Thoughts on the Remine Acquisition

I’ve now been asked by more than a few people on my take on the acquisition of Remine, the MLS technology provider, by MLS Technology Holdings, LLC., a new company formed by four major MLSs: ACTRIS (Austin), Heartland (Kansas City), FMLS (Atlanta) and Miami (er… Miami).

Disclosure: I have personal relationships with three of the four CEO’s, and for the sake of full disclosure, have done work for both ACTRIS and Heartland. I’ve also done some consulting work for Remine, trying to help them make the move to open source software. While none of those are currently active, I cannot and will not make use of any non-public information in this analysis.

Bottomline: I think this is a bold but extraordinarily risky move by the four MLSs involved. It could turn out to be the best thing that the MLS industry has ever done, but there are numerous barriers in the way that are difficult to imagine being surmounted. In addition, I think the MLSs have made one giant mistake that will make things more difficult. So while I hope for the best, I think this could end up being disastrous for everybody involved, including Remine.

I’ve spoken to at least three people who are close to the situation and are in positions to know some of the details, none of whom spoke on the record, and all of whom talked for background understanding of what’s going on. If I’m a bit less-than-specific on some things, please understand why.

The Good

Let’s start positive, shall we?

Most of the people who are familiar with MLS technology space agree that Remine has the best technology stack of any MLS platform today. It is certainly the prettiest and the most user-friendly. The Remine UI looks like it’s from this century, rather than the last one.

Remine has some very talented engineers who work there, and some real experts in the world of real estate. For example, Tim Dain, the former CEO of MARIS (St. Louis area), is heading up the MLS efforts there. They have products that have won over enough people to boast over a million users on their platform. And the entire architecture is modernized, based on APIs, and is modular.

Plus, Remine has a lot of data — a lot of property data, and a lot of consumer data. And they have data scientists and data engineers who know what to do with that data.

There’s a lot to like there.

And for the MLS industry as a whole, acquiring a full-stack MLS solution vendor solves one of the thorniest problems for the MLS: over-reliance on vendors and underinvestment due to financial constraints.

Since very few MLSs actually develop their own software, most of them rely on what I call “Big Iron” vendors like CoreLogic, Black Knight, and FBS to provide them with the tech platform on which they run their entire operations. Those agreements last for years and years, and most MLS CEOs would rather undergo a root canal than have to do a platform switch.

At the same time, since the MLS platform is often the largest non-payroll expense for an MLS, the MLSs routinely and typically negotiate the price down to razor-thin margins for the vendors. They have a hard enough time providing simple support, never mind doing actual technology R&D. Those of you who have heard me speak on the MLS know that I point out this unfortunate fact, over and over again.

One of the biggest threats to the MLS is obsolescence due to lack of investment.

So by literally owning a technology company that builds modular MLS platforms, MLS Technology Holdings is setting out on a new path that could be glorious.

1) The biggest plus, I think, is that the MLS execs believe (and I think with good reason) that other MLSs would much rather buy technology from a vendor that is owned by the MLS, rather than one that is owned by a private equity fund, or by employees of the technology vendor. There is this… thing in real estate about ownership that seems to be such a big issue. We’ve seen it with Upstream, with BPP, with AMP, and on the flip side with the hostility to Zillow, Opendoor, venture-backed companies of all sorts, etc. So under this new ownership, Remine could end up being the dominant MLS platform vendor in a few short years.

2) Perhaps now that they are owners, the MLSs won’t nickel and dime the vendor to death, which provides adequate cash flow and gross profits to Remine to reinvest into technology R&D. That could only benefit everybody.

3) Furthermore, now that Remine is owned by its customers, perhaps it will be more responsive to customer requests for features and functionality… not something the MLS vendor community is famous for today. (Which often has to do with the whole nickeling-and-diming thing, by the way, rather than some weird hangup by the vendors.)

That’s the Good. I hope for everybody’s sake that this vision of the MLS + Remine materializes.

The Bad

The Bad News is that the Good News is extraordinarily unlikely to materialize. I would be pleasantly surprised, nay, thrilled to be proven wrong here, but….

My skepticism comes from a few things.

Governance

First is the fact that governance is setup exactly like how governance is usually setup in organized real estate.

Take a look at the Board of MLS Technology Holdings:

• Chair: Emily Chenevert, CEO of ABOR/ACTRIS
• Vice-Chair: Teresa King-Kinney, CEO of Miami REALTORS
• Secretary: Jeremy Crawford, CEO of First MLS
• Treasurer: Dan Forsman, CEO of BHHS Georgia Properties
• Director: Kipp Cooper, CEO of Kansas City Regional Association of REALTORS & Heartland MLS
• Director: Phil Swift, Executive Chairman, Ayrshire Group

This is exactly the sort of representational governance that most REALTOR Associations and most MLSs practice. I don’t know if BHHS Georgia Properties is also an investor in MLS Technology Holdings, but everyone else is. It’s reminiscent of a regional MLS’s governance structure, where each shareholder Association has at least one seat on the Board… until you have Boards of Directors that are 38 people for a company doing less than $10 million in annual revenues.

I’ve been told that the principals have all worked things out, and they expect no real problems rising from governance. That may be true, because while I don’t know Dan Forsman or Phil Swift, the others are very experienced in operating organizations with that REALTOR-world governance model. I’m sure they know how to build consensus and so on.

Having said that… four of the six Board members… and the four that were the real movers behind this acquisition all work for REALTOR organizations. Even FMLS, though a broker-owned MLS, is still owned by REALTORS. They are not Board members because they individually put their own money into this venture; they invested their organization’s money into the venture and sit on the Board as a result.

And those organizations are most definitely governed like REALTOR Associations are. I am 100% positive that those organizations see these CEOs as “their representatives” on this joint venture.

So what happens when Austin’s Board of Directors decides on Path A, and Miami’s Board of Directors decides on Path B, and KCRAR’s Board decides that they don’t like either Path A or B so chooses Path C, and directs their respective representatives to go make it so. These people are CEOs of those organizations; they can’t exactly ignore those wishes. They can’t even negotiate amongst themselves for a final resolution — any final resolution will need to go back to their respective Boards for approval.

Again, I’ve been reassured that the attorneys and advisors for MLS Technology Holdings have worked out complex and foolproof rules for handling such conflicts of interest. So I guess we’ll see. But knowing what I know of the MLS and the Association world… I’m not super optimistic about the prospects.

Plus… yo, let’s face it. The three people I do know well are wonderful people and wonderful leaders… but I wouldn’t call any of them shrinking violets. They are rather strong personalities. And everyone in the industry I have ever spoken to respects the hell out of Teresa King-Kinney… but not one person I have ever spoken to thinks she plays well with others. I imagine neither Dan Forsman nor Phil Swift got to their positions in life without having some ego as well.

Take six alpha tigers and put them in the same cage. That could work out great, but… we’ll see. There’s a documentary on the Dream Team that’s interesting, where the emergence of Michael Jordan as Alpha Prime was essential in that team actually functioning on the court. It’ll be interesting to see who emerges as the Alpha Prime in the MLS space.

Management

Second, the new owners have already named Liz Sturrock as interim CEO of Remine while they engage in a nationwide search for a new CEO to take over. I don’t know Liz, though I’m certain we must have run across each other at some point or another, and I imagine that Teresa has the utmost confidence in her.

However… one of the most turbulent, uneasy, and disruptive times in a company’s existence is when it has been acquired. Certainly you can have an interim CEO named at that time… but I don’t know anybody who thinks that’s a good idea. In fact, most M&A experts would strongly recommend keeping the existing CEO in place at least for the initial transition, then slowly elevating the right people in. Quite a few M&A deals require the CEO to stay for at least a while to smooth the transition.

In our industry, the only situation I can think of that is even remotely similar is when Zillow acquired Trulia back in 2015. Pete Flint left after four months… but he stayed for four months to see the initial transition through, and his successor wasn’t somebody from the outside, it was Paul Levine, Trulia’s COO.

I’m having a hard time wrapping my head around the idea that you announce an acquisition, then immediately get rid of the CEO, and name someone from the outside as the interim CEO while searching for a replacement. If you must get rid of the CEO for some reason, then at the very least, wouldn’t it make sense to elevate someone from within so that the rest of the staff isn’t having to get used to a new CEO at the same time they’re worried about their future?

Why do they think that anybody at Remine who has any options would stick around to find out who the permanent boss is going to be?

Liz Sturrock might be the second coming of Jack Welch, for all I know. She might be a management wunderkind. But from what I can tell from her LinkedIn profile, this is her first gig as CEO of anything. Talk about throwing someone to the wolves. Plus, does she even live in the DC area where Remine and most of its employees are located? Is she relocating for some uncertain period of time? Jesus. I don’t envy her position in the slightest.

I’m just left scratching my head on this one. This is a gigantic unforced error that makes Remine’s success far less likely and far more difficult.

Product Vision

The combination of the two factors makes me really wonder what Remine’s product will look like a year from now.

I’m not a technology guy. I’m not a developer, not a coder, not an engineer. But I have spent my career around technology and around technology guys. And I do have some experience in product management. I’ve studied successful and unsuccessful products.

The one thing I am convinced of, and will remain convinced of until someone shows me proof otherwise, is that any product designed by a committee is doomed to failure. There has to be a single person, a visionary, who drives product design and development. That visionary can be informed by others, can do market research, can listen to customer requests, can think about all sorts of things… but in the end, there has to be a single visionary who sees what the product could be and should be.

Microsoft had Bill Gates. Apple had Steve Jobs. Tesla has Elon Musk. Zillow has Lloyd Frink. Opendoor has Eric Wu. Who is that person at Remine now? It can’t be Liz Sturrock; she’s a temp. Is it Jonathan Spinetto? Some CTO whose name we don’t know?

Combine that with the inevitable mandates that will come from the Board of MLS Technology Holdings and I fear greatly that what we’re about to see is MLS technology design by committee. And it isn’t as if the MLSs can leave things alone, right? I mean, if they were simply going to leave the product design and development in the hands of a visionary at Remine, why buy Remine at all? Isn’t the point of ownership that they, as owners, can decide what the product will be?

Time will tell, and I hope to be proven wrong, but like I said… the barriers are tall. And covered with broken glass.

The Ugly

And finally, there are two aspects to this deal that I don’t know if the four MLSs and the leadership involved have considered.

Who Benefits?

Three of the four MLSs are nonprofit entities, or wholly owned by nonprofit entities and operated as if they were nonprofit entities. Remine is most definitely a for-profit technology company, with a venture capitalist who sits on the board and I imagine would like to 10x his investment.

Let’s say Remine manages to climb the broken glass covered barrier and is hugely successful. Say it gets acquired by somebody in a few years for $600 million. Great news, right? But consider…

Ayrshire Group would be thrilled to cash the $100 million check. BHHS Georgia would be thrilled too, if they’re one of the investors. FMLS would be thrilled, because it’s owned by brokerages who contribute listings and transactions to make it successful. All of the beneficial owners of those various businesses benefit.

The other three?

The brokers and agents who contributed listings and transactions and paid the dues all along so that ACTRIS, Heartland and Miami can make multimillion dollar investments get… what exactly? They’re not the owners; the REALTOR Association is. Now what?

If you think this won’t be an issue, and that brokers who are struggling to make 3% profit margins are going to just be happy for their local REALTOR Association cashing a $100 million windfall… well, I’d like to have a conversation about human nature with you.

It will absolutely be an issue. It might be the biggest issue to hit those three organizations in their history.

Conversely, suppose Remine struggles, and capital calls go out. Each MLS has to pony up another $X million to keep things going. Now what?

Holy hell, the political turmoil that would ensue is not something I want to be in the middle of. But I would want to watch from the outside, far away, with popcorn ready, because it’ll be like a really awesome episode of Maury Povich.

Other MLSs

One imagines that the four MLSs who made up MLS Technology Holdings has already, is now, or will soon be trying to recruit other MLSs to join the LLC, to become co-owners along with them. I mean, yes, those four are quite large… but they’re not the largest, nor are the four of them big enough to be a self-sustaining market for Remine. Hell, Austin isn’t even the largest in its own state.

And I can’t imagine someone like CRMLS or BrightMLS or Stellar or MRED or ARMLS or NTREIS or HAR or OneKey or anybody else (a) buying Remine without being an owner, and (b) becoming an owner without a Board seat (or two).

Which means that the Board of MLS Technology Holdings will soon be about 50 people, following the representational model of REALTOR governance, if not larger. Then the product design by committee becomes something more like product design by congress.

The permanent tech company CEO that they did a national search to find will spend roughly twenty minutes answering to a Board of Directors of 50 people that meets monthly and want to know and approve every single thing he’s doing will promptly quit and find a real CEO job.

How will MLS Technology Holdings avoid this outcome? I await the answer with bated breath, because in that answer may be some kind of progress in the screwed up world of MLS governance itself.

Free Advice to My Friends

Let me end this on something like an upbeat note, because as I said, I have relationships with at least three of the six people and I admire and respect them and want to see this venture succeed. I get that they might not see this as an upbeat note, and I further get that this is my putting my two cents in without being asked to.

So I’ll just say that this advice is worth what they paid for it, and that I write this as an answer to the number of friends and colleagues who have asked for my take.

Redo Management

First task is to redo the management of Remine. Give Liz a big fat check for her pains and embarrassment, but name one of the other two co-founders of Remine as CEO. Let Liz go in as COO, or Chief Strategy Officer, or whatever but keep leadership as steady as possible in Remine for at least a year. It’d be better if two years; Paul Levine stayed until 2017 after the acquisition of Trulia by Zillow.

Remine needs to keep all of its talent, and recruit more besides. What brilliant engineer is going to take a job at a startup with an interim CEO? What executive is going to a company without knowing who the boss is going to be? And how in the world are you holding on to your talent until that permanent guy or gal is hired and in place and has won the confidence of the team there?

This should be done in the next couple of weeks, at the latest. Top flight technology people are not exactly lacking in options, and headhunters are likely swarming around Remine as I type this.

Change Structure, Change Governance

If it were me, I’d restructure MLS Technology Holdings LLC as a private equity fund. Let Phil Swift, the guy who is an actual private equity fund operator, albeit in the real estate development space rather than technology venture space, be the General Partner. Maybe he brings in another couple of finance guys as fellow GPs to manage the fund and manage the portfolio company, Remine. I think they could look towards someone like Second Century Ventures or Fifth Wall for experienced VC’s who could step in as a managing GP.

Have everyone else become Limited Partners who invested in the fund… and has no say in actual operations.

Yes, everyone else has to step down… but y’all are CEOs of important MLSs in your own right. You don’t need this position to burnish your already impressive-as-hell resumes. Plus, you’ll gain by not having to deal with your own REALTOR boards telling you to do this or to do that with Remine. You’re just an LP.

That also lets you bring in other MLSs as LPs rather than as Board members, and you won’t have to deal with a 50 member Board of Directors in a couple of years.

Open Source the Software

Finally, since product design by committee is the death knell for Remine’s excellent product, just put the whole thing into open source. That way, the visionary to drive the product will arise naturally out of the ranks of the actual people who build software: the engineers and data scientists and the code poets.

It also seeds the ground for true innovation in the MLS technology space that has been so built up with walls upon walls.

That act alone could save this venture, even if you don’t do the other two things. Because if you open source the code, then no one can actually control the code. The best code, the best product, will naturally win adoption.

Plus, there is that advantage of much cheaper software for your users. That has to count for something with your own Board, your own brokers and agents.

Hoping for the Best, Expecting the Worst

So at the end of the analysis, I’m left hoping for the best for MLS Technology Holdings, for Remine, and for the MLS industry as a whole. If they could make some changes, retain and recruit talent, and supply Remine with adequate funding to do actual technology R&D, then this could be the best thing that has ever happened for MLS technology. I do think open source is a big part of that puzzle, but y’all know my bias on that.

But hope is not a strategy, and reality doesn’t care about my feelings or my hopes. As of this writing, the structure of the organization, the dynamics of governance, the decisions already made, and human nature itself make it difficult to expect Remine to be successful.

Things could change, and yes, I hope that they do. We’ll see what the next few weeks and months bring. I wish everyone involved the very best.

-rsh