Nexme // an on demand real estate platform [UP079]

Vanessa Alvarez 0:00
If I see a listing on the platform, I click on it. I click on tour now and I’ll have a real estate agent connect with me within 60 seconds.

Jay Clouse 0:10
The startup investment landscape is changing. and world class companies are being built outside of Silicon Valley. We find them, talk with them and discuss the upside of investing in them. Welcome to Upside.

Eric Hornung 0:38
Hello, hello, hello, and welcome to the Upside podcast. First podcast finding upside outside of Silicon Valley. I’m Eric Hornung, and I’m accompanied by my co host, Mr. MLS relationship himself, Jay Clouse, Jay, how’s it going, man? You

Jay Clouse 0:54
You know, it’s nice to be back on the receiving end of nicknames, Eric.

Eric Hornung 0:57
We’ve been doing a lot of coffee chats. Oh, that’s a that’s a throwback term. We don’t really use that as much anymore. But we’ve been doing a lot of coffee chats lately, so I’ve been getting bombarded with nicknames.

Jay Clouse 1:07
Mr. MLS relationships himself. Well, as we’re speaking my girlfriend, Mallory for another podcast, Mallory is out showing a house right now. Because she is a realtor.

Eric Hornung 1:17
It’s like I’m psychic.

Jay Clouse 1:18
It’s like your psychic. Yeah. Apparently both of us like to work on Saturday mornings.

Eric Hornung 1:22
Is that a dig? Because I made you record on a Saturday as opposed to a Friday?

Jay Clouse 1:26
No, it’s all good. We’ve been doing this for years, I was actually just laughing. I have a draft tweet that has not yet gone out about the fact that you and I’ve been doing this for two and a half years. A lot of times weekend mornings. And every time even though we know exactly when we’re going to start. We’re five minutes late, because one of us is making coffee.

Eric Hornung 1:42
I love that ritual. And honestly, I think it could be a segment somewhere someday down the road, you know, like making coffee with Jay and Eric.

Jay Clouse 1:52
Before the coffee chat.

Eric Hornung 1:53
Oh, before the coffee chat. That can be like a little inside baseball. Acquired has the their LP network who pays for subscriptions? We’ll just have the making coffee crew.

Jay Clouse 2:03
Yeah, yeah, it’s been fun learning a little bit about real estate through Mallory because I knew nothing about it. And now you know, she’s working with a client or two at all times. She’s having a great year. I’m just learning a ton about real estate and how it works and how the contracts look. And she comes back. And sometimes she’ll be frustrated, like, oh, the client doesn’t understand this. And I’m like, I wouldn’t have understood that either. Like, I don’t know this. And now I do. And I feel a lot smarter. And it’s an interesting world, Eric.

Eric Hornung 2:32
is it common for real estate agents to use a tropical MBA term here to have to do their job as like a Saturday morning side hustle?

Jay Clouse 2:41
Well, I mean, a lot of real estate agents will join what is called a team. And it’s a small group of them, they pool and split commissions evenly across the team. So they’re all doing showings, they’re all trying to sell the place. She is operating under a brokerage because you have to work with a brokerage until you get your own brokerage license. But she’s independent, because she’s doing it part time outside of her job. So since she has a full time job, yeah, a lot of times that she’ll she’ll do things on the weekend or in the evenings. And it’s just just like freelancing, man, you gotta you got to find time.

Eric Hornung 3:16
You got to find time. And today, we found some time with a founder in the real estate space.

Jay Clouse 3:21
That’s right. Today we are talking with Vanessa Alvarez, the co founder and CEO of Nexme. Nexme is an on demand real estate platform that delivers instant access to homes and full service professional real estate agents, all at the click of the button or a button, Eric. I don’t know how many buttons there are. But I think there’s probably more than one.

Eric Hornung 3:40
Generally, there’s more than one button except for when there’s just the big red button and like a cartoon or something.

Jay Clouse 3:45
Nexme was founded in 2019. It’s based in Seattle, Washington. And at the time of this recording, they’ve raised about $500,000 in funding, say my notes.

Eric Hornung 3:55
You could buy a house with that.

Jay Clouse 3:56
You could buy a house with

Eric Hornung 3:58
Which I guess you could say about just about any amount of money.

Jay Clouse 4:01
Yeah, yeah. So this is this is interesting. I mean, we see a lot of companies in the real estate space, you got Zillow, you got Redfin, there seems to be a broad consensus that people want to take away some of the margin that agents earn, for better or for worse, I’m sure we’ll talk about that in the outro. But it seems like Nexme is taking their own little spin on it that here.

Eric Hornung 4:22
This is one of those things where it’s like, everybody looks at this market, and they say this market is huge. So there must be something we can do here to solve this market. People. I think people call it prop tech, real estate tech, there’s just not a lot of massive companies that have come out of it. So I’m always a little concerned on how this market actually gets evolved. Or if it just takes a little bit longer, like the tech boom, hit the internet fastest obviously. And then it hit internet enabled things second fastest and now it’s like kind of b2b SaaS, you know, places where Excel existed, but real estate is something that is real, it’s very physical. So just one of those areas that I always whenever I see a real estate startup, I’m always like, man, that is if if I was a market first investor, very exciting, but also just comes with so much risk of people doing things the way they’ve been doing them since literally forever.

Jay Clouse 5:14
Yeah, there are some large organizations with large numbers of people that have invested interest in keeping things the way that they are. So I’m sure Vanessa will talk a little bit about that. But do you know what real estate agents in our friends at Ethos Wealth Management have in common?

Eric Hornung 5:28
They want you to live the one life you have in the best place you can.

Jay Clouse 5:33
That’s pretty close to what I was going to say. So if you want to, if you wanna learn more about wealth management, you can visit our friends at upside.fm/ethos. Eric, let’s dive in and talk with Vanessa, shall we?

Eric Hornung 5:44
Let’s do it.

Jay Clouse 5:45
Alright, and if you guys have thoughts on this episode, as we do, you can email us hello@upside.fm or tweet at us @upside.fm. Hey listener, have you ever wanted to get a message in front of the upside audience but weren’t sure how to sponsor the show or weren’t able to do a long term sponsorship? Well, now you can just go to upside.fm/classifieds. And let our audience know anything that’s going on in your world, whether it’s an event, an application, a special coupon, or deal, or just letting them know who you are, what your company does, all you have to do is go to upside.fm/classifieds. And you can place an ad on this show, that’s upside.fm/classifieds.

Vanessa Alvarez 6:34
So I’m gonna go all the way back, because you know, I used to play with dolls. And jump through the fire hydrants, I will start with my major, because people always ask me, Hey, did you study technology or computer science in college? Right? And the fact is that I didn’t, I was a political science major, because I wanted to be a lawyer. Right? Like everything, immigrant families, or Latino families that are, you know, that I have just come to this country, and I’m really trying to make a living, they want you to be a doctor, a lawyer, you know, banker, so on and so forth. But in college, I actually met someone who was really into business and he said, Hey, you should really look at business, you have a great business mindset, etc, etc. And so I didn’t really think about it much, because like I said, in immigrant communities and Latino communities, most parents want you to either be lawyers, bankers, doctors, etc. Or they, you know, think that you should follow their route. So my parents came here to this country, worked in factories their whole life. I graduated college, my mother said, Hey, here’s an application at the factory where I work, go sign up and get a job. I said, No, I wanted to go to college. But circumstances in my environment didn’t really give me that opportunity. Went through a program in college for you know, students from low income backgrounds, etc. I got into college, did okay. But once I show I graduated, I always talk about that moment that I graduated as one of the proudest moments in my life, because it really was a struggle, when you come from not so great backgrounds, immigrant families, and you have everything kind of going against you and you try to persevere, definitely hit some roadblocks. But in the end, I made it and I walked across that stage. Fast forward a little bit. I did, you know, worked in a customer service department. I picked up the phone. Hello, how can I help you? I talk about those days now. Because it actually taught me how to really talk to customers, right? And really listen to their problems and help solve problems, which at the end of the day, when you start a business, that’s really your number one job is to make customers happy. And then I was living in Rhode Island, not Long Island, New York, but Rhode Island, the state. It’s actually the smallest state in the Union, which is where I grew up, and I moved to Boston, Boston didn’t really have much customer service, and the manufacturing industries, which is where I’ve always been. So I started looking around and I came upon a technology research firm called the Yankee Group. And they did a lot of market research and telecommunications, technology, media and entertainment, etc. And so I, you know, apply for this account manageable, and they said, Hey, have you ever done market research? Like, hmm, that sounds pretty easy. I did some of that in school. And I like writing. They’re like, Okay, well, we started this rotational program for analysts have a college interns and how to be an analyst. You seem like you’d be a great fit for that. You know, have you ever thought about it and i’m like, sign me up?

So I jumped into it. The only thing I knew about technology was literally a cell phone. I knew nothing. I knew nothing about storage, I knew nothing about networking. I knew nothing about, you know, media and telecommunications and how phone companies work nothing. But you know, I learned it. Right, I learned it. And, you know, I’m going back now 15 years, 16 years 2003 with the emergence of a lot of technologies in the enterprise space, like virtualization and networking, cloud computing, which was on the frontier, you know, and, and something that AWS and Amazon pioneered. And so I jumped into it, right. And one of the things that I always get asked from college students, and just people trying to break into tech is like, what do I do, like pick up, you know, online podcasts, you know, pick up some blogs, start reading, like, learn about the new technologies that are out there, learn how they work, and how they can bring value to businesses, how they bring value to people, how do they make lives easier, right. And so that’s what I did. You know, I learned it all on my own. I learned it through this program, how to how to, you know, have analytical and thought, you know, process skills. Fast forward, you know, five, six years, I became an analyst, and I focused a lot on enterprise b2b Technologies. The spot at the time was in networking, enterprise networking. So how did how do the underlying pipes in tubes work, the plumbing, and I focused in that area for a long time into the many junctures in my career, I could have switched to something easier software, social media, etc. But I didn’t, because I really like to understand how things work from an underlying infrastructure perspective. So I focus a lot on cloud computing, when it emerged in 2006, 2007, 2008. Everyone thought Amazon was a bookseller, you know, what are these guys know about enterprise tech, so on and so forth. But I believed it. And I believe that was the future. And so I focused a lot on my thoughts and building out my you know, my hypothesis and my theories and my opinions, right, you start to really think about how is this going to affect not only the industry, but customers, big fortune 500 companies who spend so much money on infrastructure, so on and so forth. And I really loved it, you know, I love speaking to fortune 500 companies, I loved writing my thoughts down on, you know, a blog. And I told everyone that that would listen to me what the future was. And so I spent a great deal of my career in the analysts world, about 10 years, and and so fast forward, I’m living in Boston, I’m traveling to California, going back and forth. And every time I came back from California, I was just so energized by the vibe, right like that fine startup vibe like, anything is possible. And I just wasn’t feeling that anymore in Boston. And so one day I, you know, I just said, Hey, like, I’m gonna go and do this, I’m gonna go work in Silicon Valley. I’m gonna, you know, explore what’s out there and figure out what kind of opportunities I can have. So luckily, I was swirled. And in three weeks, I had a job at a startup series A to just raise 12 and a half million dollars, I was the first marketing person on board. And, you know, there was only 17 people. I wasn’t number 17. You know, I had a couple of calls with the founder. And he’s like, we like what we see we like what we hear. You come well, you know, well recommended. We’d love to make you an offer. I was like, great.

Jay Clouse 13:58
How did you move from analyst into product marketing? How did you bridge that? What seems like two very different disciplines.

Vanessa Alvarez 14:06
So market research, you do a lot of you did a lot of market research and marketing. Right. So it’s about how do you take that research and position it into a great story, right. As an analyst, we did the market research part. And we spoke to a lot of Fortune 500 vendors, technology vendors to help them understand how customers were best received their message, right? Especially in enterprise tech. It’s really hard because it’s complicated, right? So how do you simplify technology to make it understandable for you know, people who don’t have a computer science degree or who are just, you know, trying to figure out how to make their applications work. So I took that those skill sets and really apply them to the product marketing role, was a director of product marketing and help the the founder doing, you know, bring his vision to life right one and I see this now to helping founders really tell their story is a skill, right that you have to really know or learn. And so I think when it came to that, you know, the CEO was working with, knew what he wanted in his mind, and but he couldn’t really put it down on paper. So helping tell that story is really, you know, what, what needs to be done and something that you can do when you have market research, right? Go talk to customers, ask them what they’re doing, ask them how they, you know, how they’re receiving this message, does this resonate? Is this what they’re looking for. And so it was, it was definitely a different route that I was taking. But at the same time, I learned how to take the skills that I had already, and apply them to a different, you know, function. And I think that’s important when you know, you’re either looking for a job, I do a lot of mentorship for college students today for Latinos, or just kids in general, we’re trying to either get into technology, or someone who’s mid career and trying to make a shift from another vertical and other industry into technology, take the skill sets that you’ve learned, right, and apply them into a role. How do those fit, you know, I never thought I would use my customer service skills to, to the way I am today as a founder. And yet I have to talk to customers every day to understand where they’re coming from.

Eric Hornung 16:33
Take me back to this decision to move from Boston to the Bay Area. How did you pick which startup you wanted to work for which stage you thought was applicable? What was it about this specific opportunity that was exciting?

Vanessa Alvarez 16:49
So at the time, when I started thinking about making the move, I thought I had two paths? Do I go back to school and get an MBA? Or do I go to a startup, right, I had kind of already learned a lot about startups and the analyst world, I would always take the opportunity to talk to startups whenever I could grab coffee, sit down and talk to startup founders about what they were doing. And, you know, founders love to talk about what they’re doing, right? Engineers love to talk about that technology. So it was it was great learning experience. When I looked at startups, I thought, so I was I made the choice from not an MBA, to go to a startup, I thought I would have more a better experience, right? I am the type of person that learns more by doing and I think that today, a lot of kids college students are sort of like that, right? You think about curriculums in colleges today. And and it’s a really vast gap, what real world is like, right? So I, you know, I always think about how curriculums can change in schools and stuff, and how can you incorporate more real world experience. But anyway, so I, you know, I chose to go to a startup. And I knew I wanted to start something from the ground up at some point in my life, right, I wanted to start something and I thought if I joined a team that was already building something from the ground up and early stages, I didn’t look for anyone bigger than 20 people, I looked for someone with money for sure. raised, you know, at least the series A because I wanted to get paid. Funny how those things change when you start your own startup. But that’s a different story further along. But, you know, I definitely wanted early stage, right, because I wanted to be on the ground and build something from the ground up and be able to make my footprint, right. And so that’s kind of what led me to the kind of startup like early stage. Obviously, the the love of Silicon Valley definitely made that really the only place that I wanted to go first. And I know that a lot of people in tech, you know, who are outside of Silicon Valley, like, Oh, I just need to be in Silicon Valley to make it happen. I’m glad that I did the same thing. And I spent two years in the valley and two years is like, dog years, right? It’s like, really five years. And working at startups is the same. But it’s not the end all be all right. And so I think it’s just about the mindset. And you know, how you think about what you’re doing and how you can impact people’s lives.

Jay Clouse 19:22
At some point, you went past startups and joined Amazon. And then eventually, today, Microsoft, which feels like a long way away from the factory application that your mom handed you after high school. So I’d love to hear kind of taking us forward to today, how you got involved with those large companies, and soon after that, I’m sure will transition into back into startups withNexme.

Vanessa Alvarez 19:47
Sure. So I know it seems like a life ago and it’s amazing because I do have to add to that to that whole trajectory, right? You can’t do it without people around you with mentors. with people who help bring you to the next level, I really am a firm believer and that the five people that you surround yourself with, that’s who you are. And if you’re the smartest person in the room, you’re in the wrong room, right? You need to be constantly learning, constantly working with people who bring different skill sets than you do. People who can make you see different perspectives, right. And so, honestly, I think people is the number one thing when it comes to any kind of any kind of trajectory in your life. I did a couple of years in startup world in Silicon Valley, which is a lot of work, you know, and again, I’m not immune to work, I’ve picked up a phone a whole day in a customer service call centers, so I wasn’t entirely immune to what hard work I actually really liked and enjoy it. But I started thinking, you know, maybe I need to have something on my resume, that’s a big company, so on and so forth. So I started looking on, you know, I definitely wanted to stay in Silicon Valley still. But I had a good friend reached out and from Amazon Web Services and said, Hey, you know, we’re hiring, we’d love to have you come join us. We’re just starting to explore enterprises and building our enterprise marketing team. What do you think? And I said, Well, I’m not moving to Seattle. So there’s that. We know how this story ended. But let me tell you how I got there. So it’s like, No, we’ve become a lot more flexible with remote working. And it’s like, Okay, great. So of course, I go through the interview process, and halfway through the process, they’re like, oh, by the way, this role is based in Seattle, and you’d have to move. So I thought, okay, you know, I was already excited about the opportunity. And I thought, how bad could it be, I’ll stick it out for a year in Seattle asked to be moved back to, you know, California. And so, you know, I went ahead with it. You know, and I think there’s a lot of things that happen when you are exploring job opportunities, thankfully, we’re lucky that we get to work in an industry that has so much opportunity. And that allows us to be I don’t know if picky is the right word, but it allows us to be selective about who we work for the reasons why we do the things we do. And so I had a couple of opportunities on the table in California, also big companies more money. But in the end, I took a look at the opportunity that Amazon was and what I would be doing, basically, you know, kind of starting from the ground up in something that I’ve loved for a long time, right, I’ve been looking at the cloud space for a long time. And so joining Amazon seemed like the right thing to do, despite the fact that I didn’t want to move. And despite the fact that I had, you know, other opportunities too I decided to make the move to Seattle and join Amazon Web Services. You know, as many of you know, Amazon operates at startup that is still true to this day. It is really always day one. And that’s the mindset, right. And so I think one of the great things that I learned at Amazon was that you always want to be building something, right? So building something that makes a difference in people’s lives, simplifies a process, always reinventing or simplifying, something that can change people’s lives. So I spent, you know, a couple of years there, and then moved on to Microsoft. And the one thing I took away from my experience at Amazon was that I was ready. Like, I wanted to build something I wanted to start from the ground up. I wanted to take a new space for me why I spent so many years in enterprise tech that I felt like it was time for me to learn something new, right. And so, coincidentally, at the time, I started looking to buy a place, buy a house in Seattle, and I met my partner who was in the mortgages industry for a long time. And I started thinking about this whole process that I was going through to buy a home and I’m like, Is this real? Like, is this really how complicated it is? Like, why haven’t Why hasn’t someone tackle this space and try to simplify it even more? We have so much technology at our fingertips today. Why is this process one of the best experiences in people’s lives so hard to do? And so we got to thinking and we went through a ton of different ideas right before we actually felt like this is the right thing like this is what we should be doing. And so again, you are working a full time job, right? You’re trying to bring your dreams to life, your vision. You’re working hard, you’re you’re asking people to join you and so my partner and I spent a good year or so just kind of getting ideas together and figuring out what we wanted to do.

Eric Hornung 25:10
Tell me about what was frustrating in that process of buying a home.

Vanessa Alvarez 25:15
The frustrating part was that number one, you have to go through so much back and forth, in trying to find an age a real estate agent, right? Who’s recommended who you know, who’s good. Who should I be going with in this neighborhood? Who knows this neighborhood? Well, I was still fairly new to Seattle, right? So I wasn’t too clear about, you know, where to live. And the whole process of finding someone, one person would give me one name, another person would give me another name, I just wanted something that, you know, pre vetted it upfront and said, Here’s someone, you know, I need to build a relationship, I just want someone to get the job done. Right. And so that was the first frustrating pain point that I felt the second one that I saw, and it wasn’t necessarily on my end, or I guess it is on the buyers, and to some extent, but on the seller side, you know, they’re paying 3% Commission for the selling agent, and 3% Commission for the buyer agent, right. I had done all kinds of my homework already, like I had gone through listings, I had picked, like, you know, nine or 10 homes, you know, I had checked them out already online, I kind of like knew what I liked in terms of amenities and things like that. So I’ve kind of done 90% of the work already, right? Real Estate Agent came in and open the doors for me, you know, and kind of told me about the home, which I already knew, but I had done the upfront work, right. And so being able to have a 3% commission go to this buyer agent was just, I just didn’t really understand how that was when I had kind of done all the work already already. And so those are kind of some of the first frustration points that I saw and a broken process. And then let’s get down to the you know, getting a mortgage and, you know, trying to figure out how that works. And and then there was just you know, fees, I had never anticipated my I’m pretty educated person, I do my research and stuff. And yet there were things that I had no, I was not aware of. And so it’s just all of those little things that was really frustrating for me, that I thought, why isn’t this already simplified, I’d like to just be able to go see a home, work with someone to open this door for me, and then take me through, you know, the process. And if I’m not, if I’m not happy, I don’t want to have to make a three month commitment with this agent, right, which is what you have to do traditionally, is you do a sign a contract with a real estate agent for three months, before you get any value. And three months goes by maybe I didn’t get any value. And so what happens, right, I’m stuck. But that’s the kind of commitment that I want. I want it to be able to change if I didn’t like this agent. And so those were the things that I looked at and realize, okay, this is this needs to be more simplified, more streamlined. And it needs to have the best interests of the buyer and the seller.

Jay Clouse 28:20
So tell us now how you landed on Nexme and what that model looks like. Sure. So

Vanessa Alvarez 28:27
Sure. So we decided to build out Nexme right, we knew this is the path that we wanted to go down, I sent you an article on GeekWire that we announced a closing of a $500,000 seed round, which was exciting for us. But I’m going to take a step back and and talk about how we got started with the team that we have today in place. So we knew we wanted to do this when my founder nor I technical enough to build a platform. Pretty technical. And I understand but I’m not a coder myself. My partner is the business side. And so we started looking for engineers to come help us build right so you can imagine how this story goes, Hey, do you want to come help us build our dream for like no money? By the way, we can’t hire you full time and we have equity for a company that doesn’t exist yet. For you know, a vision that hasn’t come to live. So plan through many, many people. Some folks are like, Are you crazy? What do you mean, you want me to work for money to make your dream come true.

But you know what? out of I would say hundreds of, you know, people that we reached out to engineers and developers, we got three, you know, we got three who came on board and like I’m willing to listen, you know, and I’m willing to hear what you have to say. And then ultimately, you know, you willing to join you in your vision here. And so I know that it’s unheard of, you know, the people don’t want to hear that sometimes, you know, you, you get asked to work for no money or you know, you you shouldn’t be doing that. I think you’re right, you shouldn’t be. But sometimes when the dream is so valid and so real, that, you know, it’s going to happen and you’re willing to be on the ground floor to make it happen. You know, those are choices that you make, and our folks made that choice. And they came on board and, you know, worked for work on our platform built it out for us. We’re like family now, for the better for worse. But you know, and it’s not to say it’s always been perfect, but the you know, we’ve definitely come together to build something pretty amazing. And we’re excited to be moving forward. So when we thought about Nexme, we thought about so many different business models, right. So we’re an on demand real estate marketplace that brings together home buyers and sellers with licensed professional real estate agents at the click of a button, right. It literally works like Uber for real estate agents. You see a listing on our platform, we have access to all of the MLS data, just like you know, Zillow and Redfin. And if I see a listing on the platform, I click on it, I click on tour now and I’ll have a real estate agent connect with me within 60 seconds. The goal of our platform is to provide instant access to homes, right? So any agent that responds to that particular homebuyer is within a three mile radius of the home that that homebuyer wants to see. Right. So it’s it’s accelerating the whole process, right? Real Estate Agents today that sign up to our platform, commit to a 1.5% commission fee, and they understand that we’re delivering value to the homebuyers. And so once the real estate agent connects with the homebuyer, they meet at the home, they see the home, they love it, the homebuyer can make an offer right away on our platform as well, again, streamlining the whole process. If the home buyer decides to stay with that real estate agent to go see other homes great. If not, if they didn’t like the real estate agent, and they can request for now again on our platform and get another agent, right? We want our real estate agents to deliver value and are in the business of our users. And so a lot of people say, Oh, how, you know, how do real estate agents react to the 1.5% Commission fee? Right? At the end of the day, we were taking half of that fee and giving it to our users, our home buyers and sellers. We do all the legwork for real estate agents upfront, right, they are getting a hot lead in their inbox in their on their phone vital way. Right, they didn’t have to go out and do direct mail for that lead. They didn’t have to go out and put fliers out to get that homebuyer lead. We have brought that to them. So that’s the value that we add for real estate agents and they get it right we’re accelerating the transaction for them. And like anything I feel Amazon has shown us that you can deliver great value in service and not have to pay an arm and a leg for that right. So our real estate agents that sign up to the platform have their own firms that they work with. We work with a lot of real estate agents from Windermere, Keller Williams, Century 21, REMAX who sign up to our platform as an additional income stream, you know, wherever they can get leads from, that’s great. The value that we deliver to homebuyers is we give them 50% of that commission back to them at the end of the transaction. Right. So give the example a million dollar home, which is what you see in the Seattle and California markets today. The Commission is you know, traditionally 3%, the agent gets 1.5. The other 1.5% goes back to the homebuyer and some instances that is, you know, covers your closing costs. It covers a lot of the prepaids that happen in real estate transactions at the end where sometimes you’re not even aware of these fees. So that gets a lot of users and homebuyers excited right there getting money back and then sellers as well, right. If you want to list your home on our platform, you’re charged a 1.5% commission fee and the real estate agent that they get by clicking on our platform is going to deliver all of the value staging open open houses, all of the listing and marketing for that home. So a lot of sellers don’t want to pay the traditional 3% right. They’ve built so much equity into their home through The years and this is their home, this is him money. And so they are really happy about, you know, 1.5% commission fee. And so people always ask us, how do you make money.

So real estate agents, mortgage lenders and inspectors, those of you can get all of those on our platform, pay a subscription fee, right? We feel that we deliver the value, we do all the legwork up front for you to, you know, be on our platform and get access to all the home buyers and sellers. And so we charge, you know, a fee for agents, lenders and inspectors. And that’s how we make money. But you know, when getting to that point, and how you make money is the hardest part, right? I mean, you can think about your technology, you can think about what it is that you want to bring value to to users. But how do you make money? Right? So we went through several different business models, before we landed on that, and you know, it’s been working, we think that it’s the right one. But you know, startups are iterative, right? You’re constantly evolving, constantly changing. We see it even in the best of startups, right?

Eric Hornung 36:14
How do you think about balancing the sellers and buyers side of the marketplace? And the paid side of the marketplace?

Vanessa Alvarez 36:23
Great question. So we try to balance it by being able to tell buyers and sellers that we are delivering the value to them via the commission back. And obviously the instant access to homes and real estate agents. We don’t think that home buyers and sellers have been in the best interest of the industry for a long time, right? This transaction process involves so many people and everyone makes out at the end of the day, except the home buyer and seller. We’ve heard horror stories, right with people like losing odds and and just having a bad experience. Again, something that should be a great experience. And then on the real estate agent side and our paid paid customers, we know that we’re delivering value to them. And at the end of the day, it’s about being able to deliver the right level of service to our customers, even even though you know, we are taking a percentage of the commission fee away from them to give to our users. We don’t take any commission. So for us, it is really strictly just a monthly subscription fee. We’ve thought about the business model in several different ways. But at the end of the day, again, my customer service skills came into into play, I wanted to do what was best for the home buyer and seller. Like I said, for a long time there have not been in the best interest. So I mean, that’s kind of how we try to balance both.

Eric Hornung 37:52
If you could only look at one metric to determine the health of the next me marketplace, what would it be?

Vanessa Alvarez 37:59
a chain of transaction late so the connection has a buyer connected with a real estate agent, that is our metric today. Because that is the value that we’re bringing to our paying customer. For us in the long term, we are going to want to see the end of the transaction and then ultimately it be the cashback that we give to customers. So how much cashback are we giving them? Are we giving the home buyers and sellers, right? Because when they’re not paying a 3% now they only pay 1.5 we just see value in that, you know, 50% cost savings that they get.

Jay Clouse 38:36
I was gonna ask real quick as a clarifying question. Are you guys in market right now? Have you done transactions all the way through the end on the platform?

Vanessa Alvarez 38:43
Yes, we have. So we are in Seattle today. We’ve been in Seattle for a little over a year now. And we are launching in Boston at the end of this month. And then California at the end of the year. So we do see transactions till the end. Because a lot of our homebuyers and sellers actually come back to us and say, thank you so much. We had a great experience. We love the cashback or, you know, we had our home sold faster than we thought it would. And thank you this accelerated the process. today. Like I said, we measure the connection right between the homebuyers and sellers and real estate agents or home buyers and sellers with mortgage lenders or inspectors. But as we start to evolve and be able to track more of the data and more of the transaction will want to use both of those metrics, right? The connection and then how does it end? Right? Do we still say within that transaction? So we do have ways of monitoring that today. But we don’t necessarily content as our core metric.

Eric Hornung 39:50
Can you give us any numbers around traction that you’ve seen in the Seattle area?

Vanessa Alvarez 39:56
So we have thousands of users on the platform? We have About 1400 real estate agents, paying customers. And we are looking to, you know, build that same community, that same adoption in Boston as well. So we’re super excited. We are already working with some great real estate agent firms on the east coast in the Boston area in Rhode Island area. And also thing, working with mortgage lender partners that we can announce just quite yet, but that we’re excited to bring on board to be our go to market partner. When we launched in Boston.

Jay Clouse 40:35
I saw that some of the brokerages, you work with big name brokerages for the real estate agents, when they do a transaction, they give sometimes upwards of 30% to the brokerage, when you’re taking away percent and a half of their commission, Does any of that come out of the brokerage fee, or is that purely out of the agent’s pocket,

Vanessa Alvarez 40:55
it is purely out of the agent’s pocket. So many real estate agents work pretty independently, right. And they they use several different ways of getting incoming leads and have different revenue streams. We’re just an additional revenue stream for them. We have had a lot of brokerage firms asked as can we be exclusive, can we white label your platform, you know, we’d love to license it, etc. Again, different, you know, business models that come up for us that we haven’t quite explored yet, because we’re pretty happy with the path that we’re going down now and kind of the vision. But you know, we do get that a lot again, you know, for agents, they don’t hang the license with us, we actually don’t hire real estate agents on our own. And so that’s what helps to keep operational model operational costs down, and helps us to move a lot faster. That is if you take a look at real estate agents in the market today, a lot of them really do operate on their own as their own business entity under a different umbrella. So we think that that model is definitely something that is an advantage to us. And as we move further down in the real estate disruption, we’ll start to see, you know, that emerge even more?

Eric Hornung 42:15
How do you think about the value to your paying customers of onboarding another buyer or seller like quantitatively, like, when does it become not profitable to onboard someone at a certain cost?

Vanessa Alvarez 42:33
I think for our paying customers, which is you know, the real estate agents and lenders and inspectors, it’s it doesn’t become profitable, when they they don’t, they don’t get it doesn’t become profit for them when they don’t get leads, obviously, and we’re not making the connections that they need. And it doesn’t become profitable for us, when we start to make more of an investment in getting those leads, then we’re actually getting paid, again, that in startup world, it is powerful course for a certain period of time, but we definitely want to be profitable as quickly as possible. And we focus on really keeping our operational costs down so that we’re not focusing on just raising funds, right? We have a great real estate investor who understands our business and understands where we’re going, but definitely wants to keep track of you know, the operational aspects of the business and understand where the money is going. And how do we get the ROI on that. So I think you know, you have a certain time period where you can be unprofitable. But there comes a time when you want to make sure that you’re keeping that balance of, okay, incoming versus outgoing, that there really needs to be in sync.

Eric Hornung 43:55
And you’re sitting there in Seattle, which is the home of Zillow and Redfin. What’s it been like, from a reception around the community, reception by investors around the community aspect, being in a city where maybe the two largest real estate real estate tech companies are?

Vanessa Alvarez 44:16
I have to say, it has been interesting from the beginning, first of all, where we’re trying to take, you know, part of the commission and give it back to our users from real estate agents, which was not, you know, something that they wanted to hear. We’re not we’re certainly not the first ones, right. But the more that they start to see a lot of, you know, real estate agents who are concerned to put it lightly. And so we did get a couple of nasty, you know, emails and messages, saying, you know, what do you think you’re doing? Redfin tried to do this 15 years ago, and, you know, look at where they ended up. And so, you know, I think it was definitely a challenge. And just still is an uphill battle to try and help real estate agents understand, but they they see us as accelerating the transaction. So the faster they get a lead and they, you know, they close it, the faster they can move on to another one and so on and so forth. We definitely heard a lot from Redfin agents, right. Because if you think about us, a lot of people online us with them, you know, there are differences, like, you know, they hire their own real estate agents, which makes the operational cost much higher, you know, and if you’re spending more money on agents, you can’t give back more money to your users. And so yeah, that’s a big difference there also, to say they give money back, but if you read the fine print this and you know, so price points are they don’t go under. And so there’s a lot of differences between us. And, you know, a lot of the real estate agents would be not so nice to us. And then we look at Zillow is really an advertising platform right? At the end of the day, just up until recently, when they started with Zillow offers, they were really just about marketing real estate agents right to their community. And one of the that one of the things that a lot of real estate agents that work with us today value is that we actually get them a lead into their inbox into their phone, right? Because it is a phone notification, the agent is seeing a homebuyer reaching out to them on their phone, as opposed to Zillow, which is just impressions, right? Someone accidentally clicked on on a real estate agents ad and that, you know, information is sent to the agent, he calls the user. user has no idea like, Oh, I’m sorry, I clicked on this by accident, you know. And so, that’s frustrating for a lot of real estate agents, right, and they don’t have to deal with that with us. That being said, you know, Zillow has definitely made different moves into the space today where they’re more on the buying side, and buying homes and selling. So, you know, we think that it’s great. We love what Zillow and Redfin have done, they’ve paved the way to, you know, real estate disruption. I always call them like real estate disruption, one Dotto, you know, where they got kicked off. But you know, it’s been 14, 15 years since we’ve seen anything, you know, come out in terms of disruption. So we feel like today, there’s a ton of different startups in the real estate space, tackling different areas. We’re just excited that, you know, there’s so much interest in trying to simplify this process, you know, from every single angle, not just a home, you know, the initial part of trying to get a real estate agent, but all the way down to closing and title and escrow. And so I think that, you know, for Zillow and Redfin, they’re the incumbents and still have a great deal of brand recognition and, and great ideas. But, you know, we move fast, startups are great, because you don’t have the baggage of dealing with, you know, process and, you know, a lot of different rules and regulations. So were excited.

Jay Clouse 48:13
Does the subscription fee vary by the different type of service provider in the value chain?

Vanessa Alvarez 48:19
It does. Yeah, so real estate agents pay something different from what a lender does from what an inspector does. And, you know, I think today, we’ve set we’ve you know, we have a set price for real estate agents and a set price for lenders and inspectors, will that vary down the road, when we start to evolve our business model, we have to introduce new features and products and services. We don’t know, right? We think that today, we want to deliver 100% superior service to our users. And we feel that we do that at one level, does that evolve as we start to grow? It could be, but for now, we’re pretty happy with what the level of services compared to the value that people receive is? And so yes, we do have different set prices.

Eric Hornung 49:07
What is that level of pricing, and how’s it charged.

Vanessa Alvarez 49:11
So today, real estate agents pay 189 for the subscription, monthly subscription fee. And then lenders pay on average, about $20,000 a month to be on the platform. And then for inspection is something that we are offering as a complimentary service and looking to really expand in that space is something new that we’ve added to the platform and I recently launched and so we’re having quite built out that part of the the model. Yeah.

Jay Clouse 49:44
Is there anything we’re not asking that we should be asking?

Vanessa Alvarez 49:46
I would say you know, there’s so much disruption today in different verticals and in different industries. And yet real estate space hasn’t seen much disruption since the you know, disruption one that owns Zillow and Redfin. Why is that? Why hasn’t it been able to evolve, like so many other industries have, right? People always say, Oh, this is the biggest purchase of people’s lives, the most expensive, etc. but yet you see millions of dollars going into Robin Hood, right? Like a financial app. people invest putting their actual hard earned dollars into this app that is a startup, right? And so what’s the difference? Right, that’s much more money than, you know, a $200,000 home or a $500,000 home, the what has been the blockers in this space that haven’t allowed it to evolve the way he needs to? And you know, those are the questions that I keep asking myself, right. Because it shouldn’t be there shouldn’t be any blockers and yet there are and, and well, you know, we’re fighting to overcome them. Obviously, we know what they are. But we want other people to ask themselves to like, why, why? Why is this 6%? Why is it 3%? Well, how can technology simplify this process? so that I don’t have to really deal with that anymore? Like, I think those are the questions that we continue to ask ourselves and we’d love for, you know, homebuyers and sellers to ask themselves that too.

Jay Clouse 51:11
Well, if I am a home buyer, or seller, and I wanna learn more about Nexme, where should I go?

Vanessa Alvarez 51:17
You should go to nexme.com, our website, we have a mobile app and a desktop site. Download Nexme on the iOS store on Google Play. And check it out, check out listings in your area. Like I said, we’re, we’re in market in Seattle, the greater Seattle area today in Boston, and at the end of the month, and then California coming soon.

Jay Clouse 51:42
All right, Eric, we just spoke with Vanessa Alvarez of next me, where do you want to start this deal memo?

Eric Hornung 51:48
Let’s start with the founder, because I have a feeling we’re gonna get into the business model pretty deeply here. But I do want to say that very impressive background deciding on Do I go MBA, do I gonna start up decided on startups, didn’t want to do anything with more than 20 people wanted a company that recently raised money, just very thoughtful about where and how she wanted to go, I just got a very like, good sense of her background as being something very thoughtful, being something very relevant and having the kind of like, in finance, there’s this thing where you kind of start with a big company like Goldman Sachs, or JP Morgan or something like that. And then you kind of go small, because you can make a bigger impact when you understand how those big companies work. I feel like there’s a lot of parallels here with working at Amazon Web Services, and Microsoft, and now saying, Okay, I understand how the sausage is made at these big places. Let me go make some sausage myself.

Jay Clouse 52:43
Yeah, Vanessa definitely struck me as a badass starting from the Yankee group in Boston. And then moving on to, as you said, Amazon and Microsoft, it just seems like she’s been fighting her way up the ladder pretty aggressively her whole career. And now, taking a pretty big risk going into a new market, building a startup just struck me as a badass. So she’s definitely somebody that, you know, sometimes we hear investors talk about like, or companies talk about, we need to support this person, because if we don’t support them, they will burn us to the ground, essentially. Vanessa struck me as that type of person. So yeah, that’s, that’s, that’s a trait that I would love to hear or love to see in a founder.

Eric Hornung 53:24
I also really like and some of the seems like it might be just be happenstance or coincidence, or maybe it was a little bit more thought through. But starting this type of company in Seattle gives me like, images of Columbus with insurance now we have Rutan’s insurance going public. But there’s five other great insurance companies in Columbus insurance startups, I should say, nationwide, obviously there as well. Or you look at New York and that direct to consumer boom that’s happening in the types of companies that are coming out of New York, it seems like one is spawning and respawning another in Seattle is I mean, is it coming? Is it becoming the hub? Or is it already the hub for real estate startups? I mean, Zillow and Redfin. And I’m sure that there’s a bunch of smaller ones that we don’t know about. They’re already prop tech, prop tech.

Jay Clouse 54:12
Yeah, I don’t know. I think that’s a pretty good segue into the company here. And let me just put this disclaimer out dear listener. As I said in the intro, my girlfriend is a realtor. So I’m sure there’s some level of bias that I’m going to introduce into this conversation, having been so close to seeing how that industry works for her as an independent realtor. And I couldn’t quite help myself but think through part of their model as it relates to realtors and the people that she works with and how it works here. So that’s the disclaimer, and I’ll try to remove that bias, but I’m also going to infuse, but I know about the market.

Eric Hornung 54:44
I’m expecting that bias to be shining.

Jay Clouse 54:47
Shining. Well, so we heard a little bit about the model. Nexme recharges buyers and sellers, a one and a half percent commission fee, which is half the traditional rate. So to my understanding, you know a buyer doesn’t actually pay their agent, the seller of the house pays a 6% commission traditionally, in most states, and the sellers agent splits that commission with the buyer’s agent, which results in a net 3% commission on both sides most of the time. So cutting this in half is Nexme’s point here, what I found personally, like I didn’t know that the buyer doesn’t pay the agent. I don’t know, most buyers, when they’re going into buying a home for the first time don’t realize that you’re not actually paying the agent. Did you know that?

Eric Hornung 55:32
I didn’t know that. But if there’s a transaction cost isn’t, maybe not directly, but indirectly? Aren’t you paying for that some way or another? Like, if I’m a seller, I’m not going okay, my house is worth $200,000. So I’m going to sell it like that the sick, the six percents already baked into that number.

Jay Clouse 55:48
Yeah. But I mean, when you’re when you’re selling a house, you’re looking at market comps, and you’re seeing what other houses sell for I’ve never heard a selling conversation of why I’ve got to make sure that I’m keeping in mind the 6% fee that I’m paying. Maybe people do that. I’ve never heard that.

Eric Hornung 56:02
Well, that’s what I’m saying subconsciously, though, so all of those market comps have 6% baked into them already.

Jay Clouse 56:07
Correct.

Eric Hornung 56:08
So by using market comps, you’re baking 6% into whatever price ends up getting put on the MLS.

Jay Clouse 56:16
Correct.

Eric Hornung 56:17
As an offer price. So that that is just a cost of doing business in this space, which and I guess the one way to prove this would be looking at for sale by owners are those on average about 6%. Less, I don’t know, that would be a good thing to have looked up before this outro.

Jay Clouse 56:34
But the hard thing for me, you know, sometimes we talk with founders, and their model makes a ton of sense to me, because it feels like everybody is winning. And so I’m trying to think about this model, the buyer is winning. So ultimately, this is something that the market will want. Like if the buyer is paying less, if the sellers paying less in terms of transaction fee, they’re gonna want that. But you have all these other parties in the middle that like they are the ones losing commission, right? So if you have a selling agent who’s making half as much a buying agent is making half as much, you’re already at a little bit of a difficult proposition, I would think. So how do you compensate for that? Probably volume would be my guess.

Eric Hornung 57:13
That assumes that everybody in the middle is the same. So that assumes if 100 houses are sold, and there’s 10 agents in a given city, that those 10 agents each sell 10 houses, my belief, and my thesis is that it’s probably a lot more like one of those agents sells 90 of the houses, and a couple more of those agents seller meaning eight, and then the bottom seven agents sell two. So I think it’s been much more like a power law, which means that the people in the middle are not the same. So increasing volume to the agents 10, 9, 8, 7, 6, 5, 4 is a huge win. Whereas increasing volume for agents 1, 2, 3, maybe isn’t.

Jay Clouse 57:55
True. So if you’re if you’re using Nexme, you’re probably not going to get the very top of the market, you’re not gonna get the bottom of the market either because they’re saying they want at least two years of experience and at least 10 transactions.

Eric Hornung 58:08
Mm hmm.

Jay Clouse 58:09
But you’re getting these people in the middle who have some variance. And I don’t know, like their volumes lower. So they’re going to be sensitive, I feel like you really have to lay out and then prove the case for this is ultimately going to be better for you. Or say like you work with us or we destroy you, which I think we’ve seen, you know, some other companies try to do that and haven’t yet succeeded. So yes, that’s the point where I just feel like there’s tension, there’s tension in the value proposition to the people in the system, which would be just difficult to resolve. And on top of that, you have a subscription model where the realtor is paying, Vanessa said $189 per month, lenders paying an average of $20,000 per month. I haven’t I don’t know that seems like for an independent agent in the middle. Are they going to be able to front $2,400 a year in marketing costs, essentially, that’s just another fee. I feel like that’s tension too. So all this to say like I wanted to be more comfortable that everyone in this value chain was going to be happy. If that that convert I’m not convinced.

Eric Hornung 59:24
I think playing kind of other side of the other side of the fiddle. Is that a is that a phrase?

Jay Clouse 59:29
I don’t think you want to play a fiddle upside down.

Eric Hornung 59:31
Okay, I just thought it would just sound like.

Jay Clouse 59:35
There’s no strings on the back of the fiddle.

Eric Hornung 59:37
Yeah, I just sound like a me scratching my desk. So I’ll make up that phrase and we’ll keep running with it on the other side of the fiddle. I don’t think if you look at the market holistically and think about me and you and the maybe the actually I don’t even know I don’t know where we fit in on this because we never bought a house. So take us out of there. But I think that there’s probably a segment of the market that This works for, and it’s more about identifying that segment of the market. I don’t think this is when a real estate agent is coming in and like doing something above and beyond the call of this is selling the average house, the $117,000 house in Cleveland, Ohio, that doesn’t really need a lot of love from a real estate agent need someone to open the door and let them walk in and do the thing and right like, it’s like, this is for the standard, average real estate case, not for someone who needs a little bit more.

Jay Clouse 1:00:32
And maybe I’m probably thinking about this through a little bit of a tight myopic lens to maybe there are agents and teams who are already spending $200 a month on something marketing related that would be willing to ship their spend because this has a higher yield.

Eric Hornung 1:00:49
Well, I think also going into teams, that’s a so yes, independent real estate agents 180 million dollars a month might not be worth it for them, especially if you’re going back to our original kind of 10 agent city, which we call it city give it a name.

Jayville.

No, no, absolutely not. Alright, so Rickville with let’s say there’s 10 agents in Rickville? Well, if you’re a if you’re a team, as you’re talking about earlier, and you have Agent 1, 3, 5, 6, 7, it might be worth it to spend that $200. Because now agents 5, 6, 7 go from producing almost nothing per year to producing something per year, it probably makes about $200 paid off very quickly, where agent one, it’s not going to affect them, they’re still going to be a top performer, regardless of this technology.

Jay Clouse 1:01:37
So all that to say, I think you’re probably right. And what I would have liked was to have heard more of that with some specificity in this interview so that I know what what segment of the market we’re talking about. That’s really the core user in terms of the agents, we didn’t get too deeply into lenders or inspectors either. But what does the avatar of that person look like? And how big is that as a percentage of the overall real estate market for me to really understand and wrap my head around this opportunity?

Eric Hornung 1:02:06
Yeah, I think a lot of things in the world generally. And also, I’m projecting my own opinion, because I think we could have gotten some more clarity in this interview. But this is where my head goes, when I’m thinking about how does this work? Where does this work? How do we, you were talking about this tension before? How do we cut the tension out and say, Look, we we don’t need to be sensitive, because we’re not affecting you. luxury market, we’re not affecting you. For home for sale by owner market, right? We’re doing this one thing really, really well. And taking a lot of the friction out of doing something that is fairly standard, really well.

Jay Clouse 1:02:39
What do you want to see from Nexme in the next six to 18 months?

Eric Hornung 1:02:44
I want to see, I want to see some data, just like what is working? What segments of the market are working? Who’s doing this? Why are they doing this? I know that as we’re recording this now, Nexme is rolling out in Boston, so a second city, all the way across the country. I just want to understand more about where, how and when Nexme works best.

Jay Clouse 1:03:06
I agree, where it works best, why it works well there? Who is the avatar that is really paying these things, and happy about it. And what are the results they’re seeing? Like I agree, I just want to see data. And I want to have more specificity because as we said in the intro, this is a huge market. And I’m coming in with some bias. And there’s probably a very large, specific part of the market that this works well for. And I just didn’t feel like I got enough of that information in this interview.

Eric Hornung 1:03:35
Yeah.

Jay Clouse 1:03:36
Which is probably reflective on us. Probably we should ask better questions. So if you, dear listener, have something that you want to say about this episode, or about prop tech in general, you can let us know, @upsideFM, or you can email us hello@upside.fm. I’ll talk to you next week. That’s all for this week. Thanks for listening. We’d love to hear your thoughts on today’s guest. So shoot us an email at hello@upside.fm. or find us on Twitter @upsideFM. We’ll be back here next week at the same time talking to another founder and our quest to find upside outside of Silicon Valley. If you or someone you know and make a good guess for our show, please email us or find us on Twitter and let us know. And if you love our show, please leave us a review on iTunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Eric and I decided there were a couple things we wanted to share with you at the end of the podcast. And so here we go. Eric Hornung and Jay Clouse are the founding parties of the Upside podcast. At the time of this recording. We do not own equity or other financial interest in the companies which appear on this show. All opinions expressed by podcast participants are solely their own opinion and do not reflect the opinions of Duffin Phelps LLC and its affiliates under Collective LLC and its affiliates or any entity which employ us. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation. Nor provided any investment advice on the show. Thanks for listening and we’ll talk to you next week.