Wow. This is interesting on its own, as others mentioned, but it's really interesting to me personally, as the co-founder of a bootstrapped local real estate referral company.
One thing I didn't see mentioned much was the 2008 housing crisis, which was disastrous for us. We were in acquisition talks in late 2007 which were suddenly canceled, seemingly in anticipation of the horrors to come. Our revenues were devastated and I went back to consulting for several years. Basically, our site was on autopilot until January of this year, when the real estate market showed signs of long-term strength and we started our current development drive.
We're still bootstrapping off consulting revenue, so it hasn't exactly been fast-paced, sadly. Let me say, still running a business you started after Startup School 2005 gives you a much different perspective than the usual startup narrative. When you bootstrap, you can press pause instead of eject. You're not on fire, so you don't turn to ashes the instant you run out of fuel, but you sure do have to keep smoldering.
For those who aren't familiar, I would describe real estate startups as being similar to a closed game of chess. Lots of long-term possibilities and plans, but not a lot of good moves available. The market is sharded, guarded, scattered and smothered.
We haven't explored (or had an opportunity for) an agency conversion, so it's really interesting to read this account, thanks. Instead, we are trying to rework our regional site into a niche national site. I'll share how it goes, hopefully before our company's own tenth anniversary. Congratulations and thanks again for writing this history.
It does seem like it wasn't as bad for them, seemingly because this was in a non-bootstrapped phase. So clearly, that's a classic example of when having investors gives your company much-needed shock absorbers.
I see what you did there. My fave HN comments are the HN-referential ones.
It's not long-term strength, by the way. The US economy is in shambles, and ready to implode any moment. What you're seeing in the real estate market is a new bubble. The buyers are investors, and the current craze started when people thought the bottom was in. The zero-interest rate policy "helps" too.
Just thought you might want to know. Be careful.
 Not only the US, but pretty much all Western economies (+Japan) are ready to implode.
So that's my gut feel as well, but I don't have a good handle on the economic & market information as to why that might be so. Can you expand?
Welcome to Reality. The mainstream media is just misleading / propagandizing you - if you want the truth, you'll have to turn to "alternative" sources.
> Can you expand?
Peter can: http://www.youtube.com/watch?feature=player_detailpage&v=Rpf...
Here's another good source: http://globaleconomicanalysis.blogspot.com/
The only people that will convert from free to paid is those that have received value. SaaS apps need to start paying attention to the 'value indicators', and provide an upgrade path on that - rather than a time limit.
This is one of the reasons that companies that charge per transaction are so awesome - because the only time you pay, is when you make money (which is the implicit value there).
This concept needs to be blown into a blog post - I just may do it - because this is so important and so easy to miss.
Your conversion rate may suck, not because your product sucks....but because your internal value metrics suck. You aren't measuring the right thing.
What does that look like on day to day basis.
How do you make all three phases work together.
How many entrepreneurs are willing to commit up to 10 years to find their path? Supporting this is what we need more of, and not as much echo chambers.
To the author: write more. Experience over time speaks volumes.
Totally planning on sharing the list in some sort of resource but if you want, I can send you a link to get your input on it's value -- email me :)
The big thing I couldn't help noticing was how inefficient the real estate industry is. There's so much regulations and people taking a huge slice out of the consumers pocket.
Even the notion of ownership by consumers is at odds with modern times, after all, we hackers are finding it too onerous to even maintain physical servers and off-loading that to the cloud, while most people are still plopping down huge sums of money and mortgages to lay claim to small patches of land, in a clumsy procedure where we fork over almost a tenth of that large sum to people who provide little value (real estate agents, lawyers, city fees).
PG should put out a call to kill real estate like he did with hollywood. There's huge profits for hackers if we wrestle it away from the current players (bank, agent, lawyers), and a lot of good for consumers.
AirBnb's a good start, further steps might be to unify it with Uber, Shopify, SpoonRocket, Exec, and Mechanical Turk and reduce consumers experience down to a few button presses. There's a big opportunity for a company to offer complete life management in an app.
> how inefficient the real estate industry is. There's so much regulations
My biggest time consumer are boilerplate disclosures and astonishing conditions, which have become nightmarish since the housing crisis. That 10 day delay in closing? Someone mis-dated and now we have to wait out Dodd-Frank before proceeding. That 41 page package of forms you need to sign and return before we can even begin underwriting? Sorry, required. The $150 you received from your grandmother for your birthday? Yeah, we're going to need a gift letter. I wish I was being facetious.
> people taking a huge slice out of the consumers pocket
Unfortunately, RE and mortgages are just high-touch industries. People need to be re-assured that someone is working on their behalf. Look what happens when PayPal shuts down an account and gives a generic response? Or Google does the same when blocking a Gmail or AdSense account? People have a complete meltdown. Imagine if that is someone's home purchase (doubly worse for first time homebuyers), and they receive an email stating "Sorry, your loan was denied" with a link to "File an appeal". The ones I work for receive calls all day every day from buyers and agents wanting updates and peppering with questions and concerns.
I automate as much as I can in my workflow (thank you Python and C#) and have considered outsourcing it, but it's a job that is 95% edge cases and one-off situations. The best targets for efficiency improvement are lenders' and RE agents' internal procedures, but that's another discussion.
An approach would be completely abstract the process. I believe the ownership model is a completely broken process that's pushed by the nefarious banks (It's easy for them to just conjure up money from thin air and indebt us for 30 years - reserve banking. This is the root cause for the relentlessly growing, but almost entirely useless, home ownership industry).
Hotel 2.0 revolution is needed. Airbnb, but with professional, heavily computerized, management of much larger property portfolios.
Can you expand on what code you wrote, here or to my nick@gmail?
Entrepreneurship is hard. You, the entrepreneur, can easily become your own worst enemy. In many ways it is a mental game far more so than anything else. The tech scene sometimes highlights the "built it over a weekend" stories. It is easy for the uninitiated to get a feeling that they, too, ought to be able to spin something up over a weekend or a few days and have success. The truth is that overwhelming majority of entrepreneurial ventures look far more like what Dave Gooden describes than the "look Ma, I built a business in seven days" crowd.
The other element of note here is that your business doesn't have to be sexy in order to succeed. There are plenty of people out there doing very, very well, with businesses that lots of techies would not even think of approaching.
And, of course, a big exit is not the only definition of success.
Know your customer. Your customer is the person who gives you money in exchange for your product or service. It’s easier than you might think to get confused about this one.
It doesn't take millions of dollars in revenue to have a wildly successful small business. An incremental $250,000 in annual revenue doesn't move the needle in a 50 person shop, much less a public company. But if you're a 2 person shop filling a niche, your year just became awesome.
There are a ton of profitable niches in software that people need filled. Markets that aren't big enough for a huge company to bother with. Markets that are huge opportunities for a few dudes to make something awesome to serve a dedicated base of customers.
For a recurring revenue net of $250k, it's not unreasonable value it at $750k to $1.25 mil depending on how likely you are to keep that cashflow going and how much ongoing investment is needed. (DISCLAIMER: this is napkin math, nothing more.) Although, after tax that doesn't sound like all that much, it is life-changing for most people. If you can for example pay off your mortgage and other debts, your lifestyle changes overnight.
This is equally true. Without sales, there is no money. Without money, no life or growth. Your point about a 2 person shop getting $250k is equally true.
Of course, many startups would take $250k and immediately spend it on becoming a bigger shop.
(Apologies for the terrible landing page).
The story also conveys about how important it is to put in TIME in a marketplace. Everyone wants to quickly flip for the big exit but the real value comes over the long and arduous process of iterating, growing, and especially uncovering unmet customer needs regardless of if it's product / service
This statement was interesting as it gives the reason for the first big pivot. I have to ask though, why didn't you just change the pricing model and enforce a few limits to capture more from these transactions?
We went through similar transitions, starting as a mobile app shop, getting more into innovative web apps powered by our own stack and now as an ad-tech company with our own proprietary DSP.
Quite a transition and a lot of what he said rings true...and I wonder if the experiences he had ahead of where we are will occur for us as well.
I happen to work just up the road from your Crosslake office in the Liss building. Stop in if you're ever passing though.
Imagine you're a contractor and had to spend 95% of your time pitching and doing spec work. What would your "hourly" rate be?
Reasons for huge commissions:
1. Restricted field: you need a license, and in general these kinds of licenses are difficult enough to get to create artificial scarcity.
-> seek employment in such a field, if you think you can get in.
2. High stakes: A lot of money is moved around so it doesn't hurt so bad to give an important service provider a large chunk.
-> seek work where the money is.
-> when dealing with Realtors etc., try and negotiate over the price anyway, just out of principle.
3. There is probably more to this profession than is visible from the outside. I don't know what, but usually people underestimate the complexities of professions they don't know much about.
-> ...? Maybe talk to Realtors and find out what it is like.
Getting an extra $10000 on your house won't earn them much more commission but makes a lot of difference to the seller.
If I understand it correctly they're more likely to be on the buyer's side than the seller's.
It makes more sense to them to get sellers to accept the first offer so they can move on to the next sale.
Still a good read. I can only imagine the acrobatics OP's stomach was doing when their newly-found CEO backed out.
Bootstrapping doesn't mean getting by on ramen and futons, per se, although that's strongly implied in the early stages. Fiscal self-discipline is a nice-to-have in any startup, but it's the difference between life or death at a bootstrapped startup.
Achieving a certain level of profitability, and reinvesting those profits in the business, is still bootstrapping. Walmart, for instance, was bootstrapped until the day it listed on the NYSE.
Their growth was then limited to how many phone calls and connections they make - in other words, no one was beating down their doors to list on their site and only after years of growing this way did they command some semblance of a home buyer audience that made it worth while for the sellers.
The model these guys implemented is tried and tired and brings nothing new to the table. That's why they resorted to the traditional broker model in the end.
Some people can do it on their own, but our partnership/friendship works well for us.
So you searched for lake listings on other sites, contacted the lister and offered to add them into your system? What kind of response rate did you get for that? I'd imagine you wouldn't hear back from most of them?
How about adding them by default and then contacting them and saying "I've add your listing to our site so you can have an idea of how it works. If you choose not to join, let me know and I'll delete it."
Personally, I enjoyed the post because it has a chronological order, specific names, dates, and numbers. Dave's transparency is refreshing and gives me confidence in his opinion. As for readability, it could use more of a contrast of the text and background, but I appreciated the increased line-height, which helped me to scan the article quickly.
Anyone can type a couple of words, this is the internet after all, but that's not why people come here.