Guest Post by Frank Richards
The Building of a Company
As an avid fan and investor in real estate I identified a significant gap in the residential investment market around 2004. I noted that 15-20% of all homes sold in the US are for investment. But I also discovered that there were no national platforms or proprietary algorithms that could help people identify the best investment markets and the best properties. Essentially there was no Charles Schwab for the residential investment market. I realized there was a great opportunity for a private banking platform to help people research, plan, acquire and manage residential real estate investments nationwide.
After developing a successful proof of concept, my business partner Dan Worley and I asked John Steuart to fund us and lead a successful Series A financing to provide the company with growth capital. Additionally our team included Sam Coates, a partner in Cooley who has an exceptional track record with early stage companies. Sam, John, and a team of advisers including some of the brightest minds in real estate, mortgage financing and academia were invaluable players to our team and our success. At the same time we launched an attractive and aggressive ISO plan to reward key executives and contributors that were so very dedicated to building an extraordinary company. Eventually NorthPoint served thousands of clients and directed the investment of more than $1Billion in residential real estate nationwide while developing the most advance algorithms for the residential real estate market.
Years later while having the opportunity to get some real rest and relaxation on a couple of golf courses in Scotland, I realized that continuing to build a national service business was going to be excessively expensive and challenging. One day looking out our balcony over the 17th hole (the Road Hole) at St Andrews I came to the realization that the power of our model was in the intellectual property–the proprietary algorithms that allowed the home owners and investors to obtain the data and intelligence to make the best decision when buying real estate. It was a revelation and SmartZip Analytics was born.
It was the world first ever rating engine for real estate. Many have compared it to Morningstar for real estate. SmartZip's first objective was to build a robust database and analytic engine to rate 80 million homes in America for the risk and investment potential. In 2007 and 2008, NorthPoint invested millions of dollars to build out the platform…The team (a tremendous team of PHD's and engineers that worked 24/7 with great pride and passion to make a difference), built the nation's most robust homeowner database utilizing over 1000 data points to engineer an analytical engine to rate residential real estate. Again our early success was a combination of a great team with special kudos to Avi Gupta and Ashutossh Malyviya (this product would not have seen the light of day without these two key inpiduals) and a great team of outside advisors and industry experts. Again John Steuart of Claremont Creek Ventures was the compass helping us with the development of our product and ultimately our monetization strategy.
In 2008, we decided it was time to hit Sand Hill road to properly capitalize the company. We went to market in an effort to capitalize the on-line business SmartZip and off-line business NorthPoint into a seamless integrated consumer offering. I thought I was turned down for dates in college a lot but it was nothing in comparison to our experience on Sand Hill Road. The message was loud and clear, separate the on-line business from the service company. Upon doing so we had a term sheet in a week.
I am forever grateful to Noah Doyle and Jed Katz of Javelin Partners for having the faith in our vision and team to first step up to the plate. Once again John Steuart and his supportive partners at Claremont Creek Ventures participate as the lead investor to round out our Series A financing. John and Jed have both been exceptional partners and board members. John's innovation, coaching and critical thinking has led to some of our most innovating products.
We closed the Series A financing on January 16th, 2009 still very much in the heat of the real estate meltdown. In May of 2009, we were very fortunate to hire a great technology executive Tom Glassanos to take the helm of SmartZip. Tom's has an exceptional track record in building great companies and maximizing shareholder value. He is a world class strategist that also knows how to get the most out of his great team He is also a fiscal conservative therefore a great shepherd of precious investment capital. With Tom on board and with the help of John Steuart and Jed Katz. SmartZip successfully closed a follow on financing with Intel Capital. Intel Capital has been an innovative partner providing substantial value day one. Christine Herron is a next generation thinker providing a new level of insight to an already strong board. Christine has visionary ideas with an understanding how to apply them to today's internet marketplace.
With the capital, products and team in place, it was now time to go make money. Tom and team realized early on that there were three immediate ways to monetize SmartZip analytics:
- License their proprietary analytics to third parties such as Realtor.com, Homes.com, RealtyTrac, investment firms, and hedge funds.
- Utilize the analytic engine to sell customized property reports to realtors under a subscription model helping the realtors win more listings and attract more buyers.
- Build SmartTargeting, a predictive listing engine and marketing system allowing realtors to target market the homes in a particular region that are most likely to be sold in the next 6-12 months. SmartTargeting allows a realtor to focus their efforts and marketing dollars on homeowners that are 4-6 times more likely to sell then other homeowners in the same region.
Revenues have grown more than 300% in the past year and SmartZip continues to innovate in exciting ways. Through the efforts of the Board (John Steuart and Jed Katz) and great effort from management, engineering and the analytics team, SmartZip has determined their proprietary homeowner database and analytics are portable to the broader market of home services. Recently SmartZip launched a comprehensive solution to provide predictive marketing services for the mortgage and solar industries. These two new channels have been well received creating the ability to accelerate revenue growth and validate how SmartZip's analytics are well positioned to serve the broader market of home services.
SmartZip has evolved into a predictive marketing company offering a smarter way to sell products and services to the home. Using industry-leading home intelligence, predictive analytics and integrated offline/online media campaigns, SmartZips' predictive marketing platform proactively finds and nurture homeowners who are most likely to buy. Over 300 real estate professionals, lenders and solar energy companies rely on SmartZip to reach top prospects early and accelerate sales.
I love building great teams and visionary companies. It's been a great journey, and I am very confident that SmartZip is going to be a huge player in the home services market.
see also Part One: Entrepreneur's Perspective: Frank Richards, Claremont Creek Ventures serial entrepreneur on the importance of partnerships