Since moving from Brazil to Miami, French entrepreneur Olivier Grinda has been quietly growing Home61, a real estate tech startup that plans to expand across the US in the near future. These ambitions are backed with $1 million in funding from known European, Latin American and US investors whom he has met along his entrepreneurial journey.
You may be familiar with Olivier Grinda’s name, and not only because he is the younger brother of entrepreneur and investor Fabrice Grinda, who boasts over $300 million in exits and 150 angel investments. Olivier is also the former CEO of defunct Brazilian Shoedazzle clone Shoes4you, which ended up throwing the towel in 2013.
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While startups die all the time, founders seldom talk about their failures, and the taboo is even stronger in a country such as Brazil. In that sense, Shoes4you was the exception to the rule, as Grinda openly discussed the reasons that had led it to fail, sharing valuable learnings for other SaaS startups and wannabe clones operating in emerging markets.
This made me curious to see what he would do next, and our curiosity increased when I found out that his focus had shifted onto a whole new market. I decided to dig deeper: what is Home61 all about, and how does Grinda plan to succeed this time around?
From Brazil to Miami
It took Grinda a while to complete the shutdown of Shoes4you once the decision was taken. As we reported in July 2014, virtual shopping site MuccaShop ended up buying some of its digital assets and relaunching the Shoes4you website with a different, more traditional business model – an online retailer for women’s fashion accessories. In addition, Grinda wanted to make sure that every Shoes4you employee could find a new job.
As the Shoes4you chapter ended, another began: Grinda moved to Miami to join forces with another Olivier, fellow French entrepreneur and angel investor Olivier Brion, with whom he decided to launch a new venture. “I wanted to go into a business that would be in a very big market in need for disruption,” he recalled. It turned out to be real estate, “because it is very big, but also very fragmented and not transparent enough. It’s true all across the globe, but it made even more sense in the US,” he said.
Olivier Brion isn’t new to this vertical: he used to be COO and later board member of vacation rentals site Roomorama, which went on to merge with former competitor Lofty. He also co-founded Previsite, a SaaS marketing solutions company for the real estate industry.
However, the business partnership isn’t just about complementary skills. As a matter of fact, the two Oliviers go back for years. “Our moms are best friends so he was a childhood friend, except we were 10 years apart. After that we invested in each other’s projects, and we had been wanting to work together. One of the reasons Home61 is based in Miami is that [Olivier Brion] was already living there.” Grinda explained.
Cash-fueled vs. organic growth
When I asked about lessons from Shoes4you that he may be applying to Home61, Grinda paused for an instant: “So many learnings become part of ourselves,” he pondered. This resulted in some key differences between his two latest ventures: “In this case [Home61], we grew a lot more organically and we started out at home, with a smaller team. We A/B tested a lot more and tried a thousand things – we’re at version 62 of our website! This brought us better metrics, and we’re still being foolishly optimistic, but [our approach] is also more cautious, customer-oriented, organic than before.”
This caution also applies to Home61’s fundraising strategy. Its first external funding round took place in April 2015 after months of operation – its first real estate transaction was closed in September 2014. However, Grinda isn’t entirely disavowing Shoes4you’s cash-hungry model, which had seen him raise a Series A from Redpoint Ventures, Accel Partners, Flybridge Capital Partners and others. “In defense of the past, the market in Brazil was different and required another approach,” he analyzed.
While moving into a new market and a new country can be challenging, he seems happy to be working on a product that can have much more impact than a new pair of shoes (my comparison, not his). “Ultimately if we’re able to make a successful business [out of Home61] it makes a big difference because [housing] is one of people’s biggest expenses,” he hoped.
With Home61, Grinda and his team want to improve the experience of looking for a property to rent or buy. In his opinion, it is currently quite poor due to a general lack of transparency, which makes it difficult to know whether an agent is good or not.
This led Home61 to adopt a business model in which it hires its own in-house agents. As we learned from a job offer, agents can either choose to work as independent contractors with a 50 percent split on all Home61 leads, or work directly for Home61 and get both fixed and variable income, with a 30 percent commission on each transaction. In addition, new hires are expected to participate in company training and team-building activities.
“Because we trained them and so on, the experience quality is constant no matter who you get as your agent,” Grinda explained. Should that not be enough, the startup is also implementing an Uber-style rating system that could see the lowest-performing agents being let go based on client feedback.
For prospective clients, the experience on Home61 starts out with entering an email address, a requirement to be able to see full listings meeting their search criteria. Sooner rather than later, they will receive an automated but personal-sounding email from one of the startup’s account managers, who are in charge of making phone calls to qualify leads and schedule showings on behalf of the agents. Once a deal is closed, administrative assistants are responsible for handling paperwork on behalf of the agents.
Grinda told TNW that most of the Home61 processes were automated, or at least made more efficient by technology. For instance, appointments are added automatically to the agents’ calendar, which they can access from the iPad the startup provides each of them with. The tablet is also linked to an internal dashboard including information of the property’s history, as well as market data on each property and neighborhood. It can also be used to close contracts on the spot, as Home61 encourages the use of electronic signature service HelloSign.
While none of this sounds exactly revolutionary, this can help Home61’s agents make a better use of their time, without going back and forth between the office and the properties, and without having to worry about secondary tasks. This is already having a positive impact on their productivity: its agents are reportedly closing an average of 2.5 transactions per month, compared to an industry average of 0.9 transaction per month according to the National Association of Realtors.
The other side of the marketplace
Home61 is a two-sided marketplace, serving would-be tenants on one side, and landlords on the other. Due to market regulations, it only charges the latter, who have to pay either a commission on the price of property sales or a percentage of annual rental fees. According to Grinda, these charges are in line with industry standards and are part of a contract that landlords can revoke at any time at no cost.
In exchange of its fee, the company provides landlords with a range of services that go from professional pictures of their homes to monthly reports, which they can also access through a dashboard. In addition, Home61 also promotes specific listings through Facebook Ads and Google AdWords. Although it might be difficult to keep on doing this once its listing base becomes larger, it reflects Home61’s positioning as a real estate tech company.
Real estate tech, a hot vertical
Real estate tech, sometimes called RE Tech, has been attracting a large amount of investments over the last few years — $429 million across 102 deals in 2013, as CB Insights reported. Some M&A have also taken place, such as the acquisition of Trulia by Zillow for a whopping $2.5 billion in stock, completed earlier this year.
One of the reasons money is flowing to these startups is that they are seen as able to capture a growing portion of the real estate market and overtake traditional brokers. Indeed, they seem more adapted to the expectations of younger prospective buyers who would rather sign an e-document than send a fax, and who overall see value in leveraging technology. This is about convenience, but also about costs.
“Since this generation has lower incomes and more debt, cost is an especially big consideration so they demand democratization when it comes to real estate. They want to be treated as well as the client with a $500K+ budget even though they may have half that budget,” Home61’s PR spelled out in an email.
Seeds for growth
This positioning and Grinda’s Rolodex have helped Home61 raise a seed round of funding from Dave McClure’s 500 Startups, Kima Ventures, German Ventures, TA Ventures, as well as his brother Fabrice and his business partner, Jose Marin, not to mention several other angel investors from Latin America and elsewhere.
I happened to recognize a couple of those faces among the pictures of happy clients that Home61 has been sharing through its social media accounts. So did most of Home61’s early traction come from selling property in Miami to its inner circles? Grinda is adamant that this is not the case: “Direct friends, family and investors only [account for] 3 of the 110 customers because it is slightly more expensive to buy a house than shoes in this new venture compared to my previous venture, Shoes4you!” he laughed.
Grinda went on to recall Home61’s first organic transaction, which took place in September 2014, making client Jeremy C. (pictured above) the first one to receive one of Home61’s commemorative “welcome home” teddy bears. Since then, the startup has been relying on a combination of marketing and word of mouth, attracting a relatively small but growing number of new clients.
The 110 transactions it boasts so far have generated a gross revenue of $18 million for Home61, enabling it to grow its workforce from 10 to 12 agents. While rentals account from 60-to-65 percent of all transactions, sales are still its largest revenue driver (60 percent vs. 40 percent for rentals).
What’s next… and what’s not
Home61 hopes to become the go-to site for people to find a place to rent or buy, but it doesn’t plan to do so by radically disrupting the way things are done.
“[Our concept] is not to change the business model of real estate, but how it is executed,” Grinda acknowledged. In other words, it isn’t getting rid of the middleman; not only because its own agents are intermediaries themselves, but also because some of the properties are managed by so-called “listing agents” on behalf of the owners.
While this last bit might sound disappointing for those of us who’d like to see more disintermediation, the company is simply being realistic about its market, and couldn’t afford to cut itself from that source just yet, Grinda noted.
As for having in-house agents doing offline showings, he pointed out user preferences; although sites like Airbnb have managed to build enough trust to get people to temporarily rent rooms they haven’t seen, people still prefer to visit the places they are going to rent on a longer term, let alone purchase.
Looking at Home61’s homepage, it quickly becomes clear that it is putting more emphasis on one side of the equation than the other. “People who are looking to rent and buy are the ones suffering, especially with medium budgets,” Grinda stated.
While he considers that landlords aren’t as let down by traditional brokers, Home61 still plans to boost its offering on the supply side and give a marketing push to these owner-focused services.
Interestingly, its roadmap doesn’t include launching a mobile app: “Mobile is obviously very important because agents and clients are on their phone at the property etc; but we opted for a mobile version and not an app, because [the user pattern here] is not recurring use. It’s very intensive during the search period but then people drop it,” Grinda told us.
Home61’s next goal is to get profitable in Miami, which its pitch deck describes as “a billion-dollar market in terms of commissions.”
While there are many competitors, Home61 is hoping to differentiate itself in its approach: “Because it’s a vacation spot, Miami has a lot of real estate agents, but the service they provide isn’t always of very good quality; so there’s a need, and demand for high-quality service.”
Interestingly, Home61’s name is tied to its current hometown:
“We have always planned to expand our our market beyond Miami, but I wanted to keep something of Miami to remind us of our roots and where it all began,” Grinda wrote in an email.
“While discussing potential names, a Miami Heat game was playing in the background and during this game LeBron James put 61 points up by himself breaking the world record. We felt it was a discreet way to remember the Miami by extension the Miami Heat to motivate us to achieve record breaking results just like King James himself. That’s how we became Home61. Of course I had no idea that a few month later LeBron would move to Cleveland… but that’s a different story.”
Both paths may not be actually that different, as Home61 is hoping to expand into other US cities. When I asked whether Brazil was on the roadmap, Grinda answered negatively. “All of our expansion will be towards the US, because it makes sense in terms of demand.”
However, and despite Shoes4you’s fate, he remains a believer in the copycat model, and sees Home61 as an interesting model to clone. “Lots of people should copy Home61 in their country! Once we grow hopefully we will be able to work with them,” he smiled.