inside real estate, lovell minnick partners - background image- computer with stock data embossed

Scaled, modern tech players rise while small end point solution firms melt.

The world of residential real estate software is transforming rapidly to meet the needs of brokers and agents. In the past, there were seemingly hundreds of small, undercapitalized firms offering end point solutions with very little capital available from professional investors (venture or growth equity firms) to support these businesses. Selecting and maintaining software solutions was a nightmare. Real estate brokers and agents had to buy 10 or more end point solutions from small vendors and tie those solutions together to assemble their own ‘Frankenstein’ business system. Not only was it a mess to integrate all these solutions, but brokers also had to worry that a competitor might buy their vendors. Compass’ purchase of Contactually is a recent example.

In just two years that world has changed significantly. At the top of the residential real estate market, there are a few select software firms rising above the rest to become the tech partner brokers and agents have been looking for. These firms have the breadth of modern solutions, the size and scale and the financial backing to be trusted by brokers and agents for the long term. On the other end, many of the smaller, weaker firms have melted away and are being purchased by consolidators that buy failed businesses and milk them for cash. Two examples, just this past week illustrate what is happening perfectly.

Inside Real Estate is an example of one of those select firms at the top. On Tuesday this week, they announced that a major growth equity firm, Lovell Minnick Partners with around $3 billion in investment capital has stepped in to back their business in its next major phase of growth. Inside Real Estate has all the characteristics these big investors are looking for. In fact, late last year I wrote about the powerful, end-to-end platform (kvCORE) Inside Real Estate launched in late 2017 which has been so successful. Their business has continued to grow significantly since then; they now have over 200,000 users. With this new financial backing (they are upgrading from a much smaller growth equity investor – NexPhase Capital), they now have the winning trifecta for a new world tech partner: a complete solution set, business scale and serious financial backing. This is the model for the future of software providers in our space.

On the flip side, you have SmartZip that this week announced the sale of its assets to Constellation Software after a long, painful decline that resulted in this foreclosure sale by their lender. We will probably see more of these ugly deaths in the future as the select few leaders rise and the rest die.

What does this mean for brokers and agents? It’s great news. With growth equity investors like Lovell Minnick Partners finally finding software firms with the scale, growth and profitability to invest in, we will see more stability and more innovation from these vendors for years to come.