42Floors is launching today to help business owners find commercial real estate online. The YCombinator startup, founded in November 2011 by former Flightcaster founder Jason Freedman, connects businesses seeking space with photos, data and other listing info on available spots. Currently active in San Francisco, the company plans to expand across the U.S. later this year. Freedman said he’s providing to business owners what tools like Zillow have provided to residential real estate searchers for years. “Commercial real estate has always trailed residential real estate in technology by at least five years,” Freedman said in an interview. “It’s like we’re back in 2004 and no one’s built a really good website yet to search for spaces. We’re just going to emulate what they’re doing.”
The site, which is free to use, was started by Freedman after he underwent his own search for office space and found the only way to conduct a search was through a tenant rep. ”I’ve had to search for office space a number of times, and it finally came to a head last year,” he said. “I was looking for space and working with top-quality brokers, but everyone claimed that they had this proprietary set of data that was extremely hard to get and it’s what differentiated them. I checked the three different brokers and it was all the same data.” He said he realized that all the brokers were showing off the same spaces, and were logging into a database that gave them the ability to print out white-labeled tour books. ”I didn’t want to pay an emormous subsciption fee that they pay in order to access it.”
He said the problem with commercial real estate data is that it’s spread out across different brokerages’ websites. Freedman said that while brokers are willing to give listing data out, it’s never been aggregated and provided in a nice format. 42Floors’ listings are from brokerages, landlords, and Craigslist. They’re populated both by the 42Floors team, and added by brokers and sellers. “We’ve had a tremendously positive response from the brokerage community,” Freedman said. “We help brokers market their listings more effectively. It saves them time, and helps them differentiate themselves from anyone who’s not supporting the latest technology.” Anyone looking for spaces can search by pictures (taken by 42Floors’ in-house photographers), size or cost, and can view by leased, shared or coworking spaces. Business owners can use the tool to arrange viewings, or can contact the listing agent directly.
Freedman is also aiming to go beyond just finding users office space. He says office space is a “nine-month problem” – the first 90 minutes of the process is searching, but then once businesses find a space they have to worry about moving, furniture, and other aspects of building out the space. In the next couple months Freedman will be debuting a marketplace to help businesses build out their office spaces. “Sometime in the next month or two we’re going to release a marketplace for service providers that’s going to make that whole process massively easier,” Freedman said, though he wouldn’t provide any specifics on how the marketplace will work.
During the site’s beta period it’s free for users and anyone uploading a listing. The site charges a referral free for brokers who get clients through the site. Though Freedman couldn’t comment on what 42Floors will charge, he said the industry standard is 20 percent. Freedman said they’ll work with both listing and tenant brokers, and “anyone who wants to market their spaces,” including private sellers. “Great brokers should get everything through referrals, and paying a small portion of that as a referral fee,” Freedman said, rather than the typical method of cold-calling clients.
Freedman says though they don’t make any money from listing live/work spaces and coworking spaces, they want to make sure they feature any option that might suit their users’ needs. “We dont’ get anything for referring someone to a coworking space. but yet it’s really important to our users, because that is a viable option for them,” he said. “We show all coworking spaces, because that’s what solves their problem.”
42Floors is in the current YCombinator class, and in addition to funding from the program, the company has funding from 10 angel investors, who Freedman says are “stewards of the commercial real estate industry.” Ron Conway’s SV Angel also did a follow-on investment in addition to the funding provided through YCombinator’s StartFund, which is the first contribution to a new round of funding that Freedman will begin raising soon.
With residential real estate tools like Zillow already dominating the U.S. market, Freedman said there’s an “almost zero percent chance” of the company extending into residential real estate listings. But while the company won’t have to compete with residential sites, they will have to compete with Craigslist, individual broker sites, and word of mouth. And companies like HomeStars already have an edge on providing info on home- and office-related service providers, so it will be interesting to see whether a standalone 42Floors marketplace will be able to replicate that kind of community.