Thursday, May 22, 2008
Interview with Anil Pereira, SecondSpace
Headquartered in Bellevue, Wash., SecondSpace (www.secondspace.com). operates a series of real estate-oriented Web sites, including LandWatch.com and ResortScape.com. The company’s network caters to those seeking a secondary residence by linking them with properties, developments, communities, agents, brokers and developers. Earlier this month, SecondSpace extended its coverage to Canada and the United Kingdom. Anil Pereira, SecondSpace’s founder, president and chief executive officer, recently took a moment to answer questions about his privately funded startup, as well as to talk about its future funding plans.
For starters, please tell our readers what SecondSpace does.
Anil Pereira: SecondSpace operates the No.1 online marketplace for vacation homes and recreational retreats. Our mission is a pretty simple one—we want to connect people with everything they need to enjoy the second-home lifestyle. And when we talk about second-home lifestyle, it really is very individualized. It’s a blend of the amenities that a region may have. The lifestyle activities, be that skiing or golfing or snowmobiling or hiking, boating, fishing, taking walks or sitting on the deck under the stars enjoying time with friends and family and really just relaxing at a getaway location.
The second-home lifestyle encompasses different things. A couple of decades ago, it was really about second residences for the affluent, or it was all about a cabin or something by a lake. That was really how the second-home lifestyle was defined 20 years ago.
Today, there’s a variety of different choices, especially with Baby Boomers wanting to enjoy their time and create traditions and memories with their families. Now we have the ability to enjoy all kinds of second homes, be they large acreages where people can have their own private hunting or fishing in all regions of the country, maybe a cabin or cottage on a lake, a chalet on a ski hill or ski area, or a residence on a golf course community.
So are these essentially seasonal residences, like a summer cottage or a Christmas cabin?
Anil Pereira: A second home isn’t necessarily a seasonal residence anymore. A lot of people have begun to split their time between multiple locations. They might find that the kids are out of the house and they don’t want to spend their time in such a big house in the suburbs anymore.
Describe your demographic. Who are your customers, and why?
Anil Pereira: The demographic is largely focused on Baby Boomers. Those are the ones who are really searching for a few things: one is to have the lifestyle that is recreational and really surrounds family and tradition. The demographic skews down to folks in their early to mid-30s, as well.
Overall, the age range we’re talking about is 30- to 65-year-olds. It’s people who want to have another place to go relax.
What made you decide to start SecondSpace?
Anil Pereira: A few things. One is I spent about a year at Classmates.com, helping part of that company get sold. One of the things we observed is that Baby Boomers make up a very large segment of the online population. In fact, Boomers are the largest segment online. They make up one-third of the online population, they spend more time online than any other segment, they spend more money online that any other segment, and they consume more content and more depth online than any other segment.
And so that made me look for something to create an online service that would bring value to Boomers. At the same time, we started to see a tremendous trend of search activity of people looking for real estate online. In fact, today, 90 percent of people start their real estate search online.
Why is that?
Anil Pereira: Where the Internet adds value today is convenience. In a primary home search, say in Seattle, the Internet is helping you avoid traffic, in essence. Say you live in Queen Anne and you want to take a look at a home in another part of Seattle. The Internet will let you take a look at that selection without having to get in your car and drive 10-15 miles.
In the second-home market—this was the real “a-ha!” moment for us—people will often go vacation to a place two or three times. Say they live in Seattle and they take a vacation to Whistler (British Columbia). Inevitably, what happens is they come back with a lot of great memories and a lot of great photos. And they start looking at those photos with their families and say, “Gee, Honey, we should get a place there.” That’s one of the things that sparks the search process.
Another factor that motivates search is someone may go to work one day and someone else says to that person, “Hey, what did you do this weekend?” And the first might answer, “I went to my cabin on Orcas Island.” And that might spark some interest.
The difference in the last two examples, though, is that those places aren’t 15 minutes away. The average second home is several hundred miles away. In fact, 50 percent of folks who own a second home actually have their second home in a totally different state. It’s very difficult to pick up on a weekend and drive from Seattle to Whitefish or Priest Lake or San Juan or just get on a plane and fly to Cabo. That’s the beauty of the online marketplace that we’ve created. You can do that and see these destinations without having to go there.
How did Ignition Partners get involved?
Anil Pereira: This opportunity was really a confluence of events. I was serving as an entrepreneur in residence at Ignition, working with Ignition to vet opportunities that were coming through the door, and I was looking for my next opportunity.
John Connors, the former CFO of Microsoft and a partner at Ignition who led the investment and currently serves on the board of SecondSpace, he had some industry relations, and, through those relationships, we actually found a Web site, LandWatch.com, and we basically used that Web site as a springboard into starting the company. So we first entered this second-home market through the land vertical.
And then what we did is we built a pretty amazing team of folks—seasoned software developers from Microsoft who built Microsoft Home Advisor and MSN Shopping—and then we brought a range of folks on the marketing side from other companies, including Amazon.com and MSN Search.
We built a pretty amazing team as we founded and capitalized the company with a goal of creating a technology platform that powers multiple Web sites, each with its own vertical focus in the second-home arena.
Today, not only do we power LandWatch.com, we also power a company called ResortScape.com. And, just this week, we announced those sites being launched in both Canada and the U.K. We also have the ability to operate customer sites on top of our platform, much like Target.com is powered by Amazon.
How is what SecondSpace does any different from what a local realtor might be able to do for a prospective buyer?
Anil Pereira: Real estate agents happen to be the unofficial mayors of these towns, communities, developments and resorts. They know the types of second homes available and they understand the community and all the activities and amenities in that area. When you buy a second home, it’s that real estate agent who serves as an ambassador. They have tremendous value in that context.
The whole idea behind our marketplace is to connect people from out of town or out of region. We really connect consumers to an agent, broker or community. We’re an eBay of the second-home space.
So how do you connect prospective buyers with the right people?
Anil Pereira: We have a very sophisticated software infrastructure that we’ve created that does quite a few things. First, it serves to power lifestyle-oriented Web sites.
Second, we are one of the first companies to actually create a semantic search engine, which uses pretty advanced technology to enable natural-language searches. You can type in on one of our sites, “40 acres in Montana near golfing,” and we will give you back the best set of results that matches that natural-language query.
We took a page from traditional media companies, both print and TV, where we saw that the most engaging publications and the most engaging shows tended to be in certain verticals.
For example, when you go through an airport newsstand, you see a tremendous number of lifestyle magazines. Yet, when you get on the Internet, you tend to lose that depth because they have to appeal to the masses.
But the market we play in—it’s probably a trillion-dollar market around the world—is all about lifestyle. It’s really trying to package up the lifestyle that comes with that community. That’s what we decided, to create vertically oriented sites that focus on that lifestyle.
According to our data, you completed your Series A nearly two years ago in 2006. Have you secured any additional VC funds since, and are you at liberty to discuss them?
Anil Pereira: We’ve been very fortunate to have very strong investors and backers behind the company. We have managed, through a lot of hard work, to generate a significant amount of revenue. We’ve actually held back from seeking additional capital because we didn’t feel that the platform and the marketplaces were yet fully built out. We still have plenty of runway in front of us to truly build these massive marketplaces, but now we feel we’re in a position where we have a very vibrant marketplace. We have a significant amount of traffic and users, and we have a business model—which is the holy grail of any start-up—we have a model that generates subscription revenues from property developers, from major land-owning companies, and from thousands of agents and brokers who are active in our marketplace.
That’s the backdrop to saying we are now primed and ready to go back into the market and get the growth financing. We’d like to pour some gasoline on this opportunity.
We’re probably 6-9 months away from profitability, depending on how things play out, so now we’re looking to raise our next round of financing this summer, either with investors that have a track record in building these types of vertically oriented companies or potential strategic partners with whom we’ll have commercial relationships.
How does the company make money?
Anil Pereira: Three or four ways. The first is a subscription model on LandWatch.com. Any agent or broker who wants to surface up higher in the listings search results, they pay us a monthly subscription fee of $49. That’s no different than Google, which has free search for the consumer but paid placements for the vendors.
For example, if a consumer types in a search for acreage in Montana at our site, they’d probably get 20 pages of search results that come back to them. We allow our consumers to sort and filter by more than 80 attributes, but the top listings they see will be premium subscribers that are relevant to their search.
Another revenue stream is on ResortScape, where we’ve created this unique marketplace. Nowhere else is there a marketplace for developers to advertise their communities within the context of all the properties available within that community. So for ResortScape, we have a service for developers, who pay us $15,000-$20,000 per community to actually list all of the properties in their new development on our site.
The third part of our model, and a major revenue stream for us, is larger land owners and developers who want a full-on presence powered by our platform. So what we do is run their Web site on top of our platform. We private label a Web site for them, we syndicate all of their listings and merchandise them across our network, and we provide them with very sophisticated business intelligence that shows where their traffic is coming from and where their buyer interest is coming from so they can adjust their marketing mix and their product planning. Those tend to be multi-year, multi-million-dollar relationships.
The fourth is basically for any broker or developer or enterprise, we actually offer featured placement on our Web sites and electronic newsletters, and that’s anywhere from $499 to $2,000 a month.
Thanks!