Small-team innovators are constantly entering the real estate market, but there hasn’t been a significant industry-changing entrant since the dot-com boom. Until now.

Zillow, a hush-hush online real estate startup founded by former Expedia executives Rich Barton and Lloyd Frink, could represent the first serious challenge to how real estate has been sold for decades. Consider the quality of its founding team, the size of the initial investment and the founders’ appetite for new business models.

While Zillow’s tight-lipped approach has afforded little indication of what exactly the business will look like, records at the U.S. Patent and Trademark Office lend some clues about what the Seattle company may be planning.

Early patent and trademark recordings filed by the company indicate that it has plans for some kind of online marketplace for real estate listings. Specifically, one record is for providing an online computer database and online searchable database featuring information and listings for real estate, and to provide real estate research services.

The patent and trademark record also notes the design of computer software, and providing online computer services for real estate, consumer goods and consumer services. Another record drops hints of plans for an Internet auction business for real estate and online services featuring tours of residential and commercial real estate.

It will take more than patents and trademarks to crack a formidable real estate tradition that stands on a 5-6 percent commission and a broker cooperation business model. But no one underestimates the seriousness and ingenuity of Barton’s team, who single-handedly transformed the travel industry with the introduction of Expedia in the late ’90s.

The timing seems to be right; there hasn’t been a well-capitalized online startup in real estate since HomeGain and HouseValues opened their doors in 1999. These two firms changed how the industry thinks about lead generation and Web marketing.

Now, the next generation of change seems to be upon us with the vast majority of home buyers and sellers starting their real estate searches online and the Justice Department’s investigation of the real estate industry clearing the decks for new business models.

The online real estate segment has heated up, with last year’s successful IPOs of ZipRealty, an online brokerage model, and HouseValues, which sells online leads, conversion and marketing tools to real estate companies and agents. Media giants including Gannett, Tribune Co. and Knight Ridder stepped up earlier this year with the acquisition of HomeGain.

Google, craigslist and host of other innovative technology companies are paying more attention to real estate, which creates an atmosphere of excitement and spawns new investment.

While Zillow is shrouded in secrets, the expectation is that over the next several months everyone will know who they are and not everyone will like what they’re doing. The company has not officially commented on what its business model will be, but has made public the members of its team, a new round of financing and a recent Web site launch.

The company on its newly launched Web site says it is “working hard to develop a new kind of online real estate service.” It has been hiring new employees and is looking for more talented people, according to job postings on

Two top venture capital firms, Benchmark Capital and Technology Crossover Ventures, are betting the team that built Expedia has another success story on its hands. The multibillion-dollar funds, which have long-standing ties to Barton, led the first round of venture financing, though the terms were not disclosed.

Bill Gurley, general partner at Benchmark Capital, and Jay Hoag, founding general partner at TCV, have joined Zillow’s board of directors, which also includes Barton; Frink; Greg Maffei, president and CFO of Oracle; Gordon Stephenson, co-founder and managing broker of Real Property Associates; and Erik Blachford, former CEO of Expedia.

Both venture funds have ties to the online real estate industry, with Benchmark as one of ZipRealty’s early funders and TCV funding all three rounds of the HomeGain venture.

Zillow’s venture funding came just three months after the company raised $6 million in financing from its directors and employees.


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