Commercial real estate values are more subjective in nature than residential as the underlying asset, while important, needs to be evaluated against rental income and operating costs. This leads to Commercial real estate appraisals requiring substantial amounts of information that are from disparate sources to understand ownership, zoning records, demographic and lifestyle information, comparable sales, and rental data. Bowery Valuation is a tech-enabled platform that unifies all these requirements into a simple to use, centralized interface that makes commercial appraisals more efficient for the company’s appraisers and requestors. Rather than employing a traditional SaaS model, the company instead uses its software platform to empower its own personnel to provide appraisal services to clients. Using a data-driven approach has resulted in the modernization of one of the most tedious parts of a commercial real estate transaction, resulting in industry-leading turnaround times. Bowery Valuation operates five offices, primarily along the East Coast, with plans to expand nationally.
AlleyWatch caught up with Co-CEO John Meadows to learn more about how the founding team’s experience as appraisers reliant on Microsoft Office sparked the idea to build a robust software platform for the industry, the company’s strategic plans, latest round of funding, and much, much more.
Who were your investors and how much did you raise?
We raised $35 million in Series B funding led by the Growth Equity business within Goldman Sachs Asset Management (Goldman Sachs) with participation from Capital One Ventures and existing investors including Builders VC, Fika Ventures, Navitas Capital, Camber Creek, Nine Four Ventures, Greenspring Associates, and Alpaca VC. This investment brings our total funding to $66 million following the $20 million in Series A venture funding in 2019.
Tell us about the product or service that Bowery Valuation offers.
Our appraisal platform is an end-to-end software solution for commercial real estate appraisers that utilizes public record integration, a mobile inspection app, natural language generation, and exhaustive databasing.
What inspired the start of Bowery Valuation?
Noah (Isaacs, Cofounder) and I grew up together in Berkeley and have been best friends since we were 14. We always wanted to start a company together and when we fell into commercial appraisals right out of college through a friend of mine from Penn, we were immediately blown away by how antiquated and painful the appraisal process was. We appraised for several years ourselves, valuing over $5 billion between the two of us, all the while saving up as much money as we could and learning as much as we could about the industry. We were at a local, 20-25 person firm in New York using Excel Sheets and Word Docs that someone built out in the ‘90s and we spent time on the side improving. After our firm was acquired by a national firm we were provided the supposed “best-in-industry” technology, which we found to be worse than our own already very painful Excel Sheets and Words Documents. This was the final push we needed to quit our jobs and team up with our third cofounder, Cesar Devers, to build real technology with the potential to change the industry forever.
We are different in so many ways. It’s easy to say our technology because that is the main differentiator behind our original idea, but I think first and foremost it starts with our people. We’ve handpicked the best in the appraisal industry and paired them with incredible Product Managers, Designers, and Software Engineers. The people at Bowery make our culture unique in our industry and make it a place that innovators and best-in-class talent want to join to build with us. Our idea is nothing without our people. Unlike other appraisal firms, all of our employees are equity holders, which gives them all a real sense of ownership. We fundamentally believe that the best people deliver the best product, and the profits will follow.
And ultimately technology is how we believe we can change our industry. We are empowering our best-in-class appraisers with superior tools to appraise more efficiently, more intelligently, and more consistently, ultimately delivering a superior product to our customers. We are looking to truly transform the value created from ordering an appraisal through internal collaboration between our technologists and our appraisers, as well as collaboration with our clients, to build technology that has never existed in our industry. Finally, we also have very different ideas around team building, culture, operations, and client service that set us apart.
What market does Bowery Valuation target and how big is it?
Our focus today is on commercial appraisals. We are headquartered in New York, with offices in New Jersey, Philadelphia/Central Pennsylvania, Washington D.C., and South Florida. Our funding will enable us to continue to expand nationally as we open offices across the US.
What’s your business model?
We don’t sell software externally, we use it to empower our appraisers to deliver the highest quality reports faster than anyone else. We look at every aspect of our business and our industry and ask ourselves how can we make it better? So that means solving inefficiencies and pain points through technological, cultural, and operational innovations.
How has COVID-19 impacted your business?
April and May of 2020 were deeply impacted, as lenders moved to the sidelines to wait and see how the market would recover. Things started to pick up again in June and come September our business really took off and we were able to exit 2020 with back-to-back best months ever. Our business has only continued to grow since then – the biggest challenge ultimately was we slowed hiring during the spring and summer given the uncertainty and we had to really push to catch up on the hiring side in late 2020 and early 2021, which was definitely a welcome challenge to have coming out of a scary time.
What was the funding process like?
It was about a 4-5 month process from beginning to term-sheet. We had a ton of meetings with investors and were super fortunate to land our top choices for new partners in Goldman Sachs and Capital One. While it’s a lot of work and certainly very stressful, it’s also an amazing opportunity to get candid feedback from objective third parties on our business and hear opportunities for improvement.
What are the biggest challenges that you faced while raising capital?
I think the biggest challenges we faced were we’re not a traditional SaaS company and we’re in a space that not a lot of Series B investors know much about. We love that we’re in a space like that, which is still a massive industry, but there’s a lot of personal comfort that’s required to make an investment of this size. So it really came down to finding the perfect fit. For us, it was paramount that the prospective investor understood what we’re building and was also excited/inspired by what we’re building. With Goldman Sachs and Capital One, we found both clients and industry powerhouses, who not only understood us, our industry, and our vision but could also be instrumental in helping us realize our vision of the future for our space.
What factors about your business led your investors to write the check?
They deeply understood the opportunity that exists in our space, existing in a massive industry that’s decades behind. Our business is clearly working, we’ve grown faster than any appraisal firm in the US since we’ve launched and when we demo our technology it’s clear how differently we’re approaching this space. And ultimately it comes down to betting on this team to lead the first unicorn in our industry in the US and our people have a really exceptional reputation.
It also helped tremendously that Goldman Sachs and Capital One are both clients of ours so they have gotten to see our quality, efficiency, and people first hand.
What are the milestones you plan to achieve in the next six months?
In the next six months, we plan to open four to five new offices and internally launch the newest version of our software that we’ve been working on for over a year, which will be a massive step-change in our industry.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
We’ve been really fortunate to have grown rapidly and had continued success raising capital from institutional venture capital investors, but most great businesses hit major roadblocks at some point or another. We’ve had plenty of long nights at Bowery. There are many different paths to building a great business and very rarely are they easy. Airbnb sold cereal to stay alive at one point. If you really believe in your business, keep at it, keep pitching it, make sure you have great people to build it with you, have faith that others will ultimately see it, and try to enjoy the ride as much as possible, even when it feels impossible.
But I also really believe that a huge amount of luck is crucial and if that doesn’t happen this time, it doesn’t mean it won’t happen the next time. We’ve gotten so incredibly lucky along the way, it’s honestly hard to believe or express. Meeting Cesar and meeting James, our Chief Appraiser and COO, are two early encounters where without them there’s no chance we’re here. But there are countless examples of that at Bowery.
Where do you see the company going now over the near term?
Our main initiative over the next few years is to fully scale our business nationally, both from a technology and appraisal coverage standpoint. There is so much opportunity long-term for us in this space across many different vectors, but right now we’re trying to stay focused and execute on becoming the premier commercial appraisal firm in the US by bringing on amazing people and continuing to create truly innovative technology.
What’s your favorite outdoor dining restaurant in NYC
Hands down the best outdoor dining restaurant in NYC is Rosella in the East Village. Jeff, Yoni, Liz, and Shea are four of the nicest people we’ve met, and their sustainably sourced Japanese food is just incredible and so unique. It’s truly Noah and my happy place in New York.