Mapping PropTech 🏠

At 360 Capital, we’ve always found PropTech to be a fascinating multifaceted industry, which we were lucky to see evolve front row thanks to our portfolio companies (ping Casavo, Siteflow). Recent market numbers show that the hype is shared among the ecosystem, with more than €500M invested in France in 2021, which represents not less than a +286% YoY growth 🔥🔥🔥

Over the past years, we’ve observed PropTech undergo deep shifts and Covid has definitely accelerated the digital makeover of what used to be a conservative space. PropTech being inherently carved in stone in people’s mind and habits — pun well intended — the market was prime for disruption. This urged us to take a step back and try and understand the ins and outs: What is PropTech? Who are the stakeholders? What are the mega trends making the lines move?

As displayed in the mapping above, we categorized the changes in 5 big segments — Build, Invest, Live, Manage, Enablers, each moved by their own trends, into which we’ll dwell further on.

The purpose here is not to pretend to a comprehensive mapping, but rather to put to the fore our apprehension of the market and try and asserting where future opportunities lie.

Truth be told, this article is also the result of researches we’ve been conducting when we came across a company we can’t wait to tell you more about … Stay tuned! 🌱

#1 — BUILD / Rebuilding the foundations 🧱

Construction accounts for a whopping 9% of the EU’s GDP and employs more than 18M people across the continent. It’s also one of the least digitized industries in Europe, facing today burning topics: sustainability, productivity and costs. First of all, the construction industry is urged to find ways to achieve greater sustainability and to figure out waste management. Secondly, ways of working have barely improved over several decades with major potential for productivity and time gains. And as the VC mantra goes, when there are issues, that’s where you’ll find room for business opportunities 💫

Building greener & greener buildings

The construction industry is responsible for 39% of energy-related global carbon emissions and European policymakers are increasingly pressuring companies to find greener ways to build and tools to monitor the carbon footprint. For this matter, we see startups develop green materials derived from recycled or natural materials, new building concepts with modular components, or a greater sustainability focus throughout the life of buildings (from conception to their everyday up and running).

Productivity increase

For a long time, low industry margins in the construction industry have justified for a lack of innovation, explaining part of the productivity lag (only 1% productivity gain over the past 2 decades). However, there is a shift in mindset to use more digital tools and start working with startups, which are making inroads in software-driven domains including digital collaboration tools, 3D vision, sensors and data analytics for smart buildings, marketplaces and shared economy rationales.

Productivity also springs from people and with many different stakeholders involved at any given phase of a project (architects, contractors, developers, suppliers…) communication and coordination are complicated, leading to reworks, delays and unforeseen costs. Hence paving the way for collaborative planning and tracking tools to help make the whole process smoother.

#2 — INVEST / Make it as easy as a pie 🥧

Investing in real estate has always been a milestone in people’s life but also comes with challenges and barriers as capital, knowledge, and time are required to pursue an investment in real estate, hence leaving out a big chunk of the population.

Removing barriers to entry

Thankfully, new models have emerged to bridge the gap and allow people to invest with a small(er) entry ticket, benefit from an educational walk-through and a hassle-free management support.

• Tokenization, which is basically the representation of an asset with a transferrable medium of exchange (token), allows for people to buy a chunk of a real-estate asset with as little as 100€ and as easy as buying on an online exchange platform. In some ways, tokenization is similar to crowdfunding, which has been around for decades, upgraded by the use of new technologies (Blockchain, NFT) or next gen UX friendly products.
• Fractionalization, which is the split of a big lumpy asset into smaller pieces, bringing together a small group of co-owners to purchase a share of a single-family home and enjoy ongoing access.
• Buy-to-let, positioned at the cross-roads of Proptech and Fintech by enabling people to efficiently and seamlessly invest in Buy-to-let residential real estate, making it as easy as investing in stocks.

Those new players aim at offering a balance between access to investment products with good risk/return profiles, and management of the real estate asset’s liquidity.

Alernative paths to homeownership

Investing in real estate is a big milestone in people’s life, it represents safety, security, family but it also often comes at the cost of a painful and expensive process. Fortunately, a number of innovative business models have emerged to fix the accessibility and affordability problem of buying a home:

• Rent-to-own, an alternative to mortgage financing that accommodates homebuyers with weaker credit scores and removes the need to make a large upfront capital outlay as the tenants contribute an amount in each rent payment, toward building up equity in the home over time.
• Full-service real estate brokerage, underwrites both all-cash offers supported by a short-term bridge loan as well as conventional mortgages.
• Shared equity, creating financial vehicles that help co-invest alongside homeowners and share in home price appreciation.

#3 — LIVE / Enhanced living experience 👪

Enterprization of purchasing and selling processes

Buying or selling your house should be an exciting experience, and yet the way things work today, it’s a painful and stressful process. Real estate agents, brokers, banks, notaries, title insurers, and many other intermediaries all make for a convoluted, difficult, and expensive process for home buyers and sellers. The opportunity is big for companies that facilitate and smooth out the whole process: home search screening, property visiting, moving services, refurbishments and maintenance up until the time you decide to sell your house. Let’s not forget that buying/selling a house is a huge transaction, sometimes the biggest milestones in people’s lives: you empty your savings, you move all your stuff and memories, turn it into a home… And people want the best support for this milestone.

New ways of living

Historically, if you wanted to find a place to live, you didn’t have much options: you either rented an appartement or saved up enough to buy. Now, think community and WeWork for housing as a series of startups are taking the well-known room mate concept to the next level and ‘rebrand’ it as coliving: more flexibility, more services, more social interaction.

On another note, while turning the world upside down, Covid paved the way for flexibility at work, fostering a big change in the way we work and organize our life around. A vast majority of employees now want flexibility in their workplace and their work schedule. With working from home becoming the norm for the foreseeable future, many are choosing to relocate their office. On the one hand, you’ll find companies now seeking to provide their employees with the best working environments, and on the other hand, for the ones who cut ties with the “traditional” office, solutions are emerging to serve the needs of these digital nomads.

#4 — MANAGE / Finally digitize the full chain 🧑‍💻

In comparison to other industries such as banking, retail, and healthcare, real estate has been a rather late adopter of digitalization. Yet, this space has long been prime for disruption: incumbent property management companies are highly fragmented and often sport an NPS score that hovers around zero, but tech can enhance the house-buying experience, property management operations and boost operational efficiency for all the stakeholders.

From fragmentation to consolidation

Following the fragmentation of this space, players have focus on digitizing each and every brick: online agencies, portals, virtual home tours, contactless solutions across home loans, payments, and insurance services. Hence, deeply changing the way real estate is purchased, sold, leased, and managed. On the business side, real estate specialists are embracing digital tools to boost operational efficiency for all the stakeholders. Same observation in commercial real estate, where property owners can take the management of their assets into their own hands with centralized dashboards providing insights and optimization recommendations.

However, we expect consolidation there and we are already observing service providers extending their offer to properly deliver a one-stop-shop, with a full digital experience far superior to current offerings.

The great delegation

Similarly to the low NPS in the traditional real estate industry, managing your property and your neighbors can be a real pain, and people are growingly asking for hassle-free solutions to take over. Think daily basis support for all asset types such as homes, rented out flats, offices, coworking, co-living, residences, student housing and also to smooth out the trustees relationships.

#5 — ENABLERS / PropTech+FinTech+InsurTech = BFF

PropTech, FinTech and InsurTech are closely intertwined and more than an overlap, the latter two seem to be enablers opening up many opportunities for PropTech innovation.

How FinTech fuels PropTech innovation

Indeed, in this march towards the streamlining of access to homeownership, a simplified financing must come first. Newcomers have come up with new ways to access capital, helping in mortgage applications and approvals by making it simpler, faster, cheaper or more collaborative (why not rely on the capital of your loved ones for instance?). Besides, Real Estate is a financial asset class and tech is definitely valuable when it comes to assessing and optimizing one’s portfolio.

Make homeownership hassle-free

PropTech is definitely upending the home-buying/selling/owning processes by making a slow process bogged down by tedious paperwork, dramatically faster and simpler. Many startups have therefore emerged through InsurTech and AdminTech to help both tenant and landlords in tenant applications and screening, rent payments protection, property insurances and smoothing the moving out process.

Besides, the construction industry is heavily reliant on insurances, with the 10-year-long defects insurance being the epitome. It is therefore not surprising that we see more and more “neo-insurances” verticalized on this specific subsegment.

All in all

We can’t say enough how much we love PropTech and are looking forward to seeing what the future holds in store ! That being said, we can’t help but notice that PropTech is one of the few industries in Europe that hasn’t given rise to multiple unicorns… yet !

We are convinced that the 🦄 unicorns of tomorrow are already around and that the time is now as stars are aligning perfectly: sustainability awareness, huge market size, room for disruption and digitization, capital available, path to consolidation, amazing founders and rising exit paths!

PropTech founders, we’re here for you: we’d be happy to know what you are building! => clara@360cap.vc

Thank you Thomas for your precious help and guidance !