Buying and selling a home is not only stressful, it’s expensive. With hidden fees, taxes, and a whole lot of time spent, there is one service you need to take the stress and fees out of your real estate experience – REX. The real estate platform replacing the real estate agent removes the traditional 6% agent fee and cuts it to 2%. The company is taking a common sense approach to buying and selling homes, and hoping to update an industry that has made few changes in the past 50 years. Expanding rapidly to more and more cities, REX is the looking to be the household names…for houses.
LATechWatch spoke with cofounder Lynley Sides about the company and its most recent Series B round of funding.
Who were your investors and how much did you raise?
REX raised a $15M Series B funding round through a string of existing marquee private investors including, Scott McNealy, co-founder and former chief executive officer, Sun Microsystems; Dick Schulze, founder, Best Buy; Gordon Segal, founder, Crate and Barrel; Amit Singhal, former senior vice president of search, Google; and Jack Greenberg, former chief executive officer, McDonalds.
REX has created an innovative technology platform that replaces the conventional real estate model, effectively providing a digital alternative in the sale of a home. The company is a fully licensed brokerage and charges only a 2% flat fee—in contrast to the industry’s 5 to 6% fee—dramatically lowering the cost of home-selling by leveraging big data, AI, and machine learning. In the same way the Salesforce.com pioneered the SAAS model over software, REX is the only company to go around the MLS and avoid excessive associated costs to deliver a better service to buyers and sellers.
What inspired you to start the company?
From day one, REX has been committed to doing good things for real estate consumers and to providing homes for those in the greatest need, wherever they may be. For every 50 homes we sell, we provide a home for a family in need. We started by funding the construction of a home for a family in Cambodia at the end of 2015. In addition to funding homes, the REX team regularly provides hands-on support to local nonprofits that provide shelter to families. Most importantly, we have dedicated shares we own in the company to building more schools and homes for children who do not have them.
How is it different?
Residential real estate has gone virtually unchanged for 50 years. REX is the first company in the industry to completely bypass the existing system—the MLS—and use big data and advanced digital marketing to discern home seller and buyer propensity and reach them directly. The result is that we sell homes faster, at better prices and save homeowners on average $25,000.
What market you are targeting and how big is it?
The residential real estate industry is $1.5T in size. REX is also gaining a foothold in the $4.5T consumer services industry by offering mortgages through REX Home Loans and moving assistance.
What’s your business model?
We go around the existing infrastructure, using technology and data to attract sellers, market homes to buyers directly, and facilitate offers, escrow and closing. In addition, we provide full service by assigning a licensed agent to every buyer and seller. Our revenue model is simply a 2% fee, paid at closing, on the sale of homes listed exclusively with REX.
How has your past experience at Goldman Sachs influenced this business?
During the time my cofounder, Jack Ryan, was a partner at Goldman, he was involved in moving the trading of shares and bonds from middlemen—who are quite expensive – to electronic trading with personal attention, saving customers a great deal of money. He realized he could do the exact same thing in the real estate industry – produce better outcomes and experiences for consumers at a much lower cost. REX is similarly doing to real estate what E*Trade did to stock investing.
Our approach was to first ask friends and colleagues for their input and test our story on them. We learned from their comments, improved our pitch and followed their introductions to potential investors. If our industry or size were not a fit, we often received referrals to other investors for whom we were. This path led us to an incredibly accomplished group of investors whose ideas and perspectives have added immense value to REX beyond the capital.
What are the biggest challenges that you faced while raising capital?
Perhaps the hardest part of fundraising is the project management of the effort. Challenges arise everywhere from creating materials to scheduling and traveling to meetings all while continuing to manage and grow the business. Executing financial and data analysis, keeping track of follow-up items, and juggling inquiries from investors in the pipeline requires a laser-focused due diligence of all those involved.
What factors about your business led your investors to write the check?
The core factors were the massive, broken industry, a disruptive business model that was truly unique, and the strength of the team. We had proven that the model works in LA by creating listing and revenue growth, a string of positive customer reviews and positive transaction economics, and beating every key industry metric. We had also proven that the model worked in a second California market, and then in other states, with increasingly rapid acceleration. Lastly, our massive future growth projections were credible because we had beaten every goal and projection communicated to our board and investors since day one.
What are the milestones you plan to achieve in the next six months?
We are currently accepting homes in Ventura, Los Angeles, Orange County, San Diego, Long Island, Brooklyn, Queens, and have plans to launch in seven new cities in 2018 including; Austin, San Francisco, Denver and Dallas.
What advice can you offer companies in Los Angeles that do not have a fresh injection of capital in the bank?
Assuming the company wants to raise that injection of capital…fundraising is largely about who you know. Get out and meet people long before you need the funds. Talk about your company. Learn about other successful businesses and their leaders. Offer advice and make introductions for people where you can. Have a specific profile in mind of your ideal investor and relentlessly ask everyone you know and meet for introductions. Just like you would with a new tech product, get out there with the MVP of your pitch – test it on colleagues, at meetups and pitch events, listen, learn and iterate.
Where do you see the company going now over the near term?
Having proven that the model works in multiple markets and raised a series B, we’re expanding rapidly to bring our model and savings to thousands of homeowners across the U.S. In addition to geographic expansion, we will be launching additional service businesses, as we did with mortgages in November, which will further streamline the home buying and selling process for consumers while creating additional revenue streams for REX.
Where is the best place in LA to watch the sunset?
The middle of Malibu pier.