In a world increasingly dominated by artificial intelligence, some platforms are busy gaining steam despite catering to one of the pickiest market segments.\u00a0<\/p>\n
In June, Henry AI<\/a> \u2014 an AI platform founded by Sammy Greenwall and Adam Pratt<\/a> that automates back-office work for commercial real estate brokerages \u2014 sealed a $16.5 million Series A funding round led by FirstMark Capital. The Series A came only two years after the company\u2019s inception, and happily coincided with Henry\u2019s next iteration.\u00a0<\/p>\n SEE ALSO: Podcast: How Physical Property Data Drives Key CRE Decisions, ID Plans\u2019 Jordan Hearin<\/a><\/p>\n \u201cWe needed to be a platform and not just a wedge product,\u201d Greenwall said. \u201cThe vast majority of customers in the market know us as a deck-making tool and not as a deal-generation, end-to-end platform. So Adam and his team went through a crazy sprint over the space of 45 to 60 days to effectively build an entirely new platform from scratch.\u201d\u00a0<\/p>\n That new platform, Henry Deal, represented a leveling up of Henry AI and was the catalyst for the Series A launch. Essentially, while Henry AI began with offering memorandums, underwriting and pitch decks, Henry Deal covers every stage from initial underwriting all the way through packaging and closing.\u00a0The platform provides\u00a0 full underwriting capabilities and a comps database. It can also build market reports, buyer lists, lender lists and even pitch a deal for you.\u00a0<\/p>\n Henry Deal was built in only 35 days or so, but Greenwall and Pratt didn\u2019t want the market to know about it until it was piloted and deeply embedded with multiple enterprise organizations on the brokerage side.<\/p>\n \u201cWe\u2019ve spent a very long period of time staying very focused on one product, refining it and improving it over time,\u201d Pratt said. \u201cI think one advantage we had is that we learned so much about our users\u2019 workflows by onboarding decks and fixing things there that a lot of the same things are true. People really want their workflow to be bespoke. They want it to be uniquely the way that they design their outputs and the process by which they get there.\u201d\u00a0<\/p>\n Adam Nelson is a managing director at FirstMark Capital. The firms were introduced via Ben Markowitz, co-founder of fintech startup Clerq \u2014 which is also backed by FirstMark \u2014 during Henry\u2019s seed round.\u00a0<\/p>\n Initially, Nelson told the Henry founders, \u201cHey, I think you guys are amazing. I love the big, bold vision here and let\u2019s stay in touch, but I think this is a really bad market, and I wish you guys luck,\u201d Greenwall recalls.\u00a0<\/p>\n Nelson is a prolific investor in New York City, and FirstMark is one of the funds for Series A investing, \u201cSo that was a really, really important point for us,\u201d Greenwall said. \u201cWe\u2019re a New York City-based company. We want to make sure that we create an ethos around that brand, where everything that we do is leading into that idea.\u201d\u00a0<\/p>\n So, when it was time to raise the Series A, less than 12 months from when the firm closed its seed round, Nelson remained one of the top people on the list of those they wanted to do it with, despite his initial hesitancy.\u00a0<\/p>\n Greenwall and Pratt spoke with Nelson many times over at the original Henry HQ \u2014 Greenwall\u2019s apartment.<\/p>\n \u201cThe first time, I got out of the elevator and there\u2019s this kitchen with like eight desks and a dog in it,\u201d Nelson recalls. \u201cWhat I subsequently found out was Adam was taking a nap because he had been coding all night in the loft above their kitchen, and we go to the conference room, and it\u2019s a spare bedroom. I was like, \u2018This is so awesome.\u2019 \u201d\u00a0<\/p>\n Eventually, the Series A due-diligence process kicked off, and FirstMark was officially interested.\u00a0<\/p>\n \u201cA couple things had started becoming really clear to me,\u201d Nelson said of what changed. \u201cThe first is that what Sammy and Adam had built was really starting to resonate in the market and really get pulled by brokers, even without a big sales team. It was just Sammy on LinkedIn talking about what they were building, and it was resonating. I\u2019d spent enough time in the real estate tech space to know that was pretty exceptional. But when you change the paradigm and start delivering outcomes and augmenting labor inputs and letting people get freed up to spend time doing the business development that actually drives the revenue, it completely changes the equation.\u201d\u00a0<\/p>\n Not that it would be an easy road.\u00a0<\/p>\n \u201cFirstMark doesn\u2019t mess around; they do their diligence as they should,\u201d Greenwall said.\u00a0<\/p>\n The Henry AI founders spoke with more than 50 funds through the process and ended up with multiple term sheets.<\/p>\n \u201cOne of the term sheets that we received was also from a really good fund, and they priced the deal about 20 percent higher than where FirstMark came in, but we decided to ultimately go with FirstMark for two reasons,\u201d Greenwall said. \u201cWe wanted a New York City-based fund, and two is that we believed that Adam Nelson as a partner for us would end up as a better outcome for our company over the long term, and we\u2019re building for 10 years from now, not for a couple of months or a couple of years from now.\u201d\u00a0<\/p>\n That LinkedIn activity Nelson references can pay dividends.\u00a0<\/p>\n \u201cSammy sent a cold message to me directly on LinkedIn,\u201d David Perlleshi, a managing director who leads investment sales for Franklin Street, said. \u201cI usually don\u2019t respond, but, for whatever reason, I responded. He wanted to jump on a walk-through of the new platform, saying, \u2018Hey, we can make your OM, we can solve your OM process.\u2019 I was very impressed by it and wanted to implement it immediately. I saw the benefits of it, in how we could streamline the entire process.\u201d\u00a0<\/p>\n And streamline it did. \u201cWe\u2019re such a high-volume team, it would take us one to two days to produce a full offering memorandum,\u201d Perlleshi said. \u201cWith Henry, it literally helped our production quadruple overnight.\u201d\u00a0<\/p>\n Further, with the expanded offerings of Henry Deal \u2014 Franklin Street was one of the pilot customers \u2014 Perlleshi\u2019s analyst is still employed and has doubled his output.\u00a0<\/p>\n Customization has been key.\u00a0<\/p>\n \u201cA small $1 million facility is going to be packaged differently than a $20 million facility, and then a land deal is being packaged completely different than a lease-up deal, and so on and so forth,\u201d Perlleshi said. \u201cThey\u2019ve been able to do a wonderful job with us as far as giving us that customization that\u2019s required, and being able to just switch things up really just quickly and seamlessly.\u201d\u00a0<\/p>\n Before AI, software was really deterministic and programmatic, uncustomizable for that person\u2019s workflow. \u201cIt was useless,\u201d Greenwall said. \u201cWe learned with our decks, and with the rest of our products, that in order to sell the customer something they want, you need two things.\u201d\u00a0<\/p>\n First, you need to sell the outcome. \u201cThat means I\u2019m not giving you a tool that helps you build decks faster. I\u2019m giving you a deck. I\u2019m not giving you a tool that makes your analysts do underwriting 20 percent more productively. I\u2019m giving you a final underwriting model that you can send to a customer. That wasn\u2019t possible before AI,\u201d Pratt said.\u00a0<\/p>\n Second is understanding the preferences of each individual customer.\u00a0<\/p>\n \u201cWith AI, you\u2019re able to build a custom experience and workflow for each customer,\u201d Pratt said. \u201cIf you give everyone the same one-trick pony, which is how traditional software is built, no one\u2019s paying for it.\u201d\u00a0<\/p>\n On that note, the No. 1 thing with the Henry team is \u201cyou never hear no,\u201d Perlleshi said. \u201cYou never hear, \u2018That can\u2019t be done.\u2019 It\u2019s always like, \u2018Let us work on it. We\u2019ll get back to you. We\u2019ll figure out a solution,\u2019 and they always do. As brokers, we\u2019re not allowed to say no. We have to figure out alternative solutions to try and get something done, and the Henry team understands that. They put themselves in the broker\u2019s seat and understand that there are nuances to relationships, to marketing, and no two deals are the same.\u201d\u00a0<\/p>\n One of the big value propositions of Henry Deal is taking all of Henry\u2019s customers\u2019 existing data and putting it into an organized box where they can then leverage that data to make actionable and impactful decisions for their business.<\/p>\n For example, if a commercial real estate broker is selling multifamily apartments in Brooklyn, someone on that team might be building 60 decks a month on Henry, and each underwriting model might have four comparable sales properties or rental properties. That\u2019s a lot of data. <\/p>\n The numbers speak for themselves. Every existing customer that has tried Henry Deal, so far, has bought into the new product.\u00a0\u201cThey\u2019re now paying us significantly more money, around 30 to 40 percent higher than what they were paying before,\u201d Greenwall said. \u201cOf our net new customers that we brought on since Henry Deal, over 80 percent of them are converting from pilot to paid customer, and those contracts are two times bigger than our old contracts\u201d.\u00a0<\/p>\n All of the investors who participated in Henry\u2019s seed round also participated in the Series A, either at the pro rata or super pro rata level. Those investors include Y Combinator<\/a>, Coalition Operators<\/a>, Pioneer Fund<\/a>, RXR Arden Digital Ventures<\/a> and StoryHouse Ventures<\/a>. The new investors were Thomson Reuters Ventures<\/a> and Karman Ventures.<\/p>\n And, it\u2019s just the beginning.\u00a0<\/p>\n \u201cAdam and I love being in the office every day with our team, and making our customers happy,\u201d Greenwall said. \u201cWe just signed our largest contract ever, and I was out in the HQ for this new customer, and I was just sitting in their conference room, and I was like, \u2018Wow, our company\u2019s 2 years old, and I\u2019m sitting with the largest office producer in this massive state so, holy crap, that\u2019s pretty cool.\u2019\u201d<\/p>\n