From idea to IPO in three years: Purplebricks founder Michael Bruce
"Every time you mention the word ‘estate agent,’ everyone gets a little bit of a smile on their face and an inner feeling of unhappiness,” says Michael Bruce, chief executive at Purplebricks, the online estate agency that has turned the industry on its head in a little over four years.
Bruce has traversed the world of property for some years, but never as an estate agent. He was chief executive of a 16 branch outfit in the Midlands before his latest endeavour, and thinks that his previous detachment from the sell side worked to his advantage. “You can look at it in a different way – it’s really not the most innovative world,” he says.
Innovation through technology was a driving force behind selling the agency and starting Purplebricks, but not the whole story. The perception of the industry as money-grabbing commission junkies was something Bruce felt should change. “We wanted to bring the very best out of the people in the industry, but at the same time build technology that makes it so much better for the seller, with a much simpler, more transparent, convenient process that works 24 hours a day.
“It was a dawning moment for me,” he says, “for the first time I wanted to build a business and a brand for all the right reasons – it was about delivering for the customer. As an entrepreneur you often concentrate on yourself – what’s important for you – but at some stage it dawns on you that perhaps you’re not the most important person after all.”
While allowing people to list their property on its website, and cutting out most of the cost associated with traditional estate agencies, Purplebricks has rebranded estate agents as “local property experts” in an effort to shed the toxic skin of past impressions. “Most people wouldn’t tell you that they were an estate agent if they were in the pub, would they?” says Bruce. “What we wanted to do is make them proud to go out and tell others they’re an estate agent.
“Agents spend most of their time chasing the next deal, so what we’ve done is take them away from that environment. We can produce those opportunities, plus advertising, marketing and a brand. They can then concentrate on the customer – and that’s proved to be really successful.”
IPO
After Bruce and his brother invested their own money, they enjoyed several rounds of external funding. Then last year, Purplebricks floated on the junior Aim market after just three years of existence.
“I think it was part of the journey for me,” says Bruce. “You’ve got to bear in mind that we were disrupting an industry, we were changing the perception, we were re-educating sellers as to a credible alternative, so IPO brought us a much higher profile in the public domain – it gave us the opportunity to grow.”
The flotation has been a success so far, adding about £25m to Purplebricks balance sheet, and putting “more tanks on the lawn,” says Bruce. But it was also a way of incentivising its local property experts and other employees, by offering share options.
“It gave the opportunity for some of the people who had been in the business for a while, who had given their heart and soul, working 17-18 hours a day. It gave us the chance to reward them for that early effort.”
Purplebricks is expecting to be profitable within its first year as a public company, and continues to use the investment to develop new technology, while expanding its already massive infrastructure. “I think for a business that’s grown to the third biggest estate agent in the UK, in such a short space of time, by committing to be profitable by its third anniversary, I think, is a huge achievement,” says Bruce.
Traditional industry has been through something akin to seven stages of grief (Source: Getty)
Traditional industry
Asked how the traditional, bricks and mortar industry has reacted to Purplebricks, Bruce says they “go through cycles”. “Like the seven stages of grief?” I joke. “Well yes actually,” comes his chortled response: “first of all they dismiss you as having no relevance, no importance – that’s the first cycle, denial. After that they ridicule, and after that, and it took a while, but then they seek to address the scenario.”
The industry Purplebricks has thrown on its head doesn’t concern him though, mostly due to how people search for property today. “Virtually nobody – zero – goes into a high street agent’s office, and haven’t done since Rightmove and Zoopla came into existence. They’re nothing but a high street presence, a face for their brand,” he says.
And whether a buyer or seller, why would they choose Purplebricks over a more established brand? “It’s a lottery,” he says. “Say you’re searching for similar property online, up comes us, up comes Foxtons, if you click Foxtons, you’ve just spent £20,000 – it’s a no-brainer.”
Purplebricks has gained 65 per cent of the non-traditional market, and around about four per cent of the market total – “even the biggest players only have about 8 per cent,” says Bruce.
Expansion
After gaining a foothold in the UK, Purplebricks’ next move was Australia, which I found quite odd. “You’ve only got to look at me and you won’t come to the conclusion that I got out of bed one morning, donned my shorts, grabbed a surfboard and away I went,” says Bruce. “My brother and I are very proud, but very protective of the brand. And Ryan, who’s chief executive of Australia, he came to us, knocking down my door to convince us that it was the right place, and he was the right person.
“So we spent months working with him, and working to understand whether it was right, and we were absolutely of the view that it was perfect. We felt that it was a low risk, high reward strategy. The Australian people are far more vocal about property, and the need for change than the UK. They’re mad for property, and the average [agent] fee is around $21,000, so even though there’s half the amount of transactions in Australia, we’re able to replicate the same size sales as the UK.”
Purplebricks has grown from strength to strength in no time at all, and I ask Bruce whether he ever had any doubts about his dream – was it a gamble? “I suppose at the time, you have a real belief in what you think is good, and if I look back now, I credit my wife a lot. At the time you don’t necessarily recognise it, but she watched me gamble 95-98 per cent of every penny we had on something that was going to change an industry – no one had ever done it before, and God knows what was going to happen. So it’s an enormous credit to her belief in what we were going to do , and it’s a nice relief the fact that it’s gone so well.