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Swimming Upstream – a conversation with Alex Lange, the CEO of UpstreamRE

by Peter Thomas Ricci

Alex-Lange

Alex Lange, the president/CEO of UpstreamRE

When Alex Lange was named president and CEO of UpstreamRE, the broker-owned company aiming to greatly simplify the data management process for real estate professionals, he came with extensive experience in both the tech and real estate worlds. A graduate of Harvard’s general management program, Lange co-founded and served as chief technology officer for Roost.com, and later served as chief technology officer for Market Leader, which was eventually acquired by Trulia in a $380 million deal.

For greater insights into Upstream – its intended purpose; its cost to agents; and how it is being funded – we spoke with Lange by phone, and below have transcribed the discussion, which has been lightly edited for clarity.

Chicago Agent (CA): Describe for us the purpose of Upstream.

Alex Lange (AL): In the long-term, Upstream is meant to be a larger platform. I use the analogy of Google Drive, where you and I can decide to use Google Drive and decide what we are going to share – or not share – with each other. Google in and of itself is simply a platform. It does not control. It does not deny. It just says, “You do what you want to do. It’s your choice. You have those controls.”

So when it comes to the efficiency of real estate data, we are finding that brokers are, in some cases, entering and re-entering listing data as many as 16 times. Whether it’s into their MLS, or into their accounting system, or into their internal proprietary postcard system, they would just re-enter and re-enter and re-enter. The sheer fact of having that many entry points when a status changes, or when a photo changes, or if it comes off the market – are you really going to 16 places to reverse it, or change it, or update it? It’s easy to forget.

Upstream, by contrast, provides a single place where the parcel data is updated, and the various vendors and internal systems – syndication sites, MLSs, brokerage sites – can just pull from it. One of the primary goals is to get rid of that inefficiency.

Another big goal has to do with equalizing the standards of that data. Most of the target systems where you send that data, including MLSs, use different standards. I know they are mandated to standardize at some point, but for the most part, they are not quite there yet.

So the data in Upstream, then, is fundamentally stored in a format that aims for a universal standard. The system is trying to incorporate the rules of both the MLSs and the vendors to try to help pass the data back and forth in a way that one can stay the standards – because right now, that translation, that conversion that is taking the data and transporting it, is actually a hidden cost that most people do not realize. When you hire a vendor and say, “Hey, I want you to be my new automated marketing system and I want you to pull the data into XYZ format for my vendor,” or from the MLS or from us, then you know often they are having to custom break code in order to translate it.

Another goal is to distribute deliberately. I hate using the word “control,” because control suggests you are going to slip something under a mattress and protect it, versus thinking of your data like more of an asset – and if you look at how people manage assets, it’s different. Literally, you manage them. You try to optimize them. You try to get the most from them, right? That’s why I like that analogy better, and we want the brokers to be more successful and not be handcuffed by their data and their limitation and where it’s going, but still maintain a sense of control, who gets it, who uses it, and how do you protect it. So the system will allow a brokerage to determine which vendor gets what view of the data at what frequency. They set it up. They have dashboards. The vendors can get certified and then they determine who gets the data and when they get it and the frequency they get it.

And while the data is not literally watermarked, it is technically watermarked. The data has some interesting, unique markers in it, so that if I syndicate the data or push the data to a vendor that is authorized through Upstream, and that vendor decides to be a bad actor and send it somewhere else, I’ll know it. I can track it down to which vendor sent it out. Not that it happens every week, but we’re going to give agents the tools.

Finally, some MLSs use what I’m going to call “legacy technology.” At the time those technologies were built, things like data, storage, and IO were expensive, so there are limitations, for instance, on how many photos you are allowed to have, and what resolution those photos can be. But now, with Upstream, you have unlimited photos that are all high res. We will give it to that target MLS in the way they want it – maybe they have a 25-photo limitation – but maybe your marketing vendor could use those extra photos that you have and then use them at a high res.

CA: What kind of role will mobile play, when Upstream launches?

AL: Huge – in fact, I just was going through the UI designs today that are designed specifically for that. There will be a Web version of it, but for tablets and mobiles – especially when you are thinking about how you want to launch a listing, or if you want to update a price or a status – are you really going to go back to your desk and log into your MLS so you can update a status? We want this all by phone. We want you to be able to do anything, especially any sort of quick edit or update, at any given time. So yes, mobile is a big part. Everything is being designed specifically with that in mind. Because if I do not make it easier for them than they are currently doing it today, this project is not going to go far.

CA:  As the CEO/President of Upstream, can you tell us what your main role is?

AL: I serve at the pleasure of the broker community. The brokers are the ones who have conceived this. They’ve fund it. They manage it. The board of managers currently numbers 21, mostly of large, small, and medium-sized brokerages, and I basically carry out the direction of the board.

CA: Can you address some of the challenges in joining a project that has been in development for so long?

AL: You have 21 people who are all CEOs of companies, and they are doing this on a free, volunteer, part-time basis – and have gotten a shockingly large amount of work done, while at it. Most of it was in thinking through what it means to do this, the legal issues that potentially arise, how do we do this right, how do we service the brokers the best, and going through and working with the attorneys to come up with a proper construct. A lot the work has been done, which certainly helps me think through their desires, because they live inside those documents as well. How many people have a board of 21 who are all competitors?

This really is the first time in the industry that all of these various competing brokerages have come together to try to solve something that they believe was a problem, and the reality is, this is not a common enemy – it’s a common problem. There is no “enemy,” per se. Technology has moved faster than us. Why are we not embracing it and using to solve problems?

CA: Where is Upstream right now, production wise?

AL: The system right now is in beta. We have five MLSs and 16 brokers across those systems that are participating in the beta, and the development is far enough along to basically give all of the participants an API that they can access on their side. So we are working with the MLSs, the vendors who are supporting those MLSs, and the brokers; the core technology, for the most part, is built. We still have a ways to go, but the beta is intended to go through the rest of the year.

CA: When are you hoping to launch?

AL: We will be out of data mode and into production mode by Q1 of 2017. The first six months, there will still be variances that we have not seen that we may have to make some adjustments, but we’re being very methodical and very focused upon this beta. Also, the beta participants were picked to try to create as many variances as possible, so that we could focus the program around them, think through processes, and try to streamline the whole thing. We did not pick the easiest ones first, that’s for certain.

CA: How is Upstream being funded?

AL: There are many implications out there that NAR was the primary, single funder of our operation, so there are two things that I want the world to really get a clear grasp on. First is the operating agreement, and what is allowed and what’s not allowed; the second is the funding that took place.

Upstream itself is being funded and conceived at a corporate LLC level by the brokers themselves.
Brokers across the country pay for the company, the operations, my salary, marketing, etc., to take this live. We sent a request for proposal, or RFP, to look at various vendors to help build the technology. NAR stepped in with RPR as their technology company to bid. They won the RFP for a variety of reasons, and part of that, to be perfectly frank, is that they said they would fund RPR’s operation through the end of 2017. So the cost, right now, is sort of a sub-cost. At the end of that, though, I will get a bill from them for running this thing. So the early sub-cost of developing the product is what NAR is taking on. So make no mistake, NAR is a fantastic partner, but RPR is still the vendor; if you look at the agreement, we can fire them, and they can walk away from the project. It’s a vendor relationship, and I am managing what they are working on and how they are working on it.

CA: So what happens at the end of 2017, then?

AL: At the end of 2017, we’ll need to figure out the development costs – the building cost is what NAR is fundamentally funding, and that is an inner-company transfer between NAR and RPR. We’ve never seen it. Those dollars do not end up in my account, so I cannot manage them or anything like that. It’s just the funding of that effort with RPR. At the end of 2017, because we will be live and in production, there will be ongoing operational costs. For instance, there will be the system costs. There is call center and support, which are built into that contract. At that point, they will just start billing. So I will get a quarterly bill from RPR for running it, for being the technology vendor, and I will have to pay for that.

CA: And the money for paying that is coming from the brokerages?

AL: Yeah, and then at some point we need to think through if there’s a monetization mechanism. That is where the operating agreement kicks in, which specifically says that this organization, Upstream, will run at the break even point. It is not intended to make a profit, and it is designed to be capital efficient and run at the lowest possible cost so that the cost to the participating brokers is as low as possible. Nirvana for me would be that it’s free.

CA: So what fee, then, will brokerages have to pay to utilize Upstream?

AL: Regardless of your size, there’s a $100 membership fee. We want to make it super accessible, regardless of the brokerage’s size; any size brokerage should be able to pay $100. Also, a brokerage can only have one unit, if you will, in the decision-making process. So a small brokerage in Chicago has just as much voting capability as Steven Baird. Upstream is not technically structured as a non-profit, but it is certainly trying to act like one.

CA: And are you confident in maintaining that $100 membership fee, after it launches?

AL: Yes, because I want everybody to become a member. I want everybody to be able to vote. There may be additional monetization – I’ve seen business models that have a per listing fee of a dollar, for instance. But at this point, I do not know. I have not gotten there yet, because until I fully understand what the operational cost and my bill is going to be from RPR – and I should at the start of 2017 – it’s hard to back into a number.

Again, my goal is free. And maybe it turn out to be such a massive hit for brokers’ productivity and innovation that NAR decides they want to forgive any ongoing operation costs. They could if all the broker members said, “This is the greatest thing in the world.”

CA: What is your operating budget right now, while Upstream is in beta?

AL: It’s a little early to say, but right now, I can tell you that the brokers themselves have given us $650,000. That covers management of my two-person office, marketing, and things like that. And as we move along, the brokers will pitch in more as we need it. We will advise them as we figure out what we need to operate. I may only have one other person in the office, but I have 21 brokerages [from the Upstream board] who, when I need something, I ask. I say, “Hey, I need marketing resources,” and people pop out of the blue.

CA: And how much has NAR committed so far?

AL: I do not know what they have covered, but the other thing that most people do not understand about the funding is there are always numbers floating around in the various news sources. RPR went to NAR through their normal budgeting project cycle and they asked for $6 million to fund their development of AMP. Their own internal project has not been with Upstream – it just was their thing. When the Upstream RFP came out, RPR said, “Hey, wow, this is a very similar technology that we are using in a different way. Maybe we could win this RFP.” And so when they won the RFP, one of the things that RPR said to NAR was, “Hey, if we’re going to do both, it’s not $6 million – it’s $12 million.” So they have a budget approval of $12 million for both projects; it’s not necessarily split down the middle.

And like I said, this is basically between NAR and RPR. I do not see that money. It  does not go through me to pay RPR, or anything like that. It’s internal funding. So the $12 million is a number people think NAR gave Upstream. If they gave us $12 million, then it’s a very different conversation with a very different power play – who owns what and who has control. That would be very different, and that is not what is happening.

CA: Are you involved in the discussions of how much money is being to committed to specific aspects of Upstream?

AL: I’m not involved in the discussions, but I have early influence before it happens. I can get reporting on it, but RPR still works for the National Association of Realtors. That is a very structured organization that requires people to fill out daily time cards. They have job allocations for their time.

Now, there are ways for me to feel comfortable that this $12 million, $6 million – whatever the number is – is adequately being funneled to the right project. So I’m reading indicators to see how much time is being top-allocated to projects, specifically things like project management, product management, and engineering.

And it really only matters if the project falls behind and I say, “Whoa, whoa, where is this money going?’ As long as the project is running along as it should be, it does not matter, because right now, it’s not really on my books and I don’t pay it back to anybody.

CA: Finally, what does the future hold for Upstream? What ambitions do you have for the platform?

AL: There will always be a backlog of improvements based on feedback from the users, and many of those features will have to do with usability. The broader way of looking at it is, like I said in the very beginning, the larger long-term desire is for this platform to house far greater than just personal data.

For instance, moving from one CRM to another is painful, because if you’ve been a top producer for five years and you have lots of customer client notes in one system, transferring them over to another is really difficult. So is that switching process acceptable? Well, what if all of that type of data was stored in the Upstream cloud, and had standards in place for parcel and listing data? What if you could switch on demand, now making the data switching not the problem, and having the vendors work to show more value, to show better functionality to win your business?

You still have control. It’s still the best version of the data, but brokers will never be handcuffed by their own data. That’s fundamentally the goal.

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