The dawn of surgery bots + buy a home for $250 (w/ Andromeda & Mogul) | E2313

Syndicate. Something that's worked incredibly well, allowing a group of people to act as one unit to buy an asset. People want to buy into single family rental properties.

0:00

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What is the goal of your investors? They want to get 10, 15% back every year in a dividend or they want to get the appreciation.

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The assets typically yield between 8 to 12% per year for dividend payout. That's dollars that you can withdraw tomorrow.

0:31

How do you make money?

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How do we at Mogul make money, you're saying?

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This week in Startups is brought to you by MongoDB. AI assisted energentic coding is helping you build faster than ever. Start building@mongodb.com AI Cla Innovation takes balance. CLAS, CPAS consultants and wealth advisors can help you get from startup to where you want to end up. Get started now@claconnect.com with you and Northwest registered agent. Get more when you start your business with northwest, in 10 clicks and 10 minutes you can form your company and walk away with a real business identity. Learn more@northwestregisteredagent.com hello and welcome back to Twist. This is Alex. Now, have you read the books in the Expanse series or seen the show? One of my favorite parts of it is whenever they get hurt, they get shot, they get irradiated, whatever it is. They go back to their ship and they put their hand and arm into a little device and it fixes them. I've always thought that was a beautiful vision of the future. No matter what's wrong with you, there's this machine that can put you back together again. Now, we're a long way from that today. If you go into the doctor today, it's person. If you get some surgery done, probably also a person and on down the healthcare chain. But there are companies right now working on building us towards a more robotic and more autonomous healthcare future, including in the realm of surgery. Now that will either delight you or terrify you. But I wanted to learn more about where the technology is today and how quickly it's advancing. So please join me in welcoming to the show. It's Nick Damiano, the CEO and co founder of Andromeda Surgical. Nick, how are you doing?

0:42

Well, great to be here.

2:12

I forgot to ask before we started, are you a science fiction fan?

2:13

I am.

2:16

That intro is perfect for you. Let's let's start by defining where the company is going. You said on LinkedIn that, quote, surgery is currently almost untouched by AI, but in 10 years, AI and autonomy will be ubiquitous. So paint that picture for me. Where are we going to be in a decade? And then I want to go back to where we are now.

2:16

Yeah, I mean, like a lot of labor in the world, survival surgeons are going to be totally transformed by AI in the next decade. Right now, surgery is way behind where it really should be in terms of where we are in terms of tech. So we're somewhere between the, to use a driving analogy, the horse and buggy era and the car era. Now there's not really much autonomy happening at all. Whereas for driving, of course, we have Tesla, Waymo and others deploying autonomous cars on roads now. Now. So we're taking surgery to that point where it's going to be mostly autonomous. Surgeons will still have a job and a role to play, but a lot of it's going to be done by AI.

2:34

So now you guys currently have a system that involves an iPad app, endoscopy, so we have a camera, we can look and see where we are. You work with surgeons, so it's kind of surgeon mediated. And there's also a robotic arm doing some of the work. It might be better for you to explain kind of what the current and Andromeda system is and then what procedures it can kind of currently tackle.

3:13

Yeah, so it is a robot that's controlled by an iPad. The robot is fairly simple. It's an off the shelf arm. We don't want to be a company that builds lots of complex hardware. The exciting part is really in the software. And so what's happening on the iPad is the important part. Okay, we are starting with urology with this procedure called holep. It's for a BPH or enlarged prostate, something that almost every man gets at some point in life. And then we're expanding from there into other urology and then other a lot of other surgical procedures to where this can be a general platform doing most types of surgery eventually.

3:33

If I was thinking about the realm of surgery and you know, as a non surgeon, I'm clearly an expert, I don't know if I would have gone with urology and endoscopy because it involves putting things in sensitive places, which to me seems a little bit terrifying. So just because I'm such a layperson here, why was this the right procedure to pick as kind of the company's wedge point into our future, more autonomous surgical future?

4:10

Yeah. One of the things you wouldn't expect in surgery is that urologists were the first adopters of robots and really one of the most tech forward types of surgeons. So like intuitive with the Da Vinci robot started in urology initially. There are a lot of procedures though, like this whole procedure that are not done with robots now. So Da Vinci covers some of it, but then we're covering basically everything else. In neurology we have these surgeons that love robots that really want new tech to do these other procedures. And this HOLEP procedure specifically is one that's really hard to do. And you've got this huge gap between somebody who's just learning, who takes like five hours and struggles through a procedure, and then the best in the world who's doing it in 30 minutes easily. And so we want to elevate everybody from the novice on up, up to that level of the best surgeon who's just cranking through eight or ten cases in a day with no problem.

4:32

This begs the question of what in the current system is autonomous, what is educational and what is assistive. I'm trying to figure out kind of today what can angiometer bring to a surgeon who hasn't done a hola procedure before to help get them from, oh God, this sounds scary to I can do three or four or eight of these in a day.

5:26

So right now you can do it robotically with the iPad. And so that's like just kind of table stakes for a robot. You can do the procedure using our controls. And then we've built some early autonomy features. One is like Google Maps for the body, where it tracks the landmarks and what you've done in the surgery so far in real time throughout the procedure. So you always have that spatial sense and just know where you are and what you need to do next. And you, and then there's also. We built this auto pivoting where instead of having to worry about all the degrees of freedom of the scope, it controls the pivot point and kind of auto adapts to force to minimize, as you can imagine, in the area that urologists operate, you don't want to have these huge forces applied where it's going to cause all kinds of damage. And so we automatically minimize that, which we think will reduce the, the incidence of things that are damaging in that space. And then we're releasing software every week. So we, we're in the cadaver lab, we're in the clinic doing live cases all the time. And then we're building stuff and every week we release new features and are improving the autonomy level to where it's becoming more and more autonomous and then easier and easier, of course, for the surgeon.

5:46

Yeah. To be clear, I was not trying to be rude by saying what autonomy exists, yet I think you're laying the correct foundation, the right technology to get there. I'm just trying to figure out, kind of like, as we draw this arc forward, where are we starting from? Because currently, as far as I can tell, there's no autonomous surgery being done. So you have to build this. Now, data is an interesting question that I talk to you about with everyone in the broader AI space. And scraping websites does not apply to you, nor does bringing in enterprise B2B workflow data. How do you get the information to train systems about human tissue and surgeries and such? Because I would presume there's a lot less to get to scrape. So how do you get the right stuff to teach these robots to be more autonomous?

6:57

The data is hard to get. That's one of the things in this space that's really challenging. And it becomes a moat for any company that operates in this space. Once you get that data, you can get surgical videos from YouTube. And we've actually talked to a lot of surgeons that are YouTube creators that have shared some of their videos. So we have a huge data set of that type. But then there are other things like the robot, kinematics, the forces, anything else you can pick up in the procedure that is not available from just videos. So we have to get that data ourselves because no one's ever collected that. So then being out in the clinic doing these cases is how we. We get it. Right now, we've done, I think, the only. We've done 45 cases, and it's the only data set of 45 cases that exist. Like, that's 100% of the world's data, and it's really hard for anyone else to get that.

7:40

Yeah. So then, as you want to add procedures, you know, moving away from just holop and urology and endourology, I think, is the phrase that I had to learn while prepping for our chat today. How are you going to have to go out and do that as well? Or are there data sets that exist that you could bring to bear on bringing more autonomy to robotics? Or is this going to be. You guys have to create it every time you want to add collarbone surgery or whatever it is.

8:26

So it is scalable in a few ways where we're not just starting from zero. One thing is that you can break surgery down into A series of surgical tasks. And so once we can make tasks autonomous, those might be repeated in different procedures. And so that's one way we're going to be able to scale faster and faster as we build. And then we can also go back to the tactic of taking videos for different procedures. There's people even building databases of surgical videos. So to at least get started, we can access those or talk to the surgeons we work with, get videos, and build some basic features based on that, and then expand from there.

8:52

Is there a flywheel effect? Like, as you get a bunch of data from other parts of the body? Like, if you get really good at working on livers, does that apply anywhere else? Or is the body sufficiently specialized that what works for kidneys in terms of pressure or sensitivity or vision or whatever does not apply to. I'm going to name another thing. A gallbladder.

9:26

Yeah. Because the set of surgical tasks people do now is finite and pretty small, Then, yes, you can generalize across procedures. If you do, say, a prostate enucleation versus an I enucleation, there are similarities to that. I mean, so in different parts of the body, you can repeat some of the stuff you built. And that's how we're planning to scale from maybe one or two new procedures a year now, then up to four or five, hopefully 10 someday.

9:43

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10:10

You just mentioned that there's kind of a finite number of surgeries that we do. That's a very interesting comment to me, because when I think about it, surgery does seem to be relatively broad.

11:04

But.

11:13

But it sounds like it's actually more narrow and more systematized than I might've thought it is.

11:13

So there's a finite number of surgeries, and the world in general is more bounded than, for example, driving. There are just fewer edge cases. Not that there aren't edge cases. Surgery is. The body is more variable than you would think, but it's a lot less complex than the entire outside world that cars are operating in. The data is more scarce, so you don't have as much training data to go on. But then the world is less complex. And most importantly, you don't have these other adversarial actors like other cars or pedestrians. You have to model their behavior. When you're in surgery, there's nobody else working against you. Fortunately, when you're in the human body.

11:18

No, that makes a lot of sense. I mean, because the body can't fight back. Because I presume everyone who's getting the surgery done in this way is unconscious. So they're not even moving. They're just pretty much static. No, I appreciate that. So when you decided to build the company, was it kind of made possible by the fact that there are now off the shelf robotic arms that are sufficiently finely controlled and workable that you can build this? Is that a new thing in the market?

11:53

That is new. There's this arm from Kuka that we use right now. They're a German company that makes robot arms for different use cases. And there weren't that many until very recently. You could use off the shelf. We could have possibly built one, though. It would have been a lot more complexity for us to take on, I think, also for the world being ready for this. There are two factors that had to exist before this for people to really embrace this concept. And one was surgical robots in general, mostly DaVinci from Intuitive and then autonomous driving, because now people are accepting that cars can drive themselves with Waymo and Tesla and so on. So those two things coexisting make the world a lot more receptive to what we're building now.

12:20

Why use off the shelf tools versus something that you designed for your own, your own use? Now, I love the idea of getting to use whatever people have around loosely, but to me, it sounds like if you're building something for a robot, it might have a different shape, a different sharpness than something that a human might use. I'm curious about that.

12:59

I mean, there are great tools for surgery already, and we want to focus on what we are, what we're good at as a company, which is building this autonomy layer. And so we, while it does help to have a robot, to have some physical incarnation where you can actually control the whole autonomy loop, it doesn't really help to build custom tools. So it's a lot faster for us to be able to focus on the software and not have to build a tool for every surgery that's done. The companies that choose that game, which is basically every other robotics company that exists so far, will find themselves moving a lot slower and a lot more inertia than what we have.

13:19

Yeah, you've really kind of excised all the things that you don't need to do in house, focused on data collection, software improvements through an iPad mediator. And that does seem to be a really fast way to build a better system. But that does kind of bring us into the what happens when it works and how doctors fit into this. Now, on one hand, every surgeon that I know is completely overloaded, exhausted, burned down, about to fall over. On the other hand, they're quite highly paid. And so there's kind of a bit of a trade off there. But to me, the idea of letting surgeons do more work more quickly, you know, with the help of autonomous tools, makes a lot of sense. On your website, you guys talk about this being a SUE surgeon, which I really appreciated that. That's a good framing. But down the road in time, maybe not 10 years, maybe it's 15, I can also see this technology improving to the point to which it can handle routine stuff like taking out my appendix if it's going to explode, for example. And so how do, how do doctors and surgeons feel about being accelerated and then possibly down the road made slightly archaic or anachronistic in certain procedures?

13:56

I think, like a lot of areas that AI is expanding into, that the job of a surgeon will change fundamentally, but it's not necessarily going to go away. I mean, there may be a point in the future that all of our jobs go away and it's all just AI. And we'll have to learn to reckon with that when the time comes. But for this one, I think it's going to be just a surgeon seeing their job in a different way than way before. It becomes something that totally replaces surgeons. So what we envision in the long term is a surgeon sitting at kind of an air traffic control center where there's a lot of different procedures happening. They can orchestrate that at a high level, but not have to do all the tedious, mundane tasks all the time. So Maybe you're overseeing 10 surgeries instead of one right now, and your Job in each surgery is different. It's more high level and less just routine, low level stuff than it is now. And most surgeons we found are really into that. The people, they, they want things to be autonomous. They want to have these unpleasant, mundane tasks taken away up to the point that they're totally cut out and don't get paid anymore. And that's a line we don't really worry about crossing.

14:55

Well, I think we're far enough away from that that that's going to be a great problem to solve once we get there. But it does sound like, as we've seen, software development get automated to some degree by AI in a very condensed time period. This is going to be similar. Ish, but over a longer time period. For example, now a lot of developers orchestrate or observe and guide their agents versus writing the code themselves. This sounds analogous to that. Although I do think it's going to take a longer time to get the data. We need to tackle more surgeries than it is to get more coding data which is indexable, available and online. How could you guys go faster?

16:03

That's the question we ask ourselves every day. So we were really, besides, I guess the goal of the company to just get to this big autonomous surgery vision, we're really focused on being the fastest iterating company in the medical world. So we want to take the iteration cycle down from what it is now. For most companies it's years down to a month or weeks. And we've done that in the clinic so far. We've been basically doing cases, then building new stuff, testing on the bench cadavers, then back into cases in less than a month. And it's been shocking to the surgeons that have seen that there are way better features this month than it were last month. It's not, that's not the way the

16:37

medical world has ever gone. That's not medtech. That's the inverse of how medical technology has usually expanded. So of course they're blown away. They've never been treated like a first party customer before. They've always been treated as the thing that gets approved after the insurance company says yes. So yeah, I bet you're popular.

17:19

Yeah, it's really just focus and automation that are the key principles behind that. When I talk about not making every device for surgery, like anything that goes into the patient and just looking at every step of the process and asking ourselves how can we make this faster? How can we automate parts of this? That's the key. And I think most companies don't do that in medtech especially, people just are not into automation. They're following an old playbook that is usually quite slow and it's really hard to scale.

17:35

Well, that means you can hit them like a hurricane then because they're not even playing the same game. So that's quite nice. Now going back to the car analogy, self driving as kind of a thing to be figured out, that's going to help people get to understand this one thing that self driving companies do. And we've talked to Wabi and Wave and just everybody, they're very interested in world models and they have tinkered with synthetic data. And I'm just curious if those two things have any play in your realm or if those are things that don't work quite as well inside of dense biological systems.

18:04

You could describe it as a world model in a way. So I think that concept, and I've seen a few different ways to define that concept, but I think that is basically what we're building in terms of synthetic data. We're open minded to that. We haven't used it at all yet. There are definitely drawbacks to using that and there's ways that could go wrong and if we were to go down that route. So for now we've been using an approach that's more, I guess more down the middle. And not taking too many liberties in that regard though, we will try things out and see if that's something that produces good results as we move and make this more autonomous. Go to more procedures and look for other ways to scale. Maybe synthetic data generation capabilities get better and better to where we do want to use those. One thing we have to just think about as we do this is that AI is advancing really fast and we want to be able to ride that wave and stay up with whatever the

18:32

latest capabilities are literally stealing my next question. So Nick, I'm curious about how advances in general AI technology is improving or aiding the company because it seems like in the era of Fable we made a lot of progress since GPT 4.5. So tell me.

19:29

I mean we use AI for a lot of our operations. We have to make sure that like with things like, like with coding that doesn't introduce non deterministic bugs that, that end up causing big problems. We have to put a few guardrails on that and make sure that we're not overusing it. Yeah, definitely. For all the documentation processes that bog down companies usually. And AI is a core part of everything that we do and in that regard. So in every process that we have we look to use some kind of LLM or some AI to improve the process? So it's really been about optimization and then yeah, for all the paperwork, it's just massive in terms of how much effort is saved.

19:42

I was more thinking about like as we consider the idea of a sue surgeon again using that phrase from the website, how much does a increase in generalized AI intelligence help you get to that point? Like, are the models smart enough today to accomplish your goals or do you still hope for some step functions and generalized intelligence you can bring to bear on your specific problem set that will help you resolve other use cases more quickly?

20:21

One of the themes we talk about over and over again on this week in startups is making sure you do your chores. I'm no expert on these things. I have some experience. Stephen Estes from CLA is an expert. Let's talk about being cash efficient. Tell us about efficiency and what you see in the in the top tier startups in your practice.

20:46

We're seeing kind of an interesting trend out there where companies aren't needing to raise quite as much as they had in the past. You really have to be careful as a founder to only take on as much money as you really need. You got to do the forecast and you've got to do the modeling and you got it dialed in and get it right. Otherwise you're going to end up either not raising enough capital to get to where you're going and you're going to have to go get venture debt or go back, have an extender to the round, or you're going to give up too much of the company because you just didn't recognize how much money you actually needed.

21:06

Yeah, very important to get this stuff right folks. And that's really a bummer when startups don't do things in a button up. I always have a great partner, a good partner to have on this adventure while things change. My friend Stephen over at cla. So if you want a trusted advisor by your side who will navigate you through taxes, accounting and everything in between you, it's time to take action. Visit claconnect.com with you and don't forget to drop a mention that your boy Jake Al sent you. That's claconnect.com with you. Start today.

21:35

I think it would, it would in the future that if you could have a better semantic understanding of what's happening in surgery. I don't think it's quite there yet to be as reliable as we want. We have to be careful in the beginning to not have things that are going to hallucinate in weird ways. So we're not using as much generative AI in the the first version of this product, though that is a thing that I think there's huge potential as it gets better and better, especially with a surgeon in the loop where they can have control over what's happening and prevent things from getting out of hand, that we can introduce that more and more. For now though, it is more of the kinds of AI machine learning that's being used for autonomous vehicles. That's been used in Tesla and Waymo.

22:07

Okay, now two questions more. One about capital. What about commercialization? So when I think about robotics, I think about catastrophic levels of expense. Nothing but love to everyone building robots. It just takes a lot of money and time. It seems you guys are using off the shelf technology for the arms, so I presume that lowers your overall capital needs. But does the company have access to the funding that it needs? And how interested is the venture community in backing you?

22:46

We. Well, we're about to announce a round that we raised recently that will come very soon. So stay tuned for more on that.

23:08

Do you want to give us a hint? Is it tens of millions? Is it hundreds of millions?

23:15

It's tens.

23:20

There we go. It's between zero and 99 million, everybody. Breaking news.

23:20

Yeah, so. So we've, I mean we've been both very capital and time efficient so far. We were the fastest robot from zero to launch in three years and we only spent about 15 million total in getting there, whereas the norm is hundreds of millions. Yeah, and that's because we don't go crazy on hardware. We've moved fast. Time is really expensive and just automating as much as possible that we don't have to do all these manual tasks that add up to a lot of expense normally.

23:24

No, that's. That makes a lot of sense to me. And now in terms of making quick software iterations, I presume that means you have a relatively advanced fleet of developers. Are there any like medical specific people you have to bring into the company to make this function? And if so, what? Who are you hiring from the health world and bringing them into technology?

23:49

One thing unique about us versus other companies that are in the medical space is a lot of the team, or more than half of the team is not from, has never worked in any health care at all. And a lot of them came from spaces like autonomous vehicles. My, my co founder built the first autonomous truck that ever drove on a freeway before this. And we've hired A lot of his former employees to, to this company. Now we do have, we have looked at companies like Neuralink to hire some of the people that have more medical experience. We found that's a company that really aligns well in terms of, of culture with us. So it's a much more deep tech and very unconventional team compared to what you'd see at like intuitive.

24:09

What if, what if, what if? Hear me out. We use the Andromeda surgical stack to do BCI insertion en masse. I think that would, we're not going

24:47

for that now, but it could, could be a thing.

24:57

Well, after you get done fixing my prostate, can you just fix my brain? Like, I don't know, man. Like I, that's a, that's what I would do next if I was you, because that's, that's super exciting. And people would also just rain capital down on you. Okay, I'm kidding. In terms of commercialization, you mentioned you've done several dozen procedures. How many do you think you'll have done by the end of the year? And when does this become something that you can do domestically with whatever the proper clearance is to actually charge for it in a non academic or research way?

24:59

We have a lot of Lois signed or people that are ready to pay for it once we're able to deploy it. Of course, we are subject to regulations and, and we're only clear to be on the market in New Zealand right now, though we're close in a few other countries as well. And so, yeah, we are at the point that we're ready to launch the product.

25:29

Is the regulatory environment in the United States conducive to this technology being allowed to function, or are we behind the curve a bit in terms of how welcoming we are to robotics, automation? In the realm of surgery, there's nothing

25:49

really that probably prevents this from being deployed. I mean, the same risk principles apply for this as they do for any product that's FDA regulated. So as long as we set up our risk analysis, our quality systems the right way, then nothing prevents this from happening. The fact that surgeons are in the loop really helps that I think if you're going to deploy something that's totally autonomous, that you press a button and then walk out of the room, that would be a lot more challenging. We need to take this in the right steps, though. One thing with FDA is that what really matters is the increment over either what they've seen before or what you last submitted. So we want to make those increments really relatively small. But then Also come back frequently with new updates so that every little bite they have to take is not that big. And then eventually that adds up to autonomous surgery across a huge range of procedures.

26:01

Huge range of procedures. And also kind of to wrap up here, I'm curious about a huge swath of the world because one thing that I'm really hopeful when it comes to companies that are working in the medical technology space and are making things faster, cheaper, easier and so forth, is that they're going to be able to take these technologies around the world to places that don't have access to kind of already modern healthcare and empower doctors to do a lot more. So is there a future when there's your setup in a clinic somewhere and maybe a doctor can remote into it from a place where they're qualified and trained it and allow them to do a lot of surgeries, maybe via Starlink where they couldn't normally get to and this people wouldn't have access to it?

26:51

Definitely. That's one of the things I think is the most exciting about the long term potential of this is that anywhere you want to be delivering healthcare, any facility around the world, even on other planets, eventually then you could have this in the operating room and it's not that expensive in terms of the value that it provides. And this could be the hub for all surgery in that center. So whether it's here in at UCSF or in some remote village in a poor country, then you could have this installed there and then do any procedure with any surgeon anywhere overseeing it. And so you give everybody access to the best possible healthcare. Like I mentioned earlier, there's this huge gap between one surgeon and the next in surgical skills. So we could totally condense that. So everybody gets the, the best surgeon in the world every time.

27:28

Oh, all right. See that gives me so much optimism for the future. I feel like when we think about AI and autonomy, everyone's so focused on losing their job that involves clicking buttons, when in reality the best and most important story is we're going to make people's lives quite a lot better. Nick, thanks for coming on. Where can people find the company online and is there a job that you're looking to hire that you'd love to shout out into our audience?

28:20

Yeah, our website, andromeda surgical.com we're on LinkedIn and X and all other platforms and we are hiring so we have a lot of technical roles open both software, hardware, robotic controls and then looking for people in launching the product and clinical as well. So definitely hiring, looking for People that have this ambitious mindset to build something that could be really defying the future of surgery. And so anybody who wants to take on a really hard project that could have big impact, then reach out.

28:40

All right, well, Nick, I love to. When this is approved for use in the United States, I can't wait to see how quickly it expands. Thanks for coming on the show. We'll talk to you in six or nine months.

29:12

Thanks, Alex. Thanks for having me.

29:21

All right, everybody, next up on today's Twist, we're going to talk about a really big trend which is tokenization and syndicates. We've been talking about tokenization for a decade. It's incredibly annoying to talk to crypto people and fractional ownership and blockchain and it's immutable and none of this has ever really worked. And it's a big question mark. 10 plus years later then on the other side you have syndicates, something that's worked incredibly well. Angellist pioneered them. We got involved with the syndicate.com creating an SPV allowing a group of people to act as one unit to buy an asset. Well, today on the program we have Alex Blackwood. He is the founder and CEO of Mogul M O G U L. And what he's doing is he's saying, hey, people want to buy into single family rental properties, right? If you are an investor and you've got a portfolio, you want to maybe build some rental, there's plenty of reasons to do that and we'll hear about that today. But you maybe you buy one or two of these units as an affluent person and then you've got a number of issues, you're only, you're not diversified, et cetera. So what if more people could invest and they could invest as little as $250 similar to with our syndicate that invests in startups. Our minimum on Most deals is 5k or 10k Most of the time when you invest in a startup the minimum is 50k to 250k for a company to take you seriously. And if you get to series A or B, you know, they probably are looking for seven figures. Welcome to the program, Alex.

29:22

Thanks so much for having me. I really appreciate being on.

30:59

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31:01

Yeah, of course. And so you have hit the nail on the head, right? The idea is buying shares in a single family rental home. So myself and co founder, we were both at Goldman Sachs in their real estate private equity group where my co founder grew Goldman single family rental platform from zero to a billion in under 12 months with three to four individuals. So we took that approach of diligence, of vetting, structuring the deals and actually gave access to everyone to invest. And so when you're buying into a single family rental home, it's fully vetted, fully diligence on our platform, fully structured, and as a result you get all the direct benefits of it, including dividends from rental income on a monthly basis, appreciation, we track it in real time and then tax benefits at year end. And so the idea behind it is as for the numbers, we've done 130 properties and within those properties we have about 600 plus units as we see on the site there. And these properties typically range anywhere from 500k all the way up to 2 1/2 million dollars. We've done typically when you're investing, yes, it's a $250 minimum. However, people on average are investing 15, 20K plus into these deals. So you're typically looking at anywhere from 20 to 80 investors per deal on average.

32:00

Got it. And so when we look at one of these homes, you know, they tend to be 250k, 500k. And so if I were to 5k, I'm 1%, a 1% owner, but the managing these is incredibly hard. So walk us through that piece of the puzzle. How does that work? Who manages it, who makes sure that it's generating revenue? And how do you not get upside down and have to go to your investors and say, hey, this thing's not renting, hey, there was a flood, hey, we've Got an insurance payment. You know, we don't have to deal with those issues when we're doing a startup SPV. We do have to deal with legal K1s every year. So we have our own set of issues that we might have to manage, but we certainly don't have to manage somebody like tearing the place down or a flood. So walk us through the management of each property.

33:20

Yeah, I mean, so that's part of the value add for the end investors. It's completely headache free. And so real estate as we know is the world's largest wealth generator. There's that old quote from Carnegie. 90% of millionaires became such three through real estate investing. However, the headaches attributed to real estate are tremendous. Right. You've all heard the horror stories of the 3am tenant coming to you because the sink is burst. Now with us, we work with direct boots on the ground property managers to actually operate this property. And so they do a few different things for us. If you walk from kind of top line down to bottom line on the top line from the revenue side, they're the ones making sure these things are rented out appropriately. We do algorithmic pricing to make sure that they're attractive across Airbnb pad split and on the long term rental side to make sure that we're optimizing for revenue, really dynamic pricing there. Then all the way walking it down to the bottom of the line. We deal with the utilities, we deal with the property manager who is working with any tenant that might have an issue or any sink that might burst. Now, for you as an end investor, anything below $1,000, the property manager takes care of it. You don't have to deal with it at all. Anything above $1,000, it actually triggers a governance vote. And so the idea being, saying listen, sing first hundred dollars, you don't deal with it. H Vac versus six, seven K. We've got these two quotes for you. We recommend this quote or we can get a third option. You come in, you vote and also you can kind of assign the vote to the property manager to decide. Now as for the actual kind of management on the go forward and all of that, you are really hands off as it relates to the property itself. So that's kind of the way that it works. Oh, and as for the capitalization, Right. And so thinking about mitigating against that major capex burden so that H vac burst at 7k, we actually don't ask for any additional dollars from the end investor. As part of each individual raise, we capitalize a Maintenance and a vacancy reserve. Maintenance reserve. We basically take into account the inventory of a home. Say, okay, the H vac is on year 6 of 10. We know that in the next 5 to 7 years we most likely will have to buy a new H Vac system. As a result, we capitalize that adequately enough in the maintenance reserve and then vacancy reserve, we actually capitalize a 12 month reserve so that asset could sit completely vacant for up to 12 months and we would never call another dollar in the door.

34:09

And so what is, what is the goal of your investors? They want to get 10, 15% back every year in a dividend or they want to get the appreciation and they're pushing you to sell this in five years and flip it. What's the goal of the investors and how do you communicate that to them? Because they're two separate goals.

36:49

Yeah, yeah. So on the platform itself, we like to say that we give as much if not more information than we would have needed during our time in Goldman's investment committee to make a decision on that asset in a more, much more digestible format. So the assets range from a mix of higher on the rental income and less on the appreciation. Maybe they're a little bit more stable on cash flow. Maybe they're more on the appreciation and less on the cash flow. All things told, the assets typically yield between 8 to 12% per year for dividend payout. That's dollars that you can withdraw tomorrow if you so choose. And so when you do that, that's the dividend payout, it's paid out monthly to you, you can withdraw it at any time. The appreciation too, obviously it's around 3 to 4%. But because we lever up each purchase, we buy it with a mortgage in place, it actually results to another 4 to 8% on top of it. So all things told, it's between 15 to 20%. Typically we underwrite to a 12% IRR on bear case scenarios to make sure it's completely conservative. We convey that to the end investor. So as you can see on the site, everything is completely for right, as transparent as possible. You know exactly what you're getting to. And the last piece that we always love to talk about, we like to joke that the IRS wrote the tax code to incentivize two things, procreation and homeownership. We can't help with the first, but we sure as hell can help with that second. And these assets, typically even though you're getting 8 to 12% in rental income, it actually is a passive loss for income Reporting purposes. So no taxes on it.

37:07

Wow. So explain that. I'm not like Donald Trump or like these real estate moguls. I know the whole system is rigged for real estate people. What does it mean in terms of the tax break? That it's losing money.

38:41

Even though the asset is appreciating in value, the structural component of the asset is depreciating.

38:52

Right.

38:58

Obviously wear and tear throughout the property. So as a result, the IRS basically came up with this incentive program called depreciation. And so even it's considered a ghost expense, meaning it's not going to directly impact your cash flow. However, you can basically take that asset's value, divide it up over a set number of periods and put that up against any rental income that you might receive from the property. And so it's almost a deduction after the fact that. So even though you're generating that 8 to 12% yield, the depreciation should cover it up and then some. Not to mention any other amortized major capital expenditure. So any other additional improvement that was done to the property.

38:58

How do you make money?

39:39

How do we at mogul make money, you're saying? So we charge a platform fee up front. It's 5% charge as percentage of purchase price amortize. You can think of it as a similar drag on return as a 2 and 20 structure of any alternative asset manager. It actually is less so because that 5% over a five year period, 1% per year, obviously it's upfront and time value of money on the return is something else. There are other two revenue streams that we have in addition to it. One is we're starting to really enact on our product roadmap and become all things up and down the supply pipeline of real estate. We're actually a lot of times not working with a broker on the buy side. And so as a result we have an additional one and a half percent that is paid to us by the seller at closing does not impact end investors, but just an incentive for us to, to keep these properties coming. So the first revenue stream, 5% up front on the purchase price, that is incurred by the customer. The 2% or 1 and a half to 2% is incurred by the seller, so it does not incur anything to our customer. And the last one is interest on reserves. So those maintenance and vacancy reserves, as a result, we do scrape interest on those. Typically it's about a 2.75 effective rate there. Yeah.

39:40

Let's say you had $100 million portfolio. Now I think you might, if you had $100 million portfolio that you've got people to invest in. You get that 5% and you make 5 million. And then you have that one and a half percent that you got as a kickback for being the, the buyer, and that's paid by the seller of the home. So you're sitting on six and a half million dollars. It's not anything to write home about, but it's not nothing. You are essentially getting paid that fee. It's a decent fee. And then you have all these other services where you can make a little money. So that nets up, from what I'm understanding or feels like, that maybe you can make 10% over the five years on the life of the home. Am I a ballpark correct?

40:56

Yeah. So we're actually entering into additional revenue streams as we speak. So it'll actually be north of that. And the idea being we have a title insurance joint venture that's starting by end of the quarter here that'll add an additional, call it 9, 10, 12K per asset, which is going to be incredible. And then we also are going into other verticals like property insurance and year one premiums from that property. We can underwrite the property better, we have better sources of data for the property, and as a result of it, we can lower the property insurance, increase cash flow to our end investors, all while generating roughly 4 to 5 million dollars in recurring revenue, year one.

41:38

So if somebody gets divorced or somebody passes away and they have an inheritance, they've got to get out of this. They're in year one. They, they invested $50,000 with you. It's year two now. How can they get their money out? Is there a marketplace to sell it? Can you buy it back for them at a discount or something? How do you deal with redemption, early redemptions? Because we have this happen, you know, in startup land. We will get a notification from somebody, hey, I'm getting divorced. I put a quarter million dollars into startups and we have to figure out how to put two people on the cap table or they'll ask us, hey, will you buy it back for me? 20 cents on the dollar. And we're like, well, we really don't have the ability to do that. Sometimes I look at it as the GP and I'm like, maybe I'll buy it from you. But it's just, it's kind of a hard situation. So how do you deal with the early redemption issue, if at all?

42:16

So there are two prongs to that. Number one, today it's a five to seven Year typical period. And we're very transparent with the end investor. And they think of this as a very high yielding savings account, almost with a high appreciation on the back end. So five to seven years up front. Now the idea is we are launching a secondary market target of next year. And with that secondary market, we're looking to do what's never been done before, which is a fully liquid secondary market. So I worked with market makers during my time at GS in their investment banking division, got a chance to see how they do it firsthand, was amazed at just how efficient these markets are. Typically when you think of the New York Stock Exchange and you're buying into and out of, let's say Tesla, you might sell out a Tesla and the person on the other end of the transaction isn't actually a person at all, it's an institution. That institution is buying it, repackaging it, maybe selling as part of an S&P 500 ETF or maybe just selling it to another individual investor. They're bearing that, what's called overnight risk. So as a result, day one, we're actually going to come in and work as that market maker. And so the idea being maybe we get some sort of bid ask spread in there, like a little bit of a scrape on there. And the idea being that if you want to sell, you could sell out tomorrow. We come in, we provide you liquidity, we get a minor bid ask spread. And because we are generating rental income that yields between 8 to 12% in a year that would actually cover any debt service that we have to actually liquidate out that asset for the end investor. So as a result, day one, we will act as market maker. But day two is really where it gets interesting with a number of different products, different risk reward profiles that make it truly.

43:05

How do you pick where to buy the homes? This is like a very dynamic market. You know, in Austin we have people, they don't seem to stop building, they just build, build, build. You want to build something, they're just like yolo, go for it, Houston, same thing. It's your land, build what you want. And rents and home prices have gone down for four years in a row, I think, which is awesome for my team members. And when you start a company here, I highly recommend everybody move to Austin. Your staff will love you, your team members will love you because their rent will go down 2/3 if you're living in a major city or you'll be able to buy your first home. Because first homes here are 250k to a million dollars just 30 minutes outside the city. So it's a pretty great deal. How do you think about where to buy and what to buy?

44:49

Yeah, so we come up with the initial market thesis, right? Saying net new supply on the horizon is not enough to meet demand. So for instance, in Austin you did have a run up in supply that happened from 2020 to 2022 in that range, and then prices plummeted by about 25%. But the net new demand on the horizon for Austin is looking incredibly attractive, especially given the fact that a lot of developers are scared out of that area. So that's exactly kind of the thought process behind it is, is that supply on the horizon enough to meet demand? Is the rent as percentage of price a high enough dislocation to generate an attractive yield to our end investors? So is the market thesis there? Is the operating model there, and then is, do these assets operate within our typical target price range? From there we come up with that initial market thesis, we go into it, we find infrastructure players, we incentivize them, and an outbound motion that starts at day one becomes an inbound motion where assets are coming to us, meeting our buy box criteria, and then we cycle through the full diligence process around it.

45:33

All right, if you want to get more information, go to Mogul Club. Really interesting startup. I'm fascinated by it. I'm fascinated by any group of syndicates buying assets together and scaling that. And we wish you great success.

46:37

Thanks so much. Appreciate you, Jason.

46:51