Last week, Bangalore based maxHeap Technologies, which operates real estate search and listings platform CommonFloor, announced its first acquisition with Mumbai based Flat.to, a students and single professionals focused property listings platform. The acquisition came just months after CommonFloor raised $10.4 million in a growth round of funding from existing investors Accel Partners and Tiger Global. Flat.to apart, the company maintains that inorganic growth will not going to be a dominant strategy this year., despite it being flush with funds. The platform, which now hosts more than 3 lakh active property listings and has over 10,000 paid customers, is concentrating on pushing aggressively into mobile and expanding its ground presence beyond the existing 18 cities.
CommonFloor CEO Sumit Jain, who co-founded the company in 2007 with Lalit Mangal and Vikas Malpani, spoke to us last week about Flat.to and acquisitions, bootstrapping, why three founders is not a crowd, fundraising and what’s coming up next. Edited excerpts:
You knew Flat.to founder Gaurav Munjal for a while before the acquisition. When did you start thinking about buying the company?
When Gaurav initially reached out to me several months ago, he was looking for guidance. I told him at the time that I would not interact with him in the capacity of a CommonFloor founder but as a fellow entrepreneur. Going forward, we realized that he would need to raise funds to grow. We also saw that whatever funds he was going to raise was not going to be enough.
In way, fundraising would have been a trap. That’s when we started looking at ways to work together and as we explored options, acquiring Flat.to began to look like the best option for both of us.
This is your first acquisition. How are you managing the integration?
Flat.to, as we have said earlier, will continue to operate as an independent entity. We think that is the best way to run a young company. Flat.to can continue to innovate and at the same time take advantage of the centralized, shared resources, such as HR, finance, etc. On the business model front, we continue to explore how we can add value to each others platforms. For instance, as you know, until now we didn’t cater to the student or bachelor market. It is an important market. People enter college, make career decisions, start their careers… and at the same time find it tough to find rental accommodation. We know that from our own experiences. When we came to Bangalore, we were bachelors and unemployed. We found it very difficult to find apartments on rent.
We’ve been aware for some time that we had not addressed that problem through CommonFloor. We don’t allow bachelors to list on the platform. Through Flat.to, now we can. The value add to us is that once these people settle into their jobs and families and start looking at buying property, they can transition to CommonFloor.
Acquisitions are not something that we have kept as a strategy for this year. However, we’re definitely open to opportunities. If we really like the team, the founders and the value proposition, we may do them. But, also note that acquisitions require a lot of management bandwidth. Within CommonFloor, we already have a long list of ideas that we would like to execute. We are more focused on executing those ideas and scaling up organically.
So, what’s coming up next from CommonFloor?
We’re working on a lot of features to make the platform more useful for users. Make the experience more informed, smoother. This year we’re going to go very aggressive on mobile. We now have apps for all three mobile platforms — Android, iOS and Windows. We’re currently in 18 cities and will launch on-ground in more cities. We’re obviously going to aggressively grow our listings. If a property is not on CommonFloor, it doesn’t exist!
Where are you currently by the numbers?
Right now we have over 3 lakh active listings on the platform and more than 1 lakh apartment communities or housing societies use the group’s products. Paid customers are at over 10,000. The demographic is primarily male dominated, working professionals, largely in the 25-35 age profile. More than 70 per cent of our business comes from the top 6 metros. We have offices and on-ground staff in 18 cities. The on-ground staff verifies properties before they are listed, interacts with real estate developers on new projects. As I mentioned, we will increase the number of cities. Of course, since we are an Internet company, our virtual presence extends beyond that to a large number of Tier II and III towns. In terms of headcount, we are at about 650 people now.
Is a three-founder team sometimes a bit of a crowd? Often even two-founder teams cannot stay together.
Maybe we haven’t had problems because we were not the best of friends before starting up! We knew each other but we became very good friends only after we started CommonFloor (Jain and Lalit Mangal knew each other from IIT Roorkee, while Mangal and Vikas Malpani are childhood buddies). But, on a more serious note, I think the reason we work very well together is because of why we wanted to start up in the first place. We were not excited about raising funds or about getting acquired. We were excited about building a company and we wanted to work together at that. So we always try to get the best out of the equation.
When you started up, Internet startups were not yet cool in India. How was the bootstrapping phase?
At that stage we faced three major challenges. The big one, naturally, was the market. We didn’t know the size of the market. In fact, we didn’t know if there was a market. The Internet startup ecosystem you see today did not exist. We had no way to measure the potential opportunity or benchmarking against existing players. So there were sitting on a long list of ideas but unsure about whether it was possible to build an Internet business out of India.
The second challenge was managing cash flows. We were very young, had just worked for a year after graduation and had very limited funds. We also decided not to take any money from our families. So we decided to run the business for a year with the resources that we had and essentially operate like a bankrupt company.
The third challenge was the most difficult. Staying motivated. We had to prove ourselves to our families. Plus we had to prove to the market, to customers that we were here to stay. I think, for nearly a year, at the end of every day we would ask ourselves — Is this really happening? Is it working? After 12 months, we stopped asking that question.
You raised your Series A funding in 2009. Has the fundraising journey been tough as well?
Fundraising has actually been easy. We have always been able to always raise funds from the first people (investors) that we met. It was like being on campus. We got a job on the first day of on-campus recruitment. We thought at the time — are we good or are we lucky? Similarly, Accel Partners was one of the first firms we met and really liked. The second firm that we met was Tiger Global. We’ve spent the least amount of our time raising funds.