What is a software business?
Issue 11 - December 18th, 2020
If you sell software as your primary revenue generator then you’re a software business. If you use or develop software to make your business model more efficient then you’re a tech-enabled business. This statement sounds trivial and insanely simple, and I am writing it out clearly to show how simple it really is when you think about it. You frequently see tech-enabled companies trying to position themselves as pure software companies to boost their valuations when raising capital from VC firms. If they do not make their revenue from selling software, then they are a TECH-ENABLED company. This is my new personal litmus test for evaluating and understanding business models hitting the prop tech and real estate industry.
At Archetape, my new brokerage company, we are a tech-enabled real estate brokerage business. We love technology and look to implement and build efficiencies wherever we can, and we have an internal saying of "partner with the best-in-class solutions and build software to fill in the gaps." Why would we try to build something like Canva or Slack from scratch when these companies are worth billions of dollars and have mastered their craft? Some "startups" lose sight of this simple idea around technology and think in order to justify their valuation or worth to the market that they must build everything from scratch. If you are not obsessively focused on delivering an A PLUS experience to your customers, then you are already at a disadvantage to your competition. If you think building some tool from scratch that doesn't improve your consumer experience helps in the long run, then you are focused on the wrong things. The real estate industry is getting more crowded with noise and non-sense, and I constantly remind myself to stay laser focused on the one thing that matters: serving your customers in the best way possible and never losing sight of this simple goal.
Newsworthy Links To Share
How Compass Became The Bane Of Real Estate: (Marker) The high-tech real estate startup boasts SoftBank backing, a $1.6 billion war chest, and plenty of skeptics. Now it’s cashing in on the pandemic real estate boom. With the SoftBank backing and massive valuation, there have also been no shortage of Compass comparisons to WeWork. (While Reffkin and Allon declined to speak to Marker, Compass fiercely resists those comparisons, underscoring that unlike the co-working giant, it has no debt.) According to The Real Deal, Compass has acquired more than a dozen brokerages, including a San Francisco-based firm with $14 billion in annual sales. It expanded from 37 to 122 markets in 2018, reportedly seducing brokers with unsustainably high commissions. A real estate executive in New York City who doesn’t compete with the firm says the startup’s greatest strength isn’t technology — but good old-fashioned brute force. “They’re a disruptor by capital, not innovation,” he says. “It’s amazing it’s gotten this far. They’re a brokerage that doesn’t offer anything different; they’re just better at selling an idea.” Read more HERE.
OpenDoor will start trading on NASDAQ on Monday under the ticker OPEN, and this past week they launched iBuying services in Provo and Ogden, Utah; Rochester, Minnesota; Lakeland, Winter Haven, Sarasota, Deltona, and Ormond Beach, Florida; and Oxnard, Thousand Oaks, and Ventura, California. The iBuyer also said that homebuyers in Tucson, Arizona; Charlotte, North Carolina; Houston; San Antonio; and Austin, Texas, can tour and purchase any home on the market, via Opendoor. This means that for homes that aren’t owned by Opendoor, a tour assistant can meet the buyer to let them in to tour the home in-person. Opendoor can also conduct a virtual tour in any home. Then, once a buyer wants to make an offer, they are connected with an Opendoor agent to represent them. Read more HERE.
Move, Inc., which operates Realtor.com, announced Tuesday it has acquired Avail, a platform that provides online tools, educational content and support for do-it-yourself landlords and tenants. The Avail online platform offers landlords free workflow tools, as well as upgraded functionality and customizations which allow landlords to create and market rental listings, screen applicants, access state- and city-specific lease agreements, process payments and track maintenance requests. The platform also offers tools for renters, including ways to complete rental applications, sign leases, pay rent, submit maintenance requests and access related products and services like renters insurance. Read more HERE.
Austin is becoming a magnet for tech workers wanting to buy homes! The Lone Star State has long been attractive to businesses of all kinds. The combination of warm weather, lots of space to build and the lack of a state income tax has been drawing companies for years. But this year, with tech companies and tech workers fleeing traditional tech hubs in droves, the trend has only accelerated, especially in the state’s capital, Austin. Austin, Texas, dubbed “Silicon Hills,” is already home to tech companies like IBM, Dell, Google, Facebook and Apple. Texas Gov. Greg Abbott said tech companies were flocking to Texas in “an absolute tidal wave.” Read more HERE.
Virtual residential real estate broker, REAL, announces $20 million dollar funding round to expand nationwide. Their entire brokerage is virtual, and Real offers agents an 85-15 commission split which converts to 100% after a $12,000 annual commission cap is reached. Team leaders have a $21,000 annual cap with a $6,000 annual cap for each of their team members. There are no monthly fees, but Real agents must pay a $225 transaction fee and a $125 lease transaction fee after reaching the cap. There’s also a $500 annual brokerage fee taken from the first two transactions after agents’ and team leaders’ anniversary year. Read more HERE.