The investor pool includes Canaan Partners, 500 Startups, Founder Collective and Expansion VC. 500 Startups and Expansion participated in CompStak’s prior raise of over $1.1mm.
CompStak crowdsources commercial lease comp information including rent prices, square footage, building income, and tenants and aggregates the traditionally dispersed data. Not yet 16 months old, the firm captured nearly 100% of the commercial real estate transactions completed in both New York and San Francisco in 2012. In exchange for in-kind information, CompStak allows brokers to access comps without charge, but offers detailed records to landlords, asset managers and private equity firms for more than $20,000 a year, according to the Wall Street Journal. Suggesting future expansion, founder Michael Mandel describes the firm as “a real estate data company that uses crowdsourcing to gather data”. The team plans to use new funds to expand into all major US markets and to offer more than lease comps.
Two Revenue Models in One
This is newsworthy all on its own, but it is particularly interesting because CompStak is one of several commercial real estate firms emerging with a dual business model that both
1) facilitates greater transparency/ quality/ speed for individual transactions
2) through continued use for transactions, aggregates massive swaths of data from disparate sources and enables analysis including longitudinal trends and comparisons never previously available, as well as the potential for detailed business intelligence, meta data about the users themselves.
As with CompStak, at View The Space, the more traffic, the richer the data set.
Transaction Data + Business Intelligence = Amazon Effect
To-date, stockpiles of transaction information have remained separate within competing firms or individual broker rolodexes, access has been limited by employer, reputation and memory. Platforms that can transcend these boundaries and assemble war chests of data and real-time business intelligence are likely to produce greater levels of insight. To this point – last October’s HBR cover story highlighted the competitive power of that killer combination to better serve consumers:
“Consider retailing. Booksellers in physical stores could always track which books sold and which did not. If they had a loyalty program, they could tie some of those purchases to individual customers. And that was about it. Once shopping moved online, though, the understanding of customers increased dramatically. Online retailers could track not only what customers bought, but also what else they looked at; how they navigated through the site; how much they were influenced by promotions, reviews, and page layouts; and similarities across individuals and groups. Before long, they developed algorithms to predict what books individual customers would like to read next--algorithms that performed better every time the customer responded to or ignored a recommendation. Traditional retailers simply couldn’t access this kind of information, let alone act on it in a timely manner. It’s no wonder that Amazon has put so many brick-and-mortar bookstores out of business.”
Fast Company highlighted a similar advantage while covering Kate Spade’s data strategies*. By using consumer data to analyze the success of product placement and sales offerings, the retailer has been able to iterate and predict its way to higher margins and stronger customer loyalty: "Kate Spade doesn’t need to prognosticate the habits of their customer base. They can hypothesize, test that hypothesis, and refine over time."
The emerging story here is about a shift in the balance of power in real estate - from analogue to digital - driven by better data, higher degrees of transparency, and more powerful analytics than have been possible to-date. None of this suggest that face-to-face meetings and individual relationships will become obsolete – but rather, that for some, those meetings may increasingly be informed by richer, more timely, and more nuanced information.
So, if you are in the field and believe that something akin to an Amazon effect might in any way impact your work – what should you do?
a) adding the tech news to your morning review, and
b) sending a heads up to HR.
Different skills, and different kinds of people may be needed to make sense of, and take advantage of all this data. The HBR article referenced above refers to big data as a people issue “…as the tools and philosophies of big data spread, they will change long-standing ideas about the value of experience, the nature of expertise, and the practice of management. Smart leaders across industries will see using big data for what it is: a management revolution.”
This month’s McKinsey Quarterly cover* frames the issue in a similar light- emphasizing the need for hiring, training, and retaining bi-modal managers “who both understand the business well and have a sufficient knowledge of how to use data and tools to make better, more analytics-infused decisions.”
Duke Long, a commercial broker and vociferous advocate for technology in real estate, who drops knowledge in a style not dissimilar from the tough love of Thug Kitchen* (Duke also happens to be a big fan of CompStak.), often asks at the end of his posts where the tech-savvy people are in this industry, so ready for modernization: “There are a ton of smart people in the commercial real estate business.” Where are you?!!"
As an case in point, Duke joined 42 Floors earlier this month and is widely held up as a, or the example of a seasoned industry veteran who has made the switch to a tech-enhanced way of doing the business he loves. Many more real estate teams may be looking for similarly facile players in the months ahead.
* Always grateful for the friends who keep me rich in nerd news: Dylan Simon - PNW broker and tech evangelist - for the tip on Kate Spade's BI strategies, Dr. Jen Petersen, Green Pearl Conference Producer and urbanist - for the McKinsey feed, and Ric Cochrane of SEED and the Preservation Green Lab - for the introduction to Thug Kitchen and countless other insights of equal hilarity.