What is the idea?
The 1001 startup idea this week is to establish a platform which will crowdsource commercial and residential real estate lease and sale information. It will compile and sell the data based information to Investors, Private Equity Funds, and Institutional Investors.
According to Marketwatch.com, the global Business Intelligence (BI) market will grow from USD 17.09 billion in 2016 to USD 26.88 billion by 2021, at a Compound Annual Growth Rate (CAGR) of 9.5%.
“As we move into 2017, there are many signs that real estate funds have been in something of a golden age over the last few years. As last year played out, closed-ended funds had record amounts of dry powder at their disposal, with managers worldwide holding US$239b to deploy (at December 2016), up from US$210b in 2015 and significantly higher than a decade previously, when the figure was just US$132b, according to Preqin figures,” says Mark Grinis, Global Real Estate Fund Services Leader, EY.
The real estate fundraising market has continued to be robust as all types of investors, from pension funds and insurance companies through to sovereign wealth funds and family offices, increase their allocations to real estate. Many now allocate between 8% and 10% to the asset class, and their quest for yield in a persistently low-interest-rate environment, and an era of loose monetary policy, is leading to real estate investing representing around 10% of the economy in many markets. They are attracted by returns that offer a better reward than, further adds the EY report on Global Real estate.
There are big real estate firms like JLL and CBRE which have access to these data, but the cost of acquisition of data by these players is very high. CompStak from the USA has a similar business model and uses crowdsourcing to gather real estate information that is hard to come by, difficult to compile, or otherwise unavailable.
Pain Point & Target Audience
The targeted customers would be the “Investors, Private Equity Funds and Institutional Investors” for Selling Data and “brokers and renters” for the acquisition of data. The world is moving fast, and the Investors need up-to-date information on real estate trends to make intelligent and data-backed decisions. As on date, there are very few avenues from where they can gather information. The only alternative is to conduct market research and that is is a time taking process. Investors need channels which can provide them up to date information on market trends.
Few organizations have set up data mining teams to collect and assimilate this information, and they use it as their proprietary information to build a competitive edge, few players sell this information to other parties at a very steep cost.
The startup will offer real estate information in a structured and transparent way so as to facilitate quality and timely decision making. The buyers can use these data points for Real Estate Investment, leasing, buying/selling, etc.
The startup will crowdsource information from brokers, landlords, and renters. Information providers will receive points for providing the information, and the points can be redeemed for sourcing other information from the website. The startup will sell the crowdsourced information to private equity funds and other institutional investors on a subscription basis or pay-per-use.
Way to market
The first step is to create a sleek platform where all the lease information can be uploaded/downloaded. It should have the functionality for efficient filtering through the data for ease of search. It should also have parsing functionality so that users can directly upload copies of their lease documents rather than entering the details manually.
The next step for the founders would be to source as much data as possible about lease and sale of various types of real estate from their network and create a stream of limited data readily available. They would need to build awareness amongst brokers, landlords, and renters to upload data on the platform and also source information in return. Once there is enough information, the startup can open the information for private equity funds and institutional investors for some fee.
The company would need to reach out to as many brokers, renters, and landlords in the first two years. It should target the usage of the platform by 500,000 customers to provide information.
Investment Needed For Prototype
For testing & building the prototype, pitch for raising 300K USD from angel investors or incubators. One could apply to Inhab accelerator in Hong Kong (focussing on real estate tech startups), it runs two batches every year for startups. There should be no office rentals or salary payout; the entire budget should be apportioned for customer acquisition and technology. It needs to be noted that revenues from this platform will take at least 2-3 years; therefore, it needs to have that much buffer to survive.
The co-founders must come from real estate industry with deep linkages in the broker network. It will be a bonus to have one of the team members with experience in real estate investments. In addition to this, you would need a data sciences and visualization expert so that you can mine the data effectively to generate insights for the clients.
Investors / Expert Take
There is going to be a lot for the founders to achieve before it reaches out to investors. It needs to show aggregation of quality data and the growth regarding usage of the platform by various users from whom the platform is crowdsourcing information. If it can showcase that, then various investors may be willing to fund the business for the prospects that it has to offer. In case you are looking at scaling or launching this venture, you can apply for our virtual acceleration program Excelrate on the Yostartups website; it will help you in streamlining and structuring your startup idea. We have limited scholarships and discount packs for deserving startups, depending on the strength of your application, you may qualify for a discount.