Thursday, March 24, 2016
How Crexi's Startup Dream Team Is Tackling Commercial Real Estate
Story by Benjamin F. Kuo
In the world of residential real estate, there are now web and mobile services for everything from finding a new home, comparing neighborhoods and properties, to finding a mortgage, and even handling paperwork and closing. But, over in the commercial real estate world—it's still fax machines, phone calls, and the post office. How do you apply technology to help improve that industry? Los Angeles-based Crexi (www.crexi.com) has taken two, very experienced teams—one from Auction.com, the other from Burstly (acquired by Apple)—and created a “dream team” completely focused on enabling the transaction side of the commercial real estate market online. We spoke with Mike DeGiorgio, co-founder and CEO of the company, to learn more about what the company is doing.
How does Crexi work?
Mike DeGiorgio: Basically, we're an all-in-one, one-stop shop for commercial real estate transactions. We manage the transaction, handle selling the deal, buying deals, listing brokers on properties, and are trying to create tools all around the day-to-day life of commercial real estate investors and traders. We're thinking about commercial brokers and how they spend each day, and trying to figure out how to make it easier. If we can figure out how to do that, we can create a dynamic marketplace, and allow them, in an intuitive kind of way, to buy and sell real estate. We want to handle everything from helping them with due diligence, making offers and making counteroffers, reporting to sellers, checking out analytics, figuring out how well deals are tracking, and everything to manage properties, to best and finals with buyers. We have have the ability to handle private, off market selling, where people have to request access to view information, and we also have a broker portal, with a CRM system for brokers, where they can keep notes on buyers, see what proof-of-funds they have, and other information. It even has a full messaging system. We are taking the process of getting a listing, and putting it out to market, to analyzing transactions, to really everything about the transaction. Most importantly, it's super easy to use. The original name of the company was Commercial Real Estate Exchange (CREX), but it was $50,000 less expensive to get the name CREXi, for Commercial Real Estate Exchange Interaction. We're developing a commercial, real estate exchange with tools for everyone in the transaction.
How are things done now in the market?
Mike DeGiorgio: There is really nothing out there like this for the traditional, commercial real estate brokerage model. Right now, a broker might work for a brokerage shop, and get introduced to the owners of some real estate. They'll try to win the listing, and they'll then be responsible for five to a hundred listings. Offers now will come in via FAX machine, and if people are interested, you might have 50 people emailing you, which you might stuff into a CRM system somewhere. You'd set up a best and final in a traditional way, by sending a note to maybe the five best people in the mail, and try to figure out which of those 5 really want to participate in the offer. You would then fly them all to some location, where they might even make offers against each other in person, in a war room. We've created an online war room. There are also services out there for listing properties, such as Loopnet, but that's just some pictures and basic information. A lot of this is antiquated and old school. If you want to share rental, lease, or other property information, your only option is Dropbox, or some people are still mailing documents to people. We have a secure file service where people can share due diligence, and it has multiple layers of security, all of it is protected, and it's confidential. That's a big contrast to how it is done now, which is by pen and paper, phone, email, and fax.
Why hasn't been done before?
Mike DeGiorgio: There are a lot of theories. Loopnet was the first adopter in 1995, and although they've come a long way, they haven't come that far along. There's a lot of old school technology in the industry, which just became the way people got used to doing business, and never really got improved or changed, or enhanced in every way. I think the only group which has adopted technology is with the property auction sites. However, we wanted to make this work the same way as traditional business. There are many people who are in the commercial real estate business who are very sharp, but they've been able to make a lot of money doing things the old school way. I think that, up until fifteen years ago, everyone though the old school ways were going to be there forever, with those with gray hairs being very well connected, with lots of back door deals, lots of off market transactions, and no one every though bringing technology to the game was needed, because everyone was doing pretty well. But, I think we started to have some breakthroughs recently, with little pieces of the puzzle, like crowdfunding, or leasing, or other aspects of the business. But, no one ever has gone after the core, which is the transaction. I'm happy no one ever tried to figure it out.
So tell us a bit about your team and background?
Mike DeGiorgio: It's a combination of Ben Widhelm, our tenical lead, cofounder, and CTO, and the same crew that built Burstly. We brought all of the engineers for our engineering team from Apple. There's really a lot of synergy with what we're doing. Burstly built tools for mobile app developers, and ultimately was the most well known marketplace for new apps. Luke Morris, and the other founders who work in sales, and myself, all came from Auction.com, the first site selling real estate deals online through an auction. Through that process, we learned about how deals were typically sold, and tried to figure out how an auction could make it better, but it never did. Then, to be honest with you, about two summers ago, I found out my mom was really sick, and that taught me that life was really too short, and I needed to do my own thing. Fortunately, I was able to get some pretty influential people behind the idea, and so we set off to do this. So, lots of us come from Auction.com, and Ben's team came from Burstly from the mobile app development side, and we're now working to create something great for commercial real estate brokers, and owners.
How did you guys—from such different industries--end up coming together on this?
Mike DeGiorgio: One of my best friends is James Borow, the CEO of Shift, and Clark Landry was one of our partners. I was telling James about my career at Auction, and telling James about some of our other ideas for real estate technology, and he said we needed to meet his partner, Clark. Clark told us we needed to get a good technical partner for what we are doing, and suggested we talk with Ben Widhelm, who had just left Apple after integrating Burstly, and was looking for the next big thing. It was a lot like speed dating – we talked over three months, were meeting a few times a week, and really got to know each other, starting exploring the potential behind the idea, and thought if we should put our teams together. That was an interesting, fun experience, and I think we've managed to create a great synergy and culture, and are now working with military precision.
Given the experience of your teams, what are some of the biggest lessons learned from your prior companies that you are applying here?
Mike DeGiorgio: The biggest lesson is that you need to listen to your clients, and listen to the people who are going to make you go. At Auction, we were so worried about taking over the broker and disintermediating them, we were not listening to what the market wanted. At Burstly, the had in some cases competed with their customers, by trying to automate certain features of building mobile apps. We don't want to take that approach. We want to help the brokers, just as Ben figured out they wanted to help mobile app developers. With Crexi, we have listened to our brokers, tried to figure out where their hiccups are, tried to make their life easier. We're not trying to force them into selling our way. We're listening to our clients, listening to our brokers, and tried to figure out how to make it easier for them by moving things online. For example, if they told us that it takes them all day on Friday to send out a report. So now, they can click a button, and the report is done for you. Plus, on that report, the broker's logo pops up in front---not us. We're very mindful of keeping attention on the broker, because it's their listing, and they're selling the deal. It's not about putting Crexi in front, it's about learning and providing better technology to the brokers.
What has been the toughest part, so far, of building this business?
Mike DeGiorgio: That's a good question. I think, it's just been turning this from a startup with an idea, to reality, and to get people engaged with it. We haven't done much marketing so far, and we just put out our first press release a few weeks ago. We've been quietly behind the scenes, getting this flywheel, wheelhouse effect going. It's been surprisingly well received. We were kind of concerned going in and how much we'd be able to build in a year, and it's been much better than anything we expected. It's been great how well this team has worked together, and the time and hours we have all put into this. We've been really lucky in a lot of ways, but we've all been through this before and it's kind of happening as we have planned.
Finally, what should be watching from you next?
Mike DeGiorgio: The next part is the other half of the transaction, so that we can handle full transactions, everything from the best and finals. We're also opening a Miami office, and will grow our presence. We'll also be looking for a Series A round soon. We want to handle the closing piece of the business, after the property is under contract, including escrow and hand off. We also want to ad more and more properties, and so far we've loaded up the marketplace. Last month we had 73 properties in the marketplace, and now we have over 350. We're proving out that this method really benefits the people on the site. We now have over $1.5 billion in properties on the site, and we'd like to see $50 billion on the site, and bigger, more institutional transactions. We're also making it an even better experience for people and building on our features—we have something like 400 tickets we are working on, and putting out new versions in two week sprints, so the site just keeps getting better. We've got lots of ideas, and it's really about executing on the plan and putting together features that make people's lives easier.
Thanks, and good luck!