Faisal’s thoughts on PropTech in 2022
2022 promises to be an amazing year for Pi Labs and PropTech, so I’ve taken out some time to share my reflections on what was a record-breaking 2021, as well as my thoughts on what we’re likely to see in the year ahead…
A record-breaking 2021
2021 didn’t just break PropTech records, it shattered them. According to our research, annual global construction tech investment had comfortably surpassed the previous record (2019) before September. This came at a time many countries around the world were looking to construction as the silver bullet to revive their COVID-bruised economies. This demand was followed by global shortages in construction materials and labour. Regarding the wider PropTech ecosystem, I shared my thoughts with The Times in December on the record level of investment in the UK over the year. The same applies across Europe (see below chart). Two of our portfolio companies led this charge — with Plentific and LandTech raising $100m and £42m respectively.
Building a truly global sector
Rome wasn’t built in a day, and neither was the PropTech ecosystem. Since we founded Pi Labs in 2015, we have seen the sector transform in several ways. One example is the surge in M&A activity. Another is the growth in cross-border capital coming from newer PropTech VCs, as well as generalist VCs in Europe, the US, and elsewhere. We see this as a huge plus for our portfolio companies and PropTech more broadly — enabling our portfolio companies to raise later-stage rounds to expand both in their home markets and internationally. I shared my perspective on this as a panellist on The Growing Consolidation of PropTech at CRETech London last October.
The view from Pi Labs
2021 was a year of growth for Pi Labs — not only in our portfolio, but also our team. In research, we saw the addition of both Professor Andrew Baum (Research and Strategy Partner) and Luke Graham (Research Lead)–both of whom joined us from the University of Oxford’s Future of Real Estate Initiative. We were also privileged to have Dhruv Gupta join our investment team, and have Georgina Nwabueze also working with the investment team to reach a more diverse network of talented PropTech founders over the second half of the year. The Pi Labs family also grew by virtue of inducting our ninth accelerator cohort (our second virtual programme). 70% of participants have since secured funding and our programme won Best Tech Accelerator at the UK Business Tech Awards. Our investment team was kept busy over the year with the addition of 10 new portfolio companies.
Things are about to get even busier in 2022. This is thanks to the great work done by our finance and capital raising teams on our third fund (an announcement on this topic coming soon). But we know that VCs earn their stripes not just by making new investments, but also by showing that those we’ve already invested in can deliver attractive returns to our LPs. We are proud to say we delivered six exits over the year (achieving a 10x return on our first fund). We are, after all, long-term investors, who believe in supporting our best-performing companies over the life cycle of their growth journey. This was demonstrated by the 11 follow-on investments we completed in 2021 as our companies grew and raised multiple rounds of growth capital. In comparison, 2020 saw three exits and four follow-on investments, so it looks like we are headed in the right direction! The growth in later-stage activity within our portfolio reflects what we’ve already discussed about the maturation of PropTech, but in my view, the best is yet to come…
Themes of 2022
Evidence from within and outside our portfolio suggests the later-stage funding activity we saw in 2021 is unlikely to slow. At this rate, it’s possible Europe could see one or more new PropTech unicorns either this year or next. In addition, we expect early-stage capital to flow into a number of exciting PropTech themes. I’ve listed some of our favourites below. If you’re a founder in one of these areas, we’d love to hear from you.
Future of work
2021 saw Pi Labs deepen our exposure to the future of work, off the back of the research we published on this topic in 2020. Future of work is a broad church — including space-as-a-service solutions, productivity hacks, communication technologies, as well as a plethora of others. The movement toward a hybrid workforce was well underway before the pandemic, but the adjustments many companies have made during lockdowns have caused them to rethink the nature of work into the future. PropTech is well positioned to facilitate this ongoing transition. We look forward to adding to our existing stable of companies in this category including Hubble, OfficeRnD, and Bright Spaces.
The metaverse
AR and VR are technologies that have been in development for some time, but Mark Zuckerberg’s 2021 Meta rebrand and the fanfare surrounding it has provoked renewed intrigue. At Pi Labs, we’ll be working hard to separate hype from reality when working with start-ups using the metaverse to complement the built environment. Our latest investment in this space, Dent Reality, was announced back in November. Outside of our portfolio, we’re seeing virtual real estate sell for seven-figure sums. Much more to come on this theme, so watch this space.
No code and low code
Recent Oxford research highlighted the lack of tech expertise within the real estate sector when compared to other industries. We see this not as a lack of demand, but instead as an undersupply of labour. The gap between the need for technical solutions and the availability of expertise has prompted wider adoption of ‘low code’ and ‘no code’ development platforms — allowing non-technical professionals to fill this gap with limited support. We look forward to adding more start-ups to our stable within this category, but in the meantime, check out our announcement showcasing our investment into no-code ConTech platform, Conxai.
Circular economy and the environment
Our recent white paper Real estate and environmental performance — Bridging the gap with PropTech highlighted a number of environmental challenges facing real estate. Consider, for instance, that the bulk of 2050’s building stock has already been built (emphasising the role of retrofits in the transition to net zero), and that recycled construction materials have a fraction of the environmental footprint of virgin materials. Given that buildings are responsible for 30% of the world’s carbon emissions, net zero will remain a central objective of PropTech innovation and investment this year and beyond. We are actively on the hunt for tech start-ups helping the property industry reduce its carbon footprint. Prior investments in this category include Demand Logic, 720, Switchee, and Qflow.
Fractionalisation and blockchain
Over my time as a PropTech angel investor and VC, I’ve kept an eye on the topic of fractionalisation, as have members of our research and investment teams. It always serves as a topic of robust debate within Pi Labs. In more recent years, we’ve seen fractionalisation and blockchain converge — with some promising this could solve some of the challenges fractionalisation has faced over the years. Generally speaking, I’d say our perspective on this topic is healthy scepticism. We’re not saying it’ll never work, but there are a few boxes this innovation is yet to tick.
Robotics
2021 also saw us invest in a number of start-ups helping to solve physical pain points in real estate through robotics. We expect this to continue as the nature of work evolves alongside demographic changes such as an ageing population. My colleague Boyan recently shared his thoughts on the challenges facing robotics — namely the socio-political effects of automating labour, scalability of hardware, supply chain challenges, commoditisation of hardware, as well as dependency on cutting edge software. We’ll keep an eye on how these issues evolve over the year.
A promising year ahead…
I’m very much looking forward to an action-packed 2022 for both Pi Labs and the wider world of PropTech. In the coming weeks and months, you can expect to see the commencement of our 10th cohort — the first undertaking our newly-designed growth programme (also the first being delivered hybrid); a number of exciting portfolio and fund announcements; as well as our next white paper (on the theme of PropTech deployment within the legacy real estate industry). We are also looking forward to welcoming some new team members to Pi Labs throughout the year as we bolster our capability globally. As always, the team and I will keep you up to date with regular communication via both social media and our mailing list. If you haven’t joined the mailing list, you can do so here. We wish you an amazing year ahead and look forward to catching up soon!
- Faisal.
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