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In our Season Premiere, Lynette Keyowski sits down with Mark to discuss the founding of REACH and what the NAR future has in store.
“That’s very much the goal is to have a proactive approach to innovation and how things will change over time, and ultimately where our member sits in the relationship with the consumer and to the transaction. Making sure that, as their role has to evolve over time, based on how consumer preferences are evolving over time, that they are positioned to be successful and that’s why we’re here and why we do what we do.”
Full Transcript of the Show
Lynette: We are here today with the senior vice president of strategic business innovation and technology. Did I get that right?
Lynette: Awesome, with the National Association of Realtors, Mr. Mark Birshbach. Welcome!
Mark: Thank you.
Lynette: It’s great to have you Mark. I’m really excited to have you as our very, very first guest on the Beyond the Box podcast. We wanted to put this podcast together for a couple of reasons. Up here in Canada, there isn’t really a voice, a commentating voice of the real estate industry, but especially the real estate technology and capital at that intersection. I couldn’t think of anybody better to bring on as our first guest than you, because you’ve really been championing exactly that down in the US on behalf of the NAR and it’s venture arm on Second Century Ventures, which I want to hear a bit more about in a second. So, thank you for joining us and I’d love to start right there. We’re recording this during this weird pandemic time, so of course we’re both at home and we’ll talk a little bit about that. But before we get there, I’d love to hear just a little bit about your origin story. Where you sort of came from in the industry and how you landed in the spot you are in now.
Mark: Sure, that’s a good place to start. I actually started my career on wall street. I was an investment banker, doing mergers and acquisitions in New York City. I joined wall street in the late 90’s which was really the first tech boom when we were seeing the Nasdaq 5000. So, I really gravitated towards working on technology transaction which is when I really started to get passionate about innovation, technology, and things like that. But I was really looking at it from an advisory perspective, or a financial perspective, as well as a strategic perspective. What companies made sense to combine together, create synergies, etcetera. So, I did that for almost a decade, and then I had moved to Chicago in the meantime, and when the financial crisis hit, our firm was really consolidating offices back into the New York area, and I wanted to stay in Chicago, so I actually left banking and found myself in the start-up world. So, I actually joined a technology start-up really early stage; we hadn’t really raised much capital, but our main product was a web marketing platform that we were selling to realtors. So, I got my indoctrination into real estate as well as what it was like to be a start-up tech entrepreneur. What I realized about real estate, the really hard way, was it’s incredibly complicated, and we spend a lot of time, a lot of capital, trying to figure out who is our customer and how should we be targeting them and what was the difference between the association world, and the brokers world, and how did the MLS system all play into that. And as a tech entrepreneur, it’s incredibly challenging to figure all of that out and to navigate through that which that, combined with it being around 2009-2010, one of the worst real estate markets in history given what had happened. It was really challenging for us to get that business to work, but it really opened the door which was an opportunity for me to join the NAR in 2013 and help launch our REACH program. So, I had a really good financial M&A background, I had, I’ll say, dabbled in the start-up world as a start-up entrepreneur myself, and happened to be working in the real estate industry from a tech entrepreneur perspective. And that experience made me the perfect fit to come work for the NAR to use those resources to help companies be successful in this place. So, I joined NAR in 2013 when we founded and launched the first REACH class, the first REACH program.
Lynette: Awesome, awesome. So, tell us a little bit about REACH; it’s genesis, what the purpose was, and I know there’s a bit of a step before REACH happened, so Second Century was to that, which would have been before your time with NAR, but I’d love for you to kind of weave those pieces together as well.
Mark: Yeah, for a very large trade association to have a venture capital arm, is pretty interesting. Pretty amazing, actually. The story of Second Century Ventures even goes a little bit farther back when a guy by the name of Scott Fisher came to NAR in the early 2000’s with an idea for a lockbox company. Which has now been very successful; it’s a company wholly own called Centralock. But it was his idea to approach the NAR and say, “I need capital to start this business. Your members are getting price gauged by a competitor in the industry who sort of has a monopoly in the industry.” And the NAR’s response back to him was, “Well, we’ll promote your product, this is how much we’ll charge.” It was a marketing and advertising relationship. And he sort of flipped it on its head and said, “Well, no I’m looking for you to give me money to invest in my company.” Thankfully Bob Goldberg and the senior management and leadership at the time; this is a really interesting concept to get into at the time – to start getting into backing companies that can help support our members. So, that was really the first, call it, transaction that the NAR did. And what they realized through that process was that with a lot of committees and a lot of red tape and to get something like that through that entire system was really challenging. And it took a really long time. If you want to be in the venture capital business, you need to be able to move quickly. So, that was the idea behind creating Second Century Ventures as a wholly owned subsidiary with a separate board that could move really quickly when opportunities came to the table. So, as part of NAR’s Second Century Initiatives in 2008 to launch the entire association into its second century of existence, they created Second Century Ventures which is really our venture capital arm where we take investment dollars, or capital, and invest that into technology companies that can help our members. So, that was launched in 2008, made its first investment in 2009 into a company called DocuSign. Which not many people have heard of at the time, but now many, many people are using it and have heard of it. So, that has been a huge success story for the fund, but as it evolved over time, we realized that we were missing out on some earlier stage companies that we could help bring into the marketplace that could really help our members. So, when Second Century Ventures was founded, the board had a pretty strict investment criteria. We couldn’t invest in any company that didn’t have at least 2 million dollars in revenue, or a significant customer base. It was a way they wanted to manage risk associated with where they were investing their dollars. What we realized that we were missing a lot of opportunities, so there were earlier stage companies coming to the table and we had no vehicle to really partner with those companies. So, we got the idea to start REACH, which is more of a programmatic experience for typically an earlier stage company but the way it’s evolved over the last decade now, is we actually get later stage companies, or start-up companies with a lot of traction in other markets who really want that programmatic experience to help launch themselves into real estate. So, it’s really evolved over time with that very early centralack investment that ultimately paved the way for Second Century Ventures to exist, and now REACH to exist which, I mean we just launched our eighth core REACH class. We’ve expanded that program significantly and it’s bringing a lot of value to the table for our members.
Lynette: I love that you waved the story that way. I just learned now why it’s called Second Century Ventures, so that’s a very cool little tidbit of information to have. I know I’ve had a lot of people ask, “Why Second Century Ventures?” so now we know!
Mark: I know!
Lynette: Launching realtors into their second century, so that’s really awesome. So, the REACH program is reaching its eighth cohort in the US, so obviously it has been an extremely successful program. Can you give us just a few metrics around historically what that portfolio looks like, how it’s performed, and how Second Century measures the relative success of the program and why it continues to invest and expand?
Mark: Yes, absolutely. I mean, we really look at two major criteria when we’re looking at partnering with any company. First and foremost, what is the value that it can bring to our members. So, what products, what service, what pain point is it trying to solve, what does the marketplace look like, how will it help our members be more successful. That’s first and foremost the number one criterion. Secondly, and I think them really more as 1a and 1b because they’re both very important, is we track and measure financial success, or ROI on that investment. It could be the greatest product in the world, but if it’s not going to get traction, or the company isn’t going to do well financially, then it’s not something we would put our equity or dollars behind. So, we really look at those two criteria. In 2013 we launched our first class with seven companies. We typically have anywhere from between seven and nine companies in the REACH program each year. And then we’ll do follow on and investing in a handful of companies from each of those classes, depending on how successful they are.
Lynette: Awesome, so what is the portfolio size of NAR, so seven to nine must be somewhere around, 70 to 80 companies that have gone through the reach program?
Mark: So, last year, almost two years ago, we actually acquired a local accelerator which we modified and turned that into our commercial program, which we just launched our second cohort this year that our commercial technology real estate solutions. So, if you include that portfolio that we acquired which includes twenty-some companies, the total SCV and REACH portfolio is over 100 companies.
Lynette: Amazing. So, really expansive traction across the up and coming tech that is supporting the real estate sector.
Mark: That’s right.
Lynette: So, the other piece that I was hoping you could talk to us a little bit about is sort of the vision for moving forward. So, the REACH commercial program I know was an initial opportunity to expand the original concept, but there’s also been more move to expand, not just REACH. So, I’d love you to talk to that point and sort of in conjunction with that, how that fits into, and I want to weave back into your particular role, in terms of strategic business, innovation and technology, and maybe how the REACH program is helping to check some of those boxes from an NAR perspective.
Mark: There’s a lot in that. So, let me talk about REACH, first of all. So, we’ve expanded REACH quite a bit. Significantly. We really looked at three different strategies which are in various stages of being executed, so there’s a lot of innovation happening around real estate and around real estate transaction and places where we can help our members be more successful if we help innovate those areas. So, the first strategy in which the commercial expansion really fit into was what we call our “vertical strategy.” So, what our real estate adjacent industries or areas which impact real estate transactions where we can invest in, help innovate and make things easier and more productive for our consumers as well as our members. So, think things like mortgage technology and insurance technology and settlement services technology. And commercial real estate technology which is actually quite a bit different from residential. So, we include commercial as another vertical even though it is real estate transaction focused. So, we’ve had companies who maybe were more focused on addressing those specific verticals that have tried to, with varying degrees of success, tried to come through the REACH core program, and we realized that we have an opportunity too, as we expand and grow, to tailor something better for them so that they’re getting a lot of value out of it, as well as our members are getting a lot of value out of it. So, our first vertical is really our commercial vertical, which we’re focused on trying to make successful. But we are looking at other verticals for future expansion. The second major growth area, which we’ve gotten a lot of traction in is our global expansion. So, this really came about because we had international companies who were looking to participate in REACH to open up their US markets. So, the very first company that we had was a German based company which was a number one player in Europe, that was looking to expand into the US. They opened their first office and realized, “Wow this is a lot different than Europe. How do we figure out how to trade the United States?” So, I was introduced into them and we had this great opportunity to bring our first international company into the US using REACH. Well, that sort of gave us the idea that innovation is happening everywhere, not just in the United States, and how can we go and find international companies that we can bring into the US that can help our US based members. And so, what we started doing last year is we launched our REACH Global effort with our first cohort in Australia. We had four Australian based companies come into the US via REACH in 2017-18. So, there’s a lot of similarities to the United States real estate market and Australia so it seemed like a natural place to start. So, we’ve since announced that we’re going to do REACH Canada this year, we’ll do REACH UK this year, and then obviously REACH US, with the idea that, let’s go find innovation that’s happening everywhere and get involved in that through these bi-lateral partnership agreements that we have with, let’s call them sister organizations in real estate in those countries. We have a natural connection there. And then we have significant connections in the international technology and venture capital communities where we can go find the best and brightest companies, run them through these, call them local programs, to those countries and then when they’re ready to come into the US they’ve got some traction in their own space, in their own location and we can help them do really well in the US. And I think further down the road and now having this portfolio of let’s call it, one hundred companies, as they saturate the US base real estate market, maybe get into some of those additional verticals by expanding their products and solutions across some of our vertical programs that are looking to grow their businesses beyond the US and get into some of these countries where we’ll already have a systematic way to launch them into those companies like we did for them in the US. So, that was really the vision around international expansion is, innovation is happening everywhere, and let’s bring some of that to the table for our members.
Lynette: That’s awesome. So, you’ve mentioned three strategies – vertical specific, global expansion, is there a third? Or was that woven into the last?
Mark: There is a third, which we are still working on and have not disclosed yet, but there is a third strategy that we’re looking at.
Lynette: Cool. So, I hear a second podcast coming up in the future.
Lynette: That’s awesome. I love that. I love that one of the things that I’ve had the opportunity to see is sort of this global interest in the REACH program which speaks really highly to not just the quality and the caliber of the program, but the reach of the program around the world; Pardon the pun, but already how successful some of those companies have become because of their participation in REACH programs. So, I love the wider vision to sort of behold technology without borders approach. So that there’s an opportunity you expand that value around the world. I love that.
Mark: And that fits in really well with the overall strategy of the strategic business, innovation and technology group of which Second Century Ventures are a key piece of, but they really fit in the middle of what I call the value chain. So, if you think just in their purest form, REACH as an early stage company, we’d partner with them in their early stage, they grow and then maybe we invest in them from Second Century Ventures as they grow and they start to fit into that investment criteria. While we’ve been incredibly successful in that band of companies, there was work to do around how about if we went up the value chain to what we call our bay-tech initiatives. Which is what is our conversation and relationship with some of these really large companies like Google, Facebook, Amazon, Microsoft. You could go down the list, and how does the NAR work with those companies to make sure that if they want to do something in real estate, that they do it in a way that is beneficial to our members as opposed to detrimental. So, we really started to open up a lot of dialogue with those companies and we’ve had a number of different avenues within how we go about creating relationships with them, whether that’s a straight up marketing relationship. I also oversee the realtor benefits program which is a program where we partner with as large as fortune 100 companies that are looking to bring a valuable product or services to our members at a discount for our members so they can take advantage of it. You know, so there’s marketing and advertising relationships that we can have, there’s corporate development, so let’s look at this 100 company portfolio of yours and look at what you’re missing and what we can fit in with what we’re doing and maybe it gives us a toe-hold into real estate and that’s an interesting conversation to have at the corporate development level. Then I’ll go all the way down the value chain to the really early stage raw, pure technology. So, think of things like Artificial Intelligence, and Machine Learning, and VR and AR.
Mark: I try to not list that one, because it’s a little bit ahead of its time as far as having practical applications that make sense, but we are certainly incredibly involved in Blockchain and how it can and will potentially affect real estate. But yes, perfect example. I have a team of emerging technologists whose sole focus is identifying and researching those kinds of technologies and going out and having those conversations with the people who are funding development of that. And a lot of that funding and development is happening, yes in the start-up world that we have a pulse on from a REACH and SCV perspective, but there’s a lot of funding at again, big corporations or government institutions or academic institutions that are doing a lot of research and development around different technologies. Our goal is to be on the forefront of that, be involved in where those conversations are happening, and thinking many steps ahead of how this can and ultimately will affect real estate, consumers, our members, and be early in those conversations. And a lot of those conversations tend to really feed what we’re doing into REACH. So, you think about the evolution of a company starts with an idea, maybe with an underlying technology, it becomes a really early stage product that is going to evolve over time, and maybe it gets some traction, it gets some traction in real estate. It makes sense for that company to go through REACH, we invest in it out of SCV, and the company is on its way. So, where I want to be is in really all levels of the conversation from super early stage, raw technology, to all the way to huge multibillion, even trillion-dollar big tech company. And this new group gives us the ability to do that.
Lynette: I think it’s amazing Mark the way you’ve sort of woven out that picture of the value chain. I think it’s really important to know that NAR as the largest, one of the very largest trade associations, is really positioning itself strategically and purposefully. But also, in a very meaningful way in every aspect of what I would call, almost that virtuous circle that you’re creating, right. So, you know, there’s the chain concept where you invest kind of in the middle stage and hope you can extrapolate to the end piece of the value chain, but really what you’re doing is feeding that system, you’re really creating the entire ecosystem, and I think shaping that entire ecosystem for the future of the real estate practitioner for certain, but by virtue, making certain that you are impacting all aspects of that real estate ecosystem, not just the transaction on the ground, not just with finance and mortgage. And so, I think it really shifts the dialogue to the real estate industry driving more of what the sector looks like, rather than sitting back and passively accepting what the sector becomes and then reacting to it. I think that is an amazing path forward.
Mark: That’s very much the goal is to have a proactive approach to innovation and how things will change over time, and ultimately where our members sits in the relationship with the consumer and to the transaction. Making sure that as their role has to evolve over time, based on how consumer preferences are evolving over time, that they are positioned to be successful and that’s why we’re here and why we do what we do.
Lynette: Love it. So, I want to be conscious of your time, because I just want to note, that we’re actually recording this in the middle of the unprecedented virtual mid-year meetings for NAR, and I know that you have a lot of things to do, so I just have to more questions. One more question, then a “let’s leave it at that” question. So, we are recording this during legislative week, or make your legislative meetings week for NAR, but also the Covid pandemic. So, we can’t not address that in the context of this conversation. So, I’d love to hear a little bit from you or more specifically how NAR is approaching this period of time in the context of that innovation sort of agenda, and how you think that may shift the thinking, where you think the shifts might happen, does it impact what Second Century is investing in? Really, wide open field here for you to address that! I think it’s anybody’s guess, but I’d love to know what your current thinking is.
Mark: Yeah, I mean this is obviously been a pretty significant curve ball, in any industry. Real estate for sure. I think what its really highlighted, really in any industry, is how can you be productive and get things done when you’re not able to meet face to face, or you can’t be in the same room, or if you’re in the same room, you have to be a safe distance apart. You know, we’ve been fortunate and working really hard to follow consumer preferences for digital transactions and eliminating a lot of the potential face to face interaction, just from a convenience perspective. While that idea has been super charged when people can’t meet face to face. The companies that we have invested in, over the last 5 to 6 years that do anything to try to mimic a face to face relationship or experience digitally or virtually are getting significant traction. All of the digital transaction tools like esignature and remote notarization and things like that are getting significant traction because people can’t physically get together. So, luckily, we were on the forefront with a lot of those technologies; we already had them in our portfolio, those companies were getting a lot of traction already just due to consumer preference in convenience. You know, not being able to be in a place. And we’ve seen through this, I think some of the slower to adapt those technologies or prefer those technologies now can’t get enough of them. Because they can’t do business without them, so I think it remains to be seen as we come out of this; what is the new normal? I think obviously these companies were very well positioned, for lack of a better world, take advantage of a situation like this. But I think this will impact how business gets done in the future and the more people get comfortable with the tools that the technology tools that they can use that were just a convenience from a convenience perspective, are now really being looked at as a safety perspective were well positioned. NAR is doing a lot to help our members navigate through this. There are business challenges. There are safety challenges, there’s regulatory and legislative challenges and we have been working around the clock to help address all of those things for our members.
Lynette: Awesome, very cool. I’ve been watching it and I’ve been seeing it through all of the news channels, how much NAR is doing to and it’s one piece we haven’t even touched on, but the intersection of advocacy and technology and how well situated NAR is to facilitated some of those changes that have prevented tech from evolving just because of the regulatory barriers. Again, for another podcast! So, Mark, thank you so much, I really, really appreciate you doing this. I think how you and the team at NAR have set up the SCV and the REACH initiative are going to speak volumes in the future. I am actually really excited about what this period of time offers for those initiatives, but they will only be successful because of the foundation that was set up. So, kudo to you and the team for doing that. Best of luck with the rest of the legislative meetings and hopefully we see each other face to face and in person before this time next year.
Mark: Hopefully, I agree. Thank you very much for having me. Happy to do it!
— End of Podcast —
Beyond the Box: Conversations with real estate executives, venture capital partners and technologists on what lays ahead for the real estate industry in a world after COVID-19.