WatchThanks to introductions from kind readers, I met with one VC on Thursday and have another meeting on this coming Thursday.
Unfortunately, the best business idea I could come up with was aggregating and selling subscriptions to death, divorce, and bankruptcy data so that buyers can figure out which houses are likely to come on the market soon and get there before the realtors do.
While it's not a bad idea and many people might be willing to pay for that data, the VC pointed out a few practical problems:
* Getting the data from the counties might be hard, even if they are legally obligated to give it since it's all public record.
* Owners who have recently suffered one of those tragic events might not be too happy about people suddenly showing up and making offers on their house.
What do you all think? Is there a better business model I can propose to the next VC? Or a way to solve the two problems above?
I'm grateful for any feedback.
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Hi Patrick, What stops VC from taking your idea and going with it. What measure did you take to prevent him from stealing it.
You have already posted it on site so there not much secrecy for now but, what can be done to prevent people from stealing ideas.
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David Losh says
I like that! It's original and I don't think anyone is doing it. Hard to scale though, since it requires lots of individual work for each house. So how could I do it, being just me? I'd have to hire someone like you, but then why would you work with me?
Data is definitely good though. I wouldn't say the system has been "corrupted" by data in any way. It's corrupted by the commission system, NAR bribes to legislators, and the infestation of every DRE with realtors, who are about as far from unbiased public servants as you can get.
In my ideal world, I'd be able to easily look up:
* Every offer
* Every sale, including all short sales, probate, foreclosures
* Every recent death, divorce, bankruptcy, mortgage default
I'd be able to get it inspected, calculate what I can afford, and calculate the value of the house based on the inspection, all with a minimum of clicks and data entry work.
Then I'd be able to make an offer with standardized online forms legal in that jurisdiction and close without any garbage fees.
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KgK one says
Nothing, but a good idea is not as valuable as you might think. There are more good ideas than there are competent and dedicated people to execute on them.
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What I'm saying is that the redfin business model is set in stone. You can mimic it, but it isn't of any benefit to the consumer, as a matter of fact is corrupts the system of Real Estate Agency by putting the burden of the purchase on the buyer.
Real Estate Agency isn't a bad thing, it used to be a good thing. You paid agents who knew where the properties were.
Real Estate agents used to work. Real Estate agents used to hit the pavement, knock on doors, talk to people. You are just trying to duplicate an arm chair property search that any Real Estate agent can do today.
Real Estate agents don't need to know anything because they are following your business model here. They look at the computer all day every day looking for an angle, or have one already.
The buyer in the mean time is on thier own.
There is no agency in what you are proposing, there is no one in the buyer's corner. That's the problem that needs to be solved.
Where will the buyer get the individual support they need?
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Patrick says
Not true. Create a tailored non-disclosure agreement. If anyone does not want to sign, run.
http://hyraip.com/2009/11/three-step-invention-protection-plan/
http://www.nolo.com/legal-encyclopedia/how-protect-invention-when-pitching-30208.html
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Instructional video to help patrick prepare, for future pitches to venture capitalists...
You can thank me later! make sure you use good math and zenn diagrams, as provided in this example.
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KarlRoveIsScum says
actually, you can. but plenty of people are already doing it... The information is not as valuable as you think, I can pull up all of the filed trust deed sales by zip code for free already; I don't, because it would be a waste of my time.
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I personally like the idea for sale by owner. If you can get enough people to your site where they can discuss and chat, while on a side there is for sale by owner it makes sense. Not having to give up 3% to 6% of your property value would be nice. And I know I'll try to sell FSBO when we'll try to sell our place.
The rest would be just spending advertising dollars and getting more folks to your website to both search and sell.
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David Losh says
I'd pay for a service that would reduce my property taxes. Hell, anyone would if it pencils out.
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KarlRoveIsScum says
In a way we are on the same page. Someone with means will likely start licking their chops at an unmarketed business idea from an unknown. (No disrespect, but imo, someone with a job is an unknown.)
Back to my mid 1990's story with the Venture Capitalist, at first he was so nice, so charming, so helpful at how to find just the right listings he could flip. Agree, I thought of suing the guy at the time, it would have taken much money and effort to uncover his trail of the properties purchased with my licensed help.
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KarlRoveIsScum says
KarlRoveIsScum says
Funny, but all your comments are pretty funny.
You would have to ramp up first, and either sell the concept or they would have to duplicate it. No one is interested in duplication today.
You have a mish mask of misinformation in your comments that isn't worth sorting out.
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KarlRoveIsScum says
Does anybody?
Biff
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KarlRoveIsScum says
Oh my gosh! No I do not. Do you know someone who does? I would surely pay them to help me. I need to hire them immediately. To bad nobody on this site is trying to cram that down my throat.
Biff
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KarlRoveIsScum says
KarlRoveIsScum you should not be giving this information away for free. Seriously, stop it.
Biff
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KarlRoveIsScum says
If I am reading this correctly, KarlRoveIsScum seems to have some experience in this area.
Biff
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KarlRoveIsScum says
company name?
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David Losh says
They sure are not getting it from commission-based agents.
David9 says
VC's never sign NDAs from what I've been told.
KarlRoveIsScum says
You'd be more believable if:
1. You showed some evidence.
2. You could construct a coherent sentence. You wrote "who's" where you mean "whose", for example. And what does "in securities" mean? And "you will have no phones which you will also not be able to do" is just not close to grammatically correct.
David Losh says
Why do you think I want to mimic Redfin in any way? They are just part of the same old commissions game. I don't want to be like Redfin at all.
What I want to do is find some scalable business model that really helps buyers. You can read "armchair" or "automated" for scalable if you like.
Maybe I should just write an investment newsletter and sell subscriptions to that.
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Patrick says
Well, that might explain these 63 reported Venture Capital Scams as recent as 2/9/13:
http://www.ripoffreport.com/directory/venture-capital.aspx
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Biff Baxter says
I wouldn't be surprised if even Patrick had this Karl the troll on ignore too.
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KarlRoveIsScum says
Hey genius. Your terminology isn't even right. Software would be used to aggregate shopping sites. This software would hopefully but not necessarily have an API.
You don't drive to town with a car door. You drive to town in a car that happens to have a door.
What I really want to know is if you are typing with your feet. I know the jacket prevents you from typing with your fingers.
Biff
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KarlRoveIsScum says
My api brings all the boys to my yard
I could teach you, but I'd have to charge.
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Patrick says
Because it is the new industry standard to let the buyer swing in the wind while commissions get sliced, and diced for market share.
Let me also be clear that redfin is a data collection site that people willing sign up for, and participate in.
They have a lot of avenues of monetization.
redfin represents a problem that needs a solution.
You're not offering solutions.
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David9 says
Viable startup ideas come from the confluence of problems shared by enough people without adequate solutions, the potential for exponential commercial growth (VCs need 1000% winning returns to offset the median near total loss), technology to solve those problems becoming abundant and inexpensive enough, and people who can solve those problems being or becoming aware of them.
Other people experiencing the same confluence will have come to the same conclusion. At least two other people independently arrived at something like Google's pagerank at the same time and cared enough to document it where the confluence was web search sucks, affordable fast internet was available for the masses and spreading like wildfire, computers and network bandwidth were cheap and abundant, and computer scientists were already ranking papers based on how often they were cited.
VCs know this, may have other portfolio companies working on the same problem, and may invest in such companies in a following round so most won't sign an NDA.
Paul Graham comments
The cult of the NDA
That said startup failure and success are almost entirely about how well you execute (design, implement, market, sell, and iterate when you're wrong or expanding your market).
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Patrick says
NDA... worthless! show one instance where someone was sued for violating a NDA
in SV. Had such been true and enforceable, we would never seen small new companies being created from former large tech firms. One of the reasons we had such a boom in SV
back in the 70s - 90s.
Frankly such pieces of paper are just filed away and forgotten.
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Go with porn, a proven winner.
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Blurtman says
Porn production costs are high. Higher than I can pay anyway.
What about porn reviews? People might pay just to follow links right to the best porn.
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I've never looked at a porn review. And of course, I have never viewed porn.
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Blurtman says
Heh Even if that were true, you wouldn't be missing much. A lot of that stuff is so unsubtle as to make a man turn monastic.
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Patrick says
In all seriousness, to succeed a startup
1. Must complete a whole product which is everything a majority market (where the money is) customer needs to solve a pain point and is good enough to compel purchase over market alternatives. Generally this implies something disruptive which is a game changer (otherwise existing market alternatives are good enough) that has recently become a practical commercial endeavor (on-line porn couldn't be a business when only government, universities, and tech companies had connections with at least 1mbit/second of bandwidth and a full time dialup connection was $300 a month paid for by a few techies when that was 10X what your phone bill would be without the feature) because otherwise enough other people have exploited the same factors to get sustainable advantages you won't overcome.
2. Must have a sustainable advantage. "Sustainable 'unfair' advantage" may be a better description like Qualcomm's patents on CDMA. 40 man years to build a product is also a high bar to entry - it'd cost a lot for startups to catch up and by the time they do that a good startup has 7 figure annual revenues increasing at 2-3% per week. Provided that the product is sufficiently disruptive big companies won't match you because that would cannibalize their existing product sales (yes that is short sighted).
3. Must have a significant reachable early majority market. No matter how compelling your product seems you can't jump directly into a mainstream market. In a world where "nobody gets fired for buying IBM" you need a beach head market from which you can attack. VMware got there as a software developer productivity tool which was picked up by IT organizations in the same companies and then by IT organizations in other companies.
4.1. Must grow exponentially.
4.2. Must produce sufficient margins.
Combined you need to end up with interesting returns for investors within an acceptable time frame. VCs want 1000-3000% on the winners to offset the mean case of a near total loss and nine figure exits around 10 years out to make their time worthwhile in terms of opportunity cost.
The house sale whole product is arguably finding enough relevant properties, getting the buyer and seller to the table, and closing the deal. Just providing leads to dead/divorced people isn't enough of a value add.
redfin, trulia, and your local agents' association could all do the same thing without cannibalizing their sales. They already have existing sales and marketing channels which yield a near monopoly for the Realtor(TM) gorilla and are probably OK for at least one chimpanzee (Redfin?). (I'm drawing from Geoffrey Moore's _Crossing the Chasm_ series because that was the first marketing book many engineers managed to read to the end because it made sense with VC and entrepreneurial community endorsements sealing the deal).
The porn whole (applying the homonym is almost irresistible) product would be getting good sexy material off the internet onto your computer display (where "computer" now includes tablets and smart phones). Obviously that requires bandwidth and computers with video which have become commodity items, the website, and a little ranking by user/machine/community.
If the online porn market is split like other products between a gorilla, at most a couple of chimps, and some small monkeys (ex: The Microsoft gorilla with 80% of the web browsing OS market, Apple chimp with 13%, and Linux 1%/Android 2.9% monkeys) the Gorilla can beat you with a simple add-on product (like you tube rating), the niche markets are marginally relevant but already have a chimp owning them that can do the same, and the monkey left overs don't matter.
You'd need to do something truly disruptive like exploiting the drop in robotics prices and democratization of manufacturing outsourcing for a teledildonics product providing a porn experience that's more than just audio visual. Maybe you could pair that with open source computer vision software to provide a migration path from existing software.
Some things are viable small businesses (a restaurant, local real estate agency, etc.), but not viable startups (no exponential growth). Some things are viable bootstrapped or angel funded startups but not enough for VCs.
That's my view having pursued startup success for the last 15 years working for five startups (3 craters, one OK event for a few early employees at $360M out after $80M in investments and $80M in debt), rejecting offers from craters (your startup rocket explodes on the launch pad leaving the investors with a fraction of their investment when they sell off the scraps)/fizzles (your nuclear attack on a market produces a conventional explosion that does some damage but doesn't win the war meaning the investors get their money back and then some but non-founders don't win)/likely "hobby" businesses (the businesses will run indefinitely creating a pleasant diversion for their operators but can't scale) based on that experience, presence at Qualcomm when they pivoted to CDMA cellular, and second hand experience from friends' wins.
By "working for startups" I mean averaging up to 70+ hours a week for a few years in positions through first technical employee / "lead architect" with no real influence on "business" decisions that'd be there as a founder with board member friends. I did meet my wife with that combination (she often slept in her car to work more, I often slept under my desk) although in general that is a _a lot_ of motivation to do better next time when competitors have nine figure exits where my equity remaining at the time of a liquidity event should be 0.25 - 0.50%.
My goal here is to do technically interesting things full time while sustaining a middle class life style with family which implies not needing a pay check so I can work on my own ventures before getting funded since that's the most practical route to making timing work landing hands-on technical leadership positions for pre-product companies that are interesting from technical and business perspectives. That wouldn't be new - I've led teams of a dozen engineers building distributed systems for business critical applications like block storage - but I want to do it repeatably.
As a technical guy who eschewed "business" as uninteresting and irrelevant early in my career, I'll also point out that making a successful startup and sub-problems like marketing are systems engineering problems choosing good input variables for a desired output. Starting at the intersection of your technical expertise and market experience probably isn't the most likely route to life-changing returns on your investments (whether monetary, opportunity cost, or time).
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House hunting, and online porn have gotten to be kind of the same thing.
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Patrick says
I hear the real money is in Gay porn. I do know of several successful companies in America, England, France, Italy, and Germany, so might be worth keeping in mind.
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robertoaribas says
My api fixes all the Fords in the yard.
And it's better than yours!
Hey I made lyrics.
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David9 says
Finally. I was wondering when we would get to the topic of gay porn.
But I still can't figure out why this site doesn't make more money. It's a real mystery.
Butt plugs anyone?
Biff
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Biff Baxter says
Me Too. There is an obvious market for Gay Porn, universally.
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Personally I'm not into gay porn, but I have to note that my traffic increases whenever gay porn gets mentioned on my site, so OK: gay porn gay porn gay porn
drew_eckhardt says
There's definitely pain in being a buyer thrown to the wolves and thinking you'll get protection from yet another wolf (your own agent).
The exact product that takes away the pain still eludes me.
But I am pretty sure the buyer will have to pay some hourly fee or subscription fee to get really good info and ways of dealing with the current RE system until it finally dies its well-deserved death.
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Patrick says
The guys at WaLaw who I mentioned before, are attorneys who have Brokerage. They say there are more, and more people who want them to facilitate the transaction between the buyer, and seller without agency services. They are contracting them as attorneys.
I do think when some one finds a place they have under contract that they should get a second opinion. Some one to run the numbers on value, and costs of ownership.
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http://www.businessinsider.com/how-retail-startup-nomi-raised-3-million-in-13-days-2013-2?utm_source=dlvr.it&utm_medium=twitter&utm_campaign=Feed%3A+typepad%2Falleyinsider%2Fsilicon_alley_insider+%28Silicon+Alley+Insider%29
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This guy, Dustin Luther has had some good success with blogging. I guess he is also looking for funding: http://dustinluther.com/2012/12/funding-niche-blog/
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You should've joined up with one of the hedge funds who were shorting the housing market and trying to push out negative propaganda. I know Patrick is way too ethical for that but you were basically doing their work for them for free.
If I were you I would forget about the small ideas. Go to where the big money is. Maybe start a fund or a REIT and start buying up houses that meet your investment criteria.
either that or porn...
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Just thought I help a little.