Riley, a tech-oriented lead-qualification startup that had raised millions in funding, announced this week that it was closing down and returning what remains of its cash to investors.
Company CEO and co-founder Daniel Ahmadizadeh announced the end of Riley Monday in a post on LinkedIn, saying that “we were unable to land on making a scalable, high-quality solution that users love in real estate.” Ahmadizadeh went on to say that Riley grew quickly, with agents “signing up at a pace that was breaking our operation,” but that there was also considerable churn among the people using the service.
“Core issues included quality, defensibility, user experience, and an inability to address value propositions offered by new competitors in a scalable way,” he added of Riley’s demise.
Riley was founded in 2015 and offered an automated personal assistant service that could find listings for potential homebuyers. The company used an automated system to begin conversations with consumers, but humans would eventually get involved to pull together listings that the homebuyer might be interested in.
The company’s products evolved over the years, and in 2017 Riley began offering a lead-qualification service, the pricing of which started at $200 per month.
In his post this week, Ahmadizadeh said that the lead-qualification product “took off.”
Also in 2017, Riley raised $3.1 million in funding and emerged from Y Combinator — a prestigious startup accelerator — where it was judged the fifth fastest growing company in its class of more than 100 businesses.
Ahmadizadeh said Monday that Riley would “be able to return 20 percent” of individual investors’ cash “and hopefully a little more.” He also diagnosed the problems Riley faced, saying that in addition to customer churn there were “quality in consistencies,” competitors with human-powered products, and customers who “did not find value in standardized conversations.”
He also said that most agents move on to other jobs within five years and Riley failed to focus on the minority, which he said was 17 percent, who stick around and succeed.
Significantly, Ahmadizadeh also suggested that there may be too much confidence in the potential of lead qualification and CRMs to generate cash. The assertion is a provocative one because the sector has generated significant investment from both startups and established incumbents.
“I am less convinced that real estate lead qualification, and more specifically real estate CRM, is a billion dollar opportunity,” he concluded. “I believe that the only way to create a mountain-moving business in real estate, one needs to change the paradigm of what it means to be a brokerage. More specifically, the transaction itself is where the value lies and opportunities exist.”