Harvard graduates Jonathan Reindollar, 31, and Matt Karle, 28, are looking to disrupt the real estate industry. They raised $32 million to fund Cloudland Capital, a real estate private equity firm in Denver that focuses on investing in small deals in the range of $300,000 to $20 million, an area largely overlooked by large private equity firms.

Business partners believe that smaller real estate transactions, such as single-family homes, vacation rentals, affordable housing, and the aggregation of commercial properties and small hotels, offer higher returns than in traditional properties than many funds seek to acquire. They aim to overcome the inefficiencies in managing, transacting and scaling these deals that have kept large investors away.

Reindollar previously worked at Rockwood Capital and Highgate Capital and Karle previously at Moelis & Company and KSL. Both noticed that many private equity firms were looking for the exact same real estate deals and not getting the returns they could.

The former classmates started talking about company building and decided to focus on deals that were too small for institutional investors like Blackstone to pay attention to. There was only one problem with these agreements. “They are really inefficient in managing and transacting,” says Reindollar.

They started looking for ways to solve this inefficiency. As they did their homework, it became clear that the problem overlapped with the solution. “There are so many entrepreneurs out there who want to start their real estate business and scale these small real estate platforms,” Reindollar says. “All we have to do is match equity to those needs, ranging from $300,000 in transaction size to $20 million. As long as it is scalable and we can build a larger platform, it could be attractive for large institutional investors to come.

The duo quickly noticed that while there was plenty of room for investment activity in the space, there was another hurdle: it wasn’t easy to find the right partners. “Our biggest challenge isn’t researching deals or finding the right strategy,” says Karle. “Our strategy is based on finding the right people. We are looking for ethical, intelligent and entrepreneurial people.

To find the right partners, they spoke to over 75 owners. So far, they have engaged in two deals with three contractors. In a transaction, they combine vacation rentals. “We’re trying to use the first fund to show proof of concept,” says Reindollar. “Once we can show that, we want to keep growing the size of this fund.”

They try to build a moat around the business by working closely with the entrepreneurs they support. “It’s a people business,” says Reindollar. “It’s not a case of throwing more money behind something. It’s about building relationships.

The fund expects to hold trades longer than average. “Our desire to retain these assets longer allows people to build this scalable business,” says Karle.

Given the rush of major investors in the e-commerce space to consolidate smaller online stores, it may not be long before they face competition. But this does not discourage them for the moment. “‘Small is beautiful’ is exactly what excites us,” says Karle.