A Peek Into A Strategic Investor’s Perspective
Only a year has passed since we last introduced our market map for Construction Tech startups in Israel, but so much has changed. Examining some of the changes we identified, we also recognize interesting new trends, which can indicate the directions in which the construction and real estate industries are expected to expand.
Let’s Talk Numbers
Generally speaking, the growth in startups and investments in the Israeli PropTech ecosystem echoes the global one. A swift look at the numbers over the last few years lays out a compelling picture:
- Currently, there are over 100 startups operating within the PropTech scope.
- In the past 5 years, we’re seeing a surge of new startups: 244% growth, with 61 new startups vs. 25; in the last 3 years, this factor reflects a 67% increase (39 new, 58 existing).
- In terms of investments, the Israeli PropTech industry saw a rise of 3000% from less than $30M, invested prior to 2015 to over $900M in the last 5 years
But the numbers don’t tell the whole story…
A Shift From ConTech To PropTech
The dramatic increase in the number of startups from last year’s map to this year’s landscape, stems largely from differences in scope and definitions. Whereas last year we focused our attention on technologies aiming to address only the construction stage this year, it became clear to us that the Israeli startup hub is moving rapidly forward to arm every stage of the smart building’s value chain, creating a pulsating and vigorous PropTech ecosystem.
With that in mind, we started cataloging these startups and realized that the Israeli PropTech market is very likely to penetrate the global one, due to its unique and original technological expertise. It was when we set out to categorize them that we noticed how the many challenges, at various stages of the building’s value chain, are met by using some of the most advanced technologies on the market.
The first thing we noticed when grouping the companies, is that there are many competing companies which introduce various technologies to solve similar problems, throughout the value chain. From planning, through “as-built” monitoring, supervising, and up to blockchain-based real-estate marketplaces, the startups justified their own categories for each stage. Segmenting the map according to different stages of the building’s value chain, from a strategic investor’s point of view, allows the various stakeholders to compare technologies from different fields and look for specific solutions to particular problems.
Though the various startups might be relevant to additional stages of the building’s value chain (therefore, to an additional category in our map), where their competitive advantage lies is what finally determined their place on this map.
Unique Local Expertise
It’s not a secret that Israeli startups often offer unique expertise in deep technologies such as computer vision, AR and ML. But what stands out in the Israeli ecosystem, is the companies’ ability to take those deep technologies, from fields such as cybersecurity and manufacturing optimization, and adjust them to other industries, in this case, real-estate and construction. Therefore, technologies we’ve seen developed in the Israeli military, automotive or manufacturing, are suddenly used in optimizing construction processes, enhancing safety procedures and empowering sales for new real-estate assets.
When Deep Technologies Meet Real-estate Challenges
Some interesting implementations worth mentioning use robotics for accurate and sometimes dangerous processes that require the highest level of precision, while improving productivity and keeping human lives safer. Virtual and augmented reality, combined with computer vision are other great examples of deep technologies, which can be used for better supervising and monitoring of construction work, as well as dramatically improving the end-user experience when purchasing a new property. A favorite example is that of a couple of founders with a computer science background who decided to use computer vision technology in order to analyze images captured periodically in the construction site, providing the different stakeholders with a unified truth about the real status of the project. By simplifying the progress monitoring task for the developer or the contractor, they are also providing a full “digital-footprint” of the building, which can then be used by the property owner or facility manager to solve future maintenance and warranty issues.
Advanced machine learning technologies are used to analyze the endless amount of information and ‘data-lakes’ (which are being generated by millions of new IoT devices and sensors) in order to support the decision-making process for potential buyers, investors, property owners, and retail operators. Specific data-driven insights such as population types, commute patterns, asset valuation, and risk mitigation for aging buildings are crucial for those decision-makers to properly lead their business. An interesting example of such implementation is a company utilizing the location of mobile devices, in order to provide real-time consumer data and behavioral insights in the ‘offline’ world. This can significantly support a retail developer in any future decision as to the best location for their new branch.
Security tokens representing real-estate properties are being offered to potential investors over private blockchain networks, thus creating innovative new blockchain-based marketplaces and investment opportunities. Landowners that are able to digitally purchase or sell only fragments of their properties; is only one example of disruption driven by technology in this industry.
IoT devices ranging from smart-home security, energy consumption units, smart lighting, room occupancy sensors and up to air-quality control sensors, are leveraged to improve tenants’ daily experiences within smart and connected new sustainable buildings. Tailoring the building environment to its tenant’s personal climate profile and properly responding to the building’s maintenance needs and services, are only the tip of the iceberg with regards to where this industry is heading
Two Conditions For Market Penetration: Non-intrusive, Zero onboarding
Construction and Real estate at their core are still a surprisingly traditional market. Even now in the midst of the data-driven revolution, it is slow to change, for one main reason: its readiness to embrace new and advanced technologies greatly depends on how swiftly they can be implemented and used or in other words, how quickly can they demonstrate real value to their clients.
That’s why in order to penetrate the market, startups need to think out of the box, defy conventions and introduce technologies that require zero to minimal onboarding and can be adopted with no major disruption to existing workflows. In other words, you want it to work — make the adoption invisible.
Fortunately, Israeli startups have that embedded sassiness it takes for quick and painless execution, allowing customers to see immediate and impactful value on daily operations. A great example of one such technology is an indoor navigation technology which utilizes the earth’s magnetic field enabling hyper-accurate indoor location awareness, using common mobile devices only requiring zero hardware infrastructures (such as WiFi or Bluetooth beacons). Finding the fastest route to a gate in an airport, an ATM in a shopping mall, a specific room in a large hospital or even the ideal route to find the full shopping list of items in a large retail store are only a few of the applications for such technology. Providing a hardwareless GPS-like service for the indoor world requires minimum integrations and creates immediate value.
Our Next Investment Spotlight: Going Beyond The Meter
Our last year’s investments in Israel-based PropTech startups include Buildots, Placense, and Oriient, all of which focus on various stages of the value chain, from inspection and as-built monitoring and up to location-based services and insights.
Looking forward, we see new buildings as sustainable, living organisms playing a crucial role in the future of smart and connected cities. We aim to focus our attention on big-data platforms and property management technologies that analyze the building’s digital-twin, helps operate assets more efficiently, and significantly improve the tenant experience. Technologies that will allow a utility like innogy to “go beyond the meter” in a net-zero energy properties era, are the ones that we believe will take the real estate industry to the next level.
At The End Of The Day
Providing tenants with tailor-made experiences while using sustainable materials and reducing energy consumption is the future of real-estate, whether a smart office building or a private home. As a global energy provider and a strategic investor, we see it as both a calling and a commitment to take an active part in forming, nurturing and supporting a productive global startup ecosystem that will create these types of technologies for every stage of the future real-estate value chain.