This article was written by Mergermarket, the leading provider of forward-looking M&A intelligence and data to M&A professionals and corporates around the world.
Posted on 09 APR 2020
by Rachel Stone in Charlottesville, Virginia
CREXi, a commercial real estate technology platform, will look to take advantage of acquisition opportunities that become available as less well-financed CRE tech startups try to weather the COVID-19-caused downturn, said CEO Mike DeGiorgio.
The Los Angeles-based startup has two people looking into all M&A opportunities. It would look to acquire a smaller, emerging company, likely financing it with a mix of acquisition financing from existing partners and stock, DeGiorgio said.
CREXi is continuing to grow amid the global coronavirus pandemic, though it is assessing how much cash to hold. CREXi has most of its USD 30m Series B funding, which it announced in January, still in the bank, DeGiorgio said. It has lowered marketing spend but plans minimal cutbacks overall.
“We want to get through this with the team intact,” DeGiorgio said. Although CREXi implemented a hiring pause for the next month or two, the company hired close to 50 people in the past four months, bringing its total workforce to 120.
It beefed up its auctions team in preparation for distressed commercial real estate properties that likely will come from the COVID-19-caused downturn, DeGiorgio said. It will take six to 12 months to churn through those opportunities, he added.
CREXi launched its auctions product in late 2019 and has successfully sold a couple hundred million dollars of commercial real estate through it. About 70% of properties it has taken at auction have sold, DeGiorgio said.
The company hit its goal for new revenue added in March, though some customers have asked for financial relief amid the pandemic. In the last few weeks, site activity has been down between 10% and 25%, DeGiorgio said.
CREXi, which was founded in 2014, is intermittently profitable. Its recurring subscription revenue alone does not cover its costs, but it also earns one-time fees on certain transactions, according to DeGiorgio. In months with more of those fees generated, for instance coming up in May, CREXi is profitable.
Although the chief executive declined to provide specific revenue figures, he said CREXi first turned revenue in April 2018. In 2019, it grew revenues about 500% and it’s targeting 600% growth this year.
The COVID-19 outbreak could suppress some of that growth, but CREXi still has “a decent chance” of achieving that goal, DeGiorgio said. In the company’s worst-case scenario, it still expects to see more than 300% revenue growth, he added.
CREXi will seek a USD 70m to USD 100m Series C funding round in about two years, DeGiorgio said. That round will then position the company to hit the public markets over the next two years.
The chief executive hopes to hit the public markets in 2023 or early 2024, eventually becoming the market leader in technology-driven commercial real estate. Whatever company ultimately offers the best product and takes that market-leading position could see between USD 3bn and USD 5bn in annual revenue, DeGiorgio said.
CREXi has a variety of investors, including Mitsubishi Estate Company, Industry Ventures, Prudence Holdings, Jackson Square Ventures and Lerer Hippeau Ventures, among others. No investor has a majority or ownership stake.