By Shellie Davis, Senior Manager of Mergers and Acquisitions at Coca-Cola
Constance Freedman, Managing Director at Second Century Ventures, the strategic investment arm of the National Association of Realtors®, discusses her founding role in the unique technology accelerator, REach®.
Second Century Ventures (SCV) is an early stage technology fund originally backed by the National Association of Realtors. SCV has a very unique platform whereby it can leverage NAR, its one million members and a very strong network of executives within real estate and its adjacent industries (mortgage, finance, insurance, home services, etc) to launch its tech companies into the trillion dollar marketplace. SCV’s portfolio companies use this industry as a beachhead to expand into other verticals (examples are DocuSign, WeVideo, Updater, Fundwell).
The REach accelerator is a ‘feeder with upside’ and de-risks SCV’s early stage investing; the involvement in the industry gives SCV both a platform to create growth for its portfolio as well as unique dealflow and exit opportunities. The Second Century Ventures fund generally focuses on investments that are between $2-$20M in revenue. REach® was created to develop a relationship with companies that are earlier stage, or new to its industries of focus. Each REach® class is comprised of six to ten companies who typically have between $0 and $11M in revenue and range between $0 and $52M in valuation. REach® companies have a shipping product, scalable business model, and plausible relevance in Real Estate or its adjacent industries, proven or not.
The program is nine months long and is built around Constance’s philosophy that, “if companies can build customers, investors will come easily” and it is therefore hyper focused on introducing companies to potential customers through monthly product demos, one-on-one mentorship meetings, an uber focus group of more than 2,500 industry participants and sector focused education. In exchange for these resources, participating companies are asked for a minimal cash payment to cover some of the marketing costs and an equity contribution typically less than 5%, both negotiable and subject to the size and stage of the company.
The program’s kick off meeting in Chicago provides the participating companies a wealth of material and training to get started in the industry, and the National Association of Realtors® Mid-Year Convention in May offers a live introduction to over 15k Realtors®. Many of the remaining monthly meetings are built around other external programming such as Coldwell Banker, Better Homes and Gardens, and Century 21 corporate summits. The program completes at NAR’s Annual convention where they showcase what the companies have achieved to the 30,000 attendees. These events offer a unique opportunity to put the participating companies on a stage in front of viable customers, to arrange one on one mentorship meetings with over 250 industry executives, and to form trusted partnerships with the leading Real Estate companies by providing them access to early stage innovation.
These monthly meetings seem to be the core of what sets this accelerator apart from others. The industry specific connections, education, individualized mentorship and guidance, and small class size, provide a valuable opportunity to explore the Real Estate vertical in a cost efficient way. This vetting process also helps de-risk investments made by Second Century Ventures and is a way to form an early partnership before the company has built a robust customer base.
The program’s first two classes of companies were incredibly successful: companies’ grew their customer bases by 90% on average, and raised $34M in outside financing after the program; Second Century Ventures invested in 6 out of 15 companies, and possibly the most telling stat is that 100% of the companies avowed that the value of the program exceeded the cost to participate.
Constance noted that the first two classes were not without challenges, citing the struggle to convince tech companies who might not be thinking about Real Estate and its adjacent industries to consider the verticals, the pivot from offering office space and co-location resources to simple relying on virtual communication and in-person monthly meetings, and finally the challenge of working with the startups to reshape their pitch and product positioning to best suit an audience of customers instead of investors.
As the program grows, Constance plans to offer separate tracks for participating companies into areas of focus such as Residential, Commercial, Finance, Insurance and Home Services in order to tailor the customer introductions, mentorship, and demos to the appropriate audiences. Past participants are lining up to go on their new tracks.
While REach™ acts as a feeder into Second Century Ventures, the fund continues to actively search for investments outside the accelerator, offering the program to viable candidates if appropriate. The program is not for everyone, but for those companies willing to commit to the 9 month course, it appears to be an invaluable introduction to a powerful industry otherwise difficult to navigate alone.