Embrace, don't replace the middleman with Michael DeGiorgio (CREXi)

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Michael DeGiorgio: [00:00:00] And I kind of, in the back of my mind, thought, "If nothing else, you know, this'll be a platform that we can transact on ourselves if people didn't want to use it."

Speaker 2: [00:00:13] Welcome to Two-Sided, the marketplace podcast, brought to you by Sharetribe.

Sjoerd Handgraaf: [00:00:24] Hi. I'm Sjoerd, CMO at Sharetribe, and I am your host. For this episode, I talked to Michael DeGiorgio, founder and CEO of CREXi, a marketplace for commercial real estate. This is an area, uh, [laughs] as you'll hear, which I knew absolutely nothing about, but it turns out to be an actually fascinating industry which was ripe for some serious disruption, as you'll hear. I talk with Mike about how to build productivity tools for one side of the marketplace and also about how, instead of getting rid of the middleman, which is something that you often see when marketplaces enter a space, CREXi actually embraced the middleman. This is a really intriguing talk, and I think there are some great insights in here for anyone building a marketplace business. Enjoy. Hi, Mike. Welcome to the podcast.

Michael DeGiorgio: [00:01:17] Hey, Sjoerd. Really nice to be here. Thank you so much for having me.

Sjoerd Handgraaf: [00:01:19] Yeah. I really appreciate it. Hey, before we dive super into the [inaudible 00:01:23] world of CREXi, can you tell the audience a little bit about who you are?

Michael DeGiorgio: [00:01:27] Yeah. My name's Mike. I was born on the East Coast of the United States. Started my career about 11 years ago now in commercial real estate. I started it at a company called Auction.com, where we were trying to change the way people bought and sold both residential and commercial real estate. Uh, I was one of the first people on their commercial division, so I was really trying to take commercial real estate transactions online and to online auctions, uh, where I got a pretty good sense of the ecosystem, the software available in our space, and some of the deficiencies in our space. Uh, I spent about four years there, had 10 different roles while I was there, did everything from broker deals to be an auctioneer on auction day, and oversaw multiple different teams, uh, during my run there. And then, left about five years ago to form CREXi.

Sjoerd Handgraaf: [00:02:11] All right. So there was already effectively a marketplace, Auction.com?

Michael DeGiorgio: [00:02:15] It was really just a different way to transact. It was, uh, taking the traditional process, which is, you know, very manual, and bringing it to an online auction. Auctions were still, at the time, were a known way of transacting commercial real estate and residential real estate, typically for distressed real estate. Uh, what we did was really just bring that auction part online. The rest of our process was, uh, still very much like a broker.

Sjoerd Handgraaf: [00:02:39] All right. Yeah. Was it a big operation?

Michael DeGiorgio: [00:02:41] So when we started, I was, you know, maybe one of the first five people on the commercial division. My, after being there for about three years, we had raised a large round from Google Capital. We raised $50 million at a 1.2 billion valuation. The company grew to 1,000 plus people [inaudible 00:02:56] during my time there. And then, I left. So got big over time.

Sjoerd Handgraaf: [00:03:00] Yeah. And so, you left, and then immediately after, you started CREXi? Or did you leave really to start CREXi?

Michael DeGiorgio: [00:03:07] Left to start CREXi. I was pushed by a former mentor of mine, uh, over drinks one night, to kind of, threw a, lobbed a question at me asking what I would do if I could go kind of out on my own. And I responded by telling him, "I think there's a way to bring, really, everything about commercial real estate, leasing, transacting, data, online in an intuitive way that's not out there, and I would go start that company." And he became my first investor, and I left my career behind about a month and a half later to go start CREXi.

Sjoerd Handgraaf: [00:03:36] All right. So basically, you are this, well, let's say, hardcore real estate veteran. And during your time at Auction, you were just thinking, "Ah, we could do this so much better." Is that what happened?

Michael DeGiorgio: [00:03:48] Yeah. I think especially, you know, at first, I was very bought into the vision. I think over time, as I learned how the transaction works for real estate really well, I probably sold 600 commercial real estate properties during my time there.

Sjoerd Handgraaf: [00:04:00] [laughs] Wow.

Michael DeGiorgio: [00:04:00] As I kind of started to learn the different ways commercial real estate was sold and really started to get to know some of the software that was available to us in the space, because we still used other software platforms to help our process, I started to see that there was none I really believed in, and there was a much better way of doing it. And a lot of them were really, you know, antiquated, kind of web 1.0 version technology that I thought could be enhanced and taken so much further than it was. So I set out on the journey.

Sjoerd Handgraaf: [00:04:27] And could you share a little bit, like, what were the things that you're like, "Ah, this is, you know, we, first thing I'm going to do at CREXi, this is what we're going to do. Like, this is how we are going to be different from Auction.com and whatever other things were out there?"

Michael DeGiorgio: [00:04:40] Yeah. I guess in its most simple form, you know, Auction.com was really putting people in a box. They were forcing, if you wanted to use it, you had to transact in an auction. And I started to learn pretty quickly that oftentimes, I would sell the property prior to the auction, more traditionally, or after the auction, because the deal wouldn't sell in the auction, more traditionally after the auction. And there's just so many different ways to transact commercial real estate. And there's also a lot of tedious processes involved in transacting commercial real estate that would take half your day and really get in the way of just you getting a deal done. And so I, I really thought, you know, the two basic things were, most importantly, let's build some tech to solve some of these pain points that, you know, maybe used to take a half a day. I could take it and make it a couple clicks of a mouse. And let's make it more flexible so you didn't kind of get forced to transact in an auction only. I thought, over time, you know, that can be an offering we have. But let's make it really flexible so that you can transact in multiple different ways on the platform. And I kind of, in the back of my mind, thought, "If nothing else, you know, this'll be a platform that we can transact on ourselves, if people didn't want to use it." So that was kind of our backup plan, was let's build something where, if I had to go start transacting real estate again tomorrow, I would be able to transact better than I could without this platform that we were going to build. And the hope was people saw the value in that, the time saving in that, the different, you know, advantages of being able to use a platform like ours, and everybody would start to use it. And we'd get the whole industry there together. And if we didn't, you know, we had, we at least knew we could transact on it and make it big that way.

Sjoerd Handgraaf: [00:06:10] Yeah. So did you rely mostly on your own expertise or, and experiences, or did you do user research before, like, hey, because you're saying basically, you mentioned two sort of different points. One is the, the way transaction happened. And then you also mentioned that, hey, we're going to build this platform which basically, like, software tools, right? So which one did you start with? Or did the first version contain both of these things already?

Michael DeGiorgio: [00:06:33] Yeah. We spent about nine months building the first version, and it definitely contained both. Part of transacting is some of the tools. You know, you need those tools to transact more efficiently. So really, in my mind, even though they were tools to help run your business more efficiently, the business we were in was transacting commercial real estate. So we spent the first year nearly just building out the MDP and getting it out there in a way that we felt comfortable and confident releasing it. And we brought, uh, a combination. You know, we brought a l- to answer your second question, we obviously had a lot of ideas ourselves from our days of transacting and brought a lot of people onto the team fairly early to kind of help formulate the idea. And then also would constantly be bringing in commercial real estate brokers, commercial real estate owners that we knew real well, to run ideas by and get a feel for what they thought of what we were building.

Sjoerd Handgraaf: [00:07:20] And, uh, could you give an example, you know, for people [laughs] like myself who don't know anything about selling commercial real estate? Like, what are some of those pain points that you were solving for them, the daily work ones?

Michael DeGiorgio: [00:07:30] Yeah. I mean, it sounds real simple, and I'll start more on the transactional side, but when you're selling commercial real estate, unless someone emails you or calls you, you really don't know who's interested in your property. So just bringing transparency so that if someone looked at the property, you knew who that person was, why they were looking, how long they spent looking, and you could connect with them really easily through a message online or, or call them really quickly. After you talk to that person, you're using some kind of CRM system or Excel to take notes on your conversation. A really easy way to enter those notes. And then, uh, you know, another kind of basic one is real, seemingly really simple, which I think was part of the beauty of it. On, like, a Friday, you would have to then go take all of those notes and summarize it and send it to your client and say, "Hey, this is all the marketing I've done. These are the people I've spoken with. This is who I know is interested in it. This is the feedback I'm getting." And you'd send these, like, overview reports for all the deals you were trying to sell, every Friday. And I figured, you know, let's make that a click of a mouse. So not only do you know real time who's looking at your property, but you can also supply them with information. And a lot of the document signing and the process of, like, signing a confidentiality agreement and exchanging documents to get the buyer to know more about the property, who that buyer was, all the notes you had, you literally, and all the marketing you've done, you literally hit a button at the end, and it spits out that report for you to send over to your seller or client so that they know exactly how effective, you know, the sale is going.

Sjoerd Handgraaf: [00:08:53] Wow. That sounds like a huge time saver. Like, are there any, because, like, there's a couple of ways that marketplaces often start out. And one of the things is called, like, the single player mode, I don't know, or SaaS enabled mode, where you start first as a kind of software tool with exactly these kind of productivity improvements, and then later, actually get people to the marketplace or to whatever is the, the platform. Did you have people who only used one of the two? For example, who only used, you know, who, they only come there to sort of generate those [laughs] Friday documents, for example?

Michael DeGiorgio: [00:09:22] Yeah. I think that's another thing that we did intentionally in the beginning, kind of went towards our theme of not forcing anybody to do anything any certain way. But we built it to be able to do all of these different things. And we knew if one part of it was valuable to the supply side, we really focused on the supply side, particularly the brokers. The brokers control the supply. If we could just make one part of this better for a broker, they'll start giving us their supply. And you've got to kind of figure out, you know, which side of the marketplace you're going to get first, and, and we focused on the commercial real estate brokers and the supply. And we didn't force them to use any particular part of it. You know, there was a lot of other functionality built in that I didn't want to bore you guys with, but as long as they saw value in one of them, the chances they'd start giving it a try and using at least that one part of it, those chances were high. And if they found a lot of value in it, slowly over time, they would use more and more of it.

Sjoerd Handgraaf: [00:10:11] Could you say that it was one of, like, your growth tactics, just, like, building a super good productivity tool that gets, in your case, the supply on board?

Michael DeGiorgio: [00:10:18] Yeah.

Sjoerd Handgraaf: [00:10:19] And then, hopefully, more of that stuff will trickle through in the actual transaction.

Michael DeGiorgio: [00:10:23] That's right.

Sjoerd Handgraaf: [00:10:24] Yeah. Were you charging anything for the use of the platform, even if you wouldn't transact on there?

Michael DeGiorgio: [00:10:28] Not at first. At first, we decided, you know, one thing I thought always was, you know, our goal was just to get everybody transacting in one place, everybody doing their leases in one place. If you do all that really well, there's so many ways to monetize it. And so we were really confident in that thesis, so we decided in the beginning to just keep it free and get everybody there as quick as we could. And still, even now, you know, the ways we monetize now don't get in the way of hurting the marketplace effects. Nothing that we monetize gets in the way of people wanting to use it and getting a lot of value out of it for free. You know, that's one thing early on that I could probably suggest to a lot of people out there, is if you're going to charge something, make sure whatever you're charging, it's worth 10 times that amount. [laughs] And if you're, you know, for us, it was, we know this is valuable. We know it's worth something. If we can make it free, everybody's going to have to use it, because it's worth a good amount of money, and it's free. You know, it's kind of that why not proposition.

Sjoerd Handgraaf: [00:11:18] Yeah. Yeah. If you can scale it in a nice way, then it's not really that much of a problem for you initially.

Michael DeGiorgio: [00:11:24] Yeah. And then, another thing we were really, um, forward thinking on was ensuring that when we brought that supply, that we also built tools that let the supply bring their own demand. So really, by us letting the supply side use it for free, it got us demand for free, too, because we had all these tools within that would really incentivize the broker to want to bring their own buyers and bring the demand side of commercial real estate to the platform also. So that was a big one, too.

Sjoerd Handgraaf: [00:11:48] Okay. Let's unpack that a little bit, because that's really interesting, because that's always, I think, the, you know, one of the network effects that anyone with a marketplace or two sided platform is looking for. You know, you bring one side on board, and because there is so much of the one side, whether it's supply or demand, the other side also comes. And it becomes this, this [inaudible 00:12:04]. So how does that work in the commercial real estate industry? So just to sort of break up CREXi a little bit. So on the supply side, you're saying, are your brokers.

Michael DeGiorgio: [00:12:12] Yeah.

Sjoerd Handgraaf: [00:12:12] And on demand side is anybody buying?

Michael DeGiorgio: [00:12:15] And now, leasing too. Yeah.

Sjoerd Handgraaf: [00:12:16] Oh. Leasing as well. All right. And so is it common, then, that they have just a set group of buyers? Is that a common occurrence?

Michael DeGiorgio: [00:12:23] Yeah. Each person, each broker definitely has their own supply side set of users. And if you can incentivize them through the platform to bring their users to us as opposed to sending them somewhere else, you know, obviously, that kind of springs forward that other side of the marketplace that you need to get there.

Sjoerd Handgraaf: [00:12:38] All right. [laughs] Yeah. That kind of get rids of most of my questions, because my next question was going to be, how did you bring demand on board early on?

Michael DeGiorgio: [00:12:46] Yeah. It was really through, initially, just making sure we drove the brokers who were using it, the supply side who was using it, to, uh, bring their own demand. Then they obviously, now, get comfortable with the site, and you start building features for them, too. And so they start to look around and see all of the supply on there, and they have a good experience. They stick around. So there was a bunch of different features we built to incentivize brokers and help brokers get their own buyers to the site.

Sjoerd Handgraaf: [00:13:10] And how do you, because, like, potentially, there is a problem that if I'm a supplier and I bring my demand on board [laughs] that, okay, once they get on board, do they get exposed to other supply? Or do you do it so that they only see from the person that they already knew? Because of course, you get into this problem that you might be competing.

Michael DeGiorgio: [00:13:28] Yeah. It's definitely something that made us a little nervous at first, but obviously, we didn't force any of the, you know, supply side users to bring their own demand. And we were kind of curious how it would work, but it ended up being something that they saw a lot of value in doing. Just to point back to that one feature, for example, you know, if you can click a mouse, and it creates a report, and you can send that report on a Friday to your seller, I'd much rather all of the people I'm going to drive to that property all go to this one place where I can just hit a button and it be, as opposed to having to add them to that report and still get to that manual work, now you have, you know, if you drive them to CREXi, you click that button, they're all there. So that's, you know, one of many, many examples of why it was advantageous, uh, for the supply side to bring their buyers. It was definitely something we were curious, will they do this? For all the reasons you just suggested. But thankfully, you know, people saw a lot of value in it, and a lot of them did. And, and way, way more do now.

Sjoerd Handgraaf: [00:14:16] Yeah. Ah. Fantastic. And when you got started, did you constrain the marketplace by any location initially? Like, did you only do a particular part of the US? Or did you go domestic wide from the start? Did you do anything like that?

Michael DeGiorgio: [00:14:31] Not intentionally. So the first person who pushed me to go start CREXi, that I referenced earlier, uh, and kind of was our first investor, he's a big owner of commercial real estate. I think he owns about $6 billion of commercial real estate across the country. So when we first launched, he gave us our first four properties to sell. [laughs] So that was how we launched-

Sjoerd Handgraaf: [00:14:49] [laughs]

Michael DeGiorgio: [00:14:49] ... with four properties for sale, and they happened to all be in Texas. This guy I'm referencing is out of Texas. So, you know, with the four properties in Texas, you could start calling other brokers in Texas and probably get a little bit more of a chance of getting them to say yes to this, uh, new concept, this new idea, this new marketplace, you know, and kind of say, "Hey, look. We got these four. You know, why don't you add your stuff?" And so, you know, there was some ways we did it that way. But other than just kind of building off, once you got a yes in a certain market for a certain property type, you could kind of jump on that and expand on that. But really, there was no strategic focus other than that.

Sjoerd Handgraaf: [00:15:21] Yeah. Because often, there's this liquidity problem, right, that you have to get both demand and supply that are matching. And so I could imagine, but this is with my limited knowledge [laughs] of commercial real estate market, that you would go sort of indeed, maybe, state by state or even, like, big city by big city. But you went sort of all in in the beginning, all the way. Or did I get that right?

Michael DeGiorgio: [00:15:43] Yeah. That's right. On the leasing side, we took a little bit more of a, uh, market by market approach. You know, by the time we turned leasing on, we had so much recognition in the brokerage community, and a lot of the brokers do both sale and lease. They'll lease property out, and they'll sell property for certain clients of theirs. So thankfully, we were able to get a lot of, uh, momentum early for the leasing side. But on the transaction side, if you're looking to invest in a property that's going to make a certain return a year, and you're looking for a certain tenant, you know, you might be open to five or six different states. Some people might be open to the whole country. So on the transaction side, where we started, it's not a very local market. It's more about what's your return? What's the property type you're looking for? What's the investment size you're looking to make? And if it fits that criteria, you're a little flexible, typically, on, on where the property is located.

Sjoerd Handgraaf: [00:16:28] Yeah. No. That makes sense. Yeah. All right. How did you go about getting the first version out? Because you're obviously more of a sales guy, I sort of deduct, more a business guy. How did you go around finding your team? Was this with a buddy? You know, you said you build nine months the first version. How did that happen? Like-

Michael DeGiorgio: [00:16:46] Yeah. Good question. So I had a, a really close friend located here in LA that I had known for a long time, and he was a tech CEO. He had a startup that he was in the process of selling. And he was kind of pushing me, more in a friendly way, to go start CREXi for at least a year, and talk to people he knew and VCs he knew, and kind of told me he could introduce me to the right tech people to get the thing built. And we would always kind of just, like, play with the idea. And I always thought, you know, it was more important for me to get, like, a really significant player in the commercial real estate space to kind of back us, too. And so once my friend in Dallas decided he wanted to back us, I called my friend in LA, and he helped put me in touch with, uh, a guy who became a good friend and a cofounder of the company, who was a CTO of a company that had just sold to Apple. And he was able to put some people on the engineering team that were just world class. And, you know, there was a little bit of a language barrier. You know, they were all Russian early on, but, uh, we all became really close. And they're still here today, and they built that first version out for us and still are leading the team.

Sjoerd Handgraaf: [00:17:45] Oh. Wow. So is it any company we might know? You said being sold to Apple.

Michael DeGiorgio: [00:17:49] The company was called Burstly, so TestFlight-

Sjoerd Handgraaf: [00:17:50] Okay.

Michael DeGiorgio: [00:17:50] ... was one of the products that they had.

Sjoerd Handgraaf: [00:17:51] Yeah. The app testing thing?

Michael DeGiorgio: [00:17:53] Yeah. Yeah.

Sjoerd Handgraaf: [00:17:55] Oh. Wow.

Michael DeGiorgio: [00:17:56] So that was one of their three products. They were tools for mobile app developers. TestFlight was their marketplace where you could test the app once you built it. And then, they had, I want to say, like, a data concept underneath their umbrella, too. But those were the products that he oversaw. He was CTO of the company Burstly that had those three products, and then they sold to Apple.

Sjoerd Handgraaf: [00:18:12] Okay. So you got, I mean, that's great that you got a seriously experienced tech team on board who didn't go, I don't know, buy the service from someone [laughs] or something like that. Yeah.

Michael DeGiorgio: [00:18:22] I really, uh, you know, there was a lot of similarities, believe it or not. We weren't building tools for mobile app developers, but we were building tools for commercial real estate brokers, and then we were building that into a marketplace, where TestFlight was their marketplace. So it was a lot easier and a lot less sophisticated tools we had to build for the commercial real estate industry than the tools he was building and his team was building for mobile app developers. So that ended up working out really well.

Sjoerd Handgraaf: [00:18:46] Oh. Wow. Okay. Cool. That's really nice. One question I had, actually, because, so, as mentioned, on the supply side, we have the brokers. On the other side, we have investors or, or buyers. Usually, with marketplaces, when they come to disrupt an industry like this, they take out the middleman. In your case, the middleman would be the broker. But you have sort of made the middleman the centerpiece on your supply side. I'm thinking that, like, is there a fear from the brokers that at one point you will out compete them, you will take over? H- Has that never been the intention? How did you solve for that?

Michael DeGiorgio: [00:19:19] Yeah. I think, you know, we really focused a lot of the functionality and tools on the broker themselves. I think that's also where a lot of the platforms that existed in the industry or were popping up in the industry went wrong. They were all immediately trying, let's just take over. Let's get rid of the brokers. Brokers, we don't need brokers. You know, I don't believe that thesis at all. Our approach has been, let's make brokers able to do three times as many deals as they used to be able to do. Let's save them, you know, most of their overhead a year. Brokers are still very necessary in a transaction, whether you're selling a property or leasing a property. You know, we wanted to change their world a little bit, just in the fact that, like, some things that took them a day a week or an analyst or four people on their team in support role, you know, let's take away some of their needs for support roles. Let's get them actually doing what they do best, getting deals over the finish line. You know, and negotiating that last kind of piece of a contract with the buyer and getting the best price and maximizing the best price. I think no matter how smart CREXi's technology gets, and it's really smart, you know, getting someone on the phone that knows that industry, knows that space really well, knows that market really well, knows who the tenants can be, knows how to increase rents and can really advise and move the transaction further than tech can, is still a critical, critical piece. And I see that being the case forever. You know, is there a world where it looks a little different? To me, that world looks different just from the fact that brokers can do, you know, 10 times as many deals a year. Right now, you know, like, a lot of commercial real estate sells in the United States each year, but, you know, it should be way more liquid. You know, why does it take five, six months to sell a property? If you put a platform like CREXi involved, you know, it should take weeks or a month or two months at most to sell a property. The more liquid you can make commercial real estate, the more comfortable people are going to be buying it, the more transactions you get each year, and ultimately, then, the more money brokers can make. And there's really no need to go after them. We wanted to partner with them from the beginning, and that's how we see it needing to be.

Sjoerd Handgraaf: [00:21:08] Yeah. And then, th- that sort of leads into my next question, because obviously, we are talking major transactions here. Like, this is not like [laughs] many other marketplaces where you order an Uber or something like that. So then, I immediately, the question pops up, like, this intermediation or platform leakage or platform brokerage, whatever you would like to call it, what's the situation with that for CREXi?

Michael DeGiorgio: [00:21:30] I think, you know, that's part of why we didn't want to force people to use it a certain way when we built it. You know, we wanted to build it so that if you wanted to embrace tech to its fullest, you could fully transact and run your business as a buyer, as a broker, as a seller, as a tenant looking for space. You could fully run that process online. But we didn't want to force that issue. There was no need for us to force the issue. You know, we can add a ton of value without the whole transaction fully taking place on CREXi. And for brokers that aren't comfortable with it, you know, how much value is it that within a week, you got paired with the right buyer and were able to get that buyer to transact on a property and earn 100, 200, $300,000 fee? You know, just the fact that we got the buyer there, real time, got the broker to connect with that buyer way before that buyer was able to get onto the next deal or the next broker, how much value we add in that moment is significant. And to us, it wasn't always about forcing everybody to transact online. I think as our technology gets smarter and as the industry gets more comfortable with it, that'll happen. But I thought it was the wrong approach to say, "For us to be successful, everybody's got to do it the way we think it should be done." You know, that's not how we wanted to build it. We wanted to build it so it could be done any way they want it to be done and that we always add value no matter what.

Sjoerd Handgraaf: [00:22:40] Yeah. So then, my question is, how do you make money?

Michael DeGiorgio: [00:22:43] So right now, we make money a few different ways. First is, uh, we have a subscription for the brokers using us to sell and lease properties. So there's a free version. A lot of the tools I mentioned early on and a lot of the functionality from the beginning is free. But our paid version is an enhanced version of CREXi, gets them more leads, more exposure to buyers, a little bit more feature functionality to make their worlds easier. So that's the broker subscription model. The second way, and this is a little bit newer, is now that we have all this data on all of these properties that have transacted, and all of the activity on all the properties that transacted, and markets and which way markets are trending, and which way different property types are trending, and how pricing is trending, we now can package a data offering that can really, really enhance a buyer's ability to feel comfortable making an offer and going and buying a deal. So we p- now have a data offering that the brokers get as part of the paid version, but that buyers, appraisers, lenders, all can pay for. And then, you know, we can charge, you know, pennies on the dollar versus everybody else, because we're aggregating that data just by the activity we see on CREXi already. So our data product is a subscription as well, and that's our second version. And then, third, we have two ways that we earn fees on deals transacting. We have an auction platform now, so there's a fee involved if the deal sells. We only get paid if the deal sells, but you can now run your full auction through CREXi. We also have something called CREXi Elite, which is basically a supercharged version of CREXi that, if the deal transacts, we get paid a small fee, and it's success based. So the buyer or the broker, the fee only happens if we transact. So it's riskless in some ways. You know, there's no risk to trying it.

Sjoerd Handgraaf: [00:24:15] Wow. That's [laughs] [inaudible 00:24:16]. I have a couple of questions about this. So, first of all, the last part where you said it's fully risk free. So is that not the case in regular, like, real estate buying, selling, that happens outside of CREXi? Would you need to pay upfront to get an auction up and running, for example?

Michael DeGiorgio: [00:24:32] Yeah. I mean, depending on the platform you use, and this is part of what I thought was broken in the industry before us, you know, you have to pay to list the property. You know th- on some of the incumbent just listing platforms, if you wanted to list a property on their marketplace, you have to pay just to list it. You have to pay to market it. You know? You got to put signs on the property. You got to put it in the local newspaper. You got to send mailers. You know, literally, the industry was still sending mailers, flyers in people's mailboxes. All these costs you have to do upfront and can cost significant amounts of money. You know, go pay for a drone video. Go pay for pictures of the property. And then, the other software that we solve for, too, a lot of that's all upfront. So if you're on our Elite or auction platform, you know, all that stuff is paid for, and you only, you know, we can drive all the traffic you need and service all the other kind of functionality you need. And you only pay us if the deal sells. But, yeah. A lot of that stuff's all upfront.

Sjoerd Handgraaf: [00:25:20] So you also offer marketing services? Or you just mean just simply getting it on CREXi and the, and the existing demand is part of your marketing services?

Michael DeGiorgio: [00:25:28] Just getting the demand, our existing demand, to the right deals. So if you're paying us, we know who the buyers are. We know what they're looking at. We know to make sure they see your deal first. A lot of little ways to drive the demand that we already have to the properties.

Sjoerd Handgraaf: [00:25:41] Yeah. And then, will you ever, I mean, I could see a way, for example, drone videos or those kind of things, is there a future where you sort of add up a service level so that, you know, you connect them with people who can make these drone videos, or you have some sort of basic package to say, "Okay. Just give us the address, and we'll send someone there?" Everything gets online. All of the information needs to be there. Videos. Everything?

Michael DeGiorgio: [00:26:04] So we already offer a lot of that stuff. We definitely see it turning more and more [inaudible 00:26:08] into a platform, where if you're someone that offers that kind of thing, you know, you can offer your service through CREXi, and we can take a little piece. I think that's, you know, definitely on the roadmap in the near, not too distant future. But a lot of that stuff you mentioned is already offered. We already have partnerships in place and the ability to do that stuff for them.

Sjoerd Handgraaf: [00:26:23] Yeah. And so is the idea, basically, to just grab more and more of the process onto CREXi and really tie people into CREXi?

Michael DeGiorgio: [00:26:32] Yeah. I mean, we want to be the aggregator. We want to be the all in one platform for all things leasing, data, and transacting commercial real estate. Lending, even, too. And we're, we're in conversations with a lot of major lenders across the country to be able to offer, uh, loan options once the property transacts, get you the ability to get a loan at the lowest, you know, rate possible and best deal possible. And, you know, we want to bring it all together in one place, and that's what we're working on.

Sjoerd Handgraaf: [00:26:56] Yeah. The question I had about, because, like, uh, you know, one of the pillars that marketplace also often brings is this idea, actually, well, it's an interesting thing, because marketplaces both bring it and sort of require it, is this level of trust. I can imagine that, especially with these kind of huge, huge transactions, so much relies on, okay, reliability of the offering, et cetera. You know, how do you produce trust within the CREXi platform?

Michael DeGiorgio: [00:27:20] Just a lot of detail into the product. There's a lot of layers of protection and privacy and kind of, uh, controls that we put in place to really give the industry the ability to really dictate who sees what and when and how things are done. I think, you know, really, how we've addressed that is just making sure we built it into the product to allow them to, you know, do it in a way that they feel comfortable. You know, for example, some brokers will want, you know, if you're selling a property, for example, uh, the rent roll is a really important piece of information. You know, if I have five tenants, you know, if it's a multi family building and there's 10 tenants, you know, are they paying? What are they paying a month? How long do the leases last? You know, that rent roll that explains what th- every tenant is paying. Some brokers are okay with everybody seeing that, and some brokers aren't. And some brokers have certain rules that they want to put in place before they're going to allow that information to get into a buyer's hands. You know, we've really carefully thought out how to build that into our software so that they can run it any way they please, and I think that's really, you know, the, the thing we do and that's separated us the most is just putting that careful thought into it, and then also making sure it's intuitive and easy enough. You know, it's not the most tech savvy group of users [laughs] you'll ever find, so everything we do has to be really intuitive and really simple and make a lot of sense. And I think that's, you know, another strength of ours.

Sjoerd Handgraaf: [00:28:34] Is it so that with an industry like this, it's kind of big, but it's also rather small? And so often, I've seen in other of these kind of marketplaces that y- you get some kind of community idea. Is something like that happening in CREXi as well? Is there, like, a CREXi community?

Michael DeGiorgio: [00:28:48] Absolutely. And we've even built that into the software now. So if you're a broker, you can create a profile page. So if you're a person who's thinking about selling, you can go and research who the right broker is to list my property based on their prior success. So basically, now there's, you know, that whole LinkedIn component, call it, where everybody that's on CREXi can have a profile page and talk about their, you know, careers and, you know, what they're capable of executing on in terms of either selling or buying or leasing a property. You know, now we're even allowing people to, uh, share news articles they write, blogs they write, so there's a whole sharing component we've built into it. So community is one of our three pillars. Our three pillars are, uh, marketplace, technology, and community. And those are the real things we focus on, is state-of-the-art tech and data, the most robust marketplace, a- and that community part, too.

Sjoerd Handgraaf: [00:29:34] Yeah. You know, was that something that you had in mind? You now mentioned it's one of the three pillars. Was it something you had in mind beforehand, or was it something that just sort of organically came along?

Michael DeGiorgio: [00:29:45] I don't want to claim that I had all the answers by any means, but, you know, myself and the group of us that I brought on pretty quickly, the vision that we had for what needed to exist, in our minds, a lot of this stuff was on that early roadmap. It really was. You know, I thought all of these things were important, all these ideas were important. And now, you know, looking at the platform, it's pretty cool, because you've seen that whole thing kind of become a reality. And we're still in the early innings. You know, it doesn't do everything we envisioned it doing in the beginning, but, you know, we [inaudible 00:30:12] pivoted, and really, a lot of the things that we thought in the beginning needed to exist in the industry are the same things we've built, like these things we talked about.

Sjoerd Handgraaf: [00:30:18] Yeah. In some marketplaces, community is a really great way, also, of getting more supply and demand on board. Do you see that as well, on your side?

Michael DeGiorgio: [00:30:25] Definitely. You know, like, an example is, like, a broker, as they put their profile together, they can tell us about and tell the industry about deals they've sold in the past, right? So this is one example of many, but now that we have that profile, and brokers are going to fill it out, they want to go back and tell us about every deal they've sold for the last 20 years. You know, that's a lot of really good data that we now can use to enhance our marketplace and enhance the experience in our marketplace. So feeling part of that community just makes them more engaged, makes it a more regular thing that they check. And, yeah, that's a big piece of it.

Sjoerd Handgraaf: [00:30:57] Okay. So community, important driver of growth. Could you identify any other big drivers of growth in the sort of journey you had so far, that you said, "Okay. Hey, we did this?" You know, whether it's a new feature or a way of presenting things?

Michael DeGiorgio: [00:31:09] I mean, there's so many. There's so many. I can't pinpoint one that really set us apart more than the others. I think it's the kind of collection of all of it, uh, in one place that's really been the growth driver. You know, people even ask that as, as we've gone out and raised money and talked to the VC community. You know, what's, like, that one moat you have? You know, what's that one thing that's going to separate you? And I really that the one thing is the collection of hundreds of things, thoughtfully built out, you know, really strategically, really intuitively. And bringing it all under one roof, I think, is really what's helped us grow as fast as we have. So many times early on, even when we were free, brokers would say, "I would use you guys, but it's got to be able to do this, this, and this." And, you know, hearing that enough and then really analyzing what this, this, and this was that we wanted to focus on, and building that in and being able to go back to that same person, you know, a month and a half later and say, "Now it does those things." You know, that's something the industry wasn't used to seeing and really hasn't been offered in the past. So I think it's the collection of all of the little things.

Sjoerd Handgraaf: [00:32:07] I ask this question because sometimes, something really nice comes out, but also, as someone with a, like, a growth background, it's a compound thing. It's, like, indeed, like consistent, small things placed upon small things, small things that eventually start driving it and sort of multiplying it really fast. No. Great answer. I totally buy that. Actually, an interesting point you brought up. So how do you consider new features? Because you said early in the interview that, well, you have your own experience. You brought a lot of the brokers on board. So if you get requests like that, how do you handle those? You know, how do you weigh those? And how do you select whether or not you're going to buy it?

Michael DeGiorgio: [00:32:43] I think, you know, the one thing we constantly ask ourselves is, "Does this fit into the bigger picture?" We'll never do something that we think doesn't help us become the company we want to become over the next 10 years, so we think really long term. And as long as it doesn't sacrifice, like, what we're trying to build, who we're trying to become, and go against any of, like, the values that we have of, uh, things we believe in and think are important, we add it to the list. And then it's just about prioritizing that list and moving it forward.

Sjoerd Handgraaf: [00:33:07] Great segue to my, sort of one of the final questions. Uh, what is the 10 years view for CREXi? Could you tell us a little bit about that?

Michael DeGiorgio: [00:33:14] I think it's really some of the things you touched on before. You know, it's just the pieces of commercial real estate transacting and leasing and data that we don't offer, building it into it and continuing just to build upon what we've already built, and getting the whole industry here. You know, I think it sounds simple, but, you know, we have a data offering. We want it to be the state-of-the-art data, you know, the smartest data, the most usable data, the easiest to use data. I mean, we want to make that world class. The community aspects of CREXi that we're starting to build in and have built in already, you know, we want to really build upon that community aspect. Parts of the transaction that maybe people are hesitant to bring online, you know, we really want to bring a lot of that transaction online. We see a lot of benefits to being able to do that. And not everybody's doing it yet, but getting more and more of the industry to embrace that and, and really bring the full thing online. There's so many, so many little things. I hate to use the same answer I just used, but just trying to make sure it stays simple and stays kind of true to what we want it to be, but adding in all the components that we know are still ahead of us.

Sjoerd Handgraaf: [00:34:10] What would be one of the things that people are not yet bringing online that you are going to bring online? Can you share one?

Michael DeGiorgio: [00:34:16] I mean, I, they all are already online on CREXi, it's just they're not all using it.

Sjoerd Handgraaf: [00:34:19] Okay.

Michael DeGiorgio: [00:34:20] Yeah.

Sjoerd Handgraaf: [00:34:20] So how much of the market do you think you're capturing right now?

Michael DeGiorgio: [00:34:23] Uh, in terms of, like, parts of the, like-

Sjoerd Handgraaf: [00:34:25] Ah. Sorry. Yeah. So I mean, like, what percent roughly of the brokers are currently on CREXi, and what could you possibly get online?

Michael DeGiorgio: [00:34:31] ... Yeah. So on the transaction side, we probably have half of the brokers that focus on transacting commercial real estate using CREXi. And about half the listings, half of all the properties that are for sale are on our site in some capacity. It's really hard to say what percentage, like, fully transact, are online or not, at this point. And then on the leasing side, our leasing product's a little newer. You know, we launched that about a year and a half ago, whereas we've had the transaction side out now for four and a half years. On the leasing side, we probably have, you know, a good 15%, 20% of the market so far.

Sjoerd Handgraaf: [00:35:02] Okay. Not [laughs] bad in one year. And any new markets? I mean, you're now in the US only, or are you global?

Michael DeGiorgio: [00:35:09] We are in the US only. We do have some very big international investors now who are big commercial real estate players across the globe who definitely want to one day push us international, and I think we'll definitely get there. With that said, you know, there are buyers all over the world that want to buy properties in the United States. So we definitely have, on that side of the business, a lot of international people using CREXi to come purchase and invest in property. A lot of people like to own property here in the States. And then, because CREXi is an open marketplace that's free, and brokers can come as long as they're the exclusive listing broker, list properties for sale or for lease, and start using the free version on their own, we do have some properties in, in other countries, uh, that have been added that we haven't really focused on, but it's happened. But it's not been a focus of ours.

Sjoerd Handgraaf: [00:35:50] But have you had any transactions outside of the US?

Michael DeGiorgio: [00:35:52] I'm sure we have.

Sjoerd Handgraaf: [00:35:53] Okay. Yeah. All right. Hey, Mike. Thanks very much. This was super interesting. Really helpful, also, for me to just understand more and more about business to business marketplaces. Any last plugs? Where do people find CREXi? Where do people find you?

Michael DeGiorgio: [00:36:06] Yeah. I mean, crexi.com. C-R-E-X-I dot com, uh, is our website. You can find it all there. You can find us on Twitter or LinkedIn, Instagram, Facebook. We're on all the social platforms, too, but just crexi.com. Real simple.

Sjoerd Handgraaf: [00:36:19] All right, Mike. Thanks very much.

Michael DeGiorgio: [00:36:20] Thank you so much for having me. I really enjoyed it. Speaker 2: [00:36:24] Thank you for listening to Two-Sided, the marketplace podcast. If you enjoyed today's show, don't forget to subscribe. If you listen on iTunes, we'd also love for you to rate and give us a review. If you got inspired to build your own marketplace, go visit https://www.sharetribe.com. It's the fastest way to build a successful online marketplace business. Until next time.