Building a PropTech Venture with a Virtual Team: Discount Lots President Paul Hersko (Part 3)

Sramana Mitra: How do you finance yourselves?

Paul Hersko: We have a fund that we run. People can invest in our fund. Let’s say you invest $150,000. We take that money and purchase property with it and provide our investors a return. Then, we sell the land.

Sramana Mitra: What behavior are you seeing in your user base? Are people buying the land to make money off of the land or are they mostly buying just to use the land?

Paul Hersko: I would say the primary motivation is for investment to be able to own something. It’s very difficult to get financing on land. If you go to a bank, the field that we’re playing in is underserved by banks. A bank is not going to give you a loan on a $50,000 property. Maybe they’ll finance 30% of it at the most.

Sramana Mitra: Why is that?

Paul Hersko: They view just raw land as risky. It’s not. It’s an overlooked real estate class. It’s a misunderstood asset class.

Sramana Mitra: Let’s go back to when you were starting this in 2019. How did you get started?

Paul Hersko: Willie had been doing this on his own for a couple of years with one employee. He learned about it by going deep into podcasts and found some obscure person who was doing it. He did it and he had a lot of success. We crossed paths in 2019.

It was the perfect match. My skillset is e-commerce, marketing, and sales. His background was investment banking. We crossed paths. I laid out this vision that we can create a trusted marketplace and build a real brand. There’re a lot of mom-and-pops that sell a couple of properties. We saw this opportunity to really become almost the Amazon for land.

Sramana Mitra: How did you get started? What did you do to launch this?

Paul Hersko: He had his existing company. We kept that alive. We each put in capital. I put in money from my Amazon business that I was running for several years. He had a lot of money saved up.

Sramana Mitra: What amount are we talking?

Paul Hersko: We each put in around $300,000 each.

Sramana Mitra: Your Amazon business was already done at this point?

Paul Hersko: It still runs today, but I don’t have any involvement anymore. In the background, we were building the website. We were building the marketing and branding. We went and bought 15 or 25 properties. What we identified from the very beginning was that people only have a couple of properties because they don’t have the cash flow to buy a lot.

We were going to come to market and have a big selection so that people can not just see that we own three properties. We wanted to have a big portfolio. In the first two months, we acquired as many properties as possible. We flew out to LA and went to the tax auction with big suitcases full of money because they only took cash. We went to this auction and we bought several properties, 25 to be precise.

This segment is part 3 in the series : Building a PropTech Venture with a Virtual Team: Discount Lots President Paul Hersko
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