Are there any mid-market PropTech firms out there?

I was recently asked by a PE firm to help them to find some mid-market PropTech firms that they could invest in. They were looking for software and service-oriented businesses that were making £1m a year in EBITDA, and they wanted to buy 40–70% of the company. The more I thought about it, the harder the request became.

The natural profile, I was told, was a company whose founder wants capital to expand, improve his/her C-suite team and/or to take some money out.

The problem is two-sided. First, there seem to be very few PropTech businesses out there who are long-term survivors with ageing founders. After the explosion of the internet and e-mail in the late 1980s, the first big PropTech wave took place during the Dot-com boom in the US, UK and elsewhere in the late 1990s, by which time mass data storage and analysis on desktops was enabled. The Dot-com and telecom collapse of the early 2000s — triggered by investors realising that the transmission capacity in place and under construction greatly exceeded the demand for traffic — allowed the hoovering up of failed competitors and the growth of market share. CoStar, Argus, Rightmove and others were able to hoover up competitors at fire sale prices.

Second, new successful businesses are often chased by Series A, B and C venture capital money, and both sides have got used to large sums being paid for loss-making businesses or huge multiples being applied to profits. There are a few unicorns, and a lot of aspiring unicorns that will not sell out. There are also a lot of loss makers and zombies.

But where is the mid-market PropTech firm? Success for an early-stage company like Pi Labs will mean that there will be a lot more out there in future, but right now the PE firm might have slim pickings.

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