Timing is everything, in real estate and acquisitions. How this real estate software nailed it

When it comes to real estate, they say timing is everything — and the same can be said for selling a business.

Mike Simonsen launched real estate analytics firm Altos Research in 2006. Sixteen years later in 2022, his efforts to sell the firm had fallen through. And not just once, but four times.

But when HW Media approached, “they signaled early they wanted to do the deal and made a fair offer right out of the gate,” he said.

However, at that point, revenue was growing, and Simonsen was tempted to wait.

“But I knew I had to sell while the growth was happening,” he said. “Even if the following year had great profit, if the revenue growth had flattened, the valuation multiple would have been toast.”

Looking back, he knows he timed the sale right.

“We got lucky with the timing,” he said. “Had I waited six months longer, it probably wouldn’t have been possible.”

From hobby to $2.7 million ARR: The growth of Altos Research

In 2001, Simonsen bought a home in Silicon Valley.

This was around the time when the NASDAQ was bursting. But what also made 2001 interesting? Real estate listings were newly available online. Simonsen, with a decade of software data experience, used this to his advantage.

“I’m 30 years old with a giant mortgage on a tiny little piece-of-s–t Silicon Valley house, and I needed to understand what was happening, so I started building some data modeling,” he said on the “Tech Nest” podcast.

He monitored market activity, inventory, price reductions and more.

“I did that for several years for myself in Silicon Valley before I realized I knew more than anybody else in the world about what was happening in the housing market,” he said.

In 2006, he launched Altos Research. The database aggregated open-source U.S. housing market data.

But his target customer wasn’t the average homebuyer. Because Altos Research was completely bootstrapped, Simonsen didn’t waste his time building consumer products and attempting to compete with companies like Zillow, which also launched in 2006.

Instead, he focused on selling to real estate professionals, investors and financial institutions.

To reach this audience, content marketing proved key.

In 2020, as COVID took hold of the country and the housing market took off, Simonsen turned to YouTube and Twitter. Each week, he published a YouTube video and Twitter thread discussing the latest housing market data.

“That practice led us to our biggest growth in many years, landed us features in major media like the The New York Times, and cemented our reach as the experts in the space,” he said.

By 2022, Altos Research — a team of 15 full-time employees based around the world — served thousands of customers, from individual real estate agents to major financial institutions. The firm’s annual recurring revenue (ARR) was $2.7 million.

Timing it right: Why Simonsen sold Altos Research

When HW Media approached Simonsen about buying Altos Research, he was immediately enticed by the fair offer, and he understood why it would be a smart acquisition.

HW Media provides news, insights and information for professionals in the housing and mortgage industry. The media company owns several brands, including HousingWire, which offers data, research, journalism and events for housing leaders.

“I immediately saw that the vision and capabilities of our companies were perfectly aligned,” he wrote on LinkedIn. He also liked the team, which he joined after the acquisition as president of Altos Research.

Altos Research was growing, so the valuation was good — but there was an interesting twist: the housing market was showing signs of slowing.

In the fall of 2022, before the sale in December, headlines on the Altos Research blog read: “Housing Inventory is Declining Again,” “Rising mortgage rates are causing home buyers to pull back” and “Key signals to watch in a volatile real estate market.”

“The timing worked post-COVID but before the real estate market was going to slow down,” Simonsen said. He also pointed out he’d been running the company for 16 years, so he was ready for a new chapter.

But Simonsen faced a huge challenge: HW Media wanted to buy Altos Research as an asset sale. Because the company is a C-Corp based in California — many businesses structure this way to take advantage of a tax break called QSBS — this would have resulted in 60% of the money going toward income tax, Simonsen explained.

“We had to completely restructure the deal or we wouldn’t have done it,” he said.

Transworld Advisors brokered the deal, and in December 2022, Altos Research sold for 7 figures to HW Media.

“By acquiring Altos, HW Media will expand the breadth and depth of its product offering to help to create the most powerful and comprehensive media and data company serving the housing market,” the HousingWire announcement read.

Clayton Collins, founder and CEO of HousingWire, is quoted: “We believe [Altos Research’s] technology will provide massive benefits to our audience of housing professionals who rely on our insights and analysis to inform their most important business decisions.”

Upon selling, Simonsen became the president of Altos Research and a member of the HW Media executive team.

“Stick around as we grow HousingWire and fulfill our mission as the most comprehensive media and data company in the housing market,” he wrote on LinkedIn.