The Jury Is Still Out On IBuying. Here’s One Industry Pro’s Take

The Jury Is Still Out On IBuying. Here’s One Industry Pro’s Take

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Paul Levine has a unique vantage on proptech.

Once the president and chief operating officer of Trulia when that company merged with Zillow, he has led teams into the modern era of real estate.

He was in a top role at a time when Zillow was defining iBuying, but left years before the notable shuttering of that company’s iBuying program. Now, as a partner with Sapphire Ventures, Levine and his team of investors focus on “companies of consequence.”

Inman spoke with Levine ahead of his appearance at the upcoming Inman Connect New York conference in April about new companies he’s watching, iBuying and getting company cultures right from day one.

What follows is a version of the conversation, edited for brevity and clarity.

Inman: Sapphire focuses on investing in “companies of consequence.” I can guess what it means. I know it’s high-growth, but does that mean anything more? 

Paul Levine: We think about it as world-changing companies that have found a special technology or approach, have found a unique market opportunity. And then we typically invest in growth stage. 

We’ll wait until a company has found that initial product market fit and starts to scale. And a lot of our expertise as a firm and as a fund is then helping companies get to that next level. So take initial product market fit and turn it into a company of consequence by helping them scale their go-to-market, add additional products, build a leadership team, prepare for a public offering, all the things that you tend to need in that journey from initial product market fit to then building a company of consequence.

IBuying and other high-growth proptech stocks are getting hammered in the last six months or maybe a little bit more. Can you elaborate? 

It’s hard not to feel the impact of the market moving. Your public stock is your currency for acquiring other businesses. It’s like the most visible and immediate barometer of how the external world values your company. I’d say it’s hard not to feel the ups and downs of that. And certainly as an operator at Trulia, and then again at Zillow, when our price was bid up to super high highs, it’s only natural to be excited and feel great about things. And when the stock sells off, it’s only natural to feel the pressure of that. 

I’ll tell you now as an investor, I have a slightly different lens on it, which is these shifts in the market are unavoidable. And neither as an operator nor as an investor, there’s not that much you can do about it. If anything, sometimes these market sell-offs create opportunities to invest in your company at a cheaper rate. It may be a slightly more reasonable price than we might have had six months ago. The boldest and strongest and most resilient leaders and CEOs are able to rise above these momentary ups and downs and really focus on what matters long-term, which is building an incredible product, being very close to your customer base, continuing to innovate, motivating your employees. Those things matter whether your stock is doing great or is sold off. And so often these pull backs separate the best companies and the best leaders from the rest of the pack.

You’ve said it’s hard not to pay attention to these iBuying companies because it’s just such a huge opportunity. I’d like to hear your thoughts on iBuying today.

To me, I think the jury is still out as to how profitable iBuying can be. Opendoor is now pretty close to 10 years into the business and is still just poking at profitability. We’re now almost 10 years into the business model, and it’s just hitting profitability. So I think it’ll be really interesting to see what happens over the next several years. 

When does the jury have to come back and deliver a verdict on it? Can we even say that, or does it just depend on their individual makeup? 

I would say the next several years is probably the timeline. If we’re a few more years into the iBuyer growth curve and it’s not yet profitable I think folks might have some questions. But there’s probably still a couple years to go before any judgment day comes.

We just spoke with Spencer Rascoff about the importance of company culture. I’ve heard you speak about the importance of getting a company’s foundation right. What kind of guidance do you offer for how to get it right?

Foundation is the right word. Your culture and your people are the key component on which everything else is built. The product that you build, your go-to-market strategy, all your subsequent hires flow from the starting point. Ultimately the starting point of the founders—but really the starting point of your initial hires. Those first early hires and early culture that you create as a founder and a CEO, everything flows downstream from there. 

Tell me how that’s been applied at companies you’ve led in the past.

With Trulia, I’ve been out of the company now almost five years, and I could still recite the core values as if they were tattooed on my arm. But the key things that we focused on, we had what were called the impact values: innovate, make a difference, act with integrity, people matter, customer-centric, and trust and respect. Literally, without having thought about that for a while, that just sort of rolled off the tongue. 

What proptech company should we be paying more attention to?

The single company I’m most excited about is this company called Side, where Sapphire invested three years ago now and it’s just a really exciting business. 

Side works with top agents in their local geographies. These are typically agents who are 5, 10, 15 years into their career, have had a lot of success at other brokerages and are essentially outgrowing the infrastructure that these brokerages are providing. They leave those brokerages, they join Side, and then Side is their end-to-end platform. It’s almost like Shopify.

In addition to that, companies that are helping to automate the real estate transaction are quite exciting to me. 

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