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130 E 59th St., Floor 17
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Hightower: The System of Record for Commercial Real Estate

Jason Black

A few years ago, Brandon Weber, CEO and Cofounder of Hightower, and I were catching up over a casual dinner in Brooklyn. We had met ten years earlier when we started our careers at Microsoft and quickly became friends.  A few months before our dinner, Brandon left the commercial real estate (CRE) brokerage powerhouse CBRE, where we was a Vice President, to start Hightower because he saw that the industry was broken. He explained in fine detail the great paradox facing the industry. Despite CRE being a fifteen trillion dollar market and highly data intensive, many of the processes were manual and relied heavily on paper, excel and email.  Additionally, existing industry standard solutions such as Yardi, MRI and Argus were siloed and 20 years old. Brandon explained that he and his cofounders, Donald and Niall, were starting Hightower to solve these problems.

I was initially skeptical because I had seen dozens of real estate tech startups and many of them struggled to gain adoption with institutional landlords and brokers. CRE remained one of the major industries that hadn’t embraced the cloud and mobile.  My gut told me there was a huge opportunity because at some point in the near future “software would eat” CRE. After spending more time with Brandon and his cofounders, they convinced me the time had come and they were the right team to back.  They argued the market was ready because brokers and landlords were using iPhones, Google, Facebook and other cloud-based tools in their personal lives.  These customers now wanted and expected the same quality of tools at work.  As we dug deeper, it became obvious that Brandon, Donald and Niall were the right team to invest in because they had the unique blend of domain expertise and world-class product experience. A few months later, RRE Ventures was lucky to invest in Hightower’s seed round along with strategic investors Thrive, Bessemer, The Box Group, and Red Swan among others. 

In just two short years, the industry has changed dramatically and Hightower is helping to accelerate this change. Institutional landlords and brokers now recognize the need to adopt a cloud-based platform to streamline core processes, to enable real-time visibility into their portfolios, to lease space faster and to remain competitive. From dozens of conversations with both brokers and landlords, adopting a cloud-based platform is no longer a nice to have but rather a must have. They see Hightower as the initial foundation that will support the entire industry as it transitions from antiquated systems and adopts new technologies. Existing customers are leveraging Hightower for many business processes including deal pipeline reporting, current tenant tracking, market data tracking, stacking plans, financial analysis, and portfolio reporting. So far the response has been overwhelmingly positive as evidenced by hundreds of millions of square feet on the platform, an NPS score higher than Apple, and virtually no customer churn. All the data suggests that 2015 and 2016 will be the year CRE comes online. 

With all that being said, I’m incredibly excited to announce that RRE is doubling down on Hightower and leading a $13M Series B financing with participation from Thrive and Bessemer and a handful of strategic real estate investors. The funds will be used to recruit and hire world class talent, enhance the Hightower platform and continue to provide our customers with high touch support. We’re significantly expanding our investment for a variety of reasons. First, we believe that Hightower has built the best team and product in the industry. Most importantly, customers feel the same way. The dozens of owners and brokers we spoke with said Hightower has helped them increase sales velocity and operate more effectively. We also discovered that informed customers have chosen Hightower over the current alternatives and the competition’s customers are defecting. In fact, they’ve had 100% trial win rate over the competition. Additionally, Hightower has a robust product roadmap and trajectory. They’re consistently first to market with the latest features and respond quickly to customer needs. With this funding we’re ensuring that Hightower is here to stay and will become the market standard. The company is now well positioned for long-term success, stability and growth. 

Since RRE’s seed investment in Hightower we’ve been very lucky to partner with a handful of innovative real estate startups such as Managed by Q, Floored, Breather and The Square Foot.  While each one is transforming CRE from a different angle, perhaps the biggest disruption and most value created will happen within information aggregation and sharing. This is the cornerstone of the industry because it’s where the listings and deals reside. By having real-time visibility into the data, both brokers and landlords can move faster and close more business. Hightower is building the system of record for the industry by providing world-class workflow tools built around leasing.  Based on all of these developments and many others, I’d argue that CRE is no longer a barren wasteland for technology but rather an oasis for innovation. CRE technology is a trend that’s reshaping an old and a multi-trillion dollar industry and Hightower is building that foundation of change.  I’m excited to say we’re just at the beginning. The future of CRE is here.

Spaceflight & BlackSky Global

Jason Black

I’m excited to talk about RRE’s investment in Spaceflight and the launch of its BlackSky Global division.

Spaceflight is executing on many of the trends that we see affecting the satellite industry broadly. After decades of isolation, open systems thinking is finally coming to this industry. For those of us who actively invest in enterprise systems businesses (networking, processing, and storage hardware) it is difficult to fathom the monolithic and proprietary design approach that still persist in most of the satellite industry. The rest of the systems/hardware industry relies on Commodity- Off-The-Shelf components, open architectures and standards and a universe of offshore contract manufacturers.  The expense of launch and of operating in the harsh environment of space have been major drivers of this approach, but the willingness to pay of Government and Defense customers has also been a big enabler. This is of course changing as the Government outsources more and more responsibilities to new suppliers. There is no better example of this than SpaceX’s contract to supply the International Space Station.

The most important enabler of this shift to open systems thinking has been increasing access to affordable launch opportunities. This has enabled satellite system designers to think in terms of replenishing the elements of a satellite constellation much more regularly. Once launch is cheap and easily accessible, then satellites become much easier to replace, which opens the door to considerable simplification in the way they are designed.

Spaceflight is deeply rooted in the legacy satellite industry, having developed small satellites for government and defense customers for more than a decade. But the company has also been a leader in increasing access to affordable launch and designing smaller form factor satellites that can still deliver high quality imaging to meet specific customer requests. We invested in CEO Jason Andrews and this extraordinary team in part because they are so deeply rooted in the industry, but also because they are consciously reinventing it. We spent a great deal of time analyzing the imaging market and the business model choices of other companies in the sector. We believe Spaceflight and its BlackSky Global division blends the best of modern systems thinking with a commercial approach that is well tuned to the needs of government and enterprise customers alike. We are delighted to have led the company’s Series B financing alongside our friends at Vulcan Capital, Razor’s Edge, Chugach Alaska Corporation, and Apogee. And we will work with our friend Richard Fade, who also served on the Whiptail Technologies board, any chance we get. Spaceflight is the 3rd company in RRE’s space portfolio, which also includes Spire and Accion Systems.

Why We Started Abra

Jason Black

Yesterday at the Launch Festival in San Francisco we announced Abra.  Abra (A Better Remittance App) is an exciting new iPhone and Android software cash wallet and money transfer application.

We started Abra because we believe that the first generation of digital currency applications are technical marvels but don’t solve real consumer pain.  To make digital currency useful to “cash consumers” digital currency should: be transferable to any phone number in the world, not represent exchange rate risk, be as private as real cash, have no costs for money transfer, and be fungible to real paper-cash at very low cost 24 hours a day, 7 days a week.  Abra was designed to fulfill all of these needs.

Our “marketing description of Abra:”

With Abra, digital cash (equivalent to US Dollars) is stored directly on the smartphone. Instantly transfer money peer to peer to any phone number in the world..  Abra never touches your money. Abra merges money transfer and payments via a single digital cash wallet that works ubiquitously anywhere in the world.  There is no bank or other third party involved in managing, storing, remitting or accepting your money.  Abra represents the next generation of digital cash applications but without the technical fuss.

Technically put, Abra is digital cash stored directly on your phone, guaranteed in US Dollars.   Abra app-based transfers use the blockchain to settle, and transactions are published directly to the blockchain from your phone.  Abra’s back-end servers never touch consumer’s money or their transfer requests.  The value of the holdings in your wallet do NOT fluctuate with the value of Bitcoin for at least 3 days after initial deposit onto your phone.  Abra is not a financial service -- it is an app that facilitates storing digital currency equivalent to US Dollars directly on your smartphone and transferring your money from your Abra App to any other Abra App anywhere in the world.

To make Abra accessible to consumers globally we are launching a network of Abra Tellers. Tellers are like mobile airtime agents.  Instead of selling airtime, Abra Tellers sell and buy digital currency.  Think of them as human ATM’s.  In the US, consumers with supported ATM cards will be able to add digital cash to their smartphone with their ATM card and pin.  This is a US first.  Those using an ATM card to buy digital cash via one of Abra’s exchange partners will need to provide ID.  Others do not have to register with Abra at all.  All Abra Tellers are background-checked, similar in fashion to Uber or Lyft drivers.

Abra began Teller sign-ups yesterday in advance of a full service launch planned for this spring. We’ve been playing with builds of the App and we love it. It’s the digital cash app we’ve always wanted for ourselves.

To design Abra we turned to the traditional Hawala model.  The concept of a Hawala dates back to the 8th century.  Hawaladars are people who collect and hand out money on behalf of others over long distances.  Hawaladars settle with each other via barter transactions, netting out reverse transactions, or in modern times via bank wires if necessary.  Traditional Hawala’s are generally illegal in the United States as no one is allowed to hold or remit funds on behalf of someone else without being a licensed money transmitter both with FinCen (the Financial Crimes Enforcement Network) and with the US State regulators where the consumers’ reside.  In the case of Abra, however, consumers and Tellers are always holding their own money just as with the standard open source Bitcoin software.  Abra Tellers simply buy and sell digital currency directly to and from other consumers in their neighborhood in small amounts. 

Funds are stored in US Dollars so there is no foreign exchange taking place.  Consumers send money peer-to-peer directly via the blockchain.  As everyone is always holding their own money in their Abra App and no third party directly facilitates the transfer of money, money transfer laws don’t apply and no foreign exchange happens.

Abra Tellers are strictly forbidden from knowingly buying or selling digital cash to any person that they believe would use the App for illicit means.

A real world example can help illustrate how Abra works:

Bill in San Jose wants to send $100 to Nancy in Mexico.  Bill finds an Abra Teller, Sebastian in downtown San Jose.  Sebastian charges 1.5% for selling digital currency to Bill.  Bill arranges to meet Sebastian from the Abra App.  When they meet, Bill hands Sebastian $101.50 representing the $100 in digital currency and the $1.50 fee.  Sebastian’s Abra App then transfers the digital currency directly to Bill’s phone.  Bill then transfers $100 in digital currency to Nancy’s phone in Mexico.
To get access to the cash in Mexico, Nancy finds an Abra Teller, Miguel, in her neighborhood and sells the digital currency to him in exchange for Pesos.  If both parties charge 1.5% for buying and selling the digital currency then they have saved a fortune in fees versus traditional money transfer services that can charge upwards of 8%, 9%, or more, for such transactions.
Why are Sebastian and Miguel likely willing to provide these services for a 1.5% fee or even less?
Consider that Sebastian and Miguel already provide some form of service in their neighborhood for cash.  In the case of Sebastian that means he already has to deliver cash to his bank every day for safekeeping.  Adding a little more cash to the mix costs him nothing and earns a few more dollars in fees every day and certainly puts him in the good graces of his friends and customers.  In the case of Miguel he takes in a lot of cash via his current businesses, selling prepaid airtime and his Bodega store.  Buying digital currency helps him manage all of his cash at no cost while actually making a little extra money in the process.  This is a real win-win.
You might be wondering… How does Sebastian get access to digital currency to sell and how does Miguel sell the digital currency he has bought from consumers.  Simple.  The Abra App has a built in “Teller” function that allows Tellers to easily buy and sell digital currency similar to the manner in which they buy and sell airtime.  They can do this for cash themselves or via their bank account.  The difference between the cost of this transaction and the fees charged to the consumer is the Teller’s personal profit.

You can sign up for Abra and let us know if you want to be an Abra Teller by going to Abra’s website. Help us make Abra better by giving us ideas and suggestions on how to improve the service design and make it useful for everyone!

OnDeck, a Lender to Small Businesses, Raises $230 Million in I.P.O.

Jason Black

Today, RRE Ventures portfolio company, OnDeck, completed their initial public offering on the NYSE. It is the largest venture backed tech IPO by market cap in NYC history. 

Congratulations to Noah Breslow and the entire OnDeck team. We’re incredibly proud of them!

Launched in 2007, OnDeck is the technology powered Main Street lender that has fundamentally changed how small businesses access capital.
OnDeck’s innovative technology platform leverages electronic information including online banking and merchant processing data to identify the creditworthiness of small businesses in minutes, while traditional lenders typically take days or even weeks.
To date, OnDeck has deployed more than $1.5 billion in capital to tens of thousands of businesses across 700 different industries. The company was recently named #11 on Forbes’ 100 Most Promising Companies in America list and was listed on the Inc. 500/5000 for a third year in a row.