Expert Investor and Real Estate Insights from Paul Levine
Investor, advisor, and real estate and technology expert, Paul Levine, has had an impressive career. The former leader of Yahoo Real Estate, Levine also served as the President of Trulia and is currently the Managing Director at Sapphire Ventures. He’s also a Side Board Member and early investor.
Levine recently joined us for an Ask Me Anything webinar, hosted by Side CEO, Guy Gal, where he shared his insight on what’s happening in real estate and in PropTech. He also details what top agents can do today to persevere and come out the other side of this pandemic stronger than ever before.
5 KEY TAKEAWAYS
1. Venture capital is still very much available, for the right opportunities.
Levine details what venture capitalists are looking for in a sound investment: 1) market opportunity and product-market fit, 2) leadership team with the passion, drive, and expertise to be successful, 3) a meaningful product or service that solves a big, previously unsolved problem.
2. Agents - develop a COVID-19 response plan in three simple steps.
‣ 1) Think like a business owner; evaluate the impact of the current situation on your client base.
‣ 2) Critically evaluate and optimize your marketing mix; think about where you’re investing time, resources, and money, what your initiatives are, and if those things make sense given the current reality. Focus on what works; don’t get distracted by new and shiny.
‣ 3) Be influential in your community; build your brand and sphere of influence. This will help you increase market share as agents less motivated to thrive through this period lose traction.
3. COVID-19 impact isn’t as bad as we anticipated, especially for top producers.
High-performing agents are faring significantly better than the average agents. There was an immediate 40-50% drop in March. Now we’re only down 20-30% from where we’d normally be this time of year, and data is trending up.
4. Being an entrepreneurial agent gives you an advantage.
Levine’s experience at Trulia suggests high-performing agents rise to the challenges presented by a crisis. After the 2008 bust, he saw agents innovate fast and transition from ‘boots on the ground’ marketing to digital marketing. Those who resisted change didn’t last.
5. The traditional brokerage model will continue to face challenges.
Like banks, brokerages were originally designed around physical assets that are now obsolete. COVID-19 is further illuminating the ever-growing need for virtual solutions as brokers try and fail to adequately adapt to the needs of top-producing agents, teams, and tech-savvy consumers.
As the managing director for Sapphire Ventures, a well-known venture capital firm, Levine regularly meets with business owners seeking funding. He kicks us off by explaining what investors are looking for during these presentations.
• Why Side was selected for funding:
“What got me excited about Side from the beginning is, at Trulia, I saw how strong and powerful leading entrepreneurial agents and agent teams are. It really is the strong entrepreneurial agent who makes the market go ‘round. Side was identifying what top entrepreneurial agents want and need [and was] 100% focused on delivering that, completely aligned. That's what led Sapphire to invest in Side, and is why I'm so excited about the business.”
• 3-step COVID-19 response plan exercise for portfolio companies:
“Sapphire Ventures has 50+ portfolio companies that are mostly tech startups. Over the last two months, we’ve been helping them adjust to the new reality and re-plan their business. Nobody had COVID-19 on their 2020 business plan.” Sapphire Ventures is helping portfolio companies re-assess and pivot by following this simple three-step process:
1. Determine what’s going on in the company’s market:
“Assess what's going on for your customers. How severely are they impacted? How active will they be this year? Are their needs the same? Or have their needs changed? Ultimately what your customers are feeling drives your business.”
2. Look at where companies are investing resources and re-evaluate:
“This varies company by company, but typically sales and marketing is a big part of the spend. People, human resources, and other resources are also areas where companies spend. We take a look at what the plan was for 2020 in terms of where the company was going to invest, then think about whether that [plan] still makes sense.
We suggest companies cut things that are experimental. If [something] is a coin toss on a new initiative, save your capital and time until it's a more certain market environment. We've also been encouraging our portfolio companies to double down on the things that are working well wherever they can, and often, that's marketing spend. A company’s marketing spend and acquisition engine [can be a smart place to] retool your strategy.”
3. Identify areas of opportunity and determine actionable ways to go after them:
“These dislocations we're going through may shut down some things you thought were going to work - but they also open up new opportunities. [Perhaps it’s] new customer needs that allow you to offer new products or approaches, or ways to grow market share and leverage your position to become even more valuable than your competitors.”
Real Estate Insights
In addition to offering a glimpse into the world of tech investing, Levine also shared what he’s seeing from a real estate perspective. He talks about the impact of COVID-19 on the industry today and about what he learned at Trulia in 2011, during global economic crisis recovery.
• COVID-19 impact isn’t been as bad as anticipated; especially for top producers:
“In March, I was concerned that residential real estate would lock up and grind to a halt. In reality, there was [an] immediate 40-50% slow down in late March, early April in terms of volume of transactions - but we’ve gotten about halfway back to normal. We may be down 20-30% from where we’d normally be this time of year, but data is trending up.
The other thing I’ve seen is that prices haven't changed that much. There was an undersupply entering the year, and if anything, there's even more pent up supply now. A lot of potential home sellers don't want to put their home on the market [because] they’re concerned they're not going to get the best price or they don't want people coming into their house while they're sheltering in place. I would expect it to take months or quarters for things to get back to normal - not years. Once things start normalizing, I think a lot of supply will hit the market, and volume will increase.”
• Joining Trulia during the global financial crisis taught me what agents can do today to position themselves to be stronger than ever:
When deciding whether or not to join Trulia, Levine says, “It was a tough market - but cycles come and go, and what Trulia was doing was significant and meaningful, so I started in early 2011. While many agents struggled, top producers and strong teams fared best - and fared quite well overall. They tended to grow their influence, and grow their market share. While they felt the pressure, they emerged stronger, in better positions after than before. Based on that experience, I encourage agents today to:”
1. Think like a business owner; evaluate the impact of the current situation on your client base.
Think about where you’re investing time, resources, and money, what your initiatives are, and if those things make sense given the current reality. Hone in your strategy, focus on what works and don’t get distracted by new and shiny.
2. Critically evaluate and optimize your marketing mix:
It’s important to shift dollars away from what’s not working and towards what is working. Levine says, “In 2010, agents were spending money on bus stops and supermarket carts. By the end of the financial crisis, they had an internet marketing strategy and were more effective overall.” He notes that there are opportunities to take advantage of discounted click costs on platforms like Google and Zillow right now. Leads may have a little longer lead time to get to conversion, but getting more volume for less money can be a great way to build pipeline. Levine says, “Always be thinking about what you're getting for the dollars that you spend, but don’t assume just because the market has slowed down a bit that it's time to pull back. It actually could be a time to push more chips.” In many cases, lower-cost clicks and leads ultimately result in a better return on investment overall.
3. Be influential in your community; build your brand and sphere of influence:
“A lot of people are feeling uncertain about the current environment, and uncertain as to whether now is a good time to buy or sell a home. Post updates about the market, offer suggestions and consultations on how to successfully buy and sell in today's environment, and just do nice things for your clients. I think, now it can just be a great time to really share your wisdom and help others, and that's not only good for the community but good for your local brand as well.”
• Traditional brokerages will continue to face challenges.
Levine expresses that the writing has been on the wall for years; maybe even decades. Top producers are rising to the top and traditional brokerages are struggling to meet their needs. Below, he provides a great analogy that summarizes why.
• Banks are to FinTech as traditional brokerages are to real estate
”From a macro perspective, the traditional real estate brokerage model has been under a lot of pressure for many years - maybe for decades. Most traditional brokerages were built in a different era -- a pre-internet, pre-mobile era. What mattered then was physical. [It was important that] the physical location of the office captured foot traffic, and that there was a recognizable brand on the big sign in front of their office. Consumers didn't have the internet to find listings back then. It was very different.
Brands like Wells Fargo and Chase -- which to me are like the RE/MAX or Coldwell Banker of real estate; those businesses were built in a different era. It was all about ATMs, where your office was located, how nice your lobby was, and how many tellers you had. Those things just don't matter for today's consumer. What matters is, is your mobile app great? Is there immediate support?”
• The future of real estate is bright for entrepreneurial top producers who choose the right brokerage partner.
“In the last 10 years, we've seen a powerful trend of top-producing agent teams gaining a lot of market share. The best, most competent agents in a brokerage are filling the void left by brokers who can’t meet the needs of entrepreneurial top producers and teams that want to build their own business. The traditional brokerage model has been struggling for quite a while.
I don't see it getting any better from here. That's partly driven by COVID-19 and it’s mostly driven by trends that have been underway for a long time. At Sapphire, we do a fair amount of work in financial services, like FinTech. A lot of what you've seen in the banking industry over the last 10 or 20 years, we’ll see in real estate brokerage as well.”
Big thanks to Paul Levine for taking the time to share his unique perspective on investing, tech, and real estate.