You need domain expertise on your team, especially if you are trying to disrupt that industry. Of course, you want an outside perspective to challenge the conventional way of doing things but you also need that deep industry expertise in-house. At CrowdStreet, one of our first hires was someone who came from the world of real estate finance, but who had the drive and desire to challenge the system.
As part of my series about the “How to Navigate and Succeed in the Modern World of Finance”, I had the pleasure of interviewing Tore Steen.
Tore is a business leader in the internet and software industries with deep expertise in strategy, business development, sales, and marketing for both publicly traded and private enterprises.
As the CEO and Co-founder of CrowdStreet Tore has led the formation, launch, and rapid growth of this leading online marketplace for commercial real estate investing. Prior to CrowdStreet, Tore was instrumental in leading the product, sales, marketing, and business development efforts for Janrain, taking them from early-stage rapid growth phases to becoming the recognized leader in the social identity space with a full user management platform and global enterprise customers. He has held senior leadership roles as the Vice President of Business and Corporate Development at WebTrends and Director of Business Development at EarthLink.
Tore earned a Master of Business Administration from Duke University and a Bachelor of Arts in political science from the University of Notre Dame.
Thank you so much for your time! I know that you are a very busy person. Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
Even as the rest of the investment world moved online, commercial real estate remained offline, cloaked in obscurity and opacity. Then, the U.S. Jumpstart Our Business Startups Act (JOBS Act) of 2012 allowed real estate project sponsors (the owners and operators) to advertise their offerings more widely to individual investors, helping those businesses raise capital. CrowdStreet was born in the wake of the JOBS Act.
My professional background is in leading technology businesses and bringing superior online experiences to consumers. It was my co-founder Darren Powderly, with his background in the real estate world, who helped me realize just how big an opportunity the JOBS Act was for real estate investors and sponsors alike. By merging our two backgrounds, we could create an online marketplace where real estate sponsors would post their deals and individual investors would easily find, compare, and ultimately invest in those deals. Our goal was to make direct investments in commercial real estate more transparent and efficient for everyone.
Our first and second hires were Steve Drew, who had the product, engineering and development leadership skills to drive our software/platform, and Ian Formigle, who has the real estate investment background and knowledge. With a few more hires we were up and running. It took about two years to get our Marketplace fully ramped and for a while, our biggest challenge was showing sponsors just how valuable taking their capital raise process online could be. These developers were used to raising money 100% offline, through personal interactions and relationship building. They didn’t always understand how moving online would enable them to build more relationships, albeit digitally, with individual investors and scale their network like never before. Our average raises started relatively small, maybe a few hundred thousand dollars per deal from a few dozen investors. As sponsors grew more comfortable and confident in our ability to raise capital, the average raise size started trending upward. $1 million. $2 million. Now we are routinely raising $5+ million per deal, and we’ve had a lot of success in 2019 raising $10 million + per offering.
Since we launched, the CrowdStreet Marketplace has published over 400 deals. With over $1 billion invested into these projects, our investors have received over $100 million in distributions. CrowdStreet drove what we believe is the largest crowdfunded commercial real estate raise in history, raising more than $27 million for a single project in late 2019.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?
Back in the early days of CrowdStreet, we got an inbound request for an RFP from Hines, a global real estate investment firm. But I initially heard it as “Heinz.” And I remember thinking, “That’s great, but why would Heinz be interested in our solution…?” It took me a minute to realize my mistake!
I think one of the most important things any founder can do is know/accept what they don’t know. If you’re not an expert, you need a partner who is–my co-founder, Darren Powderly, comes from the CRE world and has really helped me learn about the industry. One of our first hires, Ian Formigle, knows everything about the investor side of commercial real estate and helped round out my education. If you don’t know, seek to understand, surround yourself with experts who are passionate about what they do, and don’t be afraid to ask questions!
Is there a particular book that you read, or podcast you listened to that really helped you in your career? Can you explain?
My favorite business book is Measure What Matters by John Doerr. It’s really helped shape how CrowdStreet approaches goal setting and prioritization. Like any startup, we’ve had to move and grow fast–but we also need to think strategically and be clear-headed in where we are and where we want to go.
Are you working on any exciting new projects now at CrowdStreet? How do you think that will help people?
When we launched the CrowdStreet Marketplace back in 2014, we knew investors were hungry for direct access to commercial real estate opportunities and we were one of the first online platforms that made that possible. But as time went on, and we heard from more and more investors, we realized that there is no one-size-fits-all investing solution, so we launched two more products–the CrowdStreet Blended Portfolio (“CSBP”) and Private Managed Accounts (“PMA”). CSBP gives our investors direct access to 25+ deals with just one investment, making it easy to build a diversified portfolio. Across our five CSBP series, we’ve raised $50+ million from over 1,000 investors. More than half of those investors chose CSBP as their first investment on our platform. And nearly 40 investors have enrolled in our PMA service to get a customized investment strategy and let our team manage more than $18 million in investments.
We’re working on several new investing products this year, giving our investors even more ways to invest in commercial real estate.
Thank you for that. Let’s now shift to the central focus of our discussion. Extensive research suggests that “purpose driven businesses” are more successful in many areas. When you started your company what was your vision, your purpose?
Like many, I used to assume that commercial real estate investing wasn’t an option for me. I might see the occasional local opportunity, but these were mostly one-offs and novelties. I didn’t have millions of dollars to invest in a luxury high-rise. I didn’t know any real estate developers. I wasn’t a part of that world. So my co-founder Darren Powderly and I started CrowdStreet to reinvent commercial real estate investing, making this powerful opportunity accessible to all. By demystifying the investing process, making it simpler, easier, and bringing it online, we committed to opening up this industry to individual investors.
Do you have a “number one principle” that guides you through the ups and downs of running a business?
I think an unwavering commitment to quality is key. It’s easy to cut corners to get to the goal line quicker, but that almost always comes back to haunt you in the end. You have to strive to deliver the best and highest quality experience for your customers and employees, regardless of the ups and downs.
Lead generation is one of the most important aspects of any business. Can you share some of the strategies you use to generate good, qualified leads?
One of our key channels for lead generation are our affiliate partners. We work with some of the top personal finance and investing publishers and bloggers to spread the word about how CrowdStreet is making commercial real estate investing more accessible than ever. The audiences of these publishers are eager to learn about opportunities to diversify their investment portfolio and how to generate passive income, so by partnering with these sites to develop relevant content, we’re able to generate more exposure of our brand to a broader audience that’s already further down the funnel.
If a fellow CEO would ask you for advice about whether to bootstrap or to look for VC capital, how would you help them weigh the pros and cons of that decision?
The first thing is to assess how much capital you truly need. How much does it really cost to build a prototype or proof of concept to demonstrate? What does it actually cost to get new customers? To grow revenue? To scale? I would recommend that you bootstrap for as long as you can, but when you’re ready to raise the capital to take your company to the next level, go raise that capital.
At that point, it’s about figuring out what type of capital you should raise. What is the smart money to go get? If you only need $250k, you might be able to raise it from friends and family versus going out to VCs.
You want to make sure you have enough capital on hand so you don’t run out of runway too soon, but it’s also possible to raise more than you need and you don’t get credit for having any cash leftover when you head into your next raise round.
What measure do you use to determine the value of a company? What advice would you give to other leaders about how to get an optimal evaluation of their business?
I think market adoption of your product or solution is a key indicator, the second indicators are revenue and customer growth.
If you’re in a new market, like CrowdStreet was, you sometimes have to come up with new conversion rates that make sense for your business. That helped add to the value of what CrowdStreet was before we started to see revenue.
For optimal evaluation, you have to continue on that growth pattern.
What would you advise to a founder who initially went through years of successive growth, but has now reached a standstill. From your experience do you have any general advice about how to boost growth and “restart their engines”?
This happened at my last startup. We tapped out after multiple years of growth. At that point, the best thing is to evaluate the market that you’re selling your product into. Is that still the right market for your product? Is there an adjacent market that is maybe bigger you could sell in to? Is it actually a market problem and do you need to expand the sphere of the market you’re selling into?
Is it time for new product innovation? Would expanding your product suite jumpstart the company? But if you do that, then you most likely need to change the marketing focus and realign your sales efforts.
What are the most common finance mistakes you have seen other businesses make? What should one keep in mind to avoid that?
For me, one of the common mistakes is to take on too much capital, too fast, without clearly understanding your market, product needs, and approach. You need to be diligent about your goals and strategies. What you’re trying to accomplish in what timeframe, and how much capital do you really need to get there.
Ok, here is the main question of our discussion. Based on your experience and success, what are the five most important things one should know in order to succeed in the modern finance industry? Please share a story or an example for each.
- You need domain expertise on your team, especially if you are trying to disrupt that industry. Of course, you want an outside perspective to challenge the conventional way of doing things but you also need that deep industry expertise in-house. At CrowdStreet, one of our first hires was someone who came from the world of real estate finance, but who had the drive and desire to challenge the system.
- Don’t take regulations for granted. Whether it’s with the help of outside counsel or internally, it needs to become part of who you are. Finance, especially, is an incredibly well-regulated industry and a misstep can literally lead to your company being shut down.
- You need to understand who the entrenched players are and what their reaction to you coming to the market is going to be. Frankly, you need to understand who might want to see you fail. Who is not cheering you on? If you are setting out to shake things up, don’t think you can go up against someone that’s been around for 100 years and assume you can take them on from day one. They’ve survived that long for a good reason so you sometimes need to maneuver around those institutions, as opposed to trying to cut through them.
- If your product has a consumer focus, you need to understand what type of behavior you’re trying to change. Too often we take for granted how difficult it is to change consumer behavior. I think about companies like PayPal and Square. The percentage of total transactions they handle is something like less than 2% of the total payment transactions every year. While we may think it’s all digital, the entrenched players are still around and still control the lion’s share.
- Don’t underestimate how long this will take. Change takes time. Everyone thinks their idea is going to be an overnight success, but in reality, even the companies we think are “overnight” successes are the end result of months or years of behind-the-scenes, in the weeds, scraping it together for just a little longer, hard work.
Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?
First and foremost, you need to find time to disconnect from your phone or email. Just put it down. It’s especially hard in the early stages–you sometimes feel guilty for not working. But you have to walk away from it to recharge.
Second, you can’t give up on your hobbies. You might have to limit the time you spend on them, you might have to compartmentalize, but don’t give up those things that matter outside of your job.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
There is a quote that really struck me-“Only the educated are free.”
If I could change the world and do the most good for the most amount of people, I would work to turn our education system upside down so kids from disenfranchised communities could get a top-notch education. The system just doesn’t work right now and too many kids never get the opportunities they deserve.