It’s a myth that real estate tech firms need outside equity investment to be successful. In fact, the opposite is true. The average lifespan of a family-owned business is more than double that of publicly traded companies, and only half of new businesses survive more than five years.
Having sat on the other side of the table as a venture capital investor gives me a broad perspective as the owner of a 25-year-old real estate tech firm.
I’ve owned Delta Media since 2000, when its VC funding ran out during the dotcom bust. Ironically, I’ve been turning away VC funding offers ever since. When you run a 100% family-owned business, you gain a slew of competitive advantages.
When you’re family-owned, like nearly all our brokerage customers, you must run a profitable business to survive. There’s a sign in my office that says, “Be willing to grow slowly to survive.”
But when you have outside equity investors, things are much different, including:
– Exit pressure. VCs have an exit plan. They want to achieve 10X or more revenue growth, typically within three to five years. At worst, VCs want to break even, and as we’ve seen with giants like WeWork, can pull the rug out from under the highest-profile startups at a moment’s notice.
– Business focus is on growth, not the customer. Companies must grow revenue to keep outside investors happy. Growth is the focus, not profitability. And in some cases, it’s almost growth at all costs. Your focus remains on the outside investors, trying to give them what they want.
– Pressure comes with the checks. You avoid doing things that cost money when funding is tight. Then, when you’re flush, you can grow too rapidly and not be able to onboard new customers in a way that makes them happy and best served.
– Economic changes can turn off funding. The dotcom bust and the Great Recession showed us how the VC funding spigot could shut off overnight.
– Employee churn. VC-funded firms are notorious for employee turnover versus how common it is for employees to stay with family-owned firms for a decade or more.
You don’t need VC or Wall Street funds to succeed as a tech firm. Delta has been profitable every year and has grown every year since I became an owner in 2000, including the recent tripling of our staff.
Family-owned firms can also invest millions each year into R&D. Providing clients AI and automation capabilities is not limited to tech firms that take outsider equity. These are some of the reasons Delta will remain 100% family-owned.
I enjoy having a family-owned company with a great team that loves being here. Almost 100% of our clients are also family-owned. They get it, and we’re having fun doing it.
Michael Minard is CEO and owner of Delta Media Group, a leading and trusted technology partner for many of real estate’s top brands and 100% family-owned and operated. Learn more at deltamediagroup.com.
