Launching any new business is hard. Depending on who you believe, 80% – 95% of all businesses will fail in the first 5 – 10 years. A commercial real estate technology startup? Fugetaboutit! Creating real change in a notoriously pigheaded industry is fraught with difficulty. But if you’re not the type to take no for an answer, here are six keys that every commercial real estate technology startup should be aware of to avoid becoming a statistic (notice I didn’t say, to ensure success).
There is a reason I put team at number one. It’s the most important thing. You feel good about yours? What is their real estate, wait not just real estate, how about commercial real estate DNA? One of your team knew somebody who looked at a lease once? Not good! Of course, you are smarter than all of your customers, right? I say it over, and over 70% of the potential success of a startup is based on THE TEAM. You better have some serious CRE genes.
2. Competition from Institutions
It’s in the headlines now. CBRE buying Floored and Matterport. Boston Properties investing in Convene and my boy Brad and his team at Fifth Wall raising $212 million from what investors again? Established institutional real estate investors and companies. I said institutional as in flat out global commercial real estate institutional real estate brands. Did I mention Prologis? What are you going to do that they can’t? Oh, and they have access to kabillions of square feet. How about you?
3. The System
It works. It works now and could probably work for quite a while. Why change it? You think it needs changing because? It’s making people BILLIONS. Most if not all are okay with the BILLIONS. Hard to argue that. What do you bring to the table that fundamentally makes them change that system? If you are that smart, some guy named Musk is always looking for good people I hear. I hope you are that smart. I’m on your side. How about convincing your potential customers why they need to let loose of those BILLIONS? Wait, BILLIONS may not be the right number. It’s actually TRILLIONS.
4. They call It “The Stack”
Where do you fit? Do you have any idea what I am talking about? What is your potential
customer using now? I don’t mean what do you think they are using, I mean really using. How does your product fit? You, of course, say “right at the top.” Oh, how wrong you will be. How many “solutions” do you think that customer can afford to pay for, implement and use, on a global scale? Again where do you fit? You better have that answer, and not a bullshit sales answer either.
Ooh, this one is beyond tough. Looking for some slick VC that totally gets that you are the next tech savant and wants to help you jump into the deep pools of one of the largest asset classes in the world? Good luck. The window of bullshit and 3 million dollar seed rounds are far gone. Well, they are to the people with the smart money. Show me customers, paying customers. You’re not there yet and need some rocket fuel? No chance. Oh, and of course you don’t want to “dilute” yourself. 100% of nothing is? Nothing!
6. Innovation in Commercial Real Estate
What is the definition of innovation again? Unfortunately, it does not exist in commercial real estate in any way shape or form. You think you might be the one to do it? Please by all means go right ahead. Let me in on it while you are at it. I will cheerlead as much as I possibly can. If it’s real! I’ve been around the CREtech scene forever and have yet to see ONE innovation in technology for commercial real estate.