There may never be a truly easy easy time to launch a startup, but in the real estate tech business the past few years weren’t too bad. As the real estate industry’s profits surged amid a yearslong market boom, executives were more willing to spend on products like virtual space tours or property databases. But now that the market is no longer on the upswing, are leaner times ahead for tech startups?
Richard Sarkis, founder and CEO of commercial property data company Reonomy, said he’s noticed a “paradigm shift” in the way real estate firms buy technology products. As the market slows, technologies that cut costs suddenly hold the greatest appeal. “Increasingly, the conversations are shifting towards ‘convince me that our companies are not only going to drive out top-line growth but are going to help me be more fiscally responsible’,” he said.
Sarkis was speaking on a panel Thursday at a launch event for TRData, The Real Deal’s new real estate research platform. All the panelists make a living selling data tools to real estate firms, and in a discussion moderated by TRD‘s Hiten Samtani, they grappled with the difficulties of doing so in an industry that is reluctant to embrace change.
Michael Mandel, founder of crowdsourced leasing comp database CompStak, was more pessimistic than Sarkis. He argued that an industry increasingly keen on cutting costs may decide that data is not always necessary. “I do think a lot of times people do fall back on their instincts” when making decisions, he said.
David Eisenberg, who founded the virtual-floor-plan company Floored and became a CBRE executive when it acquired his startup, said his challenge as a salesperson was to convince landlords who made a lot of money without ever changing their ways to change their ways. “It is more difficult than my previous life [in e–commerce] where we sold software to retailers where the house was on fire and they said ‘Amazon is destroying me and I will pay anything to get your help’,” he said.
“Ideally, the holy grail is that I can say, ‘listen you put a dollar in and five dollars come out,'” said Caren Maio, CEO of Nestio, a leasing management and marketing platform for residential landlords and brokers.
Both Eisenberg and Sarkis said the increasing prevalence of online data makes offering numbers less valuable. Successful data companies of the future, they argued, need to offer novel tools to analyze data rather than just the data itself. Yale Fox, CEO of Rentlogic, said his company was moving toward putting together building data in such a way that it could help investors make better acquisitions.
Fox recently faced a dilemma completely unrelated to market cycles. Rentlogic grades landlords in part on how well maintained their buildings are. Last year, the startup partnered with brokerage Citi Habitats to grade its listings, but was forced to end the partnership after landlords with bad grades came down hard on the brokerage.
“The Real Deal published an article with the headline ‘Citi Habitats partners with anti-slumlord website’ so [Citi Habitats’] Gary [Malin] was getting emails day and night (…) and the relationship ended within a few days,” Fox recalled. But the episode still generated publicity, and Fox said that in the same week a dozen landlords reached out to ask about listing their properties directly on Rentlogic.
Rentlogic isn’t the only company that has felt the collective heat of the real estate industry. Listing site and Zillow-subsidiary Streeteasy recently launched a new feature that allows brokers to pay for putting their name on the platform as a listing agent, and was met with concerted opposition from real estate brokerages. Nestio’s Maio, who operates in the same universe and is partnering with the Real Estate Board of New York on its residential listings system (RLS), said “Zillow is a media company, and they make their money from advertising. So while it’s upsetting, it’s not surprising.”
The panelists also discussed how they expected the real estate industry to evolve in the coming years. Eisenberg said that self-driving cars would change the way that buildings were configured. Maio said that on the residential side, the evolution was rapid.
“I’m not even thinking about 2020,” she said. “I’m thinking about two months from now because the industry is going to look a lot different.”