PropTech, the Future of Real Estate and an Opportunity for Startups.
Seeking more efficient approaches to a bloated, slow moving industry.
2016: $4,200,000,000 invested in PropTech globally.
2017: $12,600,000,000 invested in PropTech globally.
PropTech refers to companies using technology to disrupt all aspects of real estate. It refers to the utilisation of technology as a solution to solving challenges the real estate sector faces. Everything from the way we transact, develop, manage and research property is currently being impacted by it.
With explosive, threefold investment growth globally in a single year, PropTech (Property Technology) is no longer a niche subcategory of FinTech (Financial Technology) and is rapidly capturing the attention of Angel Investment and Venture Capital. Why? Because the market opportunity is vast, and mostly untapped. Real estate has long been a technologically lagging market even though it is one of the largest asset classes in the world with well over $180 trillion tied up in ground you stand on, the houses you sleep and eat in or the places you go to work or relax. Companies in the space have the unique opportunity of tapping both bottom-line and top-line gains through space utilisation, lowering costs on operational expenses, maximising revenues through data analytics and new expansive business models that break the traditional mould.
Investing In and Accelerating PropTech.
Case and point: Oyo, which just raised $1,000,000,000 from SoftBank, Sequoia, Greenoaks, Lightspeed and others. Oyo operates a large network of budget hotels, as well as bringing on-demand bookings and room service to the digital age, smashing the old approaches of reservations and requests. Oyo is looking to expand past its base in India and recent move into China and the UK by hitting the underserved Nepalese and Malaysian markets.
SoftBank is the same group that invested $4.4 billion in WeWork, the monolithic co-working company.
With opportunities like Oyo’s, it’s no wonder that investor confidence in PropTech is at an all time high, according to Aaron Block from MetaProp (A NYC based PropTech Accelerator).
Other venture backed PropTech accelerators have popped up recently to.
JLL launched Spark in June, intending to invest $100,000,000 in both Seed and Series A startups. JLL believes that real estate is the next big thing to be largely digitised, technology from every vertical; IoT, data analytics, accounting, AI, VR all the way to blockchain will impact real estate in the coming years. JLL has started implementing these new PropTech solutions in services they provide to their clients.
Fifth Wall, is currently raising $400,000,000 in its second PropTech fund and real estate giant Colliers has teamed up with TechStars (A global startup accelerator) to create a purely PropTech accelerator. It has just started its first cohort.
The industry and investor interest in the PropTech space is growing swiftly.
PropTech 1.0 acquires PropTech 2.0
PropTech 1.0 companies are companies which started the industry through less technically challenging, consumer focused platforms such as PropertyGuru, which address consumer needs through a platform for property listings. With many PropTech 1.0 players competing for views and usage, PropTech 1.0 companies are starting to move towards creating value-added services, such as property intelligence, analytics and VR.
PropTech 2.0 began to service the needs of more complex challenges and underserved markets in real estate, with the growing supply of tech talent available these companies were able to rapidly start developing solutions to brokering, developing, commercial and residential property management through Software as a Service business models. These startups employ much more advanced technologies from day one than larger PropTech 1.0 companies.
Thus it is starting to becoming more cost-effective for PropTech 1.0 companies to acquire 2.0 startups, rather than building their own services. With the high levels of funding hitting the 1.0 companies, it could indicate many being in a position financially to acquire.
PropTech could well be the next big investment trend, PropTech companies are swiftly hitting unicorn status, funding is becoming more and more widely available and acquisitions will becoming more prevalent.