By Meghan Hall
The touchstone of the real estate industry is the business of contracts — ranging from letters of intent to purchase agreements to leases — and it is a corner of the commercial real estate sector that has remained unchanged for some time. Transactency, a contracting platform, will be coming to market in 2019 with the aim of streamlining and changing the structure of the contracting process. The Registry spoke with Transactency’s Chief Executive Officer, Mike Denker, about how his “business-contracting sanctuary” came to fruition and whom the platform seeks to serve.
Can you tell me a little bit about who you are, your position at Transactency and how the concept for the platform originated?
Before founding Transactency, I was a privately-practicing attorney for over 20 years. I spent my early years at various large law firms in Chicago; I then founded and ran a boutique firm for about 14 years.
At Transactency, I’m the founder and CEO.
The idea of Transactency was born from literally serving on the frontlines of deals throughout the years — being the tip of the spear, if you will — and seeing all of the pain and inefficiency that exists when businesses want to enter into a contract. If you’ve been through it, it pretty much sucks; it’s slow, it’s expensive, and it’s a huge headache. But the actual seed of the idea was born from a deal I did back in 2008 that sat dormant in my head for seven or eight years and then resurfaced in 2015.
What unique problem in the CRE world does Transactency seek to solve, and when did you first realize you could build a platform to solve it?
Getting to written agreement — whether it be a letter of intent (LOI), lease, purchase agreement, management agreement or otherwise — takes too long, costs too much and too often leaves you with a bad taste in your mouth when you’re finished. I’ve seen time and time again where parties build up good will when discussing a deal in concept and then all of that goes out the window when they begin to draft and negotiate the contract.
When I came up with the concept of Transactency, I didn’t jump right in. I took the next year or so and explored the idea with clients, friends and other business folks — pretty much asking them if they thought I was nuts and, if they didn’t, what the platform would need to have in order to address their concerns. It was after this lengthy process concluded that I realized I was on to something that could really shake things up.
What markets does your platform currently operate in, and what is your current perception of the national commercial real estate market? Is it healthy? What trends are you seeing?
We will be coming to market in the United States and Canada in 2019.
I think the national CRE market is healthy, and we’ve certainly seen a lot of change and advancement in CREtech over the last couple of years. Like any other market, it’s constantly evolving, with one of the movements being (some would argue, “finally”) towards the implementation of technological solutions.
I’ve seen a huge movement towards process automation — using technology to automate things that were previously done manually, whether that be viewing potential sites for lease or acquisition (VR and other solutions are coming online), buying/selling properties (now seeing advanced, curated online marketplaces) or other solutions.
I also think CRE, as a whole, suffers from significant process inertia when it comes to tech adoption, if nothing else because of its sheer size and history — it’s a very mature industry with a lot of regular practices that have been in place for a long time. Those can be quite resistant to change. But that doesn’t mean that change isn’t needed.
Who will be primarily using Transactency? What demographic does the platform target and why?
Our users are who I would characterize as the “contract initiators” — generally, your property owners, landlords, asset managers, and, if they are of such size as to have them, their in-house counsel. The folks who are initiating the deal. And, as well, the brokers.
While the sophistication of our products will lend to larger deals than you might expect, I think the nature of the platform will cause us to see the most traction with the smaller deals out there; for instance, with an office lease, perhaps under 10,000 square feet. I suspect we’ll be particularly attractive to those CRE operators who are smaller and try (unfortunately) to handle a lot of the legal themselves in order to avoid the time and cost of bringing legal counsel into the deal.
The reason for this is you have to understand what Transactency is (and what it isn’t). What I found through all my years of lawyering is that a large number of my clients were looking for a middle ground between (a) static form agreements, and (b) the customized services I provided them as their attorney. In essence, using a business suit analogy, they wanted something between a fully custom suit and one taken off the rack — they wanted some choice, and some tailoring, but not everything; basically, what you’d buy at a high-end department store. So that’s what we built for legal.
Can you explain what the “redline dance” is? How does Transactency offer a solution as a cloud-based contracting platform?
The “redline dance” is a term I use to describe the arduous, expensive process by which people currently negotiate contracts … it’s that exchange back and forth, version upon version, email upon email, of mark-ups (aka “tracked changes”) that show language taken out as strike-though, and language inserted as underscore (and don’t get me going about when people use “balloons”). If you haven’t been forced to read a multi-colored, multiple-user mark-up with five different people weighing in at once, consider yourself fortunate.
Put simply, we’ve blown that entire process up.
Transactency provides a neutral, third-party site (I like to think of it as a “business sanctuary”) where parties can interact and collaboratively develop, negotiate and execute their business transactions in a completely transparent manner — with none of the redline nonsense.
How does the cloud-based environment of the platform allow Transactency’s users to save time and money? In what other ways is the cloud beneficial to the platform and Transactency’s clients?
The intelligence built into the platform allows parties to focus only on the issues that matter. As a result of taking care of issue-spotting and, as well, having the system draft language corresponding to the choices made by the parties as to those issues, we can get you to an executed agreement 10 times faster and at 1/10 of the cost as compared to the current process. Additionally, use of the system allows a business to maintain deal-to-deal consistency of terms far better than currently available — a feature often sought by larger organizations or in-house legal departments.
By utilizing our cloud-based structure, users do not need to install any software or applications locally; they can access the system from anywhere simply through use of an internet browser. Again, this speeds deals up.
How is Transactency different from other real estate technology contracting platforms on the market? What features separate it from its competition and why?
I think a lot of the contracting platforms coming to market are looking at how to create efficiencies within — or without changing — the current structure of doing a deal; that is, the redline dance remains a part of the picture. Whether they are looking to better manage or extract data from contracts parties have signed, or generate agreements for businesses to use in a deal or analyze the terms received from other parties, they operate in the same transaction structure that we’ve had for the last 50-plus years: interacting by exchanging marked-up drafts.
When I set out to create Transactency, there were no sacred cows. We questioned everything. We assumed nothing. As a result, we’ve come up with a unique approach to solving a pervasive and costly problem that, I think, stands apart from other solutions available on the market.
Why is Transactency currently seeking funding? What will Transactency use the funding for?
I chose to develop the Transactency platform as a sole founder, utilizing strategic technical partners to handle the software development to date. Now that we’ve built the platform, it’s time to bring on help. It’s time to assemble my executive team, build out sales and marketing, and, as well, continue our development path.
All of that takes money — particularly when you’re looking to hire high-level folks who have been there, done that, and you want to move fast. It’s said that investors are often most interested in the team when looking at early-stage investments. Frankly, I’d like our investors to weigh in and assist me with building our team. Leverage their knowledge and connections. Get the right people in the right places. That way, we’re all on the same page from the get-go. Win, win, win.
What is next for the Transactency platform? Does the firm plan on expanding into other sectors of the CRE industry or are you simply planning on honing the usability of the current platform?
We’re looking for input from the CRE community as to what types of products they are looking for from us. We want to listen, not assume. Folks have reached out about wanting us to provide commercial leases for their use, so we’ve been looking down that path. Likewise, we’ve heard from brokers that an LOI product would be valuable. I’m interested in hearing from people on the property management side as to what they need.
We want to hear from more of you. Tell us where your bottlenecks are, where we can alleviate the pain. We have our own ideas, but the more we hear directly from you, the better.
We’ll continue to hone the usability of the platform — there are a myriad of features that are in the backlog that we will continue to bring to market. I really can’t wait to show you all of the things we’ve thought up during this adventure. It’s going to be awesome!