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I got a phone call last week from the key people at one of the other online real estate companies. I'll call it Company X. They have been unable to raise the final round of funding needed to carry their company to profitability. With little cash in the bank and no possible financing on the horizon, they're in trouble.

Company X's greatest asset is its large customer base, which, fueled by solid business relationships, is growing daily. The irony is that even with such an asset, Company X won't be able to increase revenues fast enough to pay the bills. With that in mind, execs at Company X have been calling other companies to discuss investment or merger possibilities.

Getting a call like this really drives home the point that we're in a risky business. One year you're on top of the world with millions of dollars in the bank and strong backing, and the next you've become a write-off from the investment community as it heads into new sectors. Given the increased focus on profits at technology and Internet companies, this is probably the first of many such phone calls we'll receive. In the next six months, we expect online real estate space to get thinned out to just a few remaining players. Luckily, we've been focused on profitability from Day 1 and are now well positioned to hit our objective in a reasonable time frame.

TEMPTING. After that initial call from Company X, I talked with some of my team about this interesting situation. We were all intrigued, so I called to get more details. Specifically, Company X wants to have somebody put in a few million dollars to cover their costs and the ongoing payroll for a reduced staff. What made this deal tempting is that an investor would be able to pick up the thousands of additional customers and business relationships at a very reasonable price. On the other hand, one big potential problem with such a new relationship is what the outgoing cash flow would do to our bottom line.

Would this be the case of a troubled swimmer drowning the rescuer? Right now, we can't take any deals that appear to delay our company becoming profitable. If we don't meet our goals in reaching the black, we could easily jeopardize our own ability to find financing in the future.

While thinking over this prospect, I'm asking you readers for your input in our decision-making process. Here are the three options we are considering:

1) Make an offer for the company: Additional clients equals additional revenue and a bigger market share.

2) Wait and see: Keep in contact with the key person and find out if there are any serious buyers out there.

3) Pass on the deal: Stay focused on the zipRealty.com game plan.

I look forward to getting your answers (send them to scott@ziprealty.com), and I'll share them with you. I'll also keep you posted on our decision. See you in two weeks.




Scott Kucirek is president and co-founder of zipRealty.com, an online real estate brokerage. The company's Internet site and online real estate agents let people complete the entire purchase or sale of a house via the Web. The company's Web site is www.zipRealty.com, and you can E-mail Scott at Scott@zipRealty.com.