The Hardest Part of Building a Real Estate Tech Startup: Sales
The “Build it and they will come” mindset is of course completely false when it comes to software.
Building a great software product that real estate agents and brokerages love, is really freaking hard.
But that’s not the hardest part of building a real estate tech startup.
Sales is.
Once you have product market fit, it is still insanely expensive and time consuming to get distribution to customers within the real estate industry. It takes relationships with agents, brokerages, MLS executives, speakers, and consultants — all of which translates to a huge capital expense.
There are a few very large sales teams in this industry. You know which companies have them: Realtor.com, Zillow, and Trulia. And they do work. I have to imagine a decent chunk of BoomTown’s recent funding will go toward investing in sales.
I’m surprised a few smaller, newer start-ups have not banded together to build a sales team, and split the required capital expense. There may very well be valid reasons a sales team selling multiple products for multiple companies wouldn’t work; I’m not a sales executive who has run a large sales team to know. I do know there have been conversations about this over the past 5 years in various circles, some of which I’ve been apart of.
But it hasn’t happened. Given the capital required to build your own sales team, it seems worth trying? If you are a founder reading this, how do you think about the inevitable sales costs?
Steve Hundley
Posted at 08:21h, 12 OctoberNice reality check on the space Drew. Been living it since 1995, yikes!
Cost of entry has increased significantly too – 10 years ago there were no IDX fees, and other garbage fees. Then add a little more regulation and it tends to affect both sides of the business. Top it off with a bit of a housing crash a couple years ago – you end up with a REALTOR industry with less targets and even smaller pool of BIG spenders or even little spenders.
As for banding together, great idea – so long there is synergy in the offerings. The biggest cost for us seems to be the service side – meaning call center, help desk, tech support, training – people will buy from a great salesperson, they’ll stay with a great service operation – my 2 cents 🙂
I’d be open to help others with innovative & incubate real estate industry products as well as leverage our 1parkplace channels and infrastructure.
Keep up the nice work my man!
Drew Meyers
Posted at 08:46h, 12 OctoberI wonder if someone could actually get away with charging someone to have access to the products that sales teams offers. This model likely isn’t scalable to individual agents, but would be to brokerage level:
https://geekestateblog.com/hired-real-estate-cto/
Sam DeBord
Posted at 11:56h, 12 OctoberLove this. I’ve seen some great ideas due on the vine because they couldn’t reach a critical mass of sales–and our scattered industry is usually the cause.
We naturally don’t trust salaried sales people because we have to earn every commission we make. Building a commission only sales team is hard, but it negates the need for startup capital. You sell, we all profit.
BlueRoof360
Posted at 08:23h, 13 OctoberDrew, I think you have adequately expressed one of the many frustrations with being a vendor in the Real Estate space. Regulation, mls fees, and a fractured market, make for a difficult landscape to build a start up in.
Drew Meyers
Posted at 08:34h, 26 OctoberHow are things going? Long time, no talk..
Patrick Hunt
Posted at 08:52h, 15 OctoberI’ve studied sales models a little bit for medical device clients, and am hustling for product-market fit right now. I also work out of Lightbank’s coworking space in Chicago, and overhear a lot of sales calls (they seem to like portfolio companies that require a large sales force, since it’s a skill they honed while scaling Groupon).
I think a pooled sales force is problematic because it muddles the message. You get the meeting and close the sale because you convince the client that they have a problem and you have a solution. That requires passion for a product, and it’s hard to sound passionate and credible when you highlight multiple problems.
Selling is definitely hard and expensive, but the real estate industry structure is not bad for startups. When you’re starting out you can pick off early adopting agents and brokers. Then you can work your way up to franchises. Along the way you can partner and integrate with associations and larger technology providers.
I’d know brokers are always being sold to. I’d love to hear from brokers about which messages resonate with them, and which make them tune out.
Drew Meyers
Posted at 08:22h, 16 October“I think a pooled sales force is problematic because it muddles the message. You get the meeting and close the sale because you convince the client that they have a problem and you have a solution. That requires passion for a product, and it’s hard to sound passionate and credible when you highlight multiple problems.”
Yup, I hear you on that one. I think the sales team would have to have some equity in all the companies’ products they are selling.
Barbara
Posted at 14:28h, 22 OctoberTrakLogix is one of these! TrakLogix offers an amazing appraisal management software and can manage appraisals, bpos, avms, etc from origination to delivery. The problem is – they are new- they offer completely customizable platforms, and a personal account manager and programmer that works directly to make everything comply with their clients’ standards.
They’ve been slowly building up a base, with different lenders and AMCs, they have a new National Director of Sales even.