Windermere Real Estate is a large and well-known residential real estate broker in the Seattle area. In the late 1990s, they invested to build an internal software system to power their own business and differentiate their services. After using and improving their software for over 10 years, the family owners of Windermere spun out the software as a new company called MoxiWorks. They hired experienced tech entrepreneur and marketer York Baur to lead the new MoxiWorks business as CEO in 2012.
After rewriting the software from scratch, they started selling their solution to other large brokers in the US. They grew steadily and expanded their product platform and their team. MoxiWorks is now a leading platform system for large residential real estate brokerages, serving over 800 brokerages and 400,000 agents nationwide, which account for more than 20% of transactions in the U.S.
MoxiWorks started as an internal technology investment at Windermere Real Estate, but their early growth years were funded by the Windermere owners and customer sales. In 2019, Vector Capital made a major investment to help MoxiWorks expand beyond its current $50 million in revenue and 300 employees.
Best quote from York:
“When it’s the go-go times, it’s very hard to be a responsible operator because everybody’s telling you, ‘Go raise $100 million and spend it and go nuts! And then when things crater as they have in the last 12 months, to people that know, you look like a genius because you ran the business responsibly and profitably.
“It’s my personal approach to things to not just be a drunken sailor when it comes to money. But also I was spending people’s family money. I felt an obligation to not go crazy and hope it worked out.
“So we built the business in a more methodical and perhaps a more mature way than you would typically see in a venture capital-funded company.”
Edited transcript of the Practical Founders Podcast interview with York Baur, CEO of MoxiWorks
Greg Head: And we’re live with York Baur, the CEO of MoxiWorks. Hi, York. Welcome to the Practical Founders Podcast.
York Baur: Hey, Greg, I appreciate you having me, and always good to be speaking with fellow entrepreneurs out there. It’s a lonely road, so hopefully what I say will be useful.
Greg: You’ve got a bigger company and it’s in a vertical industry, the real estate business. Why don’t we just start with what is MoxiWorks these days? I know it’s more than a 10-year-old company. And you didn’t found it; you’re the CEO. But like, what is MoxiWorks today? How many employees and customers and whatever you can share about revenues and growth?
York: Well, as we’ll talk about along the way, we are the overnight success that took 10 years. There’s a lot behind the numbers. We are Seattle-based, but now globally oriented, meaning we have both customers and employees around the world, maker of a real estate platform for residential real estate brokerages. We’ve got about 2,500 of those brokerages as our customers and about 300 employees now globally.
York: So, yeah, we’ve grown up from 10 years ago, for sure.
Greg: Can you say how much revenues are at this point?
York: Yeah, we’re around $50 million in ARR at this point.
Greg: And so you’ve had a little funding along the way. We’ll talk about the journey there. But this is one of the bigger companies, and it got started in a little different way. It wasn’t some 25-year-old engineers in Silicon Valley creating it or, you weren’t the real estate guy that discovered a problem and got somebody to build something for you. York, How did MoxiWorks get started?
York: I’m going to go sort of the Wayback Machine here a bit because you’re right, it’s a twisted and very different sort of origin story than most. And I’ll kind of weave where I came into it as well because I think to answer the kind of the point you just made… People look at my background and they go, “How did you end up here?”
York: The original origin story… And this might be interesting too, to people that spend their lives looking on Zillow and that sort of thing. You know, real estate as an industry, residential real estate in particular, has always been a laggard with regard to technology. Yes, it’s a non-fungible asset. Every home is different, so it’s very difficult to standardize, Amazon-ize, if you will. These types of transactions are complex; there’s a lot of regulation, a lot of locally specific regulation, etc.
York: The second reason, and I would argue the more important reason, is it’s the largest financially and emotionally significant transaction that most consumers will ever do. Therefore, they’re really interested in the relationship with the agent and that this agent is not only going to do the transaction but going to guide them, going to serve as their psychiatrist and they’re the person to cry on the shoulder of, etc. So the reason I bring that up is that technology is late in the vertical of residential. So if you go back somewhere between probably 10 and 20 years in other verticals, that’s kind of where residential real estate is today.
York: So back to the origin story of MoxiWorks, we spun out of a residential brokerage here in the Pacific Northwest based in Seattle called Windermere Real Estate. Windermere is a 50-year-old brokerage and franchisor. Very well respected, dominates the Seattle market and has for almost that entire time.
Greg: So you would see those signs in front of people’s houses when they’re selling their houses.
York: That’s exactly right. And Seattle is, as many, well, I hope everybody knows, is actually more the sort of OG of the Internet than I think people give it credit for. Everybody looks at Silicon Valley as that, but let’s not forget Spry Networks with the first consumer Internet product called Internet-in-a-Box, if you remember that thing from the ’90s. So the point is, in the tech community of Seattle, there was just a lot of discussion of early Internet thinking. And Windermere picked up on this and registered the domain windermere.com in January of 1995, which if you go to the Wayback Machine, that’s the first…
Greg: That’s about when Amazon started. That’s when Jeff Bezos bought the domain. Of course, based in Seattle as well.
York: Bingo. So that was the first residential real estate brokerage website in the United States that we’re aware of, at least.
Greg: We have a lot of international listeners, and of course, residential real estate, how houses are bought and sold, differs around the world. Can you explain to our listeners here the difference between a real estate brokerage and the agents?
York: And you’re right, there are a couple of things that define the North American real estate market. Because Canada operates pretty similarly to the U.S. In much of the rest of the world, the majority of housing is actually sold word of mouth and often transactions are done through attorneys and that sort of thing. It’s not an organized industry as much in most of the rest of the world as it is in the United States. So in the U.S., the way it works is an agent is a contractor to a business, which is the brokerage. The brokerage is a business entity that has the fiduciary responsibility for making sure that these transactions happened legally and per the consumer rules that are in place and then the agent contracts with that brokerage.
York: In our industry, it’s called hanging your license at the brokerage. And the role of the agent is to find the business and shepherd the consumer through the business. And the role of the brokerage is to provide support to that agent in the form both of going to market with marketing materials and lead generation and those types of activities, but most importantly, is really the one responsible for executing and ensuring the correct execution of the transaction itself.
Greg: Because it’s a big transaction, and do we really trust our biggest life transactions to somebody who just got their license three weeks ago, something like that. Okay, great.
York: Bingo. So the brokerage, arguably, is sort of adult supervision. One of the things that people don’t understand is how big residential real estate really is and therefore the cash that’s flowing through it. The value of residential real estate in the United States is approximately equal to the value of all the public companies in the United States. It’s a giant asset class. And the way that money gets generated, the way our customers make their money, both the agent and their brokerage as far as the transaction itself, it’s commission only. It’s a 6% commission that’s paid by the person selling, the consumer selling the real estate. There are huge monies that flow through this business.
Greg: It’s a huge business. And you’re right, it’s slowly catching up. And there are these disruptive real estate ventures. Zillow, also in Seattle. So, the Windermere brokerage company that started to be big in Seattle and had a technology orientation unlike most real estate brokerages, I guess at the time, how are they different than other brokerages and how did they end up with this software?
York: There were probably three things I would say as to how this sort of came to pass. The first I already mentioned, which is that Seattle was an early Internet hub. And so just by being in Seattle in the business community, you kind of got sucked into that a little bit. The second thing, and this is full credit to the Jacobi family that founded and today the second generation that runs Windermere, they were just very forward thinking with regard to this. They didn’t have to do anything, but they saw it as an opportunity to gain a competitive advantage through the use of technology.
York: The third thing, and this will bleed into how we think about our product family later, the thing that Windermere is built on is the importance of that relationship with the consumer. Not just a transaction, but an actual relationship, an ongoing relationship with that consumer between transactions, including how agents and those brokerages act in their communities, and how they support philanthropy. There’s a whole set of cultural values at Windermere that mean that it suits itself, in my opinion, to a certain type of marketing technology that we provide, and that has provided us, as a company, a big competitive advantage, I think, in the marketplace over time.
Greg: So they looked around and they said maybe there’s marketing software and there was sales software that was part of that whole industry in CRM for 25 years. And they looked around at Salesforce and Siebel and ACT! way back when that I was involved with and said, “That doesn’t fit what we’re doing in our business. We have to write something internally.” So they built something for their own use, which happens all over the place in vertical markets.
York: That’s it.
Greg: How long did they invest in building their own solution?
York: This shows you the longevity, because arguably that very first investment came in ’95, as I said, with the building of windermere.com. And this is something, by the way, very unique, I believe, to residential real estate. By definition, the data about the sale of homes has to be public. It’s not only public record, legalistically, but the whole point is you’re marketing homes when they’re for sale. So that led to the development that Windermere co-created, by the way, with an entity called the Northwest MLS.
York: So, in real estate, for 100 years, there have been MLSs, and multiple listing services. And it’s where all the agents come together and pool their information about the homes that they each individually have for sale so that other agents can see what’s for sale and show consumers homes and all that sort of stuff that we know and experience as consumers. That used to be done, believe it or not, in a book. I mean, there was literally a book that got published every month with all the homes for sale. So what Windermere did in concert with the MLS here in Seattle, which is the Northwest MLS, is to bring all that online and create what is still to this day known as the IDX standard, which is a data exchange standard for how that information gets shared between various website vendors and that sort of thing, including us. So, my point is, Windermere from ’95 to 2000 was investing in that and then subsequently went on to build a whole suite of agent tools on a platform that you, Greg, I’m sure, will recognize, but I suspect some of our younger listeners may not called ColdFusion.
Greg: Oh, of course, one of the early data-driven website builders. That was very complex, powerful stuff before WordPress and all this “easier stuff.”
York: Exactly. Ran on Sun Solaris Unix boxes and all this way back stuff. The point is, Windermere made enough investment to build out a complete set of tools for their internal use, for their agents to use. So things like CRM presentation software and other marketing tools, such that they would gain a competitive advantage in the marketplace, which they did. So this is through the early 2000s.
Greg: So it was a differentiation for them. And this was web-based software. So in the early 200s, Windows was dominating, and that was early Internet software.
York: Exactly. It’s good that you recognize that, Greg, because it’s… I mean, they don’t get the credit for it much, which is why I don’t mind coming on podcasts like yours here and trying to tell the story a bit. I mean, it was incredibly forward-thinking. They were basically doing SaaS before everybody even called it that.
Greg: Did they have a division inside their company? This is a big brokerage house, but like, did they have three guys in a corner coding this thing and then some crazy founder would walk over and say, “Maybe you could build some of this,” or was it more organized than that? Usually, it’s kind of a crazy adventure.
York: Probably between those two extremes, but leaning perhaps a bit more toward the crazy venture because none of this had been done before. So it was a formal technology unit within the brokerage, but it was very small and entrepreneurial. And that actually leads me to the sort of formal origin story of Moxi, because what happened is by the mid-2000s, Windermere had created through this technology a pretty substantial lead in the Seattle market. Seattle is a very tech-forward place because you got Microsoft and Amazon. So, a consumer is going to appreciate this when an agent shows up using technology. So it really worked out well for Windermere.
York: So, because it was relatively expensive, once they had a lead they kind of took their foot off the gas. You know, there wasn’t a lot of need to innovate rapidly. And then the housing downturn happened. And again, some of the younger folks may not appreciate it, but in 2008 with the failure of Lehman Brothers, it triggered a housing collapse based on a housing bubble, which was really a debt bubble. And 2008, 2009, 2010 really sucked in housing. I mean, it’s hard to overstate how challenging a period that was.
York: This, again, is to the Jacobi family’s credit, and specifically, OB Jacobi, who’s the son of the founder and really is the one I would credit more than anyone with having driven this technology thinking throughout this entire period. He, in 2010, foresaw that the next decade in real estate was going to be one in which large players with large money behind them were going to enter the market and that you as a brokerage would struggle to compete if you were just trying to build your own stuff inside your own four walls.
York: Because keep in mind, you mentioned Seattle earlier, Greg, both Zillow and Redfin, who we haven’t talked about, a tech-forward brokerage, had both started in 2007, if I remember correctly, in Seattle. And of course, both Zillow and Redfin started operating first in their backyard, namely experimenting in the Seattle market. The decision was made in 2010 to spin what was then this internal technology unit that I’ve described out into a new entity, NewCo, that ultimately is what Moxi is today.
York: And it was based on essentially two concepts. One is, it was going to take a lot more capital to compete because Wall Street money was entering through technology into residential real estate. So, a single broker couldn’t fund this thing at the level it needed to be. But secondly, and equally importantly, that it had to live its life truly as a software company, not this software thing in a traditional brokerage. Because if you and I, as software people try to run a brokerage, we’d suck at it, right? So this is kind of reverse recognition that it’s probably better to leave this or to spin this entity out and have it live its life as a software company.
Greg: And sell the software that helped you serve your agents and differentiate to other brokerages. I guess in other regions, right? Not in your hometown, but in other places.
York: Initially, you’re right, although over time that has changed. And again, tip of the cap to the Jacobis. They also recognized that the products would evolve better and become much better, much faster if you exposed them to a broad market than just one broker’s ideas. And so it wasn’t just the financial aspect, it was that too, but it was also a way to say, “Look, we want to make these products as good as they can be, and that’s going to happen faster if we let this thing live its life and serve many customers.”
Greg: So it spun out of this residential real estate brokerage. You know, that almost never happens. All these internal tools, they never get very far. The people are running their brokerage business. They don’t think about technology. All of us software guys, maybe somebody spits out of the brokerage, starts a software company, and comes at it from the outside. But this one survived and grew and multiplied and didn’t die along the way. It’s pretty amazing. And now you’re growing, and so you’re headed towards being a very sizable company. York, when did you come into that? You’re not even a real estate guy. So how did this happen?
York: No, I’m definitely not. I’m a technology guy. I have a computer science degree and have lived my entire career in technology.
Greg: But mostly sales and marketing. You’re not a CTO type, are you? Or a product guy?
York: No, I mean, I started my career technically. As I mentioned, I had a computer science degree and so on. But no, I do enjoy the go-to-market stuff. I spent a lot of time, as you pointed out, in marketing roles, for instance. So I’ve kind of done one of everything in the company with the exception of accounting and finance roles. I don’t mean to be boastful, it’s actually the opposite. I had a lot of people that believed in me probably more than they had any right too. They gave me opportunities to just get experience in different kinds of roles throughout my career. But you’re right, I’m definitely a software guy, not a real estate guy, so I had a lot to learn when I came to the company.
York: The spin-out of the Moxi entity actually happened at the beginning of 2011. That team, that internal technology unit team for Windermere just got transferred as employees into the entity. And it was run by… The guy who had been the CTO of Windermere, became the CEO to run this new entity.
Greg: The first customer getting revenue. All of a sudden you have to pay a transfer payment from your big first customer. This happens sometimes, right? I hear that all the time. We spun it out and now we have to serve other customers, but they’re our first revenue customers.
York: That is a wind at your back, I will say, in the early days. That CTO-to-CEO transition just didn’t work out for a variety of reasons. And so there was a recruiting process that then recruited me to the company as the CEO and that was in late summer of 2012. So the company had been around for about a year when I showed up as a standalone entity. But to your point, Greg, the only customer, when I showed up, was Windermere, the spin-out customer. And we had a couple of million bucks in revenue and we were trying to rub two sticks together, you know. So it was definitely… We’ve gone from $2 million then to $50 million now in about a decade. So there’s been some twists and turns along the way, as you can imagine.
Greg: You were an executive sales and marketing leader of some very cool Seattle tech companies. It is the Silicon Valley of the Northwest. I mean, everybody’s doing tech in Seattle there. How did they possibly recruit you? Did you think this was cool, or? I guess you did.
York: No, it was more of a hand-in-glove thing. I mean, not to overly dramatize it, but let me explain why. So I got headhunted through a local exec recruiter in this market who had been around forever, a really talented recruiting firm, actually. And what they saw was two things. One is, as you said, Greg, I’ve worked for a lot of different companies and a lot of different-sized companies, including some very small startup companies, including my own. So I have the small company thing, but I also have the larger company thing. I ran divisions at places like InfoSpace; I have a background at Microsoft. So, I think what they saw is someone that, while I haven’t held the title before, had run things of larger size, organizational segments that are larger. But also had done the small thing so they could see a way that I could take them on the trajectory that they wanted.
York: But I’ll tell you, the thing that really cemented it for me is twofold. One is a functional thing. Yes, I don’t have a background in real estate, as you point out. However, what real estate is… If you think about what a brokerage entity is, if you looked at a large company and you made the pie of all the functions and you cut out the two slices of sales and marketing and took those two slices out and put them in a NewCo, that’s a brokerage.
York: And not only do I have a sales and marketing background as you’ve noted, but also I have a tremendous passion for the use of technology in the automation of and the helping of the sales and marketing functions, both as a consumer of it because I’ve been a CMO and a VP of marketing, I’ve run channel sales and so forth, but also I worked for a company which is now called Altify, originally called the TAS Group. I was the CMO there for several years, which was Salesforce automation software integrating with Salesforce.com. So, I’ve always been in and around this and am very passionate about the use of technologies like CRM and marketing systems. So that made it an obvious fit. Even though it’s real estate, that’s the set of tools that we’re talking about here.
York: The second reason, and it’s every bit as important, is the relationship from the very first time I met the Jacobis. I mean, I think one of the things that we as technologists make the mistake of sometimes is undervaluing or even ignoring the relationship component in things because we think it’s all about the tech. And yeah, the technology is super important, but what I think is every bit as important is the relationships that go with that. Because all the technology in the world doesn’t create things like trust and humor and belief and all these things that we as humans pride.
York: I’m not trying to get all gushy about it, but you know, it’s important. It’s certainly important to me personally. So when I met the Jacobis, I could tell these are principled people, who believe in a relationship, who are willing to trust, are capable and have demonstrated their ability to trust in a business setting because they’ve done this throughout their entire career in history as a brokerage. I don’t find that to always be the case in technology, as I just said.
Greg: Yeah. This was not a venture-funded, “Here’s a tool. I’m going to go out and do the pitch decks and raise a bunch of money.” Speaking about mistrust and crazy expectations and…
York: That’s right.
Greg: …sometimes unproductive relationships. Not always, but sometimes. So you said, “This is a great foundation to build a real business.
York: That’s exactly right. And it was important, I think, bi-directionally, because to your point on funding, the Jacobi family funded the early years. Once I was there, I continued to fund the first three years of our evolution from there. And that’s family money; they have a family office. So, it’s not some amorphous entity on Wall Street, this is money they’ve carefully built as a family over years. So it creates a different, I think, way of thinking about funding than if it’s all faceless sort of stuff.
Greg: Yeah, there’s always funding, whether it’s your time or your own savings or profits from a company. The company is grown now. It was regional back then and then probably had a few module functions, apps or something. And now it’s an entire platform with partners and half a dozen different modules you could select from and a whole data management system. I mean, how did it grow from just an internal tool to this? It’s quite a comprehensive, integrated platform that serves your agents through the brokers coming out the back door of a brokerage company. How did it get going in the early days?
York: You’re hired, Greg. You’ve figured this out.
Greg: Yeah, you know.
York: Not your first rodeo, I know, but that’s a pretty good description of what and who we are. So here’s how that happened. So, you have to understand the basics. Who’s my customer? What am I trying to achieve? How big is the TAM? What are the critical things that they do in their workflow? It’s not some mystery where you come up with cool ideas and spam them out there and see what sticks.
Greg: Well, that’s what happens when Silicon Valley tries to do it for real estate.
York: So, let me answer the question as to how we then thought about things that led us to what we have now. If you look at the market, and some of these numbers to me are unbelievable still, but there are about a million and a half realtors in the United States that are members of the National Association of Realtors. So people have said professionally, “I’m a realtor.”
York: Here’s the more stunning number, though. Depending on whose numbers you believe, there are somewhere between 50,000 and 100,000 brokerages, which typically means a lot of those are one or two agents that are also a brokerage. When we chose the market segment we were going after, we looked at the typical market pyramid, of course, the largest enterprise brokerages being at the top. And we said, “We’re only going to talk to the top 2,000. That’s going to be our market, the top 2,000.” Which, when you stratify it, if you draw a line at 150 or more agents, that’s the top 2,000.
York: This goes back to a comment I made earlier. When you look at the money flows through here, those top 2,000s are doing hundreds of billions and in some cases trillions of dollars of transaction value. So, that’s where the money flows are interesting. You don’t need a lot of brokerages before the numbers get really interesting. So the first founding thing was we’re going to serve the enterprise brokerage. And what that does is two things. You need enterprise-class systems, that scale. And in the case of real estate, you also need the ability to accommodate franchising because much of what goes on at the high end there is franchising. So think of the names that you might know.
Greg: RE/MAX or something else.
York: Coldwell Banker, RE/MAX, or Windermere here in the Northwest, they’re all franchises. So by choosing that end of the market, it forces you to make certain technology decisions that are very hard to retrofit later. It’s very hard to take an agent-only system, for example, and adapt it to become an enterprise system. So, I think we chose well in retrospect, but that was a deliberate choice. That’s the first comment.
Greg: And did you have to rewrite the software from this early, you know, first internet developer tool?
York: Yes, we started over. In fact, a fun little fact of the story along the way is, as I used to joke, it’s like trying to rebuild the engine while you’re doing 90 down the freeway. Because you have to maintain, in this case, for our founding customer Windermere, we had to maintain everything they were using on these ancient ColdFusion servers whilst we built all the new stuff with a tiny organization. That was a hard thing to pull off, to be honest. Kudos to the early technical team on that.
York: But it was so frustrating because… And you know this, Greg, but the thing that I think people don’t think about oftentimes in the modern world is in systems like that, you can’t turn it off until the last line of code is no longer operational. So for instance, at the end we had one tiny little applet thing that we hadn’t yet replaced and we had to run all this Sun Unix infrastructure in a data center, all of it, because it was all interwoven and you couldn’t just extract this one, right? So when we actually got it finally decommissioned, we took the servers out on the loading dock and smashed them with a sledgehammer for charity.
Greg: Yeah. There’s probably a little benefit of getting out to the Internet first with the first pioneering tools that turn out to be very expensive and complex and everything, and then waiting for Amazon Web Services, AWS, and better tools and web technology to mature so you could run in and do it pretty quickly, I imagine. Compared to the old days of software.
York: Absolutely, because it gave us the benefit of having learned the lessons of what agents do and don’t like and do and all that sort of thing. You’re absolutely right.
Greg: That must have appealed to you to come in to say I know you guys don’t know the software business outside of your company, but you’ve proven this is really valuable. You’ve been running it day to day for years and years, and you have other brokerages that are lining up saying, “Can we have it too?” That is a primed opportunity. And you didn’t have to go beg for funding and promise the world to do that. Not everybody sees that as an opportunity, but that is kind of almost like product-market fit, but we just need to rebuild it and make a software company out of it.
York: You’re right. And it’s probably what I would say is maybe 50% or 60% of product-market fit, because when you’re doing it for single customer products it’s very different than doing it for the broad market. But your point still holds, Greg, absolutely. That was a huge tailwind for us because we didn’t have to start from zero on understanding product-market fit. So that was definitely… There are a number of downsides to spinning out and starting in this way, but that was a huge upside for us for sure.
Greg: When did you feel like, beyond the Windermere, first customer keeping you busy, when did you feel like, “Oh, this is really going to go?” Did it take 10 customers or a million of new revenue or something like that? When did you feel like…
York: You’re in the ballpark. And I’m trying to mentally reconstruct history. But as I said, it came in September of ’12. So ’12 was baked by the time I showed up. So in my mind, I started… Really ’13 was the first year. And ’13 was all about figuring out our product strategy, kind of as I was just describing it. I can talk more about the products if there’s interest. But ’14 was the initial go-to-market with actual production products in this new generation. And so I would say that by the end of ’14 is when I felt what you were talking about. I felt like this is probably going… We’re probably on a good track here and we might be able to take this thing somewhere. Because by that time, we had probably a dozen customers and a million in ARR incremental to Windermere at that point.
Greg: How much is your software maybe to a big enterprise? Was it $100,000 a year, or was it $500,000 a year?
York: Our deal size varies today. It varies between, and these are ARR numbers, between $50,000 on the low end and single digit millions on the high end.
Greg: Okay. Because you’re a really important system for the brokerage. You’re almost the interface between the agents and the brokerage, right? It’s a primary tool, right?
York: Yep. And this is the other thing I should mention about how we thought about the product early on. Are you building something that’s nice to have or that’s need to have? Easy to say, hard to do, but we concentrated on the need to have. What are the fundamental things that a brokerage must supply for an agent to do their business? And that’s how we chose the product categories that we then built.
Greg: And you’re not into transacting the homes and the digital documents that go back and forth and signatures and escrow and money and that thing that needed to happen before and sales and marketing technology was optional because you had people running around and faxing things. Now the sales and marketing platforms that brokerages use to empower their agents and recruit agents, it’s no longer nice to have. It’s a must-have if you’re going to be a serious brokerage. Yeah.
York: So there’s nice to have and need to have. The other is, find the business, close the business, in real estate I’m talking about, specifically. We chose need to have and find the business as our initial foray. So we’ve really built Moxi on that premise. What are the tools you need to have to find the business?
Greg: For an agent to find new clients and new homes to sell.
York: That’s exactly right. And then on the close the business part, we’ve actually acquired our way into that part of the market now. In the last 18 months, we bought a company and we’ve added that to the portfolio. But really, Moxi substantially has been built on the need to have tools for finding business.
Greg: Dot, dot, dot. It’s grown up, it’s a $50 million business and you have thousands of brokers using all your different tools, a suite of tools. Do you sell that a la carte or do they have to kind of buy into the integrated?
York: When I talked earlier about the market… As an entrepreneur, think about the market you’re going to enter. By that, I don’t mean like, “Oh, we’re going to go after residential real estate.” I’m talking about that market pyramid and where on the stratification you’re going to enter. It’s so critical to defining how you answer certain architectural questions. And you know this, Greg, but for the audience, I think I just can’t overemphasize how critical a set of decisions like that is.
York: Because we chose the enterprise, if you walked into an enterprise brokerage even a decade ago, it’s not like they have a blank piece of paper. I mean, they’re using some technology, right? So if you show up and go, “Here’s my thing, all in one. Take it all or leave it,” it’s a hard sale. Or, you’re going to have to basically give away parts of that value and you’re going to grind your price down because you have to give them everything else because they’ve already got stuff. So if you’re selling at the bottom end of the market, different story, right? They need a one-throat to choke vendor. But the point is, if you start at the bottom and then try to go to the enterprise, it’s very difficult architecturally. So we are unique at Moxi because of how we started in this way. We by definition made our product family modular because we knew that brokerage wouldn’t be able to take an all-or-nothing sort of approach. And that has served us incredibly well.
York: Maybe I’m skipping ahead here a bit, but our primary sales motion is not to get a toehold and then grow license count. It’s the antithesis of that. We’re really trying to ultimately become the salesforce.com of real estate. That’s kind of… You know, I’m not that bright. I can’t claim to make all this stuff up from scratch, I’m just copying what I’ve seen work elsewhere. But primary access for us is actually adding products.
York: So we’ll go in with an initial product, for instance. Moxi Present is a decent example. When an agent comes to your house to do a listing presentation, for instance. You want to sell your home and you’ve talked to an agent. They’re going to come and tell you what your home is worth. We have a presentation product called Moxi Present that automates and helps make a great presentation. That product will get licensed for the whole brokerage, just that single product, for example. And then over time, hopefully, they like it and they have other needs or they have another vendor that’s letting them down or whatever it is, they’ll come and say, “Hey, what about CRM? What about websites? What about talent recruitment?”
Greg: It’s kind of a layer of the cake that keeps going. Every user has to be part of it.
York: The critical thing of that I think is twofold. One is, it makes our revenues pretty stable because you’re not subject to trying to eek out these individual license growth kind of metrics. And we only do multi year deals, by the way. And then the second piece of it that I think is perhaps even more important, is it allows us over time to have this partner ecosystem that you referenced that we can talk more about. But critically, when we acquire a company, our whole everything, the way we sell and market, the way we talk to our customers, the way our customers expect us is that they, over time, there are other products they can buy. And whether that’s something we made or something that we’ve partnered with a company for or ultimately something we’ve acquired, it fits into that same sales motion that we have.
Greg: So not only can you add your own products on these layers of the cake, you can add other people’s products into your platform. So you’re the starting point, you’re the center of the universe, the correct solar system there.
Greg: Let’s talk about funding. York, how long did it take before the Windermere family, Jacobi family, was not writing checks into the business and funding the business? Did you get to be a breakeven or profitable standalone business?
York: We are now. But to be honest, you have to remember that… It’s not just the technology market, but the real estate market has been very robust for the last 10 years, and that’s on the back largely of low-interest rates. This obviously has changed now in the last 12 months, but the point is… If you think about the market we serve is doing well. And critically, I said earlier, we want to be a platform, we want to be Salesforce.com. Well, you can’t make that work well at a small scale. It’s very hard to say, “We’re a platform and we have $10 million in revenue.”
York: So my objective was to grow Moxi quickly and responsibly, meaning not do the crazy house-on-fire cash burn thing, but also not focus on profitability during a phase where we’re trying to maximize the growth and get to scale. And I’ll also go back to your original question about the funding. But my point is the 0 to 50 phase was all about run it at breakeven to slightly unprofitable level to maximize the growth rate. And then take your foot off the gas a bit and get to profitability, which is what we have now.
Greg: You guys got over that hump, the escape velocity, you might say.
York: Yeah, and I think… Thank you for recognizing that because when we talk about our foibles and struggles, I’ll tell you one of the challenges that I’ve faced, and this is throughout my career, but particularly here at Moxi… When it’s the go-go times, it’s very hard to be a responsible operator because everybody’s telling you, “Go! Go raise $100 million and spend it and go nuts.”
Greg: And you know, you can’t grow fast enough. You can’t spend enough.
York: Exactly. So you look like a Luddite when things are going apeshit, which they have been for a while. And then when things crater like they have in the last 12 months, to people that know, you look like a genius. But to everybody else, they just lump you in with all this stupid stuff that went on.
Greg: Including Seattle. I mean, there are billionaires in tech running all over the place there. It’s really a tech hotspot. Outside of Silicon Valley, Seattle was number two really for the longest time in the software space.
York: Yes. So I guess to answer your question, it’s both my personal approach to things to not just be a drunken sailor when it comes to money, but also I was spending people’s family money. And by the way, we haven’t talked about this yet, but in 2015 I brought one of our earlier customers on as an investor. You know, there’s the Remington shaver joke about how I liked it so much I bought the company. They had a commercial arrangement with us. They wanted to expand it and made an investment.
Greg: We like it. We know where this is going. People who own brokerages have a lot of money, and they wrote some checks in there.
York: And that was also a family-owned brokerage at the time. In 2017, we did the same thing again with another customer, a family-owned brokerage. So the point is, this was family money I was spending. So I felt an obligation. I mean, I have a board, obviously, and I’d have to answer to the board regardless, but I’m saying personally, I felt an obligation to not go crazy and hope it worked out. So we’ve built the business in a more methodical, and I would say, a more perhaps mature way than you would typically see in the venture capital kind of trajectory.
Greg: You grew up there. You kept adding product layers, you kept selling more, brokerages probably kept improving everything. Fortunately, you rode the wave of an expanding real estate market that didn’t stop for 10 years, from 2010 to 2020 and then back up again and it got pretty hot. Built a leadership team and you got hundreds of employees. Was that a straight line or was that just the bumpiest road you could imagine?
York: Probably somewhere in between. But the point is, that was my joke earlier about it was an overnight success that took 10 years. It’s never a straight line. Outside my door… And this is a book that you can read, for the audience, maybe, that might find it interesting. But outside my door on the wall it says “What got you here won’t get you there.” That is so true; we all have to reinvent ourselves. And my job, I think all of our jobs as leaders, really the job is get the right people on the bus, get them in the right seats on the bus, and then drive the bus to the right place.
York: Sounds easy, but the point is where you are on that journey driving that bus, you may be moving people around in the seats and you may have to, unfortunately, ask people to get off the bus and bring somebody new on the bus. The person that enjoys and excels in a 30-person company, which we were a decade ago, is not necessarily the same one that excels and loves working in a 300-person company.
Greg: Yeah, very different.
York: So it’s not that no one does, right? And I’m an example. I’m still having fun, but I’ve also had to massively change my own game and evolve my own craft. And the number one thing I would say is seek coaching. No one can see themselves from the outside. So if you’re going to evolve, you’ve got to have people that are willing to call you on your bullshit and tell you how it is and amplify your strengths, shore up your weaknesses, etc.
Greg: Growing to hundreds of employees and now getting investors and managing this ecosystem of strategic partners, your initial investors. Now you have private equity, growth equity investors. You’ve got your brokerage customers, their agents, the partners out there. You’ve got a growing ecosystem of people, mouths to feed and people to keep happy. It’s a pretty amazing feat. And I know you’re growing, say, close to 50% a year, something like that, still, and in that direction?
York: Yeah, we grew a little bit over 50% last year.
Greg: Yeah, that’s serious growth without overspending to get it which means you’re on to something. And in a vertical market, that’s probably the tipping point where everybody says, “I guess it works. It’s what people get and you get it. It’s the easy choice as opposed to the risky choice.” You know, after all of this and growing up there and being practical about it, you raised funding in, was it 2019, before the COVID? Can you talk about what kind of funding that was? Big outside funding. Was it big and was it a VC or private equity? And what did that look like and why did you do it?
York: So, I’ll go back to 2018. Because of how relatively immature and therefore fragmented the real estate tech business is, I foresaw that there was going to be a consolidation phase and I went to the board and said, “I suspect this is what’s going to be happening. I’d like us to be a consolidator not a consolidatee, and that means we need a capital partner beyond these three brokerage customer investors.” Who’d been great, but it’s not…
Greg: To help you acquire. To help fund acquisitions.
York: Yeah, that’s right. And it’s not that they aren’t well-monied but they need their powder for their own businesses, right? In 2019, I ran a bank off to pick an investment bank to work with. I chose a boutique called Software Equity Group out of San Diego. Great experience. And then with their help, we ran a process that reached out to 50 prospective investors, including some strategies and a lot of private equity firms, and ultimately whittled that down to four that we had a serious engagement with, with management presentations and so on, and ultimately chose Vector Capital to go down the road with. After their due diligence process, they invested in us in September of 2019. And we don’t disclose our numbers, but it was at the time, tens of millions of dollars of investment that happened.
Greg: And was that mostly on the balance sheet or did some of the early investors in the family get to take a little money?
York: It was a combination.
Greg: That’s normal. And now you have a partner. It’s a little bit like going public. Now you have a currency and you have access to cash to acquire more. And they’re actually investing, of course, not because they want a piece of your profits. They want you to grow, create a bigger company and be the dominant leader, be the gorilla. As markets consolidate, you either are, as you mentioned, the consolidator or the consolidated, and you want to be one of the big guys. And so, what’s their expectation and what’s your expectation for growth?
York: We’ve gone from $12 to $50 in this period, ’19 to now. So we’ve seen a pretty good growth trajectory with Vector’s help. Both Vector and us are more of the ethos of “keep your eye on the ball and the scoreboard will take care of itself.” Meaning, you don’t want to be too declarative about where this all heads. As long as you’re building a solid business, the right exit point will come. Not to be vague, but I think, further consolidation is probably the more likely path for us, both initially as a consolidator, maybe at some point to be consolidated into a strategic, for instance, is probably a more likely path than public only because of the relative small size of companies in this space. But who knows? Time will tell.
Greg: Well, one thing I’m not seeing from you is you’re not saying, “The real estate industry is dead. It’s going digital. And real estate agents, we don’t need people and agents anymore,” because you empower the people that transact these trillions of dollars of residential real estate in North America.
York: Exactly. I’m a technology guy, so I love innovation and I appreciate nifty new things. The reality though, and I said this earlier, it’s kind of like the medical profession. The medical profession evolves slowly for the same reasons, right? You’re not going to fill out some form for that $99.99 heart transplant performed by a robot. And real estate is similar. People want someone they know, like and trust to help them, and I don’t foresee that changing anytime soon. How we as an industry and we as a company help that agent be better, there a lot of room for innovation there. But the agent, in my belief, and their brokerage will always be at the center of this process.
Greg: And so you grow by acquiring products and maybe customers and expanding regions. You can make a big business focused on who you’re serving in a big way.
York: That’s right. In the short to medium term, you’re absolutely right. I think in the longer term, we might look at adjacent markets. For example, in our world, mortgage title insurance and home services are things related to the sale of a home. So, we will over time, I think, and have already, and we’ll continue to look at those opportunities when the time is right.
York: I would argue we have more and the best data of any of our competitors; it’s been a focus area for us. But we are actually looking at it as a potential product. So we have our first deal where we’re actually selling anonymized data as a product. It’s embryonic, but we are doing that. And publicly, you can go on moxiworks.com and search our blog for a thing called the Home Sales Predictor. We’re actually using usage data, again anonymized, of our product family to predict the next couple of months of home transactions. So we are starting to use the data for more than just powering our product.
Greg: Now that you’ve got a solar system, it’s like big enough that you can really see what’s going. You can actually move the universe a little bit. Well, York, that’s really exciting. What a story coming out of an industry company and then making something that’s going to grow and change with the industry that keeps on going. Any last words for practical founders out there doing it in their own way? This is one of the ways you can do it, I guess.
York: Grit is arguably the most important attribute, I think, that any entrepreneur can have. You know, you need money, ideas and people to execute any business. And it’s the people and the grit those people have, I think, that’s the most important determinant of success. So, stick with it. Even if it’s dark days, stick with it, and you might be surprised where it leads.
Greg: Well, York, thanks for sharing your journey and some of the insights of how you and your team grew this business and are creating a force within a massive industry. Thanks for being on the podcast.
York: Yeah, I appreciate it, Greg. Thanks for having me. I enjoyed it. And good luck to all your other entrepreneurs out there.
Greg: Thank you.
In this episode, York explains:
- Why the software was initially created as internal software using early internet tools when few other brokerages were using powerful software
- How MoxiWorks was spun out as a separate company with a new CEO (York Baur) to sell to other brokerages all over the US with a new product platform
- Why commercial real estate is a big market but still very slow to adopt technology
- Why their 300-employee organization is very different than a small startup, so all leaders need to grow fast or be changed out, including York as the CEO
- Why they chose to get a private equity capital partner to help acquire and integrate related software solutions
MoxiWorks Company Facts
- Founded: 2010
- Description: MoxiWorks is a comprehensive platform for large residential real estate brokerages that serves over 800 brokerages and 400,000 agents globally.
- Number of Employees: 300
- Funding: Built initially as an internal software for Windermere Real Estate, it was spun out in 2010 as MoxiWorks by the Windermere owners. In 2019, Vector Capital private equity invested in MoxiWorks.
- HQ: Seattle, Washington
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