to hear about.

---

Know someone that would enjoy the newsletter? They can subscribe here.