Archive for the ‘Venture Capital’ Category

2008 Predictions

December 30, 2007

Real Estate 2.0 Predictions

Redfin will run out of money. Unable to raise another round, they will enter the TC deadpool towards the end of 2008. The company’s assets will be listed on Ebay and the reserve price will not be met. Glenn Kelman (CEO) will go back to school, get that MBA from Harvard and become an owner/operator of a Quiznos sandwich franchise. Subway sandwich artists around the country will cry foul.

Since every major real estate company that signed up with Trulia has now inked deals with 993+ me-too real estate search sites (including my 14 y/o neighbors startup), Trulia’s initial successes have become null-and-void. Agents and brokers will continue to feed their listings to as many sites as possible, making it impossible for Trulia to gain a competitive advantage or any real traction. Trulia will continue to operate throughout 2008 but Bjorn and Sven will sell cheap (2nd quarter 2009) and start their search for the next big thing (they will utilize heat map technology to discover their next endeavour).

Zillow will continue to display declining values to a shrinking pool of real estate masochists. Agents will realize that paying $0.01 per ad impression ($10CPM) to put themselves in front of the wrong audience is a losing proposition. Zillow investors will push the company to ramp up the marketing spend and we will see a Zillow commercial during the Super Bowl. Zillow’s revenues will not support an IPO and the company will be sold to Yahoo! towards the end of 2009 or beginning of 2010 for a small profit.

Craigslist will introduce a small fee to post in the real estate section. Everyone will pay it.

Greg Swann will start a cult. The BloodhoundBlog Unchained Conference is the opening he has been crafting in his head since he was 4 years old. All conference attendees will be deloused, forced to remove their shoes/socks and don a robe of hemp for the initial weekend of re-education. Their brokers will never see or hear from them again.

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How is Redfin Doing?

November 2, 2006

I am asking agents/brokers in Seattle & San Fran to provide me with some data – or maybe the good folks at Redfin can stop by and let us know.  I want to find out how Redfin is doing.  Does anyone have any current numbers?  How many properties are currently listed through Redfins $2k flat fee?  How many deals has redfin closed (either side)?  What are the numbers?

If you have any info, you can leave it here (as a comment) or send me an email at realestate20@gmail.com

Maybe I could find this data at the Redfin site…but the have made some changes (I have not been to their site in a while) – I cannot even figure out how to find the “for sale” listings anymore.

Trouble for Zillow

October 26, 2006

Funny – the same day techcrunch writes up zillow (again), they get hit with multiple FTC complaints.

“Zillow is placing the American dream of homeownership at risk for countless working families,” says John Taylor, NCRC President and CEO. “For a company that represents to consumers that they are the ‘Kelley Blue Book of Homes,’ this is a very dangerous situation. We call upon the FTC to intervene and ensure that Americans receive accurate appraisals and valuation information to protect the single most important investment of their lives: their home.”

“NCRC and its members are aware of a growing number of real estate and lending professionals who use the misinformation on Zillow.com to perpetrate fraud in our nation’s markets, often by targeting consumers in violation of Federal and State Fair Housing Laws.” continues Taylor. “During this time in our economy when the real estate market is changing and consumers are already at risk of being over extended due to the increased access to non- traditional loans, Zillow’s misinformation exacerbates the situation. Practices like theirs undermines the critical importance of valuation protections that benefit consumers and lenders alike, and guide the actions of all valuation professionals.”

It will be interesting to see what happens.

Was Mark Cuban working for Google?

October 13, 2006

I was talking with some friends last night about the Google / YouTube acquisition and suddenly it came to me – Mark Cuban must have been working for Google!  Could it be true?  Does it make sense?

On September 17th (about 3 weeks ago), Cuban wrote a post titled The Coming Dramatic Decline of Youtube.  For no apparent reason, Mark Cuban started a public relations campaign against Youtube – and from that day on, he was on the attack.  He was blogging, he was doing radio, and he was doing the TV circuit – he was out to lower the valuation of Youtube.

Now when you sit back and think about it, who would benefit from such an attack?  Mark Cuban?  Youtube?  In the long run, there was only one entity that could benefit from all of this negative press – Google.

Now I am not much of a conspiracy theory type of guy – but this looks kind of obvious to me.  A few members of the billionaire club get together and discuss the fastest growing website in history, figure out a plan to decimate its valuation, and make the acquisition. 

Big businesses go to great lengths to ensure they come out on top every day…just take a look at the HP fiasco – if companies are sending spies into news rooms to figure out who is talking to who – do you think that a few billionaires could not get together and create a negative pr campaign against an acquisition target?  That would be child’s play for these guys.

Now let’s look at the Youtube founders – a couple of very young, inexperienced, highly mathematical type guys.  Very smart in many, many ways, but maybe not so smart in some other ways.  I know that if I had the fastest growing website in the history of the Internet, and all of a sudden there are 10+ news reports per day talking about how we are going to be sued out of business, I would be pretty nervous.  I would probably get so nervous that I would be looking for an exit – and I would probably not worry about leaving some money on the table…As a matter of fact, I would probably be willing to put a billion dollar deal together in three days.

I’m not saying that these guys did not get very, very, very rich.  I’m just wondering what kind of money they could have got if Mark Cuban was not involved for the past 3 weeks.  Anyway you look at it – Mark Cuban cost these guys some big money – I’m just wondering if he was compensated.

What do you think?  Could I be right?

Zillow Post Update

October 12, 2006

I was just searching through my “blog spam” and found this comment on my Zillow Post.  The “commenter” did not leave a website link…but I thought you may be interested in his take.  I happen to agree.

–start comment–

Here’s a little question that I think will be fun and interesting to answer… how many visitors will Zillow need to attract to generate the revenue, earnings, and market value that will satisfy their investor’s?

Assumptions
– $50M is all the VC money they raise
– 60% of the company is now owned by VC’s, giving them a current valuation of $83M
– 5 year time horizon to exit
– VC’s want a 75% IRR

This means this now $83M company needs to be worth $1.36B in 5 years for the VC’s to get their IRR.

Housevalues (SOLD) currently is worth $162M with a P/E of 14.7. So if the market values Zillows at the same P/E, it implies Zillow needs to be earning $92.6M in profits by 2011. Ok, so what does that mean for their top-line?

If you assume Zillow will be 2X as profitable as Move.com (3.5% net margin in Q2 07), Zillow need to generate top-line revenue of $1.32B in 2011 to get the requisite $92.6M that will give them the $1.36B market valuation.

So how many users must Zillow attract to get $1.32B in revenue?

Well, it depends on their average CPM (they do claim to be an advertising business do they not, so that’s a fair measure). Let’s assume they generate a very high CPM of $10 per 1,000 page views (Myspace is getting sub $1 CPM’s).

1.316B / 10 = 131 million ad units X 1000 page views per ad unit = 131,684,095,177 page impressions.

Assuming each visitor to their site views 10 pages, Zillow must attract 13.2B visitors to their site PER YEAR by 2011.

Considering their are 6.5B people on earth… every man woman and child on earth must visit Zillow 2.0 times EACH per year in order for Zillow to generate the profits, via an advertising model, that will create the profits to support the market value that will pay back the investors.

My take… Advertising is not really their model.

–end comment–

Great Idea – Not Much of a Chance

October 10, 2006

Pay Per Post

I have been following PayPerPost.com since they launched.  What a great concept – excellent ORIGINAL idea!  I know that some hardcore bloggers think that this is a death sentence for the blogosphere…but it is impossible to deny – it is a great idea…period.   

PayPerPost recently raised $3M from VC’s – and this is where I have to offer up my two cents…

Unfortunately, first to market is not always an advantage (i.e. yahoo/excite, aol, angelfire/geocities, etc..) – second or third to market often finishes first. 

I think the management/shareholders of PayPerPost would have been better served if they offered consulting services to technorati and/or feedburner and/or blogger and/or wordpress and/or (you get the idea) – because they just provided these leading “blog” companies with a great/excellent/genius revenue model.  Easy to imitate with absolutely no barrier to entry and much, much larger userbases. 

These leaders have immediate & instant access to millions of bloggers.  (I expect to see a pop up screen the next time I login to real estate 2.x.)

So that’s my 2 cents.  I will stress that I think the guys/gals that started PayPerPost are very, very bright people, they came up with an awesome new model – but in the long run, PayPerPost just created a revenue model for the big guys, that until now, had no revenue model.

 

Will Zillow Die?

September 27, 2006

Zillow 

I decided to sit down and give you my take on the all mighty king of the hill.  While I have some things to say about Zillow, two of my favorite bloggers have already said much of it (better than I ever could)…I believe they have effectively picked apart the foundation of Zillow’s business – so I am going to try to look at Zillow from another angle.

As we all know, Zillow has raised in excess of $50M from various venture capitalists. 

My first question would be – if Rich Barton believes in the viability of this company/business model, why didn’t he maintain 100% ownership of the stock?  $50 million is a drop in the bucket for this guy – he literally has 60+ stacks of $50M, and he couldn’t wouldn’t bet one of them on his brainchild?  If he doesn’t believe in it enough to bet big on it, why in the hell would anyone else?  What are these VC’s thinking?

My second question would be – How are they going to make money?  I know the real estate profession is infamous for throwing money away on bad/useless/anti-ROI advertising, but come on.  I would think hope that most agents are smart enough to figure out that their odds of actually hooking up with a buyer or seller through a banner ad on Zillow are about nil.  Visitors to Zillow are not buyers and sellers searching for a real estate agent to represent them in an upcoming transaction.  The good/bad thing about the web (depending on which side your on) is that results are easily measurable.  If you are an advertiser wasting money, you can find that out quickly.  If you are a website selling ads, you could be screwed.

My third question would be – If the real estate market continues downward, do you think Zillow’s traffic will go up?  I am pretty sure that Zillow’s traffic will be directly related to property prices.  Everyone loves to see how much money they are making – it is fun, but most people are not going logon each day to watch their zestimate go down (accurate or not).  Personally, I find the site quite boring…one visit seems like enough.

My fourth question would be – if the validity of their purpose has been picked apart, and their revenue model is full of fatal flaws – when do they run out of money? 

Maybe we should start a pool?

The Redfulia of Apartments announces it has $20M to burn.

September 21, 2006

mynewplace.com

Mynewplace.com, another web 2.0, google map, ajax ridden, pathetically slow Internet startup announced a $12M VC round the other day – bringing the total up to $20M.

So what are they going to do with the $20,000,000?  That’s easy, give it away to anyone willing to use their website (sound familiar?). 

Need an apartment?  Get $100 cash back (your choice – a check up to 10 weeks later –or- the coveted amazon gift certificate) when you locate your next apartment using their website.  After scrolling down the search results and waiting for the pages to load, I think you could break it down to about $6-$6.50/hr.

Oh…did I mention you are not allowed to actually look at an apartment until you provide them with your email address?  Genius!  (Note to self: the next time you launch a website with $20M, make sure to build in a guaranteed loss of users)

So this is the point where I give this startup, and the VC’s that backed them, some insight.  It is the same advice I have offered up before.  As a consumer, you will only get one chance to bog down my browser and piss me off by asking for my email address to use your site.  It’s a simple frick’n recipe folks – it’s called the path of least resistance – simple is always better.

Oh…one more tip – the next time you announce a major round of VC, make sure your blog has been updated within the last 40 days. 

The Elevator Pitch

September 20, 2006

Dear Venture Capitalists,

Over the past several months, my team and I have been working diligently on what we feel will be the business model that revolutionizes the real estate industry.  Our sophisticated, web 2.0 technology allows users to search for properties via an interactive map.  Buyers that choose to purchase a home through our online service will receive a 150% rebate on the full purchase price while perspective sellers receive $20,000 to consider using our free services.

The management team is willing to relocate to Seattle.  We have embedded our website below for your review.

 

—————————————————

redfulia

stand by

trulia – I don’t like it

September 15, 2006

trulia

Today I am going to take a look at trulia.  I am going to point out some strengths and some weaknesses, and then I will give you my take.

Strengths:

1. Although trulia is considered “web 2.0,” they have done an almost flawless job with their web 1.0 SEO efforts (with the exception of adhering to w3c standards – their San Diego listings page shows 182 errors).  The site’s architecture is set up exactly the way it should be…unfortunately, their programmers wrote some ugly code.  It’s nice to see a 2.0 company that still worries about search engines, even if their programming team is what I would consider second rate.

2. Trulia does a great job at implementing RSS feeds.  Although RSS is still very far from being main-stream, geeks love it, and it meshes nicely with real estate.

3. They have been able to do a good job with PR.  PR is the most important strategy for a web 2.0 business today.  When meeting with a VC, you get to say things like “we haven’t spent anything on advertising.”  Then you get to say things like “our growth is organic” or “our growth is viral.”  Everyone likes that.

Weaknesses:

1. No inventory.  Sure, trulia has a ton of listings…maybe 2% of the listings in each market they serve (probably less).  Why in the hell would Joe Buyer want to look at 2% of the available homes for sale in his market when he can visit any local IDX site and view everything?  So he can play with a map? 

2. Slow, slow, slow.  When you use trulia it feels like you are on a dial-up connection.  The pages take forever to load – if you accidentally mouse over something, it slows everything else down.  The site is just dreadfully slow.

3. I think the two points above are fatal.

My Take:

First: What it comes down to is this.  Using trulia is a waste of time.  If I am a serious buyer, I do not want to visit 15 websites (not even 2 websites) to see what is available.  I want to go to one website – and I do not want it to feel like I am on a 14.4 modem.  Trulia will never have a meaningful percentage of the market (unless they join every MLS in the country).

Second: As far as agents and brokers using trulia – Its pretty simple, trulia is a pimp – and if you feed them all of your listings, you are a whore.  Without your listings, trulia would not exist…they should be paying you for content…not the other way around.

Sure, they may not be charging you anything right now, but a good crack dealer never does.  When you find yourself dependent, you better believe you will be paying the piper. 

If you want to spend your time and money building businesses for other people, give me a call – I can help you out with that.