2023 Year in Review: The Soft Landing

Given that my previous Year in Review leveraged an airplane analogy, I figured I'd keep up with the trend… that and "soft landing" may be one of the most search phrases on Google given the current interest rate environment.

In beginning to write 2023's Year in Review, I started by reading what I wrote 12 months ago and seeing how close I was to predicting how the year would unfold. While it is most likely just dumb luck, the year unfolded similarly to what I had expected on how we performed as a business and where the general market ended the year. That said, what I failed to predict was on the extremes.

Hitting Rock Bottom

Going into 2023, I was optimistic that the worst was behind us. We saw revenues decline towards the end of 2022 but stabilize at the end of the year. While I did not expect our business to improve quickly, I expected it to stabilize.

In reality, we still had yet to hit rock bottom. The impact of the new interest rate environment would continue to create stronger headwinds throughout all of 2023, and that materially impacted our business. We ended Q1 2023 worse than the previous quarter and found ourselves needing to make more cost cuts to ensure the company could weather the storm. To make matters worse, in March 2023, we went through the collapse of our primary banking provider, Silicon Valley Bank, which effectively froze all our liquid assets. Needless to say, March was rock bottom for us.

Correcting Course

At the end of Q1, we were faced with two possible paths forward: 1) cut costs (i.e., payroll) to account for the loss in revenue, or 2) find a way to grow revenue quickly enough to reduce our burn rate effectively. Additionally, regardless of option 1 or 2, we knew we would need to raise additional capital to ensure we could get well into 2025, if not 2026.

What we did, while maybe unorthodox, was a combination of the two. We decided to be extremely transparent with our team, explaining our situation and our need to grow, or we would have to cut. With our Board's support, we gave ourselves two months to hit a revenue target that would ensure we wouldn't have to make cuts. We changed our daily meetings to focus solely on our daily progress towards hitting that goal. We created special teams internally to focus on any and all ways to grow revenue in a market with significant headwinds. Additionally, we offered a soft landing in the form of a voluntary separation with severance to any employee who wasn't fully committed to our direction and what we were building.

The result? By the end of May, we had grown revenue and lowered costs enough through voluntary separations that we would not have to make any cuts. I'm incredibly proud of what the team achieved in those two months; they were painful and challenging, but they allowed us to "reset" the business and get laser-focused on what was most and will be most critical for the years to come. The icing on the cake was we could close a bridge round over the summer led by one of our longest-standing customers, Fundrise, with participation from our major investors that positioned us to reach free cash flow and control our own destiny. We had completed the soft landing.

Taking Off

As we entered Q3, we were energized, having successfully corrected the course, but we had very tempered expectations given what had happened to the business in the previous twelve months. To our surprise, the growth we kickstarted in Q2 continued throughout the year. At the end of 2023, we closed Q4 with our best quarter ever in terms of profit, inspections completed, unit economics, and every metric we deem critical to the business. While we are not out of the woods by any means measured, I enter 2024 with high conviction that we have the team, product, and investors to grow Inspectify into the dominant player in the inspection and data services industries.

Outlook for 2024

2024 will be a very telling year for the industries we serve. On one hand you have strong signals from the Fed that interest rate hikes are on pause and the possibility that up to 75 basis points of cuts are possible towards the end of 2024. This is a significant tailwind for our customers that operate around the real estate transaction. Additionally, 2023 was another year of extreme weather, and our customers, especially in the insurance industry, care more and more about having accurate, real-time data on properties vs. relying on predictive models. That being said, it's also an election year, and there are still concerns of a possible recession, and proptech companies are closing doors left and right. In general, there is still a ton of uncertainty in the future.

Overall, I'm confident that we are well positioned to take advantage of these tailwinds and weather the headwinds as we continue to invest in our product offering and keep laser-focused on offering our customers the best inspection experience and platform. Cheers to another exciting year in proptech!