NAR’s noncompete clause with realtor.com a factor in tech incubator selections

Companies that engage in the public display of listings 'likely ineligible' for REach program

Fight averted image via Shutterstock.Fight averted image via Shutterstock.

The deadline to apply for the National Association of Realtors’ tech incubator, REach, is looming, but the odds of success may be stacked against companies that are in the business of publicizing for-sale listings.

A noncompete clause in the realtor.com operating agreement between Move Inc. and NAR means that companies that engage in the public display of listings are “likely ineligible” for REach, according to Constance Freedman, founder and managing director of Second Century Ventures.

Despite the limitation imposed by the realtor.com agreement, “We encourage interested companies not to self-select out of applying to the program,” the director of NAR’s 5-year-old venture capital fund said.

“We work closely with realtor.com, and if there is a mutually beneficial partnership opportunity that can be agreed upon by all parties, we would consider an acceptance in that case.”

The final deadline for applications for the 2014 class is March 1, and NAR plans to accept between six and 10 firms to the program in April.

Second Century Ventures announced the REach program in November 2012, with the stated goal of helping startups and established companies learn the ropes of the real estate industry.

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(Inman News launched an “Inman Incubator” program in April 2013 as “a launchpad for companies that will define innovation in the real estate industry … by providing mentorship, promotion, access to specialized resources, business-building connections and ongoing support.”)

We encourage companies who are interested to apply and not self-select out."

Firms that participated in REach’s 2013 class received access to 150 mentors, about 500 Realtors who volunteered as “beta testers” for their products, office space at NAR’s Chicago headquarters and networking opportunities at industry events. In exchange, the companies paid a marketing fee and handed over equity stakes of between 2 to 5 percent in order to participate.

The realtor.com operating agreement dates to 1996 and references the “exclusive nature” of the relationship between NAR subsidiary Realtors Information Network Inc. (RIN) and Move subsidiary RealSelect Inc. in Article III, Section II:

“Except as provided in this Agreement, during the terms of this Agreement, Operator and RIN shall not engage, directly or indirectly, in the Electronic Display of Real Property Ads, and shall not, directly or indirectly, develop, market, sell, acquire an equity position in, be engaged or employed by, or endorse any service or enterprise, or authorize, appoint or engage any other Person for the purposes of the Electronic Display of the RPA Business.”

NAR does not disclose this restriction on the REach website or in any other public materials about the program. Freedman said this is due to the “complicated nature of the matter” and because there are cases in which the restriction may not apply.

“Clearly there are cases where exceptions exist, such as the investments NAR made in companies like (Realtors Property Resource) and that SCV made in Xceligent,” she said. “This is why we encourage companies who are interested to apply and not self-select out.”

RPR is a wholly owned NAR subsidiary and national property database for Realtors, but it is not public-facing. Xceligent operates a commercial listings site and is therefore not traditionally in realtor.com’s wheelhouse, though the two announced a partnership in the fall that gave realtor.com an expanded commercial search functionality powered by Xceligent.

Indeed, Freedman cited “compelling partnership opportunities” as something that companies that publicly display listings can offer that might better their chances of being accepted into REach.

Freedman said she was not aware of any other type of company that would likely be ineligible for REach. When asked whether the realtor.com operating agreement would prevent NAR from investing in a company that engages in the public display of listings but also offers another product that has nothing to do with listings, Freedman said, “Potentially. It is a case-by-case issue.”

REach’s inaugural 2013 class included seven companies, none of which engage in the public display of listings:

  • BombBomb: a video-focused email marketing software provider.
  • Lumentus: a social media metrics provider that helps companies focus social media messaging on their brands and missions.
  • Planwise: a financial planning service for individuals to visualize, via real-life scenarios, how major life events affect their financial future.
  • Reach150: a referral platform that helps individuals manage their online reputations.
  • Treater: an app that lets users send “treats” from their mobile phone, to be delivered by Facebook, email, Twitter or LinkedIn.
  • Updater: a free online service consumers can use to easily manage a change of address.
  • Workface: a live chat — via text, audio or video — software platform that facilitates one-on-one communication with a client in real time at critical points in their decision-making process.

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