Buying or renting a home should be a joyous occasion, one full of optimism and excitement for the future. Unfortunately, it is more often an experience riddled with incompetence, delays, paperwork and pure pain. As Olivier, Co-Founder & CEO of Home61 would put it, we are talking about an industry that happens to fall just ahead of Comcast in terms of customer service. So yeah, the real estate agent industry isn’t exactly #winning to say the least.
Teams like Home61 are starting to set their sights on trying to challenge the notion that one of the most important decisions in your life has to be as abysmal as trying to get your cable operator to come install your cable box between the hours of 9am and 5pm. Reinventing how real estate transactions are completed isn’t easy, but by all means the opportunity is there.
Through a mix of technology and a reformatting of the real estate agent business model, Home61 is proving that there is a better way. Check out how in our discussion below and if you like what you read, you too can be an investor in Home61 via NetCapital. Yes, I mean anyone thanks to Title III and awesome platforms like NetCapital can now access investing in this high growth real estate tech company backed by some major VCs.
CL: Olivier before this you have been an advisor to some well-known companies like AdoreMe, and founded your own ecommerce company in Shoes4 you. So why Home61 and why now?
OG: Home61 stemmed from an anecdote that happened in my life. I left Brazil after selling two of my companies, and for the first time I had a bit of money on my hands. I contacted my friend in Miami and said that I was in a conundrum, because I had all this wealth in startups and was wondering how to manage this.
He suggested I diversify and buy an apartment, which I was excited to do because it was my first physical asset investment. However, as I started looking for an apartment, I ran into an inability to find an agent that was good despite lots of agents on the market and struggled to understand the marketplace because of a lack of transparency. Despite going through a friend referral, I ended up doing all of the research and found my agent knew nothing.
Once I finally closed, it took almost 90 days to actually close and there was a great deal more cost involved in the process than expected. To put it simply, it was absolute hell.
This experience got me thinking that this can’t be way it is. I realized that for most average Americans who haven’t run a business before, this is the biggest purchase of their life and yet real estate agents are the second worst ranked service right after Comcast. I just felt that beating Comcast can’t be the best that the real estate markets could do.
It was at that moment that I started looking at all the pain points involved in a real estate transaction. First of all agents don’t make much money with typical agents making $10K in his or her first year and maybe $75K once they get going. The reality is they end up doing everything themselves, which means if they want to make any money they have to start selling higher value properties for more commissions because each sale is very time intensive. Additionally, on the consumer side it is a very emotional transaction, so I felt that people likely want someone there and very involved.
I decided that from the first click to closing, consumers should be able to interact with one agent, one interface and one process that is educative and valuable rather than detractive to the purchase experience.
CL: For those that don’t know can you define Home61 as a business?
OG: Basically, we are real estate uncut because we do everything from A to Z. In the current real estate environment leads go to platforms like Zillow, which then get sold to real estate agent, and are also pushed to lawyers and listing agents. At Home61 we do it all directly on our platform and thus simplify and cut out a great deal of cost for the customer.
CL: How would you define the unique differences between a platform such as Zillow or Trulia and Home 61?
OG: Zillow and Trulia capture you as a lead and then will sell you as a lead to 10 or 15 real estate agents regardless of interest. On top of that when each agent does call you, they will only call about 1 property so you may end up getting 5 or 7 inquiries, which is just a mess.
What we do is provide one environment and as a customer you stay there. If you want to see five properties, we call you in five minutes and put you in touch with one agent that we make sure will fit your needs most. The agent that you get paired with based on the community and type of housing you are looking for, will help you see all properties of interest rather than needing to work with multiple agents.
CL: From a consumer perspective what are some of the pain points you are solving in the home buying / renting experience by utilizing technology?
OG: The biggest pain point is the stress that is involved in the transaction. It can be quite stressful having to work with incompetent people in order to make the biggest transaction of your life. In our case we make this process enjoyable. The biggest pain point we solve for is that we take all the pain away. And we do that across several different dimensions.
Some of the technology advances that have the biggest efficiency ratio gains for our customers is the data page that we have on every single property. Utilizing this, we can instantly crunch data on the neighborhood and building in order to give you an exact price for that property, as well as provide information on availability and so-forth. This is a very powerful tool that enables our customers to no longer speculate on the price of a property and be able to make a more informed purchasing decision.
We have also worked to alphabetize and centralize all key documents. We actually have our system prep the entire contract and auto-send to all applicable parties to make completing the entire transaction incredibly painless.
We even help to make the process of a showing super seamless, which may seem easy but getting a showing together often involves about 5 interactions and 3 to 5 hours of work for an agent to make sure all parties can make the showing work. Our system automates all of this effort and makes the handling of these conversations take minutes, not hours.
CL: What do current customer acquisition cost look like and what lead gen tools is the team currently utilizing?
OG: While I can’t tell you the exact customer acquisition cost, we utilize a multi-channel marketing approach, including traditional online channels as well as referrals.
CL: One of the major benefits of Home61 is the ability to drive qualified leads directly to agents who don’t have to wade through non-qualified leads. Do you have figures on how many leads you have to sift through to get to qualified leads worth transferring to an agent?
OG: We identify and remove over 50% of leads that come in as non-qualified. However, we think about qualified in a couple of ways. The first qualifying step is to determine if a person is capable of buying or renting a place. But once we qualify that they are able and in the market for a place, then we determine who the best person would be to serve them.
We do this by considering a handful of data points such as where you come from, if you have kids, and where you are looking. For instance, if you are an individual from Venezuela with children looking in a certain area, we want someone that understands your culture, has knowledge of the school zoning, and ultimately has knowledge of the area you are looking within. This all becomes very relevant as we work to reverse qualify which agent is best for you.
It’s funny, people often think that technology dehumanizes the process, but I completely disagree. On the contrary technology enables us to give customers the tools to make the process a lot more humanized. If our agents weren’t empowered by our technology, they couldn’t spend nearly as much time engaging with our clients due to administrative burden and wading through non-qualified leads. We let our agents focus only on what matters most, and that’s taking care of customers in the market.
CL: Home61 touts an 8x close rate and 4x commissions for real estate agents despite taking a 50% cut of commissions. How is it that Home61 can be that much improved to the traditional market?
OG: It’s partly because the market itself has an abysmal close rate. But that’s what you can expect if you continue to do the same things over-and-over again. Our big differentiator is that agents that work with Home61 don’t need to spend time on marketing, qualifying and organizing showings. We provide the leads and all the needed data to them with no effort whatsoever.
When a lead comes to an agent they already know the properties the customer wants to see and once a customer is ready to close, we have a closing team that takes care of the entire process so the agent doesn’t waste any time with busy work. In addition to doing the heavy lifting our system is smart and knows how many leads you can handle at any one time, which means our agents can become laser focused on doing one thing and that is serving customers.
One of the biggest barriers to entry to do what we do is that we don’t have one silver bullet. Instead, we have numerous silver pellets in our repertoire. That’s what makes Home61 a cool business to be in.
CL: As you look to expand the footprint of Home61 what cities will you look to next?
OG: We look for a handful of factors including cities that are secondary markets, with billion-dollar real estate commissions, lots of transactions, and bad service. Secondary markets are very interesting to us because they are typically very fragmented.
As soon as we have competition we win over the competition. Some cities that we are considering for expansion include Phoenix, Dallas, Austin, Chicago, and Philadelphia. We will also expand the listing side in our current market a great deal too.
CL: Currently, you are raising a round of funding on NetCapital, which allows anyone to invest in Home61 including non-accredited individuals. Why pursue an equity crowdfunding round after having raised $4M from traditional investors in the Fall?
OG: We really like the idea of NetCapital because as a young entrepreneur, I was lucky as hell to be able to know people in the startup universe that provided me access to unprecedented deal flow and were kind enough to allow me to invest as little as $5K here, and $1K there. This is rare for people to have and frankly it has been a big part of my success simply because I was lucky and well positioned.
Philosophically, I just feel that everyone deserves access, and I love to give others the same types of opportunities that I was given. Technology is one place where there is just a huge amount of growth and untapped potential and I think all people should have access to those deals.
Secondly, I think NetCapital provides not only an opportunity to bolster our equity round, but to also get great exposure. I really believe in the equity crowdfunding ecosystem and believe that the ecosystem just keeps on giving. People who invest in us will talk and work with us. It will be like a self-fulfilling prophecy in general. It’s a virtuous circle we are trying to achieve.
CL: During your more traditional funding round you received some of the funds from your brothers own VC firm, FJ Labs. What was that like and how did you convince your own brother to invest in you?
OG: In some ways it was easier, and in some ways it was terrible. The easier part of it was that I’ve been working with FJLabs for a long time, and we share a lot of the same philosophies. Trying to enter verticalized marketplaces is part of their exact investment core so it was easier to talk to them, because I really knew the fund, and what they stand for.
However, the relationship part was much tougher, because you don’t just get a pass through to your brother since that would be a conflict of interest. At the same time you know he’s there in the background even though you are having to go through all of the other investors to get it done. And to add to it, you now have this pressure that you are representing him, and, you feel that there is even more pressure to succeed and not fail. But, at the end of the day it’s something that happens all the time, and it was a wonderful experience.
The Minute Rundown with Olivier Grinda
CL: If you could model yourself after one founder who would it be and why?
OG: This is an interesting question. Let’s take Tesla and I don’t mean the car but the original inventor. He is this really cool engineer and brilliant innovator that in many ways built the 21st century as we know it. And then you have Edison who for the longest time was regarded as this awesome inventor, but over time his reputation has been hurt as people have learned that he didn’t necessarily invent all of it. However, what he did well was to apply these inventions and market them in a way that worked well for people.
In many ways I am much more Edison than Tesla in my career because my focus has always been on applied technology, rather than inventing brand new tech. And to be clear I believe that Edison has truly played a pivotal role in changing the world for the better through tech.
If I am to take this question from a more modern perspective, I’d say Richard Branson is incredible. At some point early on, he took a loan out on his mother’s house to build his record company. This guy is ballsy, because you better believe it’s going to work if you risk your mom’s own home. I love his bold attitude and his continued focus on living life to the fullest. Be it extreme sport, tennis in the morning, or kite surfing, which are all things I love to do I am always impressed by him. And of course you have to love the consistency of success in terms of each and every one of his businesses.
CL: If you could provide one tip to someone considering starting up what would it be and why?
OG: Pick a partner that has a similar view of the world as you but doesn’t overlap with you. That way when you are making challenging decisions, you will have someone to play ball with that will ensure you make better decisions. Almost all great companies have had several co-founders.
One of the differentiators I look for in tech startups is whether or not they can remove frictions from a process by an order of magnitude, be it 5 or 10X. Home61 is already well on its way from the agent side of the business, with an 8X improvement in close rate for agents, and on the consumer side, it is bar none the best experience you can likely find.
Needless to say, I see huge potential for Home61 to have huge success as it continues to expand to more markets. What I also love about Home61 is its ability to show how this world of Fintech doesn’t have to destroy jobs but rather enhance them. Imagine more agents moving to work for platforms like Home61, because they can make more money and focus on the work they actually enjoy more.
What Home61 is doing is not destroying real estate agent jobs, but rather making the whole ecosystem more efficient and service driven, which is a recipe for a more enjoyable and profitable job sector. The future for Home61 is bright. And the real estate markets don’t even know what is about to hit them.
Thank you Olivier, and the entire team for investing in truly Simple.Innovative.Change