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BrickX chief executive Anthony Millet has opened up about the brutal lessons learned from starting up the fractional real estate investment business.
Speaking at the Intersekt fintech conference in Melbourne this month, the former online retail executive said mistakes are bound to be made when operating a high-growth company.
“Learning from your failures or some of those mistakes, making sure you have some validation of what to do and what to not do in future, is something that forms everyday part of being a startup,” said Millet.
“I probably have 10 failures a day. Building up that resilience – and having that vision — is really a key part of being a startup founder and continuing to power on.”
BrickX allows everyday people to invest in parts of a residential property through units called “bricks”, which cost as little as $66 each. The bricks can then be bought and sold on a secondary market, operated by BrickX, for liquidity.
Here are the three lessons that Millet learnt from the BrickX experience:
Hiring the wrong staff
Hiring the wrong people was a problem for BrickX’s early days.
“It’s not actually difficult attracting people to come and work in fintechs, as long as you can pay decent salaries, because there’s this Utopian dream of ‘that’s going to be so exciting, I’m going to change my life and I’m so bored of my corporate job’,” he said.
But the right person for startups is someone that believes in the product, is willing to step out of their existing skills set, and be flexible about the day-to-day work they have to take on, according to Millet — and not just a person that needs a change of scenery from the corporate life.
And with candidates never completely forthcoming about their true motivations, recruitment becomes a fine art for startups.
“Because if you get it wrong, which we have done a few times, in certain situations you end up six months back from where you could be.”
The ideal customer profile
Millet said that he’s learnt that the education level of the customer has a big impact on the success of a retail fintech like BrickX.
“A better educated customer is going to be a higher adopter of fintechs, because they have more conviction and confidence in the decisions that they’re making,” he said.
“When someone comes to BrickX, I don’t want someone putting $100 in – because that’s more of a novelty product. I actually want someone going ‘This is the product that I’m going to save my housing deposit through. I’m putting in $1000 a month.’ – because that’s when we’re really adding value to customers.”
BrickX now has 7500 investors on board after a year of retail operations, an achievement Millet and his company are proud of.
“That first year is often the most difficult year in terms of building that trust and capability in a product.”
Knowing your market
But a whole year before BrickX was available to everyday folk, while waiting for a licence to sell to retail investors, the fintech launched to sophisticated and institutional investors. This could be done because its major shareholder already held a wholesale financial services licence.
“We were thinking, this is great, we can beta test it here,” said Millet.
But the startup disappointingly learnt there was very little interest.
“What we found out was sophisticated and wholesale investors generally don’t have difficulties getting into residential real estate. We actually had pretty poor take-up,” Millet said.
“What actually spurred us on through that, the learning from that, was that as soon as we got some media and press coverage, we had a lot of people coming up to us saying ‘let us know when we can use it’.”
BrickX now concentrates on the retail market with apartments and houses in Sydney, Melbourne and Adelaide. According to the company, after initially putting in about $600, most investors continue to add to their account so the average portfolio size is now just a tad over $2,000.
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