We sat down with former LoopNet CEO and Fundrise investor, Rich Boyle, to talk about the recent explosion of the real estate tech space and how the climate for innovation within the real estate industry has changed since LoopNet, a marketplace for commercial listings in real estate, was founded in 1995.
Between the recent Trulia - Zillow merger, Redfin’s purchase of Walk Score, and tremendous venture interest in real estate startups, there has been a lot of interest in the “real estate tech” space as of late. Why now?
I would cite three key drivers behind the recent interest in real estate technology:
1. Despite all of the advances that have been made over the past 20 or 30 years, real estate remains an industry filled with legacy technologies and a lack of accessible, transparent information. Given that the real estate industry is also one of the largest sectors of the economy, there is ample opportunity for technology to add real efficiencies.
2. Tech advancements tend to come in waves, building upon previous innovations in interesting ways. In my time at LoopNet, we did a certain set of things to optimize the real estate industry. Now we see several companies improving on what we did, bringing the building blocks of business and technology together with new, inventive approaches.
3. Tech investors, motivated primarily by returns, are naturally excited by the space given the number of big successes of late like the LoopNet acquisition and the Trulia - Zillow merger, to name a few.
How have attitudes towards innovation within the real estate industry changed since your days at LoopNet?
Technology has become more pervasive—it’s simpler to use and less expensive to create. We’re able to access information much more quickly than we were even 2 or 3 years ago and it’s become easier, cheaper, and faster to build a website than ever before.
20 years ago, when we were starting LoopNet, you’d pitch a broker on using our technology and it was a tough sell to make because most principals were barely using the computer. Now, the drivers and decision makers of the real estate industry are comfortable with technology and, as we’re seeing, are beginning to embrace it.
And, in many cases, there has been a catalyst—a major economic shift or an obvious opportunity. In the case of Fundrise and many other marketplace lending platforms, the threshold-bearing event is the JOBS Act, which changed, and will continue to change, the lending and borrowing landscape.
What other tech innovations will we start to see in real estate?
Commercial real estate, in particular, is still plagued by what I call ‘information inefficiencies’—an inability to get reliable, real-time information about transactions. There is an enormous opportunity here for an innovative solution.
Why does real estate crowdfunding show promise?
I’m an enormous believer in online marketplaces and their ability to increase transparency and efficiency in almost any industry.
Real estate crowdfunding allows for the creation of an online venue with total information transparency and much greater scalability because of the added efficiencies. Platforms like Fundrise have begun to optimize the way real estate investment works by allowing investors to see, dig into, and access diverse investments, while lowering fees and giving real estate companies new tools for raising capital.
As more sponsors start to view crowdfunding as a more scalable, efficient way to access capital and investors begin to access real estate equally and online (as opposed to the offline, word-of-mouth process that is currently dominant), traction will increase. We’ll see the network effect kick in, which is maybe the most powerful mechanism for growth.
Where is real estate headed in 2015?
I’m generally optimistic on the future for both real estate and technology and, as a long-term investor in both sectors, I tend to be positive on how innovation can continue to drive great opportunities over time.
We’ve seen solid jobs reports recently and a good interest rate environment, which fuels both real estate and tech growth. I do worry about people broadly over-extending themselves like we saw in 1999 and 2000.
Do you have advice for anyone looking to get into the real estate tech sector?
Learn to code! Start to understand how to apply technology to business problems and how to communicate a value proposition to customers. I’m bullish on opportunities in the tech sector and, in terms of picking a career, I find it hard to see how you could go wrong with tech right now.
Source: Boegh, Flickr