Disruption Comes (Finally!) to Commercial Real Estate
Freedman was no stranger to the sorts of obstacles that can keep a company from getting off the ground. His first start-up flopped. Called Openvote, it let communities debate and vote on issues. Freedman co-founded it with a friend while still at Dartmouth's Tuck School of Business. They folded it after struggling for two years to reach profitability, leaving Freedman with so much credit-card debt that he had to hunt for bargains in supermarkets just to eat. "I had tried to succeed by being the smartest guy possible, and that didn't work out well," he says. "My problem was that I wasn't surrounded by a community that could help me succeed."
Freedman took a job with a consultancy and, three weeks later, was at an airport. He called a friend to kill time after his flight was delayed. "I could have told you that flight was going to be delayed," the friend said. Freedman asked him how, and the friend explained how publicly available flight and weather information could be used to predict which flights would be delayed. Freedman's wheels started turning.
A week later, Freedman and his friend were at work on a new company, FlightCaster. And having learned from his last mistake, Freedman applied to Y Combinator, the celebrated Silicon Valley incubator that twice a year provides some 65 companies with about $20,000 each, the opportunity to spend three months of intense development in a collaborative environment, and a Demo Day at the end of the session to pitch VCs. Most important, they get the chance to tap into the wisdom of Y Combinator co-founder Paul Graham, whose ability to spot and help shape potential Internet winners is legendary. In the interview for the program, Graham ripped the FlightCaster idea to shreds, and then abruptly ended the meeting by offering Freedman funding and a slot in the next session. "I'm only that hard on the ideas I like," he explained to a flummoxed Freedman.
FlightCaster took off, making money by selling apps and providing flight information to corporate travel departments. Less than three years after its founding, Freedman was offered a sum for the company he will only say was "millions." He couldn't resist what seemed to him a staggering amount at the time. As part of the acquisition deal, Freedman agreed to stay on with the company for a year. Toward the end of that year, his final assignment was to find new office space in the Bay Area.
With his employment coming to an end, he had vowed to do not much of anything for a year, especially not start another company. But the truth was, he was already itching to get back into the game. A big reason: He felt he had bailed on FlightCaster much too soon. "It's fear that makes founders do that," he says. His realization: "You have to have a big number in mind when you start a company, so you don't take the first decent offer that comes along." The experience left him yearning for another shot to take a company big.
And that's what called out to him about commercial real estate. It was one of the last big markets to hold out against the online world. Like Everest or K2, it loomed in front of him, daring him to tackle it, no matter how many others it may have crushed. And with $25 billion in broker commissions potentially in play, the payoff could be spectacular. Freedman began writing his chapters.
Chapter one: "Hackerdesk." Early-stage start-ups need much less space than any broker is going to bother with. Meanwhile, other small companies are often forced to take more space than they need. The win-win solution: Let the companies that need space rent from those who have extra. It could all be done online, no brokers needed. It was a great idea, but one month into it, a company called Loosecubes launched a similar service, which has since taken off.
Chapter two: "Lending Tree for brokers." Brokers would compete online for customers' business, by lowering their commissions and offering better service. Brokers made clear that this would happen over their dead bodies.
Chapter three: "About Me" for brokers. Brokers would simply sell themselves on the site. No one liked this idea.
Chapter four: "Ratings." The site would evaluate brokers and award the best brokers special citations. Also popular with nobody.
Now, a few months in, Freedman was discouraged. He had been determined to come up with an idea good enough to get him back into Y Combinator for the session starting in January 2012—just months away. Even worse, he felt responsible for wasting the time and effort of the other co-founders, former FlightCaster employees Jon and James Bracy and Ben Ehmke. The Bracy brothers, who are fraternal twins, grew up with missionary parents in Papua New Guinea and taught themselves programming after moving to Vermont at age 13. Ehmke is a graphic designer from Texas who proved adept at whipping up eye-catching, highly functional websites. For each chapter, the team members had thrown themselves into producing slick demos, only to have to throw it all out. "I felt I was letting them down," says Freedman. "And anyone could have told me what the problem was. I just didn't know enough about commercial real estate to build this company." He had learned as much as he could in several months. But now he felt he needed years of knowledge to get it right.
Freedman was at his desk, feeling distressed and unsure about what to do for the next chapter, when his phone rang. It was a friend of a friend looking for advice about how to break into the world of Internet start-ups. After Freedman sold FlightCaster and started his blog, he had been getting a lot of calls and e-mails like this. He never turned anyone away. The caller explained how he was looking for meaningful work, having just left a job he hated as a data analyst for a large commercial real estate firm. "Stop talking," Freedman said. "Can you meet me right now?" The caller was David Woodworth. That serendipity thing. By the following week, the two had come up with Chapter Five.
Chapter five: "Online dating for brokers and tenants." The idea was to help match tenants' needs with brokers' specialties and skills, and to alert tenants to brokers who did sleazy things.
Freedman was so sure they had a winner that he decided to bounce the idea off Graham. Graham gave him 30 seconds. "That's not interesting," he opined, after listening to the pitch. "You should be showing spaces." He walked away, leaving Freedman to slink back to his co-founders with the bad news.
