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GEM Diamond July 2022 Radar

Drew Meyers

• 11 min read

Below is a wrap-up for the month of July with the most interesting analysis & commentary from the GEM Diamond.

Beyond the content side of our business, we curate proptech dinners, lunches, walks, and happy hours around the country. Member gatherings are taking place at Blueprint (Las Vegas), iOi (Los Angeles), and CREtech (New York), with additional Fall events spanning Seattle, Austin, SF, Denver, and Atlanta. Want to get involved? Apply here.

— Drew Meyers

(note that some links included below are members-only links to prior Transmissions/Radars)

JULY MONTHLY RADAR

New Members

Without further ado…

CLIMATE

A BILLION TOWARD CARBON-NEUTRAL BLOCKS
The LEGO Group recently announced an investment of “more than the US $1 billion to build a new factory in Chesterfield County, Virginia.” After completion, the 1.7 million square foot carbon-neutral facility will employ upwards of 1,760. Being “designed to minimize energy consumption and use of non-renewable resources,” all of its “day-to-day energy needs will be matched by renewable energy generated by an onsite solar park.” The factory will be the company’s seventh globally and the second in the Americas.

One the most revered companies in the world making a major infrastructure investment with climate front and center…what’s not to like? And yes, part of flagging it here is also my deep admiration for the brand as a longtime customer: my fiancee’s 40th birthday present for me yesterday, currently consuming the majority of our kitchen table, is proof I’m LEGO-obsessed (re-kindled during the pandemic). -DM

$500 MILLION TO COMBAT CLIMATE
Fifth Wall “announced commitments of half a billion dollars to close its inaugural Climate Fund, which launched with $116 million in August of last year,” according to CNBC. The capital will be invested “in software, hardware, renewable energy, energy storage, smart buildings and carbon sequestration technologies.” The company believes that “decarbonizing real estate is one of the most important ethical imperatives and economic opportunities of our lifetime” and that its “consortium model can play a dramatic role in convening the industry’s largest players to fund the climate tech solutions critical to its future.” The fund has already backed Assembly OSM, Brimstone, Clarity AI, Electric Hydrogen, Icon, Sealed, Span, Turntide Technologies and Wildcat Discovery Technologies. In typical Fifth Wall fashion, the announcement comes with a professionally produced video giving context for the involvement of a few of their strategic LPs–British Land, Equity Residential, Hudson Pacific Properties, Invitation Homes, Kimco Realty Corporation and MGM Resorts:

Climate change is very very real. And, frankly, the industry needs all the help we can get bringing urgency to building and adopting solutions that can help in the race to de-carbonize. A huge allocation of capital into innovative startups can do nothing but help. Props Fifth Wall. -DM

REAL ESTATE

ENLIGHTENING SELLERS ON COMMISSIONS
The NWMLS, with its 32,000 subscribers, is changing “its rules and its transaction forms in a bid to boost transparency regarding agent compensation, offer buyers and sellers more options regarding compensation, and encourage innovation in brokerage models,” according to Inman. That means that “when offered, compensation to the buyer broker will come from the seller directly” rather than the longstanding policy of the listing broker sharing a portion of the commission back with the buyer broker. The changes go into effect October 3rd. After that date, NWMLS’s new residential purchase and sale agreement will specify “that the seller may offer no compensation to the buyer brokerage firm, may offer additional compensation in order to meet the buyer’s obligation per a buyer representation agreement, may offer a credit to the buyer, may reduce the compensation offered in the listing, or may offer an alternative to either of those options.”

The NWMLS is at it again, wreaking havoc on the future of compensation. The last rule change allowed Redfin to publish commission data on hundreds of thousands of homes. These additional policy changes are a shot across the bow in the divorcing commissions debate. Forcing sellers to pay buyers agents directly will certainly heighten awareness and drive additional dinner table conversations. All of that will (eventually) lead us to the final straw, forcing buyers to open their pocketbooks directly. -DM

SNAPPING THE APPLE OFF
First announced in October 2021, CoStar’s long awaiting antidote to Zillow (in New York) is finally here: Citysnap, powered by listings from the Real Estate Board of New York. Remember, category kings sell different–yet this is the same value proposition and functionality provided by every online buyer for as long as I’ve been in the industry: Search for a region plus the same core filters (price, beds, baths). So, why Citysnap you might ask? Well, CoStar took the liberty to answer that for us…right on the new portal’s home page:

  • Designed by New Yorkers, for New York City.
  • Built from the same technology loved by over 1 million real estate agents.
  • Direct from New York’s top agents and brokerages.

Never have I met a consumer anywhere that cares about any of those reasons.

Note as of the time of publish (June 30th 2022, 10 pm PST), there are no listings in Williamsburg (across both rentals and for sale)…

Compare that to StreetEasy’s results. It’s blatantly obvious no Williamsburg buyer will be switching anytime soon. Seeing that empty module on the home page doesn’t give me a lot of faith in technical execution. And, without buyer demand, you don’t have a viable portal. Full stop.

I have to call out that, in Inman’s article, Andy Florance went on record with a doozy of a quote:

New Yorkers no longer have to rely on out-of-date, inaccurate listing information or be connected to agents and brokers who don’t know anything about the home they are interested in, making a difficult process even harder

Let’s knock down IDX, why don’t we? Heck, let’s just get rid of the buy-side agency entirely, why don’t we? All across the country, buyers buy homes every day with agents that know nothing about the homes they are interested in. I’m sorry, but a new portal isn’t going to change that.

At the end of the day, I’m with Greg Fischer on this sarcastic sentiment:

Consumers are eager for a more industry pleasing solution and excited for the top listing brokers in the city to get their contact info so they’ll switch from the top real estate platform just to reward them

He’s spot on. Consumers have never given two sh*ts about the biz/industry problems facing agents and brokers. And they never will. If CoStar is banking on that reality being false as a core driver of adoption, this portal is dead in the water. -DM

NOT SO BOUJEE AFTER ALL
RE/MAX is shuttering booj and reducing headcount by 17%, according to Inman. The end of the tech platform it acquired in 2018 coincides with an “enterprise-wide relationship with Inside Real Estate, the developers of kvCORE,” which will now be available to “RE/MAX affiliates in company-owned regions across the U.S. and Canada” at no cost. Discontinuing all of booj’s products by the middle of next year will cap off RE/MAX’s “pivot from using in-house tech for its all-in-one platform to partnering with a dedicated technology company.”

I don’t want to say I told you so, but Rivers Pearce certainly can: he called this several years ago when he said, “Millions in investment isn’t needed to get a tech stack working.” Exactly, they could have simply partnered with Inside Real Estate back then to save years of headache and millions in wasted investment. Backtracking on the “brokerages are tech companies” line of thinking just might be complete. On the other side, this is certainly a huge win for Inside Real Estate, congrats to Alissa Harper, Steve Servais, and the team. -DM

RESURFACING A FRACTIONAL PLAY
Emails titled “Live from NYC” eight days ago and a “Welcome to the Community” email clued me into Landa‘s recently launched fractional investment platform. It’s really a re-launch though, since I set up my original profile back in 2019, and bought my first share of a rental property in 2020. They ran into regulatory hurdles in the form of a subpoena from the SEC, and my original investment was dissolved and the cash returned to me later that same year. But, alas, they are back in the fray–in New York and having added multi-family buildings to its portfolio.

The question is have they missed their window to own the fractional real estate investment space from a consumer mindshare perspective? Over two years later, I own a range of shares through Arrived. Will I give Landa a second shot? I took step 1 by downloading the iOS app, but bailed when they asked me to upload a photo ID. On the flip side, I opened a tab on Arrived and was able to invest another $200 into a Cincinnati property in less than 60 seconds. Consumers skew toward the known easy solution, and the unfortunate reality is Landa now has to be 10x better than Arrived to entice consumers to switch. Or substantially different, but I don’t think a minimum of $5 (rather than $100) or multi-family is enough. Of course, all that is fortunate for Ryan Frazier and the team at Arrived. -DM

OUT OF THE BOX

THE LAST MUSEUM
A fascinating web3 company came out of stealth: Arkive, a decentralized physical museum curated and operated by its members. Its mission is “to collect, exhibit, preserve, and contextualize cultural artifacts of the past centuries, building a collection that creates opportunities for dialogue, education, and the expansion of appreciation for human culture.” It’s first acquisition is the patent for the ENIAC, the world’s first programmable, electronic, general-purpose computer.

Artifacts will be showcased in an upcoming traveling exhibition, and then lent out to existing museums to display. Interested in being a member/curator, you can apply here. Curious to learn more? Listen to Packy McCormick’s Not Boring Founder interview with Arkive’s co-founder, Thomas McLeod.

Talk about fascinating. Takes me back to my thoughts on pop-up museums in open houses from several years ago. What if arkive’s traveling exhibition took place at luxury listings around the country? -DM

STARTUPS

YOU ONLY NEED ONE
On ResMan’s Proptalk, President Elizabeth Francisco spoke with President and Chief Strategy Officer at Moved, Caren Maio to discuss what being an entrepreneur has looked like for her, from success to imposter syndrome. It’s a transparent and vulnerable conversation worth tuning in for.

With the venture landscape shifting toward doom and gloom, founders are getting lots of “no’s” these days. That’s coming through loud and clear in the numerous fundraising inquires that I’m fielding lately. But, as Maio says, if you think about it, a VC’s job is literally to say no. To succeed, you only need one yes. Keep pushing the ball forward. Remember, you have to stay in the mindset that your companies’ success is happening with or without said VC or angel. Onward. -DM

ESSENTIAL QUESTIONS TO FINDING WINNERS
Yes, we are in a crash. But, that doesn’t mean opportunities don’t abound. Packy McCormick is right, in a downturn, “the weaker companies get shaken out, leaving the strong companies with less competition for customers and employees.” The worthwhile investment opportunities post-crash follow a theme: they’re fundamentally hard.

McCormick posits that “it won’t be as easy for the average, or even very good, software startups to get really big as it was in the past decade” due to competition. I couldn’t agree more.

To be one of the true winners….it’s my belief the why is crucial. To help flush that out, the two questions I think are worth asking more often of founders:

  • What will be possible in the future as a result of your company being successful?
  • So what?

My so what for Horizon: The life we live is a f*cking fairly tale to the majority of the world. That’s a fact. Those who travel and see/understand poverty with their own eyes realize that and live the rest of their lives completely different than those who don’t. That idea was brought to light in a 2007 email from one of my best friends, and cemented with my own travels. Money is not the reason people don’t experience the world. It’s fear. And you can only counteract fear with community. While we weren’t able to scale Horizon (and ultimately had to shutter the product/company), the same why underlies the long-term good that MyPlace can bring to the world. And, that’s why I put my dollars in as an angel investor.

What’s your answer to so what? -DM

BIZ INTEL

BLUEPRINT PROPTECH: FOXY AI (SERIES II, PART VI)
Using artificial intelligence and computer vision to convert everyday real estate photos into treasure troves of data, FoxyAI’s suite of AI-powered real estate tools, all available through an API, compute quality and condition, renovation costs, and detect objects and materials.

Founded: 2018
Total funding: $2 million
Last funding: Seed led by Hyperplane (November 2021)
Team size: 15-20
Sector: Visual Property Intelligence

GEM Representation: Vin Vomero (co-founder), Dan Hurwitz (co-founder), Stefan Martinovic (advisor), Jane Hood (advisor), and Ben Rubenstein (investor and board member).

APPLY FOR DIAMOND MEMBERSHIP TO READ FULL VERSION

FRACTIONAL SECOND HOMES ECOSYSTEM INTEL
Shared ownership of real estate has been a reality for generations of affluent DIYers. But costs and maintenance are often prohibitive, given family vacation properties sit empty the majority of the time.

Enter the modernization of co-ownership of homes. Using fractional ownership structures, shares of vacation or second home properties are sold to multiple buyers through an LLC. The companies take care of sourcing co-buyers, maintenance, and some even include extra perks such as on-site child care or meal preparation. Most curate professionally designed and fully furnished homes that fit their own criteria of location/quality/size, but some work with buyers to find one listed on the market instead.

Often associated with luxurious and lavish lifestyles, these companies promise buyers the same high-end experiences of a professionally managed vacation home at a fraction of the cost. Buyers gain flexibility and equity accrual, without paying full price for an asset they will only use for a few weeks of the year. The age-old concept of timeshares, in contrast, allows owners to purchase the right to use a fixed amount of time in a condo/house shared by dozens of people.

With Pacaso, the current category king, remaining focused on second luxury homes for personal use (i.e. not rented while vacant), it was only a matter of time before we saw a co-ownership company divvying up rental homes, blended with usage rights. Enter Kocomo and SecondShare, with more certainly on the way.

Leave it to proptech innovators to create a new category by making another more accessible with reduced friction at a lower price point. Just as Airbnb modernized sleeping on couches and Opendoor modernized taking cash for your home, the modernization of timeshares is well underway.

To many, the idea of owning one home, let alone two, seems very far out of reach. While this path to second homeownership is still not accessible to the average buyer, it does unlock a new market of moderately wealthy homeowners. It’s only a matter of time before share prices come down. Once they hit $25-$50k levels, buyers will swarm.

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