Perry Zheng is the founder and CEO of Cash Flow Portal, a real estate syndication software and investor portal. He got his start as a software engineer for Amazon and Twitter, then became an engineering manager for Lyft. He began syndicating during this time, which inspired him to launch Cash Flow Portal. In this episode, Perry discusses why he created the software, the factors that have contributed to its success so far, and his vision for the future of Cash Flow Portal.
During Perry’s first syndication deal in 2019, he relied heavily on DocuSign and spreadsheets. He decided to make his life easier by creating his own software, and he hired a small team of engineers to help. They would allow beta users — syndicators Perry knew — to try the software out for free. By 2021, Cash Flow Portal had gone public.
Designed to help syndicators do their first deals, Cash Flow Portal is an investor portal and marketplace combined. The marketplace aspect allows passive investors to find sponsors, view their track record, and initiate a connection.
Cash Flow Portal was accepted by Y Combinator, a Silicon Valley accelerator program for startups. “The acceptance rate is about 2%,” Perry says. “Once you get into the program, on average, about 2% or 4% of those companies go on to become billion-dollar companies.” Graduating from the program was a humbling experience for Perry. “It was exactly where I needed to be,” he says, “and I learned a lot.”
Before getting into YC, Perry and his team had raised $4M for Cash Flow Portal. After graduating, they raised an additional million. Today, he says Cash Flow Portal is growing by 50% month over month, with 300 syndicators and 3,000 investors engaging on the platform.
A year ago, credible syndicators and reputable industry leaders told Perry that syndicators don’t want their investors to be poached, and if Cash Flow Portal became a marketplace, his customers would vanish. However, Perry envisioned a transparent platform that LPs could trust to help them make educated investment decisions. “It was not easy to make an investor portal to also be a marketplace,” Perry says. However, a year later, he says the marketplace has been very well-received.
Today, he is working on expanding the Cash Flow brand to include Cash Flow Underwriting and Cash Flow KPIs within the next two to three years, in addition to a property management software, Cash Flow Management.
Perry Zheng | Real Estate Background
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TRANSCRIPT
Ash Patel: Hello Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I'm Ash Patel and I'm with today's guest, Perry Zheng. Perry is joining us from Seattle, Washington. He is the founder and CEO of Cash Flow Portal, a real estate syndication software and investor portal founded in April of 2020. Perry is a GP on 830 units and an LP on over 2,000 units. Perry, thank you so much for joining us and how are you today?
Perry Zheng: I'm doing well. Thank you for having me here.
Ash Patel: Thanks for being here, Perry. Hey, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
Perry Zheng: Absolutely. My name is Perry Zheng, founder and CEO of Cash Flow Portal. I am located in Seattle. I started my career as a software engineer at Amazon and Twitter, then became an engineering manager at Lyft. While working, I started syndicating, and right now, I have 850 units as GP. During that process, I noticed how painful it is to send DocuSign, send wire instructions, and Renko investors, so I started a software company. Now, two years later, we graduated from Y Combinator, one of the incubators in Silicon Valley, and we are off to the races.
Ash Patel: Perry, when you were in tech in Silicon Valley, were a lot of people syndicating, or were you an outlier?
Perry Zheng: Good question. I am an outlier. I know I am an outlier, because when I go to these mentorship groups and conferences, I have yet been able to find a single software engineer, or staff software engineer, or senior software engineer from Google, Amazon, or Facebook. I have not run into a single person like that. I know these are my friends with who I got dinner and lunch all the time, and they don't go at all to these conferences. I think the syndication community is a very close-knit community, and is an awesome community. But in the end, it's a small bubble compared to the real world.
Ash Patel: Why are you an outlier? Is it they're just working too many hours, they have no interest in it, or they're making plenty of money and don't care about being financially independent any sooner than they're going to be anyway?
Perry Zheng: Good question. That might explain why I want to get into it. I have this very competitive edge, where in the tech world, I know I'm not the best engineer. I'm a good engineer, but I don't think I'm like the top 1% or 0.1%. I always make the claim that within technology, I'm one of the best in real estate. When I go to real estate, I say I'm one of the best in technology, and that stems from my need to be achievement-oriented. So to your question, why are my peers not that invested in real estate, or doing real estate syndications.
That being said, their profiles are they're educated, they're smart, they're highly intelligent, they're very busy, they are experts in their craft. They have gone through many years of schooling, and they're critical thinkers. They're not exposed to it, because they are the equivalent of baseball Little League or major-league players, where they start off their career getting paid a lot, right out of college, then they peak in their early 30s. Then they start seeing the writing on the wall, that they are competing against these fresh grads right out of college, that they can see by the time they are in their 40s or 50s, they may not be able to compete on the engineering level, unless they become a manager. That's when they start feeling that pain. But by then, they have a family, they cannot travel. By then, they also have enough savings, because they made it in tech. So right now, they are always in this capital preservation mode. They are looking, as far as I know, for something that's accessible, that's something that's transparent and trustworthy online. It's a combination of being busy and they don't need the alternative.
Ash Patel: Yeah. That's a great insight. How many syndications did you do before you realized, "What a cantankerous process... I can make this better."
Perry Zheng: The first deal, we used pen and paper. By that, I mean DocuSign. We raised $4.3 million. I raise $3.5 million out of that $4.3 million. We send some of the DocuSign to our investors, they signed it, they sent it back, and I countersigned, I put their investment in a spreadsheet; if they need to change their address, I go back to my spreadsheet and change it. This was back in 2019. At that time, there were only a couple of investor portals out there.
2020, we did 408 units and we use a very established syndication software. 2021, I used my own software for the raise. People who used both software said mine is just as good, if not better; actually much better. They didn't know that I owned the company. They just use it as an investment portal.
So on the very first deal, I realized how painful it is. I think that at that time, my fear of going into this industry is that it was crowded; people have done it. I don't know how big syndication will become. That's how I used my insight that these mentorship groups and conferences are a small bubble compared to the world as an impetus to alleviate that fear.
Ash Patel: Yeah. That's incredible. When you started developing the Cash Flow Portal, was it just to make your life easier? Or did you know you were going to market the software?
Perry Zheng: I only wanted to make my life easier. I started moonlighting, while being an engineer manager. The only goal I had was to make a family lifestyle business out of it. I got permission to work on the product, I hired a small team of five engineers. I could [unintelligible 00:08:00] but I decided that I will continue to work on my W-2 job. I did that for a year and a half. The only goal was to ship a good product. And we didn't do any marketing, we didn't do any sales. We just continued to iterate on the product and we showed it to our beta users. I was lucky, because I know a lot of syndicators. We let them try it out for free, and then a year and a half later, we launched to the public.
Ash Patel: Perry, I'm going to push you. Have you found really good property management software, or are you in the process of making your own, too?
Perry Zheng: Great question. Cash Flow Portal - Cash Flow is the brand, and Portal is the feature. We will have Cash Flow underwriting, Cash Flow KPIs, and two or three years from now we will have Cash Flow Management, that competes with the property management softwares out there. Now, why is that useful? That's useful because I'm a syndicator, right now I go to the property management software, download the KPIs, and then put it into a spreadsheet; or I have the on-site manager do it.
It will be so nice if the KPIs are automatically filled out from the property management software. Then at the end of the month it automatically populates the charts. So by the time I get to my investor monthly update, the charts are there, I add a paragraph at the beginning, I add a paragraph at the end, and I hit Send. That's the future that we are imagining. I know because I'm a syndicator, so I know that pain point. It might take us a couple of years to get there.
Ash Patel: So from a selfish standpoint, I'm going to tell you, I invest in non-residential assets; so multifamily, warehouse, industrial, and office. Would you also incorporate things like triple net leases, CAM charges? And would you incorporate that software so people like us can use it as well?
Perry Zheng: Absolutely. Yeah.
Ash Patel: Alright, I'll be a beta tester.
Perry Zheng: Cool. Sounds good.
Ash Patel: Awesome. Here's a question. You have to spend a tremendous amount of time developing the software; does that take away from your business as a syndicator?
Perry Zheng: Great question. This may sound bad, but I actually don't care too much about my real estate syndication business. We have amazing results; like 30% annualized return plus. And because of that track record, we can raise money quite easily.
When I started the software, some interpretation is to use the software as a facade to help you raise more money. That's not true; in fact, it's the other way around. It was pretty easy for me to raise money, because my network is all Silicon Valley luminaries who are directors, they trust me. It's basically my management chain, plus a bunch of co-workers I used to work with.
I want to bring that kind of network to the syndication work. So that's point number one, is I have had success raising money on my own. Point number two is software is judged differently from the personal syndications. I did the math; if the software company does well, personally, it's a lot higher financial reward than syndicating one deal at a time. And software is infinitely scalable, that's number two.
Ash Patel: Sorry. For real estate people out there, that means it's higher than a 2X multiple. [laughs] It's an exponential multiple.
Perry Zheng: Yes, I'm talking about 200, 300. And then number three - I have more product-founder fit with the software than with syndications. Syndications have always been a hobby for me. I do one deal a year, just how big the deal is. Or maybe one deal every nine months. So far, it's been one deal a year. The startup is also a lot more challenging, fun, and intellectually stimulating for me, personally. Not to say that -- I also learn a lot from personal syndications. Right now, I spend 95%-97% of my time on my startup and 3% of my time on syndication.
Ash Patel: Yeah. That makes a lot of sense. Once a syndication is up and running, you've got a team that manages it; there's nothing you can do every day to make things better. Whereas your software, it's more than 24 hours in a day is what you could put into it.
I want to come back to something that you said. You said it was very easy for you to raise money. I think you're downplaying what you did, because - granted, your colleagues were high net worth individuals, but that also means they're probably getting pitched left and right on different alternative investments. So how did you penetrate that? Because friends and colleagues only go so far? When you're raising money, you still have to educate them and prove to them why they should put their money in with you. What challenges did you face in doing that?
Perry Zheng: We just graduated from YC. YC gave me a very good lesson, which I think helps with this question. They say, "If you have less than 1 million potential customers, you do sales instead of marketing." So what I did on my first deal is I almost did no marketing at all. I don't even have the Mailchimp set up on my first deal. I had the deal, I wrote this pitch deck, slide deck, and we had a webinar. And I was manually emailing people because I was doing more sales. At the end of the day, you only need 20-30 investors; you only need enough people to be on your first deal. Your second or third deal and your fourth deal is not going to be based on how much marketing you do, it's going to be based on how you did on the very first deal. So focus on the very first deal.
The first deal was difficult. It took us about a month and a half to two months to raise all the money. The second deal we raised it in 48 hours. The third deal was oversubscribed before we had the webinar. That gives you that trajectory, so that's for the listeners how do you do your first deal. The first deal took us a year to get that deal under contract. During that one year, I was going out to dinners with folks. I had just joined this mentorship group, and it's been a while since we can get anything under contract. It's very expensive; 2019, it was already very expensive. And these friends told me, "If you have a deal, let us know, because we are interested."
They know that at that point, I have five single-family houses in the bay area, so I'm passionate about real estate. They also know that I even live with housemates. I could live anywhere, but I still have roommates because I was very into personal finance and financial freedom, so they know. One comment was, "If Perry is willing to live with five housemates, he is going to make whatever deal he's going to get work."
Finally, I was a good employee. I won the employee of the [unintelligible 00:15:28.06] Award, I was a good engineer, I was promoted to staff, which is one of the highest levels, and became an engineer manager. So they know I can execute and I have integrity. I don't have to recreate myself, my identity to serve those people. They just know I am competent, I hope, and that I have high integrity. That was just enough to get to that first milestone, which is closing on my first deal. And I don't worry about the next deal. All I care about is doing a good job on the first deal.
Break: [00:16:00] [00:17:46]
Ash Patel: It sounds like it's your character and the work ethic that did all of the marketing for you on the first deal. You mentioned YC a couple of times... Can you let our Best Ever listeners know the significance of Y Combinator and what a competitive program that is?
Perry Zheng: Yeah. For the listeners, Y Combinator is a Silicon Valley accelerator program for startups. The acceptance rate is about 2%. Once you get into the program, on average, about 2% or 4% of those companies go on to become billion-dollar companies. So the odds are still stacked against us. The companies that graduated from YC and go on to become successful include household names that you may recognize, such as DoorDash, Airbnb, Stripe, Coinbase, and so on, so forth. So it's an honor. I did not expect that we will get into YC.
Now that we graduated from it, it was also a humbling experience. I joke to my parents that while in YC, if you judge the companies based on traction, based on our founder's impressiveness, based on market size, and based on their diligence and their work ethic, I'm probably in the bottom 25 percentile across all four categories. I don't even know why I'm there. But it was exactly where I needed to be, and I learned a lot.
Ash Patel: That is incredible. Such a feat to achieve, just getting into that let alone coming out of it. Did you end up raising capital for Cash Flow Portal?
Perry Zheng: Yeah. We raised $5 million. We raised $4 million before we got into YC. Now that we've graduated from YC, we had a very small round to just keep the momentum, but we didn't need the money. We raised an extra million after we graduated from YC. That one we actually had to turn down half of the money. So yeah, we are doing well. To give listeners the company... Growing 50% month over month, with 300 syndicators now, and 3,000 investors engaging on the platform; that's the size.
Ash Patel: Perry, is that software only for experienced syndicators, or somebody doing their first deal?
Perry Zheng: It's definitely for someone doing their first deal. We are an investor portal. Now, you may have heard of investor portals out there. Our biggest differentiator is we are also a marketplace. We are a marketplace that allows passive investors to go on here and check out the sponsors, see their track record and be able to connect with them. Then the syndicator and the investor both get an email, then they can schedule a call. Once a call is finished and maybe a couple of calls later the syndicator can say, "I have a substantive relationship with this investor." From that point on, that investor will see all of the syndicator's deals.
Ash Patel: That is incredible. Essentially, a match.com for real estate syndicators and investors.
Perry Zheng: Yeah. With an investor portal that we spent two years building, so we could do the logistics, the actual investing as well.
Ash Patel: Yeah. I love that. You're an LP in over 2,000 units. Why do you invest in other people's deals?
Perry Zheng: That number has gone to 3,000 now. I invest in other people's deals because on the passive portion, it's the same return as my passive portion on my own deals. That's the first reason. It's an intrinsically good industry that gives you 12%-15% IRR on average; sometimes it's 30% IRR. And compared to the 8% from the S&P, that's 50% better. So that's one, it's intrinsically a good thing. Number two - me investing in other people's deals allows me to see how they communicate and allows me to see if we want to partner with them in the future for our own deals.
Perry Zheng: What they say before you invest usually is, one, personality, and then after you invest, the way of communication, the responsiveness tells a lot about you. I know I'm not going to lose money, "knock on wood". I might. But it's for relationship building; it's to see how they perform on a month-to-month basis. How timely are their investor updates? How do they respond to random questions? How they try or try not to cover all the things they don't do well. How transparent they are. Those are the things that we look for when we want to partner with them for co-sponsorship or deal sponsorship.
Ash Patel: Essentially, a lot of market research. You're in the trenches, seeing how deals are getting done and how other people are conducting themselves. That's incredible. Perry, what is your best real estate investing advice ever?
Perry Zheng: I like this mantra of doing something; just do something. Don't worry about what will come two years from now, but what you should be doing right now. For people who don't have a deal, are working on their first deal, going from zero to one is the hardest thing you will ever do. It took us nine months to get our first deal. So coongrats on signing up for this journey. On my first deal, I went to Texas once a month. That's another reason why people in tech don't do real estate syndication. They're very smart; they're too smart to the point that they don't feel like they need to put in the work. Whereas for me, I don't think I'm that smart, so I like to grind my way into some success.
I was going to Dallas from Seattle every month. That's a lot of plane tickets, a lot of times on the plane. This is four or five years ago. I was sleeping on the mattress of my real estate business partner, in the living room, because I didn't know any better. I thought that was fun; I don't think it was hard work. It was just like, "We've just got to get that one deal."
There's a lot of achievement and perseverance between zero to one. But when you climb over that mountain, you will taste that achievement and you will feel really good about yourself. So just keep going. But focus on the very next step.
So if you are looking at your first deal, the only thing that matters is making an LOI. Don't even worry about getting a website. Even though I'm selling you software, don't worry about getting software, getting a website; make an LOI. If I talk to someone between time A to time B, they still have not made an LOI, I kind of know that this isn't probably not going anywhere. I will elaborate on that point. This is also some life advice I get. Even if I don't know the baseline, I can judge someone's probability of success based on velocity. Because if you are moving at a high speed, regardless of the baseline, you can achieve immeasurable success above all your wildest expectations.
How I measure velocity is I will talk to a person in time snapshot A, and then I'll talk to them maybe three months later in another conference, time snapshot B. If the advice in time snapshot A was to make LOIs and time snapshot B they make two LOIs, I almost will bet $10,000 that this person is going to get a deal in a year, and they do. But if three months later they have the same questions, either need to get out of that mindset, or you need to start moving faster. I don't need to know what's your baseline, as long as you're moving fast enough. That's how all great companies get built, that's how all great personal achievements get built as well.
Ash Patel: Such great advice. Best Ever listeners, rewind that and listen to that a couple of times. Such great advice. What's been your biggest challenge with Cash Flow Portal?
Perry Zheng: That's a great question. If you asked me about a year ago, that we are an investor portal wanting to be a marketplace, people will laugh at me and say, "This will absolutely not work." These are credible syndicators and reputable industry leaders. They say, "Syndicators don't want their investors to be poached. And whatever customers you have, once you become a marketplace, those customers will vanish." And I heard you; I even agree with that statement that syndicators don't want their investors to be poached.
On the other hand, if you climb over that mountain and you see the end result, every LP has a trustworthy, transparent platform to make educated investment decisions in real estate. It's not easy. You could argue that on the way to the mountain, our company dies along the way, because we'd never make it that far. But if you made it that far, it's important enough of a vision that I think we don't mind the possibility of dying along the way, for the chance to achieve that vision. It was not easy to make an investor portal to be also a marketplace. A year later, everyone loves the marketplace. We will continue to be contrarian and right with the belief that LPs, at the end of the day, will shape the syndicators' behavior. We will do whatever is right for the LPs.
Ash Patel: I love that vision. Joe Fairless shares that as well on his website. He is bragging about other syndicators. He's trying to promote other syndicators, not just himself and his deals; he wants to bring other people up as well. And look where he's at now, $2 billion of assets under management. So that philosophy and that mindset absolutely works. Bring everybody else up. And I love how you said, "Syndicators are going to shape the marketplace. They're the ones voting with their dollars." Again, incredible mindset. Perry, are you ready for the Best Ever lightning round?
Perry Zheng: Yeah. Go for it.
Ash Patel: Alright Perry, what's the Best Ever book you recently read?
Perry Zheng: There is a book called, How To Get Rich by Felix Dennis. It's not a self-help book, it's actually by a successful entrepreneur that goes into the agonies of entrepreneurship and being successful. I really liked that book. It's a startup book.
Ash Patel: Perry, what's the Best Ever way you like to give back?
Perry Zheng: I donate. I love to give back with my time as well. For example, I have these informal mentorships with folks who want to buy a house, their very first house, and we get dinner. And I'm just so proud when they got their first house. And I'm also proud that I did not tell them, "Hey, you should invest in syndication." Because I do know that you have to buy a primary residence to taste what it feels like to be a landlord, to appreciate investing in syndications.
Ash Patel: Yeah. Perry, how can the Best Ever listeners reach out to you?
Perry Zheng: The best way is to go to cashflowportal.com/bio/perryzheng. That is my real estate syndication multifamily bio. You can click "Connect with me", and we will both receive an email and you can schedule a call right there.
Ash Patel: Perry, amazing. Thank you for being so gracious with your time and telling us your story. You worked for some of the top companies in the world, you exited tech, and you've got into real estate tech. Cash Flow Portal - we're all going to check it out. I'm excited for what's to come with it when you guys start getting into property management as well. Thank you again for your time.
Perry Zheng: I appreciate it, thank you for having me here.
Ash Patel: Best Ever listeners, thank you for joining us. If you enjoyed this episode, please leave us a five-star review, and share the podcast with someone who you think can benefit from it. Also, follow, subscribe, and have a Best Ever day.
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