Interview with Anil Pereira, CEO of SecondSpace

SecondSpace is a web services company that runs marketplaces for buyers and owners of land and second homes. We connect folks looking for their dream location with a broad range of real estate professionals and service providers that can help them make the most out of the second home lifestyle.

Number one, it’s much larger than it ever has been; and number two, it’s much larger than everyone realizes. For example, according to the National Association of Realtors, 40 percent of all annual home sales are second homes. Now, you add into that, land, land for recreation or land for building your dream retirement property or land for investment. You add in fractionals, time shares and all of the international activity that’s taking place. A million people in the U.S. own property in Mexico, 50,000 plus in Costa Rica, Nicaragua, Panama, etc. You add up all of that purchasing behavior and believe it or not, the second home market is bigger than the primary U.S. residential real estate market, just no one knows about it.

It’s a combination of people looking at second homes or rural retreats purely for vacation or recreation, sometimes people have dual purpose. They’ll buy something and they’ll rent it out part time, or they’ll buy it and they’ll hold it for a future period. And then it also couples in things like pure investments, someone buys a property to solely rent out.

The thing that we’re most interested in offering is that whole lifestyle component. People really want to engage and experience a lifestyle, and some people take time to plan these things out. For example, there’s a segment of the population called the “splitter market.” People hit the age of around 45 and they start to think about retirement, or maybe “I’ll retire early at 55″ or “I’ll semi retire and then at 65 I’ll officially retire.” Well, they start looking for a change in their lifestyle. They move from the suburbs of the city, maybe they’ll buy an urban condo for half their time, and then they’ll buy another place in a sunshine state or location for the other part of their time.

A couple of years ago, I had the good fortune of sitting at Ignition Partners which is here in the Seattle area, the largest venture capital company in Pacific Northwest, and I was there as an entrepreneur in residence. And I was looking at a number of things in largely the baby boomers space. I’m a 20 year direct marketing veteran and pretty much been chasing boomers my entire career. So, we were looking at the whole baby boomer segment and realizing that according to research, boomers spend more time online than any other segment, more money online that any other segment and consume content more deeply than any other segment. In fact, they’re the largest segment of online population except a lot of the newer web companies are chasing a younger crowd.

We looked at the whole baby boomer segment and looked at a number of things that they do and then we’re lucky that we were approached by a company that ended up becoming a strategic partner of ours. We don’t name them in the press, but they had some very interesting things going on in the baby boomer space. So, we formed the vision and the business plan for SecondSpace in early 2006. On the heels of that, we funded the company with a Series A Round in mid 2006 and we’re off to the races. So since then, we’ve created an amazing web services platform that powers a number of lifestyle oriented websites including LandWatch.com, which is the number one site for land and rural retreats and country living and ResortScape.com, which is all about the resort lifestyle, resort communities in the Americas.

That’s right. We don’t think that we will have thousands of domain names. We’re not really a traffic aggregator at all. We really want to have a few properties which enable consumers to experience a highly immersive online experience. So, when you come to the site, you really feel like it’s all about land and rural retreats or recreation to do with land. So, with ResortScape, it’s much more about resort communities, be that Whistler or Lake Chelan or Wenatchee or Crystal Mountain or Whitefish.

So, it may be Pebble Beach or it may be Semiahmoo, but for us it’s really about giving the consumer this deep experience which is our dream for the Internet. A lot of sites our there tend to be quite cold. If you want to think about colors, they have white backgrounds with primary color navigation because they have to cater to the mass market. So, what we’re doing here is segmenting the mass market into distinct audiences and that’s giving our business customers a tremendous advantage in generating highly qualified referrals and collecting market and business intelligence that helps them drive their business worth.

Our broad vision is to connect people with everything they need to enjoy the second home lifestyle. So, the value proposition for consumers is quite simple. It’s free to consumers, it’s free to use the sites and free to register so you can get a number of features and benefits if you register. So, for consumers, it’s all about dream properties, it’s content around those special communities, it’s services and in fact over time where it will even become things like user communities around these resorts and rural areas.

So, for us, it’s that broad panoply of things for consumers, everything they need to have a great experience. So, that’s helping you find your dream location and property, it’s helping you connect with people that can service it; property managers, property maintenance, the people that can help you mow your lawn or over time help you find that ski tuning shop, etc. So it’s everything you need to have a great experience when you’re at one of these locations.

And then for businesses, the advantages…it’s the marketplace so we connect the consumers with businesses. So right now we connect them with real estate professionals; agents, brokers, developers, etcetera; so we’re 100 percent broker friendly, we don’t really let consumers list property on the site. It’s all about professionals and that’s where we make our money.

And then we have service providers, it might be as close into the real estate transaction as someone in financial services that you know can help a consumer finance that piece of land or that second home. Or other types of service providers that can help you clear some of your properties so that you can put a cabin or a home on it. Or someone that can actually help you maintain it, right it might be local amenities, entertainment, activities, anything to do with you enjoying that second home experience. So that’s the business in itself, it’s basically marketplaces that can connect consumers and the broadest range of service providers that can make the most of your second home.

Well, that’s a great question. You know it’s a classic flywheel and many of us in the team have executed against this type of flywheels in our past lives. So that the first thing is really all about content and generating significant mass of content such that you can drive interested segments of traffic to that content.

So the first thing we did was amass the broadest range of land and resort listing that we could across the country and then in a few other countries that US, you know US visitors are interested in. So not a number of property listings, I think when we launched we had about 15,000 land listings, and let’s say probably 10,000 resort units that were listed in our network. And so that was the first step.

The second thing was also building some traffic and so we did an unusual thing. Most companies that are start ups generally tend to launch their company at the same time, they’re sort of getting their first piece of property. Well, what we did was we actually launched our site; LandWatch.com was the first one to launch. We put it out on the market almost a year before we actually came out of stealth mode. And then ResortScape was in beta a couple of months before it came out of stealth mode this past summer.

So we started generating an interest to those sites, we just didn’t link them to SecondSpace and so it’s actually a bit of company folklore, but we all had three business cards. We had a SecondSpace business card to connect with investors and prospective employees and business partners; a LandWatch card to go into different rural states to talk to brokers and other types of organizations, and I had the ResortScape’s card as I ventured into places like Florida and Colorado to talk to large developers and place makers and alike. So all that came together under the SecondSpace umbrella this past July when we efficiently launched the company.

I won’t say that, but we’re pretty frugal people and so I won’t say that. But it all came together then. SecondSpace to us is really this umbrella to federated brand that will carry through the brand in destination websites to operate. Also, we power a number of other sites out there, so we power mini sites for developers. If you go to WaterMark, which is the development team in Intercoastal Georgia or The Pines at Fisher River which is a development in Montana, we’re powering those mini sites on our platform.

One large property developer will build their next generation site on our platform, much like Amazon.com, powers Target.com or MarkSpencer.com. So it really is a very robust platform and we’re a technology company, so we just keep innovating on that platform. All of our customers, whether they’re consumers that visit our sites or businesses that actually put their entire Web presence on the platform, get to take advantage of it.

It’s actually a bit easier than it sounds. So we really focus on two things for business customers. One is highly qualified referrals. If you can get someone looking at a listing on a site with contextual relevance. So for example, the demographics of the population looking at second homes and land are amazing. The average age is 47 years old, household income of $100,000 and above.

A tremendous number of international customers are moving in to the United State’s real estate market. Today, much of that money is coming in into the second home market. So the big international boom is going on. One out of five realtors in the US serves an international client today, the median price that foreigners pay for a property is 30 percent plus more than someone in the US.

So we look at all of that highly valued segmented user base, and we basically take that and package it up for businesses in two ways. One is as highly qualified referrals, so we basically are able to generate very high quality leads for our customers. The second thing is business intelligence. Now that we have a tremendous number of listings and traffic and data falling through our system, we’ve created a behavioral targeting engine that more the site experience for users as they come to LandWatch.com and ResortScape.com.

We also then package up that clickstream data and play it back to our business customers; and so, they can see market comps, price elasticity of demand for certain types of listings by region or by size of property or by category. So we are able to really mine the data on behalf of our business customers.

So at the end of the day, the business model is our quality leads and business intelligence, regardless of what size the customer is, a small business or a sole proprietor, agent or broker, it could be a mid sized developer or mid sized service provider or a large enterprise.

So, if someone puts their website on our platform, the reason they are doing it is because they believe and we believe that they will generate better leads, more leads and more qualified leads by putting their sign on our platform; and also, that we’ll be able to have the collective business intelligence of the data that runs both on their site as well as through our marketplaces that we can package for them.

Yes, and that really takes a page from the team’s past, and so one of the thrilling things about working here is that you know, we have a seasoned team that has done these types of things before. My background is prior to admission, I was at classmates.com for a while; before that I was an Executive at VeriSign down at Silicon Valley, and at VeriSign we built a huge channel network both domestically as well as in 45 countries overseas.

Satbir Khanuja, who is our VP of Marketing was at Amazon.com for seven years, first building up IMDB, the Internet movie database, and then for the last two years of his tenure there was VP of Worldwide Traffic, running the 200 person Traffic Team at Amazon including the Affiliate Program in aStores, which they launched for small businesses and individual users.

We understand how to embrace the channel, and so that’s exactly what we’re doing here. Our customers are what we call business partners. We are truly in partnership with them to help them succeed. And the next thing you’ll see us rolling out will be a true affiliate program where we’ll be able to take our customers’ listings and syndicate them into other affiliated sites in a great partnership model.

You know what, I’ve had the good fortune back in the 90′s of getting classical direct marketing cleaning at American Express. You couldn’t ask for a better experience in terms of learning and understanding all the nuances of direct marketing. At Amex, I actually worked a lot with new product development and developed a number of new products, which was funny considering the company was 150 years old but really had no product development group.

In late ’96 I was working on a few things that touched on the Internet and started to really see that the Internet was getting ready to take off. At that time, I moved out to California and joined their site at a very early stage and got the chance to run corporate marketing there at their core business as a company as we really grew and became a trusted structure provider for the Internet. I’ve managed to have a great experience participating in the company’s ITO, dozen acquisitions, etc. It really helped me kind of feel that I was part of that early entrepreneurial team. I was there for six years and wanted to do it again.

I moved up to Seattle to join Classmates. Classmates was a bit further along at that time but was really looking to grow beyond the core of high school business. So I ran a new businesses group and we launched a new number of businesses at Classmates. The one on Provistov was Classmates International, where we actually acquired a number of companies in Europe and put them together with some business partnerships there. Then we launched Classmates in that market. It’s gone extremely well with that company with several million registered users now in a number of locations in Europe.

When Classmates was still with United Online, I left the company just a bit before that. I took some time off then was looking to get into my next gig. I realized that the one way to do it was to actually think about incubating something of my own. I wanted the chance to be around some people who had great experiences and also with context that could be a sounding board for a new venture. That’s when I talked to a number of venture capital firms. Ignition was an easy decision for me on a number front of great operating experiences. Their partnership there was really classy, they were great folks to work with, and they tend to have a great deal flow. A lot of people certainly in the northwest, as well as in the west coast, come to see Ignition, and so I had a great view into potential deals that were taking place.

That’s how I ended up at Ignition. It was just a matter of time. As with any entrepreneur residence, you eventually have to leave amidst. When we started working on SecondSpace I knew it was something that we really were just passionate about. Within five months, we put together the business plan, the financing, and the core team. And we actually eventually launched the company.

One of the books I did read a couple of years ago was a Jim Collins book, “Good to Great”. I found that there are some definite similarities and parallels in building a start up or helping to accelerate growth within a large company like American Express. I look at what Collins calls the “hedgehog modeler”.

The hedgehog approach has three things. Number one, what are you just deeply passionate about? Number two, what drives your economic engine? The third is what can you be the best in the world at? I think what really helped us jump start growth at American Express and I was a small part of that big company was we really focused on those things. What’s that company really passionate about? It was serving consumers and businesses in a real quality way. It was really all about service.

What drives the economic engine? It was fairly simple. It was basically the number of people that carried your product; the share of their wallet that your product had and basically the number of merchants that actually accepted the product. Then we just focused on how to be the best in the world about those things. We pretty much did the same thing, which was we were deeply, deeply passionate about enabling people to use Internet with confidence. So we really focused in on making sure that the Internet was a trusted place. After that, we found what drove our economic engine, which was services that enable trust across the Internet. We were just best in the world at doing that and built a multibillion dollar company at scale.

So that’s the same thing that SecondSpace is. Here we’re very, very passionate about two things. One is helping people find their dream lifestyle. And the second thing is connecting businesses with those consumers that they wouldn’t otherwise reach. That’s what makes this model that we’re in very powerful, unlike the primary residential space. I live in the Bellevue, Washington area and I kind of know a bit about the community. If I want to look for a new home, it really is largely about commuting distance and schools and neighborhood quality and affordability. Those are the primary characteristics.

Well, when you’re looking at a second home, the pieces string is much broader and much longer and much more elastic. So if you put a pin on the Seattle area and then you take a big circle, you may get a second home in Maui or in San Juan or Whistler or Crystal Mountain or White Ridge, Montana or Lake Tahoe a number of places. When we connect to people with businesses, we’re really adding value because 70 percent of the leads we’re generating today for business customers are from out of state. That gets them very excited; they’re reaching an audience that they wouldn’t otherwise be able to reach through their own local advertising.

I’d say I love entrepreneurs and I love entrepreneurship because someone told me once, “You have to be made of bullets in order to be on.” Or, “You have to eat bullets for lunch,” I think they said, which is not an easy thing to do. You basically have to have the fortitude to execute to a plan, to execute to a vision.

I think for entrepreneurs it’s really all about painting a very broad vision but then tactically executing to a plan. So that’s, I think, the most important thing. If you try to actually build products that fulfill the ultimate vision of a company in a year, let’s say, obviously you’re vision is not big enough because your vision should push on beyond a year or you’re taking on too much. And so, the advice I give folks is basically paint a very broad vision but then make sure that you have a plan or road map, if you will, that gets you to year one, that gets you to a five year base camp, and then lets you continue beyond that.

I’d say a few things. I’ve had the fortune of working with a number of folks who have helped build billion dollar companies or billion dollars of market value for companies from scratch. And so, I’d say one is really understanding what it takes to go from small to big, or good to great, to quote Jim Collins.

The second is we look for people who know what it’s like to win. We have a winning culture, and winning is something that if you have experience at it, you can taste it and feel it; you know what it looks like. We may be small today, but we’re proud of the fact that in our first year in stealth mode we did well over a million dollars in revenue. This year we’re going to do substantially greater revenues and what not.

But you got to know that when we hire people, you have to know what it feels like to win in order to build a billion dollar company. You have to be able to deal with ambiguity. Things change very rapidly, and so we look for people that can actually work in an ambiguous environment because not only do you have to multitask, but as things evolve we want people to make sure they’re not locked into a singular approach.

And we look for people who have what we call multiprocessing. You have to be able to process on several fronts at a very high level of bandwidth. Sometimes we’ll meet people that come from bigger companies and they’re very good at one task, but they’re just not going to fit into our company where you have to be able to work on three things at once with excellence.