Innovators like Waterton have figured out a way to tap into technology that not only helps starving startups but also boosts its own business. Recognized recently as a HIVE Top 5 Innovator, their program coined Elmspring, started just four years ago, has already accelerated more than 30 companies that have gone on to raise $21 million. Elmspring targets businesses that align with Waterton’s business in some regard and offers the startups a token amount of money for legal and marketing. Century 21 Affiliated and Harrison Street are partners with Waterton on Elmspring and share commonalities on programs focused in multifamily, hospitality, and senior housing.
This structure “gives us the opportunity to look at and invest in different types of companies that we see,” says Eric Potter, director of innovation at Waterton. “What we have seen is that [the program] has to be vertically integrated in order to be successful. The movement has been to create vertically integrated accelerators because that’s the way that venture capitalists think.”
Potter goes on to explain that the down side for this program is relatively limited.
“Elmspring invests $20,000 in each company,” says Potter. “It’s not a lot of investment. The expectation is that there will be a failure rate, but that is buoyed by the success of other companies.”
Bob Gillespie, executive director of Elmspring, points to their success as identifying where the company is in what he calls the five phases of incubation to make sure they are not investing too early. He outlines the five phases as:
- Ideation, competition, and plausibility.
- Defining the product or service to determine if it is differentiated and if it can price well.
- Adoption—the hardest phase to survive, which includes a trial, beta test, development scale and funding.
- Growth—how big can it get?
- Exit and profitability.
Potter talks about how Elmspring works in this short video.
Part of the Business
How does Waterton support this initiative? Gillespie and Potter explain that they have an innovation council with members from different areas of business, such as the site team, hospitality, and the executive team. The council builds a relationship throughout the course of the accelerator with the startup to eventually shepherd the new organization into a Waterton property. Having this innovation council at the disposal of the startups has made a big difference.
“If you are a young company and only have $125,000, you can only burn $10,000 per month and if you have to build a feature that costs $20,000, you can either build it or work with a member of the innovation council who has been in multifamily for a while and use their resources and expertise to help facilitate that development,” Gillespie explains. “Access to the council can maybe save them $20,000 off a burn rate.”
Plus, these startups are injecting innovation straight into the veins of Waterton, giving it access to new technology that the competition doesn’t have.
“Many times, it solves real problems for us,” Potter says, adding that there’s a “huge advantage to have immediate access to the technology to make custom changes and understand how it fits into your business model. That’s how the partnership works. They get linked to the innovation council and have access directly to customers who can shape their service or product.”
According to Potter, Waterton started to measure what type of feedback was received along with the level of customer engagement. Over the course of four years, the company has learned to tie the investment back to operations and to the operations platform, rather than measuring dollars, which didn’t always tell the true value of an accelerated program.
Minting Hospitality
Elmspring helped launch Minte, a program that does a quick hotel-style clean for residents when they push an IoT button in the apartment so they can come back to a fresh, clean home. Not only does this startup offer a differentiator for Waterton properties, but it also has been successfully expanding to work with other property management companies such as Greystar.
The company, through trial and error and closely working with the innovation council, was able to learn how to work with unions and how to hire the right housekeeping talent.
“We can help companies think through those things, and we can mentor someone with a start up like that,” Gillespie says. “At the same time, it’s not our core business. We don’t have to add headcount and management. All we provide is mentorship and investment dollars.”
Talent Play
Elmspring not only brings innovation in technology to Waterton, but also attracts a new ecosystem of talent to the Chicago area.
“We’ve created jobs in the market,” Gillespie says. “We’ve made money, access to great technology, and the play of doing something good for the city we sit in. We also drag talent to Chicago. They have come from different states and even from other companies.”
The two coined Chicago as the birthplace of real estate startups with Sam Zell and Equity and hope to see that Chicago multifamily will continue to drive tech talent to the Midwest.
This story appears as it was originally published on our sister site, www.hiveforhousing.com.
