Can industry-specific accelerators succeed? NAR believes so with its first class of real estate startups

By Erin Griffith , written on March 26, 2013

From The News Desk

There's a long list of criticisms one can lob at accelerators. Namely, that there are too many of them, the companies they churn out are not that impressive, and that investors have tired of their endless demo days and hype. Even as today, Y Combinator unveils a scaled-back class of companies in its latest demo day, the elephant in the room is that the program has not produced another Airbnb and Dropbox. Which is precisely what the country's hundreds of second and third-tier accelerators are hoping to replicate. If the elite YC can't do it, good luck to anyone else.

The signs of fading accelerator fever are already cropping up. Last week Greenstart, which runs a clean tech accelerator, announced it would kill its accelerator and opt for a studio model. The artificial construct of a three-month program didn't give Greenstart enough time to make a meaningful impact on the companies, and the growing negative stigma around accelerators meant applicants weren't as high of quality as they had hoped, the company said.

But the negativity surrounding the asset class hasn't slowed the accelerator machine. Today the National Association of Realtors (NAR) has announced the six companies that will join its first ever program, which it developed as an extention of its venture capital arm, Second Century Ventures.

Given my past coverage of accelerators, I found it strange that NAR would want me to write about REach. But after speaking to Managing Director Constance Freedman, who designed the program, it became clear that this thing wasn't just thrown together. I've never been entirely sold on accelerators, but Freedman had answers for my tough questions.

Industry-specific accelerators like to brag that they offer better resources to their companies because their mentors are deeper into their industry, they have better access to customers, and they're all-around more tied into the industry their companies are trying to break into.

But critics will say that they leave the companies in a bad position. Graduates of programs run by corporate players like Nike or Kraft, for example, are forever tied to those companies. Would competing companies want to do business with a startup that's essentially in the back pocket of their top competitor? Further, the industry-specific programs don't have the all-important relationships with venture capitalists, which is essential for getting the companies funded after the program ends. Lastly, unlike with general programs, a room full of companies that play in the same industry are more likely to compete with one another than collaborate and learn from each other.

"I wish there was a different word to use [than 'accelerator']," Freedman said when I rattled off each of those criticisms to her. Systematically she addressed them. REach was created after Second Century Ventures had to continually pass on investing in young, promising startups on account of its investment mandate. The fund only backs companies with $2 million to $10 million in revenue with a proof of concept in the marketplace. REach is meant to help bring the younger companies up to that level. "The idea is that by helping them gain access to the market, we can form a relationship with them and decide if we're comfortable investing," she says.

That market she refers to is NAR's one million members. The six companies selected to enroll in REach's nine-month program will be continually put in front of that membership through marketing and at NAR events. Further, REach has signed up 500 realtors to beta test the startups' products and provide regular feedback. The goal is not necessarily raising a new round after a demo day (there is no demo day); it's customer growth. The mentorship sessions and education portion of the program is, Freedman says, "less about 'Startup 101' stuff and more about, 'This is what the industry is, here's how you think about your customers and where to find them,'" Freedman says.

NAR has already proven it is willing to go to great lengths to help its portfolio: the group recently wielded its powerful lobbying presence to host a summit with representatives from many of the country's largest financial institutions. It was in the name of NAR's portfolio company Docusign, which has struggled to get the FHA to fully accept e-signatures.

Freedman says the issue of competition between companies in the accelerator will not be a problem because the class is diverse. REach chose companies that don't yet serve the real estate market but want to. "We help them learn if its a good vertical for them at least," she says.

Real estate is in dire need of new tech solutions as realtors transform themselves from providers of hard-to-get information to facilitators of transactions, Freedman says. They need to prove their relevancy in a transparent world of Trulia and Zillow. "Never before have consumers had so much information at their fingertips. It forces a relationship where the agent has to be able to show the value they can provide," she says. REach aims to arm them with better tools -- while giving these six startups a boost in the process.

If successful, it won't be because NAR followed the standard accelerator model. The organization may not have experience building startups, but it owns the real estate market. Unlike almost any other accelerator, REach is a nine month program featuring later stage companies working trward a specific goal -- customer acquisition -- with no demo day to speak of. REach isn't a Y Combinator wannabe -- which may be the precise reason it works.

Here is REach's first class:

BombBomb, Colorado Springs, CO – Mobile email marketing platform

Reach150, Palo Alto, CA – Professional referral platform using social media

Workface, Minneapolis, MN – Professional communications tools

Updater, New York, NY – Tool to help people who are moving change their address and connect their home services

Planwise, San Francisco, CA – Life event financial planning software

Lumentus, New York, NY – Regulatory-compliant social media management tool