First.io — 2016 Year In Review
Launch
We started 2016 with a January 31st launch of a completely new product for real estate — a simple app that synced your existing email contacts and told you who was most likely to list their home.
It was novel. It resonated with agents as the first intelligence tool for their core growth engine of network & referral, which drives 70–80% of real estate transactions. Turns out top agents are missing dozens of listings from people they already know, and First’s dead-simple solution helps them win more of that low hanging fruit. Of the hundreds of agents who have walked through our demos this year, over 1/3 have signed up for a subscription.
Product-Market Fit
From launch onward, our singular focus has been to establish product-market fit. On the “product” side, we built mobile and web versions, launched dozens of new features, integrated with Adwerx to offer 3-click retargeting, expanded our data coverage nation-wide, and built the most powerful predictive model in the industry. At every step, we’ve run experiments to sift through the noise to understand true signs of traction.
A few signals worth noting:
- First was chosen as one of 15 RE Tech companies to compete at the FWD event for the title of “Most Innovative RE Tech Company.” We placed 2nd (see presentation here).
- Seven CRM platforms asked to integrate our predictive intel, and we inked our first partnership with Contactually which will roll out in Q1.
- We negotiated a pilot with the largest brokerage in the country, which we’ll announce later in January.
- Most importantly, we invested thousands of hours working alongside our customers to develop a deep understanding of what leads to activation, opportunities our mover intelligence provides to optimize agents’ workflows, and what drives churn in our industry.
Most rewarding for our growing team is the response from agents as they win listings and see their top-line grow.
In fact, we’ve found agents who focus their current outreach efforts on the people First predicts will list are winning 4–7 additional listings (20–30% increase).
We’ve also learned a lot about the “market” side of the product-market fit equation. The trends we’re capitalizing on in this unique space boil down to three primary numbers for us:
- 70–80% of the industry runs on network and referral. On the flip side, the $12B spent on Zillow, Trulia, Google Adwords, and other lead sources combined drives only 12–15% of transactions!
- 93/10 instead of 80/20. The top 10% of agents & teams closed 93% of the $70B in commissions last year.
- 100% yoy growth in “teams” of agents.
These numbers give us an exciting perspective of the scale of our market because, at our current price point, every 1% gain in market penetration among the 200k top agents/teams will generate $10M in ARR.
From a trends perspective, as the industry continues to consolidate around teams we’re seeing increased professionalization. The whole industry is shifting focus from “lead-gen” and reactive sales to proactive marketing. And that’s why predictive intelligence and automation are poised to explode on the scene.
Money-ball for Real Estate | Owning a New Category
As we press further into product-market fit in 2017, there is a lot of work ahead to define First’s new category. Agents aren’t looking for “Marketing Intelligence,” let alone “Mover Intelligence” platforms. Yet.
We believe predictive analytics unlocks incredible new competitive advantages for agents — to supercharge their prospecting, improve marketing spend, define new workflows, build hyper-personalized campaigns, and ultimately improve the experience for movers.
We started by tackling the first missing variable in the industry so agents can now know when people will move. It’s shocking this has yet to be solved at scale, and First has the opportunity to quickly become the market leader of mover intel.
Mover-models, however, are just the beginning. In fact, we believe they will be commoditized over time. The most valuable platform will be powered by intelligence (and data) about when and how to convert upcoming movers into clients. We believe relationship will remain central to that equation.
The market needs a new type of platform. Some will try to bucket First as a hybrid CRM/Marketing Automation/Intelligence system. Despite the fact that there are several competitors chipping away at near-neighbor projects, we are setting out to define a new category.
We’re selling a better way for agents to scale their business. We’re combining the proven power of relational sales with cutting edge machine learning to 5x (currently seeing 3–4x improvements already!), and eventually 10x productivity. Gone are the days of scrubbing 180+ leads to win a deal.
How big is this new market that we’re working to shape? Zillow is just a part of the 12% I mentioned earlier…and their market cap today is $4.5B. This opportunity attacks the 70–80%.
Other Learnings
The past year’s success is the product of building a great team and also thanks to several active advisors. We started 2016 with 8 employees and ended with 15, with each hire adding new functional areas of expertise to our organization. From Glenn Vanderburg joining as VP Engineering, Jeff Magnusson and Nathan Lande’s contributions on our data engine, Robbie Allen joining as our independent BOD member—we’ve surrounded ourselves with (and started to hire) the senior leadership to scale First.
I take great pride in being a part of this team.
If there’s anything I regret or feel we have failed to do as well as we could, it’s in not capitalizing the company enough to capitalize on the opportunity we have uncovered. That has held back two areas of the business:
- Hiring several senior roles (#1 determinant of success).
- Grossly underspending on marketing (#1 determinant of sales).
I’m looking forward to executing on our plan to remedy both of those in 2017.
There have certainly been benefits to being scrappy. Our team members are clearly bought in on the mission and the culture we’re building, as they were all making more money elsewhere. We’ve been capital-efficient in negotiating great data deals and managing vendors carefully. I would also argue there is no shortcut to product development, and that faster sales/marketing growth would have slowed product iteration. All of these factors position us for rapid expansion in 2017, and a concerted focus on growth.
We won’t jettison our spend-thrift DNA, but I refuse to let First continue in an under-capitalized state. The opportunity to become the market-leader is simply too big.
2017 is About Growth
The primary questions we have to answer as a business revolve around CAC (Cost to Acquire Customers), and Customer Satisfaction — specifically, the “stickiness” of our product and churn.
We’re raising a small round now to expand our Growth Team and invest across key channels for building demand.
Several channel partnerships and enterprise clients will augment our revenue growth and serve to build our market leadership — but will be secondary to the focus on acquiring and delighting individual top agents and teams.
As we continue down our dev roadmap for a more efficient system to grow realtors’ businesses, our job is also to effectively communicate this new platform/category. We’re not just selling software. We’re selling a more relationship-driven listings engine, we’re selling a pay raise while having more time at home with family, we’re selling a new way of thinking about adding value to movers.
And to that end, our primary measure of growth is in the total increase in listings across our partner agents.
We aspire to drive so much bottom-line value to agents it would be irresponsible for them not to sign up for First.
Other areas of growth in 2017:
- We’ll outgrow our office in AU@Main — despite our distributed dev team, we’re bursting at the seams in our 729 sf space.
- Raise A-Round — we’ve built inroads with 4 top-tier firms, and developed relationships with a host of others. Once we reach our ARR target, we’ll be in a strong position to raise our A-Round to go after market share.
- On a personal note, it’s a new role for me to become the public face of the company. This month I’ll be on stage several times at InmanNYC, and at an event presenting to 400 RE CEOs. It is an honor to be at the intersection of much of the innovation in an industry, and part of a team that has a shot at developing a market leading platform.
2016 was truly an incredible year. We at First are thankful to our agents for their partnership, to our team for incredible progress and hard work, and to our investors for their support and encouragement.
PS: I’d love to hear from you! (mike@first.io)
