How we identified a US$3bn niche market

We both sat down last year and decided to brainstorm ideas. We did some business together in the previous year and things were working out well. But our ambition was larger than the odd deal here or there. We knew the time was ripe for something bigger and better. Something global and scalable.

The real estate cycle was turning and selling brand new, off-plan property was becoming harder. Buyer appetite was slowly diminishing after years of steady growth and real estate developers — who enjoyed a honeymoon period leading up to 2016 — were starting to feel the pinch. It was the perfect time to start helping real estate developers with their broken sales process.

One Warren Buffet quote kept coming to mind.

Only when the tide goes out do you discover who’s been swimming naked.

In this note, you will find some key slides from our pitch deck with context and insight into how we see our US$3bn niche market. We explain the problem, our solution and the size of the market. We’ll update and add links to peers and resources from time to time. So this note is intended to be a reference point for our planning and business journey.

The Painpoint: Converting online leads to qualified prospects

One of the things we both did well in our businesses and throughout our careers was listening to real estate buyers. Finding out their pain-points. A good salesperson listens first and qualifies their buyer. When the market was hot in 2010–2016, real estate was basically selling itself.

Many agents lured to the brand new property market were basically order takers. It was common for estate developers to sell projects out before launch date. Demand was the key driver. When the real estate cycle turns, managing demand becomes difficult.

The good agents earn their commissions by converting every possible opportunity into a prospective sale. They can’t force buyers into the market, but they can do everything in their power to find as many potential buyers and bring them to the table.

With this in mind, we saw a big industry pain-point — converting an online lead through sites like realestate.com, Zillow, Rightmove etc and turning that into a meaningful conversation. Our research showed that only 4% of online leads turned into sales.

We then investigated further to see why so many leads were slipping through the cracks. We spoke to agents we knew, read the latest research and even travelled to industry events like Inman Connect in San Francisco to see why agents struggle with qualifying online leads. We found these key reasons:

We started to understand and qualify the scope of the problem. Real estate developers are spending hundreds and millions of dollars each year to generate leads for their agents. Yet most of these leads are slipping through the cracks because the matching process to the agent is done on an ad-hoc basis.

Agents told us that their daily workflow and distractions were getting in the way of contacting leads, most of which are starting to come in after hours (when the agent is at home).

Market size: How much money do developers spend on marketing?

We anecdotally knew from our own work experience that developers spent huge amounts on upfront marketing. But we had no idea on exactly much money developers were investing in generating leads. So we looked at several different sources to build our estimates. We started by going through the financial reports of REA Group and Domain — the two main players in Australia.

We found that marketing to real estate developers was a major growth segment, yet the breakdown of revenues was opaque at best. For example, Domain includes brand new development marketing in their commercial real estate division and so stripping the number out is difficult without access to the CFO and finance team.

So we took a different approach, we looked at the total number of dwelling completions across three key markets — Australia, the UK and the USA. We see this as our key global niche because selling brand new real estate in these markets is virtually identical. The entire sales process, from lead generation, to buyer experience and construction cycle is similar.

Our market assumption is based on a modelled hypothesis that each dwelling costs the developer around US$4000 in upfront marketing (on average). So a 100 lot development will usually cost about $400k in upfront marketing (lead generation, display suite, brochures, renders, reports, PR etc). We modelled this estimate against the number of dwellings coming to market each year to estimate the value of our market.

We even met and spoke to industry leaders who work directly in their marketing process. For example, we met with Andre Dolnikov who owns and runs Binyan Studios. Andre’s team designs the beautiful images you see behind many new developments. A set of images designed by Andre’s team can cost tens or hundreds of thousands of dollars.

Here is what Andre told us about the way brand new developments are being marketed:

Our solution: Lead qualification platform

We went to market immediately in October with the first version of our platform. Naturally, we turned to contacts we worked with previously. We found that the larger and more established firms were willing to invest in innovation and receptive of our solution.

In the past six months we’ve managed more than 7,000 leads for real estate developers and discovered:

• Most agents have very little inbound information about their leads (usually a name, number and email address)
• Leads are allocated on an ad-hoc or round-robin basis, rather than allocating the right buyer to the right sales agent
• Agents didn’t want disruption to their existing workflow
• Developers fell into two camps — those with very little workflow tools (some billion dollar companies running on excel spreadsheets) while others were at the other extreme (paying for Salesforce tools they hardly used)
• Integration into Salesforce is important
• Pricing isn’t a major pain point. We found that many developers are willing and able to invest $1–5k per month in sales tools which helped their teams become more efficient.
• This is because they’re already investing anywhere from $10–30k per month on generating leads. So a $1–5k investment to qualify those leads sounds more than reasonable.

Our product: Qualifying leads with simplicity

We’re now working on the next version of our platform and hope to have it released in 2Q19. We’ve documented key data metrics over the past six months and used this insight to build exactly what the market wants.

Our 2.0 platform will focus on providing the following features:

• The ability to handle any inbound lead, regardless of lead source. This is important because developers and agents are now generating leads from a variety of sources (real estate portal, social media, Google AdWords, offline).
• Instant implementation with zero coding required. We can set teams up in less than an hour and have all their leads flowing into our platform with no disruption to their existing workflow process.
• Once the lead lands inside our platform, our data enrichment process will uncover behaviour, social, demographic and ownership insights to help the sales team build a better picture and frame their conversation.
• Simple integration into Salesforce. We’re Salesforce friendly and not a competitor to their existing CRM.

Our ambition: Dominating our niche

We’re building an excellent utility that can be used for many other uses cases — student accommodation, second-hand real estate, financial services etc. We could expand into so many areas, but our focus is dominating what we have extremely high confidence in.

The biggest names in brand new marketing are all looking for tools and innovation. This puts us in a perfect position. Agents are the users and distribution partners of our platform. Real estate developers are the clients who pay. The incentive for the agent to push CRIBZ to their developer client is better-qualified leads. Agents want the commissions and commissions only come with sales.

Developers are already investing in generating leads for their agents. They want accountability and measurement on their investment. Our platform is the perfect solution.

New York real estate giant Douglas Elliman recently saw a 75% plunge in earnings, driven on the back of lower sales volumes. Selling brand new is becoming harder and very few proptech businesses are building tools to genuinely solve one of the biggest problems — generating more sales.

There’s also growing validation for investment in lead qualification. Proptech expert Mike DelPrette recently wrote about the growing demand for lead qualification tools. NewsCorp acquired Opcity late last year for US$210m while Agentology closed a US$12m Series A round.

While early days, we see similar upside potential in similar real estate niches. Student accommodation makes perfect sense as the next step with more than 1.8 million students in the UK, 23% of whom come from abroad.

Accommodation providers are constantly trying to generate leads and qualify them to make sure students fit into their existing space requirements. It would be great for them to know more about each student when they apply online. Our platform would make perfect sense.

Interested in knowing more about our journey. We’d love to hear from you. Connect with Co-Founders Peter Esho and Domenic Nesci on LinkedIn.