“I lost count of how many ‘no’s’ I got”: How Melbourne real estate startup REALas overcame rejection and got acquired by ANZ
Wednesday, October 4, 2017/
For Melbourne real estate startup REALas, what started as a search for funding has led to an all-out acquisition by big four bank ANZ and an overhaul of its user offerings, platform and price-prediction algorithm.
Founded in 2011, REALas is a real estate platform that claims to give future home buyers accurate predictions of housing prices, and it is this niche offering that differentiates it from other formidable competitors like REA Group, according to its chief Josh Rowe.
While Rowe says it was the startup’s “unique” algorithm that made it “quite attractive” to the Australia and New Zealand Banking Group , REALas hadn’t originally set out with a goal of being acquired by the bank.
REALas was initially seeking investment to expand its user offerings and marketing efforts, but Rowe says while talking to ANZ during the fundraising process, a conversation about a partnership progressed into a full acquisition 12 months later.
“This conversation came about because we realised that our customers wanted more from our platform and product … we needed to be more responsive in terms of their needs, our market penetration was fairly low, and only 1 in 20 home buyers were aware of our service,” Rowe tells StartupSmart.
Rowe and the REALas founders had approached other high net worth investors, venture capitalists and other companies for investment, but ultimately found it was ANZ’s acquisition proposition that would take the company in the right direction.
“ANZ wasn’t the only party interested in investment … but it was the alignment [in our goals] that made acquisition attractive, and that led us to make that decision,” Rowe says.
The startup was acquired by ANZ at the end of last year for an undisclosed amount, although a report from Fairfax puts the figure “in the low millions”.
Rowe says as a result of the sale, the REALas team has now doubled in size. The startup has also been able to revamp its website, expand its user offerings and hone its algorithmic predictions.
ANZ said in statement that REALas will operate as a wholly-owned subsidiary of the bank, although the bank may seek incorporate some REALas features into existing products and services.
“This is an important acquisition for our digital transformation as we know customers are increasingly turning to online resources for help as they navigate the Australian property market,” said ANZ managing director of customer experience and digital channels, Peter Dalton.
While Rowe will stay on in his role as chief executive, he has sold his stake in REALas, as have co-founders David Morrell, Andrew Newbold, and Jeremy Press, who are moving on to new projects.
“I lost count of how many ‘no’s’ I got”
Being acquired by a larger company is a feat many startups would be envious of, but Rowe says the journey to selling REALas was not as smooth as it seems.
REALas had previously landed in hot-water over its claims that it can expose the agents inaccurately valuing properties, and Rowe says one of the big challenges of the acquisition process was proving and validating the accuracy of its offerings to ANZ.
“One of the core parts of our [REALas] offer is our algorithm — we needed to be able to demonstrate to ANZ that what it did was true and accurate,” Rowe says.
To prove this accuracy REALas relied on an independent third party who was “at arms length” from the business and could demonstrate the quality of the product ANZ went on to aquire.
Proving its product and going through due diligence weren’t the only hurdles REALas had to clear in the acquisition process; Rowe says remaining determined in the face of rejection was also key to its eventual success.
“I lost count of how many ‘no’s’ I got,” Rowe admits.
“I got so many no’s from so many different parties when we were seeking investment that it could become very easy to lose hope, but if you’ve got a good product then you just need to keep driving and keep pushing for it,” he advises.
Seeking funding and being turned away can be a hard learning curve for any startup, but Rowe urges founders to embrace rejection with open arms.
Rather than seeing this rejection as a failure, Rowe suggests founders should view it as a valuable learning opportunity.
“The advice we got from all the VCs was really valuable,” Rowe says, adding that startups should “treat every conversation with a VC or high net worth investor as a consulting session”.
Raising funding doesn’t have to just be about pitching to VCs and trying to land partnerships, and Rowe says startups should consider entering pitch and awards competitions to get their name known.
“Consider who you’re presenting that product to — it does not always have to be for investors alone. We’ve actually won the Westpac Innovation [Challenge] in 2014,” Rowe says.
“Getting yourself out there and visible within the market, where investors participate and are viewing what’s going on is really important.”