When Noah Isaacs and John Meadows were best friends growing up in Berkeley, Calif., they dreamed of remaining friends for life. What they didn't imagine was living together in New York and starting a company together -- yet they have. It's called Bowery Valuation, and it's aiming to bring commercial real estate appraisals -- currently an $8 billion market -- into the modern era at long last.
Investors certainly see the need for an upgrade. The nearly three-year-old outfit just raised $5 million in seed funding, including from Cushman & Wakefield. In fact, the real estate giant is now using the startup's technology to automate and optimize the entire appraisal process, allowing its appraisers to provide multi-family valuation services (meaning for apartment complexes) for the first time.
For Cushman & Wakefield, that's a big deal. The valuation and appraisal piece of real estate has remained largely unchanged over time. Appraisers trudge through properties, scribble down details, snap pictures and complete a painstaking analysis afterward that includes visiting more than a dozen sites to collect information about taxes, zoning and land use. It's sufficiently onerous that until Bowery came along, Cushman employees typically appraised only bigger commercial buildings -- a missed opportunity given that in New York, apartment complexes make up the majority of the buildings.
Yet Isaacs and Meadows say they understood well Cushman's pain -- as well as that of all appraisers. As a University of Pennsylvania undergrad, Meadows knew he wanted to get into real estate development and figured there was no better place to start than by doing appraisals, which is often a building block toward a career in lending or with a brokerage. But when he began work at a large independent appraisal firm in New York, he was horrified by the industry's antiquated ways of doing things. He plugged along, making mental notes, while Isaacs, who'd attended McGill University in Montreal, was working as a statistician for the Toronto Blue Jays. ("Reading the book Moneyball in high school, I thought it would be the coolest job in the world," says Isaacs. "But it wasn't all I'd dreamt it would be.")
Soon, Meadows and Isaacs were talking about getting Isaacs to New York, where he took a job with the same appraisal firm and was equally surprised by how much work was required to appraise properties. When the friends had socked away enough money to live in New York for a year without a salary, they quit to start Bowery.
Their first move was to raise friends-and-family money to hire a co-founding CTO. ("We had an idea of what the software would look like, but we're not technical," says Meadows.) After bringing aboard Cesar Devars, a Princeton grad who'd studied economics and worked on several startups after graduating, the three got to work, including hiring a couple of other software engineers.
Within a year, Bowery found itself applying to MetaProp, a 5.5-month-long accelerator program that focuses exclusively on real estate and typically only accepts startups that already have a product. "We went to meet with them, and they said that through their real estate connections, they help companies grow their sales and brand. But they were like, 'We can't do that for you,' so we said, 'Okay, fine,' " recalls Isaacs.
To the team's surprise, an email came through the next day saying that Bowery was in after all, and the experience ultimately proved "hugely valuable," says Meadows. "They get you thinking about strategy and the vision of your business and they help with building early relationships. When we went to raise an initial seed round, having their support was key."
That first round, closed with $1.75 million in April of last year, included the real estate-focused investment firms Camber Creek, Corigin Ventures, LeFrak and Expansion Ventures. Another firm, L.A.-based Fika Ventures, also chipped into the financing.
With that capital, Bowery was able to hire a VP from CBRE, the biggest commercial real estate company in the country, to be its chief appraiser. It also plugged more resources into its offering, which includes a mobile app that let's appraisers tick off items, rather than write everything down. (Granite counters? Check. Brazilian cherry hardwood floors? Check.)
Bowery's platform has several other much-needed features, too, say the founders. For one thing, it automatically pulls in public record data so appraisers needn't surf the web to find what they need. According to Meadows, once an appraiser has entered in a property, all subject-level data is right at his or her fingertips. Another feature, they say, is so-called passive databasing, meaning that rental and sales comps that are often lost today are saved forever and can be easily found via a map-based search.
Last, the company is using natural language generation to help its appraiser clients produce reports. "Instead of writing the same paragraphs time and again, you click and check boxes to explain why a property is better than a comp -- whether it's because it's on a corner or has high ceilings or proximity to public transportation," says Isaacs. "There's just no need for appraisers to waste six hours a day on manual administrative work," he adds.
Whether the company is making much money right now is hard to discern. Like any other appraisal firm, Bowery bids on properties, often winning its bid, it suggests, because it's faster and more affordable than traditional options. (Typically, the appraisal fee for an apartment complex in New York costs between $3,000 and $4,000; Bowery says it charges roughly half.)
Bowery also sells a white-label version of its product to banks and lenders and to Cushman, all of which pay on a per-report basis. (Subscriptions may be coming, too, says Meadows.)
Of course, the company is young. It also has ambitions to expand nationally in the not-too-distant future, first to L.A., then possibly to Boston, Chicago and Washington, D.C., if everything goes as planned.
In the meantime, that $5 million in fresh funding -- which was led by the L.A. and San Francisco-based venture firm Navitas Capital -- should help. So should a frustrated real estate industry. "If you ask lenders what's their biggest headache, if appraisals isn't number one it's at the top of their lists," says Meadows. "We're trying to turn that headache into an asset for them."
Pictured above, left to right: Bowery founders Noah Isaacs, John Meadows and Cesar Devers.
This article originally appeared on TechCrunch.