Real estate technology startups are abundant and continue to attract funding. According to CBInsights, 2016 was a record-breaking year for real estate tech investment with $2.6 billion deployed across 235 deals. This year appears to have similar momentum with more VC funds specifically focused on real estate tech. One of the higher profile new funds, Fifth Wall (a $250m+ LA-based fund) has even gone a step further and announced the launch of an accelerator program for early stage real estate tech companies.
From a market opportunity perspective, the surface has barely been scratched in terms of the potential for technology to transform the multi-trillion-dollar real estate industry. This is even truer for truer for commercial real estate which has historically lagged behind residential, broadly speaking, in terms of technology adoption.
Tech start-ups are hot
In addition to the good timing around real estate technology, the broader start-up ecosystem has also evolved greatly in recent years with a lot more understanding of how to launch new ventures as well as myriad support resources (accelerators, incubators, online programs, meet-ups etc.) available to provide both moral and practical support for the budding entrepreneur.
But non-tech founders often struggle
However many would-be start-up founders without a technology background feel they cannot effectively launch a technology-based company. This does not have to be the case. In real estate in particular, deep industry domain knowledge is essential and thus you already bring a lot to the table having identified a valid problem or opportunity in a complex industry, envisioned a solution and built a network of relationships over your career that will be essential to successfully launching and growing the venture. The missing piece is the technology but this need not be a showstopper.
Who to work with?
There are several options for fulfilling the technology component of your new venture, each with their pros and cons; the key is to figure out which option is the best fit given your particular opportunity, company stage, budget and other considerations.
- The Technical Co-Founder – this can be a good option if you can find someone who is equally committed to the venture and is able to work for equity or mainly equity for a while during the early stages (assuming as in most cases that a budget for full-time salary is not available). The pluses are that you get a fully aligned partner who is (hopefully) in it with you for the long run and you can make progress on the technology by leveraging their time even if cash is limited. However there are a number of potential downsides to relying purely on the tech co-founder option – such a person will often have a day job which could slow progress (time to market is key), they will often be strong in some areas but weak in other areas which could affect product quality as well as timelines and of course one technologist means a single point of failure – if they get sick, go on vacation or are otherwise unavailable the product development grinds to a halt. Nevertheless a good technical co-founder, especially when combined with some of the other options below, can be a great asset for a fledging venture. In addition to personal networks, sites like cofounderslab.com, founderdating.com as well start-up mixers are good places to go hunting for a co-founder.
- Freelancers – on sites like upwork.com you will find a broad of range of freelance engineers (and some smaller companies) offering development services. The rates will often be lower than working with a more established company and for some entrepreneurs the right freelancer could be a good way to get an initial product or prototype built. The challenges with the freelancer model, especially when it is one individual, are similar to those outlined for the technical co-founder above. Sometimes a founder will create a virtual team by aggregating several individual freelancers with different skill-sets (e.g. a designer, front-end engineer, back-end engineer etc.) but then they often have to take on the project management / coordination role. Many sites will offer ratings and other mechanisms help you identify the freelancers with a decent track record and always check references.
- The Chief Technology Officer (CTO) – a common question from founders is whether and when they should bring a CTO on board. Unless you are a very well heeled founder it is unlikely you will be able to hire a CTO at market salary for quite a while. If you are fortunate enough to find a technical co-founder (see above) of CTO-caliber then great, problem solved. Although for the future keep in mind that many engineers will position themselves as CTOs to founders but in due course the company outgrows them and a person with true CTO-level experience may have to be brought in. An emerging (and more affordable) version of the traditional CTO role is the “fractional CTO” – highly experienced CTOs who will work part-time across multiple start-up companies at once in return for some combination of cash and…