What’s the future in tech mergers and acquisitions? Tom offers insight into what the real estate technology industry’s future looks like in light of COVID-19. He’ll talk about brokerage tech trends, M&A, and more in this edition of the REAL Trending podcast with Tracey Velt.
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Tracey Velt:
This is your host Tracey Velt, editor-in-chief of content for REAL Trends. Today, we’re speaking with president and managing partner of Constellation Real Estate Group. A company that acquires, nurtures and grows real estate software businesses that are committed to providing longterm solutions and partnerships with franchises, brokers, agents, MLSs and associations. Tom George has spent over 20 years acquiring and managing real estate technology companies.
He’s responsible for driving strategic growth across the Constellation Real Estate Group’s portfolio of 19 companies, through ongoing acquisitions and integrations with a heavy focus on longterm technology partnerships. Tom is a champion for technology that strengthens the businesses of its users and enables the industry to spend more time interfacing and increasing their bottom line. Despite headwinds from the pandemic in 2020, Tom took the Constellation Real Estate Group into a new vertical with the acquisition of Inspire for Enterprise along with two additional acquisitions and the residential real estate vertical. So welcome Tom.
Tom George:
Thanks for having me Tracey.
Tracey Velt:
Yeah, absolutely. So I’m interested in talking to you a little bit about the MNA market. So technology has obviously been so important for real estate professionals and brokers especially due to many of the COVID-19 restrictions. So how has that impacted the MNA market for Constellation?
Tom George:
Well Tracey, COVID-19 is been really positive for real estate tech companies because has just gone through the roof and the market’s been very strong. You see mortgages double this year from last year. So things like lead nurturing and home showing and property marketing, all these things are seeing really maximum usage. And so the companies that we look to acquire have seen their businesses grow a lot stronger and this has really improved the market for us.
Tracey Velt:
And tell me a little bit about the Inspire for Enterprise.
Tom George:
So Inspire for Enterprise is a business that we acquired earlier this year and we had to finish the deal remotely which was new to us but the business is interesting because it’s a step out from our standard real estate playbook. Inspire focuses on multi location businesses including companies such as Hand and Stone and Affordable Dentures and while the services are similar to the products we provide to our real estate companies, it’s definitely a different customer segment.
Tracey Velt:
Okay. Yeah. That’s interesting. And so where do you see brokers and professionals really struggling? What are they struggling with in terms of technology today? When your experience, what are you looking for in your MNA the activities to help them?
Tom George:
Well what we’re really seeing is kind of A Tale of Two Cities. Those brokerages that have been focusing on implementing technology over the last 10 years are in a pretty good position right now because they have the systems in place. Those that haven’t done that are realizing that these systems are now mission critical and they’re struggling to get them in place. So they’re competing with those who have already put this technology in and then at the same time they’re struggling to put it in themselves.
Tracey Velt:
Okay. And what do you.. What are you looking for as far as kind of the services that you’re offering to real estate brokerages and obviously agents, MLS’s associations. What are what types of companies are you looking for to kind of round out the services that you already offer and has that changed since COVID?
Tom George:
Well you know business we bought this year is a virtual tour business and this is a technology that’s been around for some time but it’s really sort of stepped into the limelight during COVID. So that’s a great acquisition that we think is going to be a strong compliment to our brokerage portfolio.
Tracey Velt:
Yeah definitely.
Tom George:
You know generally we want to acquire mature companies that have a track record and have an installed customer base in the real estate segment.
Tracey Velt:
Okay. And I noticed that you do that. So your specialty is kind of recognizing mature and established tech companies to purchase. So tell me a little bit about that market today and how is it impacting real estate brokers directly?
Tom George:
Well one of the biggest struggles that the real estate brokerages have is they have to manage too many relationships with too many vendors. And even if these point solutions are strong and what they do in a narrow way, it’s difficult to knit these things together. So our big focus in the broker segment is to be a single source provider of front office, back office and data services. You know really provide a one-stop shop or one neck to choke.
Tracey Velt:
Okay. And so what do you find to be your greatest challenge in that business and kind of getting that together?
Tom George:
Well when you take technologies from a number of different vendors and you knit them together, integration is always a challenge and there are many different potential integration points. What we do is we really focus on our customers and the use cases that are most important to them. So we can tie the applications together that we provide in a way that’s really meaningful for them.
Tracey Velt:
Okay. And so tell me, I guess I want to know a little bit more about what you’re looking for in a technology company for Constellation and what are you feel are your greatest successes as far as bringing in new people or new companies to join you?
Tom George:
We see so many subscale companies that one of our biggest focuses is increasing share. And we’d like to be the number one or number two vendor in the marketplace. We’ve already spent 10 years driving towards that goal but we continue to buy companies that were formerly direct competitors in order to gain that share and get that scale so we can make the enterprise level R&D investments that our customers really need.
Tracey Velt:
Okay. And then where do you see the most opportunity in real estate brokerage as it relates to this technology?
Tom George:
Well I think the biggest opportunity is in really focusing on metrics that drive usage in their agent base. Whether this is around a metric like efficiency and being able to execute more transactions per agent or conventionally some leads using technology such as our smart data and our move scores. I think taking a couple of key metrics you want to improve and really focusing on using technology to achieve them is where the most opportunity is for brokerages today.
Tracey Velt:
Yeah that makes a lot of sense. I think there’s so much data out there that a lot of brokerages aren’t really sure where to focus their energy and by just picking a couple of important metrics, they can really get a lot of bang for their buck so to speak in how they handle their business.
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Tracey Velt:
I want to talk to you a little bit about how obviously technology is been… It’s always changed quickly, obviously. And the pandemic though has brought about even faster innovation. So I want to talk in depth about some of the trends you’re seeing in the real estate industry and how they’re impacting your company.
Tom George:
We’ve really seen some step function changes during the pandemic and I’ll give you an example from outside of real estate. The Microsoft teams product really overnight went from around 40 million users to around 80 million users. And we’re seeing these same types of step function growth happening with our products. So I’ll give you a couple examples.
Tracey Velt:
Okay.
Tom George:
Tech enabled lead management nurturing is something that we’ve seen really grow rapidly. Real estate agents are used to being able to go to live events and rely on chance encounters with their book of business but they really can’t do that now.
Tracey Velt:
Right.
Tom George:
So the usage of these nurturing technologies combined with smart data such as pre-move scores is something that we’re seeing increase rapidly.
Tracey Velt:
Yeah definitely.
Tom George:
The second example is, sorry Tracey. The second example is home marketing. I mentioned earlier that we acquired Paradigm which is a virtual core company and we are incorporating that into our core offerings. We also have provided the ability to link to popular technology such as Zoom to do virtual home showings and virtually overnight, virtual home showing because they’ve become something very common in the industry. Lastly, the transaction itself can easily require a lot of face-to-face meetings and touch points.
Tracey Velt:
Right.
Tom George:
Party eSign technology helps you get around that. Whether it’s just signing a COVID form, you can go see a house or actually getting into the mid of the transaction.
Tracey Velt:
Okay so anything else that you want to talk about as it relates to MNA in that market for Constellation? I know that’s what you specialize in and I think a lot of real estate brokers are curious where you’re taking it. You’ve got an interesting group of companies that you’re putting together for kind of a one-stop shop. So what are some of the things you’d like to add to that?
Tom George:
Well another area that we’ve been spending a lot of time on is complementing technology that’s being developed in house, real estate brokers and franchises. This has become a really big trend over the last 24 to 36 months. We know because we’ve been developing this type of software for 25 years that you can’t do this in a vacuum.
Tracey Velt:
Right.
Tom George:
And we’re realizing that each of these organizations is going to pick and choose what they consider to be their strategic advantage that they want to own from an IP perspective. But there are lots of other parts that it really, you know isn’t worth their time to do themselves.
Tracey Velt:
Okay and so what next? I mean when, you know obviously technology has been, a lot of brokerages have used that as their differentiator. However, it’s been heightened with the pandemic that innovation must come and once all these brokers do have that technology platform, what do you feel is the next step? What’s the next thing to differentiate themselves?
Tom George:
Well that’s a great question Tracey. And you look in other industries where you have a higher level of technology use and you obviously have to differentiate some other way. I think that there are these standard processes that are table stakes in terms of your technology investment.
But what I think will happen over time is that different brokerages the same way they differentiate on service level or on branding or on agent recruitment, there are going to be parts of their technology stack that they consider unique to them, they consider the algorithms to be important IP and this may have to do with lead acquisition, this may have to do with how they automate the transaction process, this may have to do with how they manage team collaboration or collaboration with the consumer. There are obviously an infinite number of ways to do this but I don’t think this is something that real estate brokerages have really considered in the universe of differentiation in the past.
Tracey Velt:
Yeah, definitely. Well thank you Tom for taking the time to talk to REAL Trends. Is there anything else that you’d like to add before we sign off today?
Tom George:
I don’t think so. Thanks so much for having me Tracey.
Tracey Velt:
Yeah.
Tom George:
And I am very excited to be able to speak with you and your listeners.