When CoStar Cometh
Plus 7 Fundings, 1 Piece of News, 5 Worthwhile Articles, and Video/Podcast
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For those of you not familiar, let me introduce you to CoStar.
Founded in 1987 by Andy Florance, CoStar is a data provider to the commercial real estate industry. CoStar provides lease and sales data (as well as photos and maps of properties) for owners, brokers, lenders, investors, appraisers, and any other transaction-dependent professional to utilize.
CoStar has a monopoly. Full stop.
No one really argues it and, so far, the FTC hasn’t cared. I’m not going to argue here whether that is good or bad or right or wrong. I simply assert that it’s true.
They spent hundreds of millions of dollars doing manual property inspections, photos, broker interviews, etc to build that monopoly.
And on the point of broker interviews, it is important to point out - CoStar is not a tech company.
Their process is almost entirely human (not technical). They call you.
I got a call like this a few years ago:
“Hey Matt, my name is Joe Blow an Account Executive at CoStar and we saw some leasing activity in your office building at 123 Maple Street. Could you please tell me about the lease rates you closed with Company X.”
Now, I could say - “Sure, Joe. It was $27 psf on a 5-year lease with two months of free rent.”
Or I could say - “Eat poop and die, Joe. You aren’t paying me and I’m not playing your game.”
Or - “Sure, Joe. We got lucky and got $350/psf on a 20 year lease.”
Or maybe - “Oh bother! We gave it away at $3/psf on a 3 year lease.”
Which is true? And how would that poor CoStar rep know?
How many people tell the truth on those calls? How many inflate or deflate their numbers? How many refuse to provide data?
Since you know that the answer is unknowable and that this is the process and the backbone of the entire data set that CoStar sells back to me at $20,000 per year, how do you feel about CoStar as a data provider?
. . .
The funny thing about monopolies is they like being monopolies. (gasp)
CoStar has a current (as of 10/15/20) market cap of around $34B.
Thirty. Four. Billion. Dollars.
So it should surprise absolutely no one that CoStar has a history of being, ahem, protective and having their attorneys go to work on competitors.
In 2014 they sued Compstak’s customers for stolen data and dropped the suit after a few months.
In 2015 they sued RealMassive for copyright infringement.
In 2017 they sued Xceligent for “data theft”.
Just a couple weeks ago, they sued Crexi for “flagrant and widespread” copyright infringement.
Be sure not to miss why this is interesting.
It’s not just that CoStar is possibly displaying consistently anticompetitive behavior. All monopolies do that. $34B is a lot of money to lose.
What is more interesting is that Compstak survived. They seem to be doing quite well. (Keep hustling Michael!)
And now there is a potential roadmap to dealing with CoStar and their lawsuits.
Because if CreXi makes it through to the other side, that’s a trend. If two scrappy startups can survive attacks from the big blue death star then we may be on to something. Maybe there are vulnerabilities in the armor CoStar has built around itself.
(Not sure The Force will help you much on this one, Luke, but we are all cheering for you!)
Again, nothing here is meant to opine on good or bad or right or wrong. These are complex and nuanced cases and each is a little different.
But when an extremely large company ($34B!!!) repeatedly brings lawsuits against smaller competitors in the space, I think we as investors, founders, advisors, and early-adopters need to pay attention.
Once I know more and can give more details, I will. For now, pay attention to this.
It’s important.
. . .
If you want to go a little deeper on CoStar, check out this great piece from the Real Deal in September 2018 about how it became the juggernaut it is today-ish.
And check this out from TRD:
On to this week’s deals and data:
Fundings:
Casai, a Mexican short term rental platform, raised a $48M Series A from investors including Andreessen Horowitz.
Kasa, a SF-based short term rental operator, raised $30M in a Series B led by Ribbit. Congrats to Roman and team!
Adan Neumann of WeWork invested $30 in Alfred alongside Spark, NEA, and Greystar.
Passive Logic, a smart building platform in Utah, raised $16M led by KeyFrame Capital.
SiteAware, a construction startup tracking building progress with drones, raised $10M from Axon Ventures.
Urban Umbrella, a NY-based startup bring sexy back to scaffolds, raised a $7M Series B.
CoveTool, and Atlanta-based energy modeling and management startup, raised a $5.7M Series A led by Mucker Labs.
Funds:
Paid Subscribers only.
News:
It’s not tech exactly, but if JLL really is buying Cushman . . .
Articles:
Speaking of Adam Neumann (see above in Fundings), somehow I missed this long piece by the Intelligencer on his rise and fall from this Summer (nothing else happening this Summer, right?)
FastCompany wonders why pre-fab construction isn’t everywhere.
Gensler has their take on how to Reposition Office Buildings for the Future.
Leasing startup Beekin has a nice analysis that shows an unlikely winner post-COVID . . . Atlanta.
Video:
Watch a Nexus panel on advanced supervisory control. Warning - next level nerdery here (and you love it).
Interesting Company:
Paid Subscribers Only.
One Last Thing:
I’ve written before about the pain in retail and CBInsights has updated their bankrupt retailer viz:
Thanks for reading!
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