Venturehouse Group CEO Mark Ein - moneyball for CEOs, real estate data & buying sports teams

Mark Ein is the founder, chairman and CEO of Venturehouse Group and has been involved in the founding or early stages of six companies worth over $1 billion. He also served as Chairman of the President's Export Council, is Executive Chairman of Kastle Systems, owns the DC Open, and was a key partner in the $6.05 billion acquisition of the Washington Commanders. In this episode of World of DaaS, Mark and Auren discuss: Cross-sector investing advantages and pitfallsOffice occupancy data and ret...

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Auren Hoffman?

  Hello, fellow data nerds. Welcome to World of DAS. I'm your host, Orin Hoffman, CEO of Incubate and GP of Flex Capital. Discover more episodes, get weekly data as a service news, original content, articles on data and more at worldofdas.com. That's worldofdas, D-A-A-S, dot com. Hello, fellow data nerds. My guest today is Mark Ein. Mark is the CEO of Venture House Group and has been involved in founding or in early stages of over six companies worth over a billion dollars. He also served as the chairman of the President's Export Council, the executive chairman of Castle System. He owns the DC Open, which is the biggest tennis tournament in DC and was

• 0:47Auren Hoffman?

  a key partner in the $6 billion acquisition of the Washington Commanders. Mark, welcome to World of DAS.

• 0:53Speaker 01

  It's such a pleasure being here, Orin. Thanks for having me.

• 0:56Auren Hoffman?

  Absolutely. We've been friends quite a few years now, so I'm super excited to dive in. Now, you've got this like very weird portfolio. You've got like cruises, you've got prop tech, you've got sports teams. Most investors kind of stick to like one sector. Like, is there some sort of commonality amongst these things?

• 1:15Speaker 01

  First of all, maybe it seems weird on the outside. I wake up every day just like so happy I get to work on the coolest stuff. And I've got a wide range of interests. And so I truly like literally wake up every day just feeling so lucky that I get such an interesting portfolio of activities. And I would say to some extent, it has been driven by things that I have an innate interest in. But as you said, it's not focused in one sector. It is pretty broad. And I'd say, Orin, it's an interesting question, because I would say rather than it be a negative or disadvantage to not be focused on one area, I'd say it's an advantage to be able to see across a variety of things and bring the things that you learn in one area to an area that may

• 2:00Speaker 01

  not have been exposed to them. And I'll tell you, one of the things that someone said to me early in my career, because I came to DC 30 some years ago to work at Carlyle when it was new. And we backed this amazing entrepreneur. And he actually told me, I was young, I was in my late twenties and he said, Mark, you know, it's amazing. You bring things in from the other things you've seen to hear that we wouldn't have seen. I told my dad that my dad said, you know, from a very early age, that was the thing. About you. I found interesting is you would apply things from. One part of your schooling or education or one part of your. Childhood experience and apply it to others and see things that maybe others didn't see. And so this topic is one I'm super fascinated and actually a woman. Gillian Tett, who was editor of the FT.

• 2:45Speaker 01

  Wrote a book called The Silo Effect and we spent a lot of time talking about it. I was in it. Because I told her, I think there's great power. In being able to do this well, and we can talk about how to do it well, what the pitfalls are. How to do this well, I think there's really great power. In being able to see across a broader set of things and bringing the things you learn in one area into another.

• 3:08Auren Hoffman?

  I can see some of the parallels. I can see like, okay, this stuff you learn in prop tech. You could actually like move to a sports team because in some ways like. You know, you're dealing with these very, very complex spaces. You're trying to fill those spaces like. There's definitely seems like there's some overlap between these things.

• 3:25Speaker 01

  Well, I think actually, so if I just take Castle, which was an amazing company. And I'd say, you know, interesting, maybe for your audience, the thing that I focus on how I got. To sort of this portfolio and the stage of company. Is in my career, I did everything from starting companies, early stage growth. To buyouts and over time I just developed. Sort of a model that appealed to me, which was I loved the psychological rewards. And I love the process of building companies that you do from an early stage. My only thing is I didn't really love working with companies that were always losing money. I always said. The day after you write the venture check, they're losing your money the next day. And you hope you get to the next fundraise before you lose money.

• 4:09Speaker 01

  And so I came up with this thing that I want to find existing companies. That are really fantastic, but for whatever reason, their existing owners. Haven't made the most of it and we can come in and apply. That venture growth mindset to maybe a company. That could grow a lot faster, but hasn't. And so Castle was one of those companies, incredible company, incredible business model, great entrepreneur. But for a variety of reasons, it had kind of been stagnant for a while. And so I came to it with a tech per- and everyone who had been in that company had just done that for a really long period of time. The minute I saw that company, I dropped everything in my life until we signed it up and got the deal done. Because I saw this and I said, from all these other experiences I've had,

• 4:53Speaker 01

  we can take what this company has done in a very narrow way and broaden it. We can do more things for more verticals in more geographies. We can bring new products. Cause I had done an RFID company. I had done wireless networks. And then in my sports stuff, I had done, I understood what it takes to delight customers and we could bring that. And the company, this will be the deal of my life. It'll be an extraordinary return someday. And a lot of it, I think, comes from how we transformed the company from what it was when we got there to all the things that we brought from our other experiences to make it what it is, the company today.

• 5:32Auren Hoffman?

  In some ways, what you're doing is a little bit more of like the older school private equity. Like back in the day in the eighties and nineties, you would like buy a company and you'd actually make it significantly better. Today, it seems like a lot of private equity is more about financial engineering. Cause they're often buying it from another private equity firm that isn't done. So they actually did a pretty good job on it as well. And then they're kind of flipping it to another private equity firm. So you kind of see it like you're hearkening back to like the more the original era of private equity?

• 6:02Speaker 01

  So I think it's interesting because private equity originally was what you said. And then I went through a phase that really was about financial engineering, buying, putting leverage on, getting whatever growth, flipping at a higher price. Especially with low interest rates, people made great fortunes doing that. I do think as the world's become so much more competitive and so many more firms, I was doing what I know long before this last phase of institutional private equity. Institutional private equity, a lot of it has gone back to how do we institutionalize the business building? So if you look at a firm like a Platinum, they have a 50% operations team. We've worked with them. If you look at- Blackstone, they have a lot of, you know, look at Vista, that's a great example, that big in-house group.

• 6:47Speaker 01

  So that, like, people have come around to say, we can't really generate the returns without actually building the businesses. And so I think the industry has come back to it, but it's always what I've done because I like making money. There's no doubt. It's something that is good. But my motivation to get up every day is not actually about making money. It's about making a difference in the world and doing things that are gratifying and that you feel like you're accomplishing something. And so for me, just buying with leverage and having modest growth and flipping didn't really feel like that. I love the building process. I love being the closest partner to the CEO because I've been a CEO myself. I know how badly you want it. And so being an active partner and building great businesses is what drives me.

• 7:31Speaker 01

  And that's how we got to the model that we execute on today.

• 7:35Auren Hoffman?

  Do you have like some sort of money ball thing that you're looking for in CEOs that other people don't? Either they don't appreciate or they think of as flaw?

• 7:45Speaker 01

  The hardest part of this business, the most gratifying and the hardest part is picking the right people. It's all that really matters at the end of the day. And it's funny because when you're young and in this career, everyone tells you that. And, you know, probably don't appreciate as much when you're young. And then you get a few decades in and you really realize that is the absolute most important thing. And picking people is really, really, really hard. I mean, I tend to be, especially for CEO jobs, a very slow hire. Because I find that a lot of times people are great in the first session, sometimes the second. But if you spend enough time with people, you eventually get down to who they are, how they think, what matters to them.

• 8:28Speaker 01

  And so just you spend a lot of time really trying to really get to know people. I get very specific in what did you do in your previous experiences? And how is that connected to what we want to do? I probably over-index on clarity of thinking and communication because I think that's indicative of how people.

• 8:47Auren Hoffman?

  Is it just like having conversation with people or do you want to see that written? Or how do you see that communication?

• 8:53Speaker 01

  It's more just the communication and spending the time. I mean, we have done it where at times you'll say, give us a business plan or do a presentation on what you would do. And I do think that can be a useful part of it and that can really be illuminating too. But a lot of it just comes down to spending the time with someone and seeing how the conversation goes.

• 9:11Auren Hoffman?

  You've been kind of like focused on these things or like continuous improvement potential. How do you know when it has that potential?

• 9:19Speaker 01

  Well, it's more about how do you bring continuous improvement? I'll tell you the story that got me on this was one of, you know, we all have these moments in our life and I had this moment, I was on the board of a company with a guy I was telling you about who I invested in, it was a Carl Rogers thing, he had a company called LCC International, which was the biggest engineering firm for designing wireless networks in the 90s. We took it public and we had a guy on the board named Arno Penzias, who won the Nobel Prize for discovering the Big Bang and I love Arno, he unfortunately passed away a couple of years ago, but he became a dear friend. And it's interesting because if you know the story of how Arno discovered the Big Bang, it was kind of by accident. He wasn't looking for the Big Bang, but he saw an echo in the telescope and put this whole theory together.

• 10:04Speaker 01

  And so the genius in working with Arno was that he just saw obvious things that other people missed. And we were working on this company and things just kept going wrong, but they were always a different thing. And we were in the middle of a meeting talking about the latest thing that had gone wrong and Arno just like started pounding the table and said, "Stop, stop, stop. When are we going to stop putting out fires and figuring out why the fires are starting?" And it's so obvious, right? And it's root cause and all that stuff. Back then in the mid 90s, that was not written about as much as now. But it really got me to like, that is the right thing. If you're in a situation where things keep going wrong, you gotta go root cause and

• 10:47Speaker 01

  you gotta get continuous improvement. And the greatest companies and the greatest individuals are all about continuous improvement. And it's the thing that I just, my whole life is obsessed with this. How you do it is a lot harder than saying it and a lot has to go in, you have to put the right process in place, you have to have good collaboration, good communication, you have to be able to have honest communication, people need to be able to receive it without being defensive, that's one of the hardest things. People have to be willing to not just gloss over what went wrong and thick put a Band-Aid on something, but dive into the root cause. But when you do it, the organizations, the companies you build, reach levels that people never thought they could. And I'll tell you, it's, I view it the same as with people.

• 11:33Speaker 01

  That people who are committed to continuous improvement, reach levels they never thought that they could. You talked about, and I know we're going to talk about in a bit, my role in the tennis world, but I befriend a lot of tennis players. And we talk about this, that if you look at the greatest tennis players in the world, and we had an era for a while that was on the men's side, Roger Rafa, Novak, who separated themselves from everyone else. You look now, you have a situation with Sinner and Alcaraz, who have separated themselves. The reason isn't because they're that much more talented than everyone else. The reason is they're the best at getting better faster than everyone else. They have played each other in the finals, I think, of pretty much the last eight Grand Slams. And people are like, how's that possible?

• 12:14Speaker 01

  I'm like, the reason is because they are the best at continuous improvement. And so whatever you do in life, I think continuous improvement is the unlock to levels that otherwise are not achievable.

• 12:27Auren Hoffman?

  How do you get a sense that somebody is? Because obviously you could watch them over long periods of time and see the delta. And that's one way, but it's a little bit more difficult. And sometimes you're not like, you don't even have that observation ability. So how do you get a sense by talking to them, by meeting them, that this is the type of person who is into continuous improvement?

• 12:48Speaker 01

  If someone is a zealot for continuous improvement, and you talk about their history, it's going to come out. Because the people in my life who I've sort of bonded with over this, you can't talk about your experiences if this has been embedded in it and not bring it up. So it will come up. So that's a thing. And you know, the way you ask the questions, as I said, to me, the biggest thing in hiring is to be very specific. So I'm always like, what did you start with? And what did you end with? And how did you get there? And so in the course of that, you can uncover it. And then this is the hardest thing. You can't know this, and I don't believe it's hard in the interview process, unless you do psychological profiles, which I actually think can have a good place. And a lot of people swear by, and I think can be really good,

• 13:33Speaker 01

  is are they defensive or open minded? Because if you don't embrace this, a lot of people in the world get very defensive, very stubborn, very standoffish. When you go through this exercise, their first instinct is defensiveness. And it needs to be the opposite, is like, let me hear what the group's talking about. And is there truth there? And is there something I can do better? We can do better that I should be embracing?

• 14:00Auren Hoffman?

  Is it correlative or anti-correlative where you could see someone, let's say you saw someone who's continuous improvement at getting better at running or something? Is that actually correlate to how they do in business? Or is it almost like that's their outlet for continuous improvement? Maybe they're not actually as good in business.

• 14:18Speaker 01

  I don't know. I've never thought about it. I'm now going to think about it. But I will say I have a passion for sports. We talk about it for our kids. My passion for sports isn't sports in itself. It's sports in life. And it's why I love not just being involved on the business side of sports, but competing and playing myself, because so much of the things that I think about or am committed to in business, that these beliefs comes from playing sports itself. So it should be correlative. It definitely should be. But you know, there might be people, a lot of it really just comes down to how open-minded and non-defensive and non-stubborn people are. That's where people get stuck. You need to be embraced.

• 15:01Speaker 01

  And so I'm not sure how much that's related to sports, but no one's great at sports, really great, without trying to figure out how to always get better.

• 15:09Auren Hoffman?

  Now, speaking of sports, like if I was evaluating like a car wash to buy or a bunch of car washes to buy, you know, I can do some sort of understanding the cash flows and understanding how much I can improve it and maybe the growth and expansion opportunities in the place. And then you can have a sense of like how much the business is worth. When you're looking at a sports team, there's that of course, but there's also this kind of like trophy aspect to it. How does one understand like the value when those things come in? These kind of weird, non-financial intangibles?

• 15:44Speaker 01

  I think especially when it comes to the highest profile sports teams, that it's a combination of a business and a piece of art. And the value is somewhat determined by the underlying business and probably equally and increasingly maybe even more for its scarcity value and its desirability as something that someone would want to be involved in. So. It is not easy to do traditional financial analysis. I'll start with not that. Let me start with the other ones. And some of the other ones I've done, it always does start with, like when I bought the tennis tournament, it started with an underlying economic analysis of what is the possible economic potential of this. And I didn't count on the fact

• 16:29Speaker 01

  that someday the value may be something more than that. And we actually did that. As we've looked at bigger sports teams and you mentioned the commanders and I made investment in a British soccer team called Leeds United, which just got in the Premier League. And by the time this comes out, I will have closed an investment in the Baltimore Orioles, my hometown team. You know, you do do the financial analysis, but the likelihood is you're not going to get to the value solely on that. Then it starts to be a bit of relative value, which I actually find is usually pretty dangerous. Like if this team went for this in this league, then this team should go for this. If this league's going for this, then this should go for that. It's not easy.

• 17:13Speaker 01

  You can't really evaluate them the same as another business. And I'd say if you go in it because you think you're going to get super wealthy, because the business is someday going to support the valuation you paid plus the return you hope to get. That's probably not it. The reality is so far the values have kept going up because more and more people want to own them. They found ways to find other business opportunities around it. And so today, they've all been really amazing investments.

• 17:47Auren Hoffman?

  And is there some sort of sense where it's almost like a leverage bet on the US economy or something? Or is there some sort of sense like if the economy did bad, maybe like, maybe like art is a little bit like that? Or, you know, or is like the global economy?

• 18:00Speaker 01

  Yeah, I think it's more a store of value. I think it's a combination of a business, something people want to be involved with because they're at a point in life and they're like, this is something I want to do for me and my family. And then there's a store of value. Look, the Commander's deal is a super interesting situation. We did incredible amount of financial analysis and, you know, for a long time, it was Josh, his team, me, working on that. And we did extraordinary amounts of analysis. And look, there is a real case. I mean, I love, the NFL is by far the greatest sports league in the United States, if not in the world, and it's so dominant. And, you know, two years ago, of the hundred highest watched TV shows

• 18:43Speaker 01

  in America, ninety-four were NFL games, three were college football games. So it's the one place that delivers a mass audience, which is something that a lot of people want to get to, whether it's an advertiser or a network or a streamer. So you have that. But then the interesting thing about the NFL, Warren, is that the Super Bowl is only watched by 140 million people. It's watched by about 100, 110 million people in the US, which is obviously the biggest by far. But then it's only watched by 30 or 40 million people outside the US.

• 19:14Auren Hoffman?

  There's a lot of potential.

• 19:16Speaker 01

  A lot of potential, whereas the final of the World Cup is watched by a billion and a half, two billion people.

• 19:20Auren Hoffman?

  Yeah. And by the way, I love to see, like, there's NFL games now in Brazil, there's in London, there's Frankfurt. You're starting to see a little bit of, okay, let's kind of expand the appeal to other folks.

• 19:31Speaker 01

  Exactly. So to take a venture mindset, how do you expand the TAM, right? So traditionally, the TAM for the NFL has been domestic. There's a very, very strategic, well-executed plan to bring it to the rest of the world, and that's all new people. So that's big. The other one that I love is flag football, and especially for girls and women. My daughter plays flag football, and it's extraordinary to go out and you see these girls field, like, literally, the place she goes, there's six games, all young girls, all loving it. And then they're all coming, then I go to our stadium, and there's all these young girls coming in their flag football. Uniform. So you also want to talk about this team. Now, look, there's always been a good

• 20:14Speaker 01

  female fan base in the NFL, but when the girls are actually playing it, that's only going to

• 20:19Auren Hoffman?

  Yeah, they understand the game more when you're playing it for sure.

• 20:22Speaker 01

  Exactly. So these were all the things we thought about is like, is this a league that's kind of tapped its potential the more actually international and those are two gigantic, relatively untapped Tams that we knew the league was going to go after. Plus the ability to deliver this audience. That was good, but that all said, you know, it's pretty well reported that we brought in a pretty good sized set of partners to do this. And the amount of people who were willing to write a really big check for this, I'd say was somewhat surprising. And it really opened, I think, all of our eyes that I think a lot of these, a lot of them are families. View this as they have a subjective reason for doing it, but they wouldn't do it if they didn't think there was a financial underpinning.

• 21:06Speaker 01

  It's a store of value. It's just like a great piece of art. There's only thirty two franchises in the greatest sports league in the world. There only probably will be thirty two. I don't know. Maybe that's changed, but that's probably thirty two and that scarcity should continue to drive higher and higher values.

• 21:22Auren Hoffman?

  We saw in the NBA where Mark Cuban like sold his or at least part of his interest in the Dallas Mavericks. Is there some sort of sense that in some sports leagues, we could be maybe at the top? Or do you think like in these permanent sports leagues, the NBA, Major League Baseball, et cetera, Premier League? That there's still just so much room to grow.

• 21:43Speaker 01

  It's interesting. I mean, Mark Cuban sold his, Michael Jordan sold his, right? But the values since then have gone up dramatically. But I can so relate to both. I mean, I'm a little younger than both of them, but in the same zip code. I can totally relate though, you know, they both got involved. They pour their heart and souls into it. They're the most fun, greatest things in the world, but you also spend a lot of time on it and you hit a point in life where you're like, I could take out all this money. Maybe someday it'll be worth more. But you know, I've got twenty summers left in my life and what do I want to do? Do I want to keep doing it? I think when people Do that, it becomes. And then I think Mark thought he could use help in getting a new stadium

• 22:26Speaker 01

  done. And that's a whole nother work stream. And at some point, the decision to sell, whether it's a sports team or a company, has less to do with the company itself, more to do, where's the owner in their life? What is it that they want to do? And I think I totally understand how someone could reach that decision at some point.

• 22:43Auren Hoffman?

  It's also a little weird where today, there's so many benefits to fame. And it's like a very weird thing where a lot of wealth is generated by fame and by influence and stuff like that. And of course, if you're like, a sports team owner, you're like instantly famous. You may have been like the super billionaire, you run Apollo Group or whatever, but like, no one's ever heard of you until you buy the sports team.

• 23:07Speaker 01

  Some people want that. Some people accept it as part of it. Some people don't want it. And some people have it for a while. And then they say, I'm ready to not have that life anymore. And it is part of the overall equate.

• 23:21Auren Hoffman?

  Of course, then you have millions of people who like, all they do is they rail against you every day.

• 23:26Speaker 01

  You have to be humble in all of these things, because it's all precarious. And you know, one day, you're on top of the world and things are going great. And then the next season, you're not. So you can't take it too seriously on the way up or the way down.

• 23:41Auren Hoffman?

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• 24:23Auren Hoffman?

  Now, on the D.C. Open, until I met you, I didn't even realize these USTA events could be owned by an individual. For some reason, I just thought it was owned by the USTA. I didn't understand it before. How does the economics work?

• 24:37Speaker 01

  The tournament in D.C., the Mubadala D.C. Open, we have both an ATP men's event and a WTA women's event. Those are the names of the two tours. And they don't run the men's and women's tours. The USTA owns the U.S. Open, the Grand Slam. It is interesting because a lot of the events in the tennis calendar are owned by the federations or the governing bodies of the sport around the world. There are tournaments that are privately held, including, obviously, mine. The great thing about mine is when I was a kid, I was a ball kid at this tournament. And the highlight of my summer was getting to be a ball kid for Jimmy Connors and Guillermo Vila and Jimmy Arias and all these guys.

• 25:21Auren Hoffman?

  That's amazing.

• 25:22Speaker 01

  Yeah. And then, fast forward later in life, you end up finding a way to own it. It's pretty amazing. But our tournament had been owned by a not-for-profit for almost 50 years. And as the requirements to showcase these tournaments got higher and higher and the need for investment got more, frankly, they weren't able to make those investments. And the tours were imposing requirements, so they had to find someone to come in and do that. And I had been talking to them. This, honestly, was my dream. The two things I cared about as a kid were the tournament being a ball kid and the football team. And so now, to be in a position to be involved with both, it's indescribable, the feeling

• 26:02Speaker 01

  of it. I feel so incredibly lucky. But the chance to come in and really elevate that tournament to where it should be on the world stage was something I was so excited about. Frankly, there were people from all over the world bidding on it. And the price got higher and higher. And I almost, at one point, stopped. And then I thought, this tournament had meant so much to me as a kid and so much to so many tens, if not, really hundreds of thousands of people in D.C. over 50. Years that I had to try to be the buyer so that it would stay in Washington. Fortunately, that happened and we've transformed the event. And so it really is a really solid, good business.

• 26:43Speaker 01

  We make money from tickets, from sponsorships, from TV, from the food and beverage and from merchandise. And they're not the biggest businesses because they're one week, but they're really solid business. And the sport is in incredible shape. I mean, the sport is really, really thriving around the world and now in the United States.

• 27:02Auren Hoffman?

  How does a nonprofit even sell a business? Like, how does that work?

• 27:05Speaker 01

  Well, they own it and then they sell it and then it goes into an endowment. And part of our deal with them, which was sort of what my pitch to them was, and I believed it is they get all kinds of intangible benefits for being there. They get tickets, you highlight them. It's an incredible program that provides after school programs, the combining tennis and education for kids, many of which inner city in DC. It's an incredible organization is I can leave you with all the intangible benefits of this. The tickets, the recognition will support your gala, all the things they got. But you can rid yourself of the financial obligation and you don't have the wherewithal

• 27:50Speaker 01

  to make the investments that are being asked of you. So it was kind of perfect and then you can take the money and endow the organization forever, which is what they've done. They now have an endowment from our deal that will support the organization for the rest of time.

• 28:04Auren Hoffman?

  One thing that's really been changed in the last 10 years or so is sports betting. And it seems to now it's becoming more prevalent in some ways, also bringing in new fans. I remember when I was a kid, I got into baseball because I was into baseball cards, not the other way around, dealing baseball cards. How does that like affect the sport long term?

• 28:24Speaker 01

  Yeah, so sports betting has been an interesting phenomenon. When it first came on the scene, I remember a decade ago, it was actually a woman who's just retired as the tournament director of the US Open, Stacy Ellister. She was talking about the fact that sports betting was happening on the content owned by the leagues and the events, but you weren't sharing in it. And it would almost be as if people were selling T-shirts outside your stadium, unlicensed, without permission and making money. And so eventually people said, if this is happening, A, we should share in it because we own the content. B, we should also make sure that it's safe and governed and there's a set of guard rules around it.

• 29:06Speaker 01

  And so that trend obviously happened. I think people thought it would be in and of itself a bigger financial windfall than it has proven so far for teams, because you really only get a small piece of the overall betting. And so it's nice. In tennis, the data revenue, which tennis is the second or third most bet on sport in the world, actually, because...

• 29:30Auren Hoffman?

  Because there's always a game, right? There's a game like every day.

• 29:32Speaker 01

  Exactly. And if you talk to people in Europe, a family will have dinner and one of the parents, after they put the kids on the bed, will go sit and watch a tournament somewhere and bet. And so there is additional economic streams from the data and betting. But you hit the nail on the head. The real value is engagement. An interesting stat in tennis is 80% of the tennis bets are after the match starts. So what people are betting on is not who's going to win or lose, is who's going to win the next game, who's going to hit the next ace, who's going to win the next set. And so really, the way to think about sports betting, and it's true, I think, in fantasy football and all these things, is it's entertainment amplification. Watching a game is fun. Watching a game because you're

• 30:15Speaker 01

  passionate about the team is way more fun. Watching a game because you're in love with the team and you have money on it is all another level of engagement. And I think that's the real benefit to the sport, is it just gets people more engaged. Now, by the way, this topic, you can't talk about it and not talk, though, about how important it is to also really make sure that you have the right guardrails and safeguards, not just for the sport, but the people betting on it. But in its right place, in the right balance, it really is a great catalyst for people to be more engaged in the sport.

• 30:48Auren Hoffman?

  One of the things I don't like about it from the like the DraftKings or these other kinds of things is I've had so many friends who got kicked off of these things because they're winning too much. And it just seems like kind of unfair, like in the stock market, if you win too much, great, like, keep going, like, that's the whole idea. I don't understand why they don't change their business model and just be like a market maker, rather than having to always take like the other side of the bet.

• 31:16Speaker 01

  That's interesting. I'm not a better in anything or a gambler, so I don't think I've ever made, I've never made a sports bet in my life, so I'm not that close to it. But it is kind of amazing when you look at the point spreads, how accurate they are, though, how often they hit it exactly right. Two and a half, and the game is either two or three points. It's amazing. So you would have thought like Vegas, that they get it close enough, right, that they can win on either side, but there probably are people who are figuring it out, and I'm sure they don't like to lose money.

• 31:44Auren Hoffman?

  Now, you were doing SPACs kind of like long before they became like a thing. Why is that potentially like a better path for public markets for certain companies?

• 31:54Speaker 01

  Yeah, we did our first back in 2007, right before the financial crisis, and turned that into one of the best mortgage REITs ever formed. And then we did a whole bunch of them, and then obviously the space got super crowded and we kind of stopped, which I'm glad we did when we did. The whole idea, and I really did this because what I love to do, we talked about this a bit, is work closely with companies. And I don't like to work with a big portfolio. I like to have a really concentrated portfolio and make big bets of time and money. And this was, to me, a really interesting deal by deal, like, single deal vehicle, where you could give access to public market investors into the kind of investing that we're doing,

• 32:38Speaker 01

  kind of value creation we're doing. And I thought it was, and it was for a very long time, and a bunch of the stuff we did turned out fantastically. It was a really interesting way for certain companies to access the public markets. This common thread was generally, there was something about the company where a

• 32:57Speaker 01

  Traditional roadshow where you do a series of 30 minute meetings and no Q and A and no diligence was needed to talk about the company. And so trying to start a mortgage REIT in the depths of the financial crisis was zero possibility on a traditional path. But through its back, what we did is we actually spent a huge amount of time with a set of investors who in the end believe what we were doing and gave us the capital, go do it. And each situation had some element of that where the actual process of going public that was a lot more intensive, a lot more diligence, a lot more time was going to be beneficial to the company. And what's interesting, Lauren, for the longest time, we had the stickiest investor bases.

• 33:41Speaker 01

  It was amazing. People would back us in the SPAC, the vast majority, almost everyone would stay in. And then they would then stay in longer in the company than the people who came in when we did the merger. Because it was almost like a private equity deal, like they did a massive amount of work upfront. And they knew the company. They weren't swayed by quarterly stuff one way or the other. And we had really sticky investor bases and it worked really well for a long time. And then obviously the space got super overheated, people was hot money and it all changed. But for a long time, it was a really interesting vehicle.

• 34:16Auren Hoffman?

  In the world of today where it's so much easier to access money in the private markets, is a SPAC just an SPV that I could just do in the private markets today? And without all the regulation and I could, because the problem with the SPACs, I can't say the target ahead of time when I'm raising money. Whereas an SPV, I can go do that. Or is it just like a PE firm with one kind of thing?

• 34:39Speaker 01

  Yeah, I mean, the thing about the financial engineer around SPACs on the IPO of the SPAC before you identify target is you're guaranteed at least a return, right? Because you can always ask for your money back. And so it's financially engineered because of the warrant and the option value intrinsic in it. Now, you know, we did a bunch where the interest rates were so low that you weren't even returning. Now you're getting interest on trust plus the option value. And that's why people do it. The flip side is The more attractive the return is to just giving the money at the IPO and then redeeming is you create a higher hurdle for the merger to actually get people to not ask for their money back.

• 35:21Speaker 01

  That is what happens. But one of the reasons that in such a short period of time, SPACs have gone from a four-letter word to now hot again is because the opportunity for investors in the IPO is kind of you can't lose. And if someone uncovers some amazing deal, you can win big. So it's pretty asymmetric. That's why you see a lot of people raising them.

• 35:41Auren Hoffman?

  Now, on Castle, you guys track occupancy rates across tens of thousand or over 10,000 buildings. Like, what is the data showing right now around return to work? And is it any different than the media narrative suggests?

• 35:56Speaker 01

  From the very beginning, because we didn't know this until the pandemic, that we had the best source of people going to office by far. There's really no comparable. And then we started publishing it and then everyone was asking our opinion on it. And from the very beginning, I've been a believer that CEOs and executives generally wanted their people in the office. I know you run a generally distributed company and other tech companies do. But the vast majority of executives want people in the office at least some of the time. They feel like that's the way it is. And they just for the longest time couldn't because of the labor market and whatever. But over time, it just, this has just been a continuing trend. And more and more executives and more and more high-profile ones put a stake in the ground and

• 36:39Speaker 01

  say, you need to be in the office at least some of the time, all of the time. If you're not coming in, don't work at my company. And that's been it. And so it's been a steady increase up. But you really need to get underneath the data because across the country, I think we're at 55% of pre-pandemic occupancy. See, well, that's not that high, but there's a couple of things. First of all, that's a weekly average.

• 37:03Auren Hoffman?

  Right. So like on a Wednesday, it might be 80% or something.

• 37:06Speaker 01

  That's what it is. It's like 65, 70% across the country. And on Fridays, it's like 30 some percent. So Mondays is slightly less. So that brings down, it's also a constraint to getting the number up when a couple of days are so low, you can't get back to a good number. The other thing, though, that's important is there's become huge stratification in type of buildings. So when you look at C buildings, B buildings, A buildings, A plus, when you look at A plus buildings, meaning the best bones, the best locations, on the peak days, they're mid nineties. They're basically back to where they are. And so here, real estate developers.

• 37:44Auren Hoffman?

  Makes sense. Like if I'm going to come back to work, I want to come back to work in a good place with a great building, with great amenities, with all the other types of things.

• 37:53Speaker 01

  And vice versa. That's one side, totally right. And on the flip side, if you're a company and you're paying the highest rents, you're going to say, I want my people to use it. So it's both sides. So yeah, it totally makes sense when you think about it. But the data, but then look, we know that there's a lot of C buildings that people are looking to convert to other uses because for the exact reason you said. If you're going to go to the office, you want it to be a good environment and a good location where there's amenities and stuff. A less good building in a less good location is going to find it really hard to get people back and their occupancy is way less. And so the average has gone up, but the growth rate has slowed a lot.

• 38:29Speaker 01

  But when you get behind the data, you really realize that there's this stratification and that the average is swayed by the different days of the week. That's sort of the picture of it these days.

• 38:39Auren Hoffman?

  As these like leases change and you know, we're already starting to see them change from pre pandemic leases and stuff like that. Some of these had like these seven year leases and stuff. What happens in the office market?

• 38:54Speaker 01

  Most major markets, if you want a big block of A plus space, you can't find it anymore.

• 39:01Auren Hoffman?

  But for people who had C and B buildings, you know, and there's all these lenders that lended money for these C and B buildings and stuff like that.

• 39:08Speaker 01

  Look, you've seen banks take over, you've seen distressed sales, you've seen that, you've seen some of those turn to condos. I think a not great building in a good location, you'll probably see someone buy it and renovate it and try it. It's probably a quicker path to getting it to an A building. If it wasn't for interest rates and frankly, costs of materials, which have a lot of things, including tariffs and other things, you'd start to see some real office building construction right now. I think that is going to come just because the space actually doesn't exist for the best spaces. If you're looking for less good space, you have a lot of options with a lot of flexibility. I mean, I followed WeWork from the very beginning. And to me, the innovation in WeWork was never about like keg parties and vibes. It was like the

• 39:53Speaker 01

  basic relationship between tenant and building owner was like sign a long-term lease, put a lot of capital upfront for tenant improvements. Doesn't really work for most company and also no flexibility. To me, what WeWork did in temporary space was actually giving people that flexibility. And I think what you see in less good buildings, you're going to see more of that kind of flexibility.

• 40:17Auren Hoffman?

  How are these like real estate owners like thinking about data?

• 40:22Speaker 01

  They love it. I mean, it's one of the things that makes them like Castle so much. And it's one of the biggest requests we have, which is give me more data, more data, more data, more data about my properties relative to other things. Everyone's focused on it. So like, you know, we have the occupancy data. So if you're a building owner and a lease is coming up, and we can tell you if those people are coming in the building or not, you can tell if they're risked to renew or not, right? If no one's coming, yeah, and they're probably not. And so there's all that kind of stuff that people are pretty voracious about. I mean, it's interesting, because when we first bought Castle in 2007, we came with the tech background. I mean, I have done a lot of different things, but a lot of it really was tech telecom related. So we came to

• 41:07Speaker 01

  the company thinking, well, we're going to really be a, we're going to provide a vision, a tech vision. And for the longest time, the real estate industry was really tech laggards. And it was frustrating because it was very hard to get people to embrace it. Interestingly, right before the pandemic, you started to see real estate owners actually change on that. And what you realized is that they knew that people wanted the same tech enabled Experience where they live and work is they have in every other part of your life. If you can order a cab on an app, if you can do your banking on an app, if you can get your sports tickets on an app. I also want to interface with my building in the same way. And so that started, it accelerated in COVID.

• 41:50Speaker 01

  Until that time, until a few years ago, there was no such thing as prop tech. There were no prop tech conferences, newsletters, venture funds. And then all of a sudden they popped up. I will say that it has cooled a little because getting to scale in that industry is very difficult. Every building is a small sale, so it's definitely cooled off a bit. But the real estate industry now is looking for data and other tech that lets them run their businesses better.

• 42:19Auren Hoffman?

  Okay, a couple of personal questions. So we haven't played tennis, but I know that you're an extremely good tennis player. Do you have your own like training process of continual improvement to get better?

• 42:30Speaker 01

  I do, and it's why I love the sport. I mean, in the summer, I play two hours every day with a young, couple of young college players, but they're pros now. And the thing that I love, every single time I go out there, I'm trying to get better at something.

• 42:45Auren Hoffman?

  Is it to work on the weaknesses or work on your strengths?

• 42:49Speaker 01

  I actually work on my weaknesses, but you should work on your strengths more. That's actually the smarter thing to do, but I'm obsessed with figuring out the stuff that I know I should do better. I for the longest time videoed, not always, but I would for a while of part of our workout, I would video. And then I would actually go back and look, there's now some amazingly cool apps that you can get that will track the speed, where the ball goes, can show the highlights, and it really is a great tool for all of that. I mean, I love it. Tennis is such a great sport and it's so fun. It's such amazing exercise, but it's also, it's great if you're obsessed with trying to figure out. You can always get better and it's fun to figure that out.

• 43:30Auren Hoffman?

  So I started playing when I was older, so I didn't really have the basis of it. And the first coach I had was this very, very interesting philosophy where he would only tell me when I did something well. It was so great for my confidence as an early player. The first time I went out there, he's feeding me balls and they're like going all over the place. And then every once in a while by accident, I would hit one well and he would like stop and then he would bring me to the net and he would dissect exactly what I did well. And of course, if you can do it, even if it's by accident, it means you could do it again. Right. And then out of, instead of one out of 100, I was doing five out of 100 and then 10 out of 100. It was a really great way to get someone like into the sport.

• 44:12Speaker 01

  I will tell you, one of my other, it's an obsession that may turn into a pet project is I generally think the state of tennis coaching in our country is not great. In other countries, it's a lot more certification and education that goes into it. Here it's a lot easier just to hang out a shingle and do it. And I see on the courts all the time, very few coaches who are great. And I'd say the two things that are most important is tennis is a moving sport, not a hitting sport at any level. So knowing how to move is equally, if not more important than knowing how to hit. And then secondly, the best coaches, if they want to teach you something, what you just said, they teach you progression.

• 44:54Speaker 01

  So they break down the stroke into two, three, generally three, four or five steps. And you do one step, then you add another step, you add another step. And that's how you build up to actually know how to do it the right way.

• 45:06Auren Hoffman?

  To me, the most difficult part of tennis is the serve. And it's like the most important part because there are so many weird steps. And in some ways, it is a somewhat of a foreign motion for people to go do it. But until you master that, you really can't really play at any serious level.

• 45:24Speaker 01

  Totally true. I mean, the best comparable to serving is throwing. So if you go out and you'll see, if you go to the practice courts at our tournament or any, you'll see some players will bring a football. And they'll literally warm up before throwing a football because throwing a football is very similar to hitting a serve. In fact, I remember watching Novak Djokovic, who used to have a horrible serve. Speaking of continuous improvement, now is a very, very effective serve. Watching him really try to learn how to throw a football is a way to learn how to improve his tennis serve.

• 45:57Auren Hoffman?

  And now, this wouldn't be a good interview without bringing up my favorite sport, which I know you're not necessarily the biggest fan of, which is pickleball. How do you see the pickleball tennis rivalry changing over time?

• 46:10Speaker 01

  I think we found a good balance, to be honest. It was really disruptive for a long time. In fact, I gave a speech, I joined the USTA board in 2012, and in 2013, I gave a keynote at the USTA Southern Section, which is the whole southeast of the United States. And I said, pickleball is going to be the great disruptor, the way these tech companies did. And people just were like, come on, it's loud, it's got a funny name. I was like, no, look at the growth curve.

• 46:37Auren Hoffman?

  Growth curve is unbelievable, right?

• 46:38Speaker 01

  They talked about taking things from one discipline, one part of your life to another. I just saw the growth curve, and then you listen to it. The issue with tennis that pickleball solved is tennis is not really that fun for either person if you're not in a narrow band of the same.

• 46:55Auren Hoffman?

  If they're in a super narrow band.

• 46:57Speaker 01

  Whereas pickleball, anyone can play with anyone. There's guys, friends of mine, who played on tour in tennis, and they can play pickleball with their buddies. And so it solved for that, it was social, and so obviously it took off. And, I mean, just as an aside, since this is a lot of venture tech investors who watch your podcast, the journey for acceptance for the tennis industry was just like every other disruptive force you've ever seen. When it started, it was totally dismissive, as I said. And then the next thing is, well, let's go buy it. So they went to the Pickleball Association, the USTA, and said, do you want to sell? And they said, no, we exist because we don't like you. And, our phrase, I don't want to get in trouble, but some version of that.

• 47:42Speaker 01

  And then we said, okay, we need to start our own. So we started our own version of pickleball, right? So it's like, what was the Google social media, Google Circles?

• 47:51Auren Hoffman?

  Google Plus.

• 47:52Speaker 01

  Google Plus to compete with Facebook, right? So let's start our own. Of course, that failed. And then it's like, okay, acceptance. And that was the tennis world's reaction to pickleball. And for a long time, people were converting tennis courts into pickleball courts. Now I think people realize that if you have some pickleball courts, it brings people to the club, they're probably not going to go, not many people go from pickleball to tennis, but it'll support the club. Their growth has slowed a little, tennis growth is through the roof. Honestly, padel or paddle is a new force that is really growing fast that people love. And so you're creating these really great clubs that have pickle, paddle and tennis. I think it's kind of everyone's found their happy place for the moment in it.

• 48:36Auren Hoffman?

  Yeah, it does seem like pickle's growing, padel is really fun, is growing though much less accessible than pickle. And if you go to like a public court, there were used to be like three tennis courts. Now you have, you know, 10 to 12 pickle courts in the places. They're completely full. I used to drive by these tennis courts. Nobody would be there. Now I drive by and just like, there's like a sea of people. It's like, I don't know. It seems like a very good community. Now the neighbors don't always like it, but good for the community as well.

• 49:06Speaker 01

  Yeah, no, it was a participation sport. It's been great. I did invest in a pickleball team and their values have gone up for all the reasons, all sports teams. It has not yet proven to be a great commercial success on the pro side. It's a little harder. It's not the same viewing experience, but on the participation side, it's been great. But tennis from 2019 today has grown at 45%. In the pandemic, it grew tremendously because it was the perfect sport and it's kept going. So they're both doing really well.

• 49:34Auren Hoffman?

  Okay, amazing. Last question we ask all of our guests. What conventional wisdom or advice do you think is generally bad advice?

• 49:41Speaker 01

  The thing is, whenever someone says, no one's ever lost money doing X. That's usually a sure sign that someone's about to lose money doing X. At large, that was something that people said about buying a house, right? That was always like, you'll never lose money buying a house. And then eventually, obviously, unfortunately, that turned and caused a lot of issues.

• 50:04Auren Hoffman?

  By the way, I've lost money on every house I've ever bought. I have no idea anything about real estate. I've enjoyed the houses immensely though, so.

• 50:12Speaker 01

  When I did it, the best advice someone gave me is don't worry about that. If you need a nice place to live, so think about it that way. So I agree with that. But one of the things is no one's ever lost money buying a sports team, right? Values only go up at some point. That may not be true either. But when people say like, what's your reason for doing it? And they say, well, no one's ever lost money doing this. I'm like, well, that's a sure sign. Someone's lost a lot of money doing that. So it's a red flag and something that I always try to steer away from.

• 50:41Auren Hoffman?

  Well, this has been great. Thank you, Mark Ein, for joining us on World of DAS. I follow you @MarkEin on X. I definitely encourage our listeners to engage you there. This has been super interesting, as I knew it would be, and a ton of fun.

• 50:53Speaker 01

  It's great to be with you, Auren. Thanks. I really enjoy this series you do, and I'm a huge fan of everything you're doing, so it's fun to be with you.

• 51:02Auren Hoffman?

  Thanks for listening. If you haven't already done so, please subscribe to World of DAS wherever you consume your podcasts, YouTube, Apple, Spotify, and more. And please help us get discovered by leaving a review and check out worldofdas.com. That's worldofdas, D-A-A-S, dot com. And of course, connect with me on Twitter, at Auren. That's A-U-R-I-N. Would absolutely love to hear from you.