Some people are just born entrepreneurs. Richard Sarkis of Reonomy is one of those people. “I was an entrepreneur as far back as when I had hair,” he jokes. He started his first business in college after discovering that textbooks could be purchased for a fraction of the price in other countries. He and a friend came up with the idea of importing these books and BookCentral was born.
When he graduated he went into being a full time entrepreneur, until he decided to get his MBA at Wharton. After graduation, he was offered a management consulting position at McKinsey. He did well enough to be offered a position as Junior Partner in only five years. Instead, he quit. He had no idea what he was going to do, but he knew he wanted to start a business and build something himself.
A partner at Primary Ventures named Brad Svrluga introduced him to Charlie Oshman, the guy who would become his co-founder. “We started talking about the lack of transparency in commercial real estate data and sparks flew,” he said. They noticed that there was no real data aggregation going on even though there are so many possible sources. “We saw that the industry leader, CoStar, is not really set up like a tech company, they are a data company. They use ‘researchers’ in call centers to collect data themselves.”
Instead, Richard and Charlie decided to try and build a scalable cloud computing architecture that would be able to collect and organize the data that was already available. “The biggest challenge at first,” he told me, “was just figuring out where we would start.”
They decided to start at the top of the transactional funnel. That meant helping identify potential properties for professionals. They wanted to be able to give all the important information to help make a quick go/no-go decision without “drowning them in data” as he puts it.
“The only way to do this is to know what all the possible sources are,” Richard said. So, they set out looking for every possible source of data. They find it using three initiatives.
The first is from public sources like assessor documents, county violations, title liens, tax and debt filings, deeds or anywhere else the government might have recorded something for everyone to see. That isn’t the hard part though. “We have to clean it, parse it, digitize it and put it into nice relational databases,” Richard explained in a simple way so that I could (kinda) understand.
The second is to form data partnerships. They have agreements, some exclusive, with lots of companies and organizations like title companies, credit agencies, mapping companies and many others. They give them access to their data and in return get another source for their collection.
Lastly, they collect information from their users. This one is tricky because no one wants to think that they are giving their precious in-house data to their competitors. “We never share the data itself, we mostly use it train our algorithms to detect anomalies,” Richard said. Same goes for user behavior. By knowing what everyone is looking at, they are able to understand how to make the process even more valuable.
After cutting their teeth in New York City, the belly of the real estate beast, they feel like they have gotten to a point where they can replicate their service nationwide. When I asked why he started in such a contested market, Richard says he saw the early challenges that city provided as a good thing: “New York is a unique market with a lot of nuances. It has co-ops, air rights, historic landmarks and each of the five boroughs has its own data sources.” Now, he is ready to take his proprietary data aggregation technology to the masses.
The enormity of this task should not be overlooked. Richard estimates that in New York they had to collect data on about 330 thousand properties. Now, they are preparing to do the same with the 40 million properties across the country. While Reonomy doesn’t track residential data, they do identify which buildings are for residential use, so with those included they have around 150 million parcels in the database. While Richard wanted to make this expansion earlier, he’s glad that they waited. “A lot of the big data technology that makes this possible wasn’t around five years ago,” he says.
Reonomy plans to become the “golden source” for data in commercial real estate. They think that their technology will have the most comprehensive, up-to-date parcel information available. They’ll have every valuable piece of information not only about the parcel, but about all the entities associated with it. If Reonomy is able to do this effectively, they could very well build that big thing Richard quit McKinsey for. They also might change the way we view commercial properties forever.
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