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The European startup ecosystem has reached a level of maturity that can support the creation of tech giants. We have knowledge derived from experience, networks that have transformed into communities, infrastructure to build on and smart capital. Perhaps most importantly, we’ve refined our mindset and scale of ambition. After years of encouragement to dream bigger, a new generation of bold European entrepreneurs is ready to compete on the global stage. This is the first in a series of conversations that showcase their visions and journeys.
Teun van den Dries, GeoPhy’s Co-Founder and CEO, can’t be accused of not thinking big. Started in 2014, alongside Sander Mulders – Van den Dries’s former university architecture teacher – GeoPhy’s mission is to understand the value of every building in the world. Essentially, to become the Google of the built environment. For Van den Dries, this means making information universally accessible and bringing transparency to the real estate industry. As he explains further, the end game is not merely to identify a property’s worth, but to provide in-depth insights about the drivers behind it and its predicted future value – faster, at scale and bias-free.
To achieve that goal, GeoPhy captures thousands of conventional data points (i.e. property and transaction records) and unconventional hyperlocal factors (i.e. crowdsourced data on independent businesses, events, and reviews) that are then used to inform its machine learning enabled value assessments. Currently focused on commercial real estate, GeoPhy’s AI-powered valuations help steer acquisition due diligence, portfolio monitoring, and site selection for institutional lenders and investors in the real estate and financial sectors.
Real estate is the world’s largest asset class, with global investment in commercial real estate alone reaching an estimated $730 billion in 2018. However, standard approaches to real estate value assessment often rely on a combination of intuition and limited, anecdotal data. As GeoPhy explains, the process can take weeks and costs thousands of dollars. The method is necessarily retrospective, and predictions about future income streams are proprietary and difficult to obtain. Bringing a new level of information to this significant segment of the economy can be transformative.
With a proven product on hand, Van den Dries’ conversations have shifted from him being told that what he’s trying to achieve is technically impossible to stakeholders reaching out to invest, acquire, or partner. When asked about the long-term defensibility of GeoPhy’s technology, Van den Dries refers to the current high-performance levels of the model and the feedback loops that continuously improve it over time. Going beyond this, he is quick to point out that data is already becoming a commodity, but how the data is used to create new models and information for people to act upon, is not. It is precisely the way in which new insights can be applied to improve information quality and depth that will define years to come.
Miruna-Ioana Girtu: Technology can shake entire industries, even the most traditional ones that might resist change. As you’ve put it, for incumbents, inaction is a Kodak choice. From your perspective, what are the core innovations driving change in the real estate industry?
Teun van den Dries: The vast majority of how people work has been very low-tech and relationship-heavy. I think we’ve seen that combination in a lot of industries, but it is really something that is shifting in most of them. It’s not so much that the relationships go away, but that technology will be used to complement and augment those human capabilities.
If you talk to real estate professionals, they will say that it is all about the relationships – who you know and what kind of deals you have access to. But then, if you look at how they work, there is actually a lot of data acquisition and transformation involved in that process. They’re just not very aware of it. For them, the visceral, easy thing to notice is the fact that they do the deal while going out for drinks with people, even if the actual work behind the scenes is generally a giant exchange of information and data.
Girtu: Looking back, was starting GeoPhy from outside the real estate industry more of an advantage or a disadvantage you had to overcome?
Van den Dries: It certainly was beneficial to come from outside the industry. We did not have preconceived notions of what was possible or feasible. The ‘can’t-be-done’ feedback we got initially wasn’t just defensive – it was that many of the large players had tried this in the past and were not able to do it. Because we entered the market without those preconceptions, we were able to navigate to an intersection of domain knowledge and technology application with less friction.
However, it’s not just about the technology. You can’t make a viable valuation model if you do not understand the space. It’s been a significant learning curve for us but acquiring that domain knowledge was essential. It has, however, proven easier to teach real estate to a technology person than to teach technology to a real estate person. Our approach has been to start with technology hires and bring in real estate expertise as needed to ensure we have the appropriate balance of technology and domain expertise.
Girtu: What was GeoPhy’s initial mission and how has this evolved over time? Did you think this big from day one?
Van den Dries: The original premise certainly didn’t have the scope of what we do today, merely because we didn’t know it was possible. Our initial premise was to create an all-encompassing data set for Dutch properties, approximately 8 million buildings, which included quality scores for those properties.
As we developed it, we realized that much of what we were doing could be applied to other countries. The ability to leverage the wide breadth of available data to expose real estate value drivers objectively was a realization of serendipitous discovery.
Girtu: How did you manage this journey to product–market fit? Did you use any key indicators to guide you through the process? When did you realize you were onto something big?
Van den Dries: When clients effectively began developing our roadmap. We’ve had the luxury of having to respond to referrals and requests from the market. Having a product in the market with an evident value proposition combined with the amount of inbound interest have been the main indicators.
Girtu: GeoPhy has started in Delft, the Netherlands, but now has offices in New York, London, and Kaunas. How are you navigating the process of expanding globally?
Van den Dries: While we are now more actively scaling the business and geographic locations of our teams to align with market opportunity and the availability of technical skills, it’s an approach we have had from the start.
We began establishing our office in the U.K. after six months and our office in the U.S. after a year and a half. That required the development of a resilient information and management structure from the start. Today, working in a distributed environment simply is part of our DNA. That adaptable business infrastructure continues to help us navigate the international scaling process.
The international approach also translates to our working culture and hiring process. There is no one dominant location, there’s no one dominant culture, and everything has been built to foster diversity from the start.
Girtu: This diversity of thought I’m sure is important in all aspects of building a company. So is the ability to attract and retain great people. In a little over four years, you’ve grown to a team of nearly 100. How do you approach recruitment and how did you go about creating the company culture? Were you deliberate in doing it or has it happened organically? Was it difficult to retain that culture with scale?
Van den Dries: When my co-founder and I started hiring, the only premise we had was that we wanted to hire people smarter than us. We’ve tried to keep that up over time, essentially aggregating the average IQ level of company hires. It became harder and harder to achieve. The initial hires tended to be friends and former colleagues, then we very quickly branched out to hire what we thought would be the best possible talent regardless of location, background, or educational talent. Realistically, experience is part of that equation. However, identifying potential, interest, and a willingness to learn has proven to be far more crucial.
Focusing on potential helped us identify a certain group of talent that is self-directed and seeks a meaningful technical challenge. Scaling that approach demands commitment and a lot of hard work. But it’s worth it. It enables an environment where everyone works towards the same goals even when working at disparate locations.
Having that entrenched structure of distributed teams necessitates a high-trust environment of working, and promotes meritocracy over any strong hierarchy. That structure and hiring approach contributed to the formation of an implicit culture of transparency, curiosity and focused urgency. A culture we have made very explicit over time.
Girtu: How does your background as an architect influence your approach to building the company, if at all?
Van den Dries: There is something to be said for having an architect’s background as an entrepreneur. The one thing you learn is to be a systems thinker. A building isn’t ever one domain. You always need to bring all of these different disciplines and different perspectives together. As the architect, you are the orchestrator that makes sure everything works symbiotically. To a large extent, this also holds true to building a company. My job is to enable others to do their job. When I do that well, assuming I’ve hired the right people, it propels the company forward.
Girtu: You’ve recently raised a $33 million Series B, backed by notable investors (Index Ventures, Hearst Ventures, Inkef Capital). What have been some of the biggest lessons learned when it comes to fundraising?
Van den Dries: Raise capital when you don’t need it. Being in that position allows you to be selective and structured in your fundraising approach.
Part of that structure is understanding and defining your goals and the specific gaps that investors can fill to help meet your defined goals. Partnership with VCs and investors can help you raise capital to essentially grow a piece of technology that you would not be able to build organically. However, there are potentially toxic elements such as perverse incentives and fund structures that do not align well with cultural and business goals. Defining goals and expectations beforehand helps to successfully maneuver through the process to find the optimal partnership.
We chose not to disclose previous rounds to the extent we have now. We simply did not want it to be the central point of discussion because it didn’t speak directly to our technology or the value we bring to the table. Rather than viewing our funding achievements as success points, in some ways, we considered it more as a point of failure.
That’s not entirely true, of course. Funding success in many ways speaks to our market value and stakeholder belief. It also provides the resources to drive more rapid growth to accelerate the attainment of strategic goals.
Girtu: What were the main considerations you had when choosing your investors?
Van den Dries: Our focus has been in choosing partners, not just money. That means aligning with those committed to us for the long haul, not simply to cash in and exit with an IPO at the end of three to five years. It also requires partnering with investors who share our vision. Investors who have the passion and experience to help us convert ambition into a transformative international business.
Girtu: The founder–investor fit is very important and not enough people talk about it.
Van den Dries: Exactly. That tends to be overlooked because of the intense pressure entrepreneurs face to secure funding. That reinforces my initial belief that it’s optimal to seek funding when it’s not a necessity. It allows for a more holistic, open approach to investor engagement.
During our recent round of funding, we had the luxury of being selective. We engaged investors that understood our business, aligned with our approach and had the proven resources to help contribute to its realization. Again, many investors will position as value-add resources with amazing industry contacts and relevant networks. However, that simply is not a reality in most cases. You have to do your due diligence to identify investment partnerships that align culturally and professionally.
Girtu: In this quest to reimagine and disrupt the real-estate industry, do you think there are areas where technology falls short?
Van den Dries: That is a strong yes. There are a number of elements we believe are important for the industry to address. For example, climate risk or the health of buildings. We initially thought these would be relevant, important feature indicators for property value. Something people would want to consider when assessing value over time. However, to date, those assumptions have proven to be marginal at best.
Our model tracks what the market is doing. We found that there is this lag between what we would hope to see in the market, what we think should be there in terms of these indicators, and how they should drive value to some extent. That’s definitely something we view as a technology shortcoming in that the information is out there, but people don’t seem to be using it optimally.
The conversation has been edited and condensed for clarity.
March 13, 2019 at 04:51AM
Forbes – Entrepreneurs