PUBLIC CT. . 2011 .. 003 THE COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34, as amended; IN THE MATTER OF an application by the Commissioner of Competition pursuant to section 79 of the Competition Act;
AND IN THE MATTER OF certain rules, policies and agreements relating to the multiple listing service of the Toronto Real Estate Board.
BETWEEN: THE COMMISSIONER OF COMPETITION Applicant -and-
THE TORONTO REAL ESTATE BOARD Respondent -and-
THE CANADIAN REAL ESTATE ASSOCIATION and REALTYSELLERS REAL ESTATE INC.
Intervenors WITNESS STATEMENT OF JOEL SILVER TRILOGY GROWTHt LP
I, Joel Silver, of the City of Toronto, Ontario, state as follows: 1. I am the Managing Director of Trilogy Growth, LP ("Trilogy Growth"). Trilogy Growth makes direct investments in early stage, innovative companies and other opportunities, including online, media and retail companies. Previously, I served as President of Indigo Books & Music,
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Inc. ( 11 Indigo'') and worked there from 2003 to 2011. I am currently a member of the Board of Directors of Indigo. Previously, I co-fo'Wl.ded and was CEO of SalesDriver) a web-based company specializing in online business-to-business sales incentive programs. I hold a Masters of Business Administration from Harvard Business School and a Bachelor of Arts (Honours) from Wilfred Laurier University.
2. Earlier this year; Trilogy G1·owth invested in TheRedPin.com Realty Inc. ( and I am now a member ofits Board of Directors.
3. Trilogy Growth was founded in Apri12011. Our objective is to invest in companies at an early stage in their development, in industries or markets that present key innovation arid value opportwrities (such as industries that are on the verge of change or where an innovative approach to a business will create a significant opportunity). Our approach is to make a small number of equity investments in such companles and become actively involved in their growth and development.
4. Since founding Trilogy Growth, we have researched over one hundred companies in Canada, across a wide variety of industries~ for opportunities to invest. We have chosen TheRedPin and a few othexs :from that much broader group.
5. In broad overview, TheRedPin presented an opportunity to become involved in a business that has great potential to innovate in the real estate brokerage market~ an existing I online platform serving builders in the condominium industry and a smart leadership team that has experience in both technology startup businesses and in the Toronto real estate business.
6. I first met members of TheRedPin's leadership team in an IKEA parking lot, A man asked me to take a photograph of him and his colleagues loading their new office furniture into the back of a rented truck. I asked whether they were starting up a. business and introduced myself. I met Shayan Hamidi, a co-foWlder and now CEO of TheRedPin. He told me about their online platform for new-build condominiums. I was intrigued and we exchanged contact infonnation.
7. Several months later; after I started Trilogy Growth, Mr. Hamidi and I re-connected and discussed TheRedPin's business. After doing some initial research into the U.S. and Canadian
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real estate brokerage markets, my initial view was that an online business serving builders in the Toronto condominium market did not meet our investment criteria. However, when TheRedPin had an opportunity to offer customers services based on both its existing database of new condominiums and a data feed of resale home listings, it became clear that TheRedPin could offer online services to customers participating in a broader range of real estate transactions, This opportunity was more consistent with Trilogy Growth's investment criteria.
8. In April2012, Trilogy Growth investedjust.under $3 million in TheRedPin and I became a member of the Board of Directors. I provide TheRedPin with assistance and advice through my active involvement on the Board and in other aspects of the business.
9. My belief was, and is, that the real estate brokerage business in Canada will move towards more transparency and efficient offering of services through the internet, in the same way that real estate brokerages have done in the United States and as other industries have done. I have seen this pattern previously in my careert as online book selling affected Indigot and eBooks with the Kobo business, as well as during my time as a founder of SalesDdver. My own experience being involved with businesses where change occurs due to the use of innovative technologies and the internet~ leads me to believe that the "frictions" being experienced in the Canadian real estate brokerage business can be addressed by innovative brokerages such as TheRedPin that use technology, particularly the Internet.
10. I believe that it was the right moment to invest in TheRedPin, when the real estate brokerage market in Toronto appears to be on the verge of a period of innovation in response to the opportunities presented by the internet and a customer culture that is hungry fat more, detailed information in an online setting. Based on my researcht the inefficiencies in the real estate brokerage market arising from, for example, key information being held tightly by agents, brokerages and TREB, will and should be addressed through brokerages' use of the internet to provide information and other services to customers. The brokerage business will always involve people, because they must do the showings of homes, negotiating transactions and so on, but there are many aspects of the business that can be done more efficiently through effective use of technology.
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PUBLIC 11. Two principal business reasons supporting Trilogy Growth's investment in TheRedPin were that TheRedPin can, in my view, i) significantly improve the customer experience of buying or selling a home and ii) operate a much more efficient real estate brokerage business from an online platfonn than traditional real estate brokerages.
12. First~ the customer experience would be improved by addressing the fact that the buyer's real estate agent is paid more commission if the buyer pays more for the home. This rnisaligrunent creates an incentive problem and can leave customers unhappy. By increasing transparency in the way agents are compensated, and by better aligning the financial interests of the buyer and the buyer's agent through a brokerage that compensates agents based on customer satisfaction (rather than the mere completion of the transaction), I believe the customer experience would be improved.
13. A brokerage with a significant online presence has the opportunity to create a very different experience for the customer than the traditional experience of a buyer or seller. From a customer perspective, buying or selling a home is an infrequent event that involves multiple different service providers and difficult1 complex decisions often involving significant amounts of money. The customer experience is characterized by 11 :fdction" in the process of buying or selling. Providing customers with all of the infonnation they need to assist them in educating themselves about their possible purchase or sale, from one user-friendly online source, would reduce the friction and significantly improve what otherwise can be an unsatisfactory experience in traditional real estate.
14. Second, my research prior to our investment in TheRedPin indicated that real estate agents in a traditional brokerage spend as much as three quarters of their time looking for "leads", that is people who will soon become a buyer or seller of residential real estate. A brokerage with a significant online presence to attract and educate customers would significantly reduce the time spent on lead generation and allow the agents to focus on other aspects of providing services to customers. From the brokerage's perspective, building the online website infrastructure is also less expensive to the business, and a better allocation of resources, than agents spending extended time with each and every potential customer. An improved customer experience from using a website would create significant efficiencies for the brokerage because
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it will better convert people who visit the website into actual customers of the business, These and other efficiencies should also lead to lower prices.
15. As a brokerage's website becomes more responsive to customers' need for better and more detailed infonnation and services online, and more control over the process~ the customer experience improves dramatically and the brokerage's business becomes more streamlined. As an investor, I believe that providing brokerages with a data feed containing more key information cWl'ently held closely by the real estate industry (such as the prices of homes that have sold, changes in the prices of homes that are currently for sale and disclosure of the offer of commission made to the buyer's agent) will have at least two effects: it will further enhance brokerages such as TheRedPfn's ability to improve the customer experience through innovative online services, and it will allow them to compete more effectively in providing real estate brokerage services.
SIGNED THIS2-2-DAY OF JUNE, 2012.
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