Rich Sarkis, John Catsimatidis, Mike Krupka and a screenshot of the Reonomy platform
Real estate research and data startup Reonomy raised $16 million in its latest funding round, about three years after last raising venture capital. The company, founded in 2013, has now picked up just under $40 million from investors, making it one of the deeper-pocketed startups to tackle the burgeoning market for commercial real estate intelligence.
Bain Capital Ventures, which headed up Reonomy’s Series B in 2015, also lead this round, with additional investment from Softbank, Barry Sternlicht’s family office JAWS, Marcus & Millichap’s venture arm, and John Catsimatidis’ Red Apple Group. Reonomy is also entering a partnership with Newmark Knight Frank that will see the newly public commercial brokerage layer the startup’s data atop its own.
Reonomy’s long fundraising hiatus combined with the departure of some key executives had led some observers to believe the startup was struggling. But Richard Sarkis, co-founder and CEO, said that unlike many of its flashier counterparts, the company opted to seek further capital only when it became essential to scale.
“We didn’t get ahead of our skis,” he said. “We didn’t need to raise a dime for three years. We would have been in real trouble had we done so – we knew it was going to take a lot of time from an R&D perspective.” The new round includes venture debt from existing lender Silicon Valley Bank.
Sarkis acknowledged that the company’s national rollout – it started in New York and is now in 3,000 counties and 20,000 municipalities – didn’t come as swiftly as initially hoped. “It went slow, city by city,” he said. “We did the math and said we’re going to have to replicate the same approach 30 different times- it was very much the old way of scaling.” The company went back and rebuilt a system Sarkis described as “market-agnostic,” one that can be switched on in a new market without the need to start from scratch.
Core clients include real estate developers and investors such as Red Apple and Tishman Speyer, brokerages such as JLL and Cushman & Wakefield, and banks such as Wells Fargo and JPMorgan Chase. The partnership with Newmark will give the brokerage, which went public in December, the ability to use Reonomy’s data to build its own tools for brokers and clients.
Sarkis said a major growth area for the firm is going after hedge funds, private equity firms and insurance firms – companies that “care about commercial real estate as an investable asset class” and have been “massively underserved.”
Case in point: A hedge fund is thinking of investing in a real estate investment trust, but the REIT may not individually list every property it owns.
“This REIT is associated with this 250 different entities – those entities own 2,200 properties,” Sarkis said. “If a hedge fund is interested in understanding what individual properties a REIT owns, it can’t tell who the tenants are and what their credit risk is, it can’t tell what the debt is across the portfolio.”
By aggregating and analyzing hundreds of public databases, Reonomy can put together a detailed tapestry of a property or holding company that includes zoning information, sales data, debt history and contact information. That’s the kind of intel that can make or break an investment.
“It’s like 6 degrees of Kevin Bacon for corporations,” Sarkis said.
Red Apple’s John Catsimatidis Jr., who heard of Reonomy when shopping for a 1031 exchange deal for 823 11th Avenue, said his firm invested “a nice amount” into the new round. Reonomy’s property-level data, he said, could help the conglomerate across several of its businesses, including supermarkets, real estate, and energy.
Reonomy has a team of about 40 people and, according to Sarkis, is “well on our way to double-digit millions” in recurring revenue. It has seen some churn in the ranks: Co-founder Charlie Oshman jumped to Michael Shah’s Delshah Capital in 2016, the same year in which another co-founder, Guillermo Sanchez, left. Aviva Fink, formerly of VTS/Hightower, leads the client success team.
The commercial real estate startup scene had a moribund 2015 and early 2016, with venture money drying up for pretty much everyone not named WeWork. At the time, Sarkis had suggested that investors were no longer chasing “unicorns” – defined as startups that hit a $1 billion valuation – but rather, “cockroaches” – slower-growth companies that could show long-term resilience.
In late 2016 and 2017, the space did see a flurry of substantial capital raises. Softbank, the Saudi-backed Japanese giant, played its part. But more broadly, it experienced greater consolidation and alliances, such as the merger between cloud-based portfolio management platforms VTS and Hightower, Moody’s strategic investment in real estate information firm CompStak, and Goldman Sachs’ partnership with the Kushner brothers’ real estate investment platform Cadre.
It also saw some carnage. In December, Xceligent, the closest competitor of data giant CoStar Group, filed for Chapter 7 liquidation after a lengthy and pricey legal battle with its rival. Xceligent’s co-founders then sought to build a new data company from the ground up, but that attempt fizzled.
The prospect of seeing CoStar in court is one that looms large over many aspiring commercial real estate leaders, but Sarkis said Reonomy’s offering is distinct enough from CoStar’s to avoid a standoff.
“I can imagine,” he said, referring to CoStar and Xceligent, “how there’s litigious bad blood between two sides that are fighting a war with the same tools and the same approach.”
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