Pi Labs’ Call for Start-ups to join Cohort 8
A common question I have been repeatedly asked is “How do you define PropTech?” and it’s a fair question — although not new as a concept, the exact definition of PropTech is elusive. People who’ve been in the industry for some time will recollect alternative terms such as RE Tech & CRE Tech, and they are still loosely used to describe the industry in the US.
Above, you can see a Google trend analysis for the term and you can see that it has started picking up traction only in the past few years. In the short time that PropTech has been around, it has evolved dramatically — initially used to describe the introduction of online listing websites, it now encompasses the whole property industry. So, going back to the initial question — what is PropTech?
For us, PropTech refers to businesses, using technology solutions to improve any stage of the real estate value chain — from sourcing and planning to building management and financial services. This is also reflected in the startups that we have supported over the years — looking at the spectrum of solutions below, you start getting a feeling of how broad PropTech really is.
The industry has evolved dramatically over just a few years and in response to this ever-changing landscape, each year we select several key areas to focus on for investments and research. Last year’s focus was on democratising property ownership, well-being in the built environment and automation and we saw some great teams addressing those issues. For 2020, we’re focusing on the following 8 key areas. Please note that when selecting themes, it doesn’t mean that we aren’t interested in other PropTech ventures, however, the below categories are our key areas of focus.
SUSTAINABILITY IN THE BUILT ENVIRONMENT
Real Estate is estimated to consume 40% of annual global emissions and account for 20% of international carbon emissions. Hence, the role that the property industry plays can significantly impact the future of the environment.
By 2050 all buildings are required to be net zero carbon in London. On top of that, just last month Real Estate firms with over £300bn of assets under management signed a public commitment to tackle climate change. The commitment asks real estate owners to share publicly how they plan to get to net zero by 2050 for both existing and new buildings. This pathway is due at the end of 2020 — only 1 year away.
We’re looking for start-ups that can help tackle these problems throughout the whole value chain, from new buildings to existing buildings. By 2050, 87% of buildings will have already been built, so it’s imperative that we maintain a strong focus on existing buildings. We have recognised how important sustainability is, especially when looking into the future of property and that can be seen from our investments in 720 Degrees, Demand Logic, Qflow and Switchee and we continue to welcome more start-ups in this most important space.
SMART CITIES
With the recent boom of connected devices and AI, the concept of a smart and connected city is now closer than ever. We feel this to be an important part of PropTech, as it has the potential to profoundly change the way we live and work in an urbanised environment.
Although being around for some time, it’s only recently that ideas have turned into reality. In fact, there are already 50 cities in Germany that have undertaken smart city initiatives, in order to tackle some of the biggest issues of urbanisation such as transport, waste disposal and safety.
We have previously invested in the sector with our alumni Built-ID and we look forward to speaking with other disruptors.
CONSTRUCTION TECH
As outlined in the white paper that we recently published, the construction sector is struggling on several fronts, from diminishing productivity and labour shortages to more stringent regulation and incredibly low margins. In 2018 the top 10 construction companies had a turnover of $31 billion, with a profit margin of just 0.38%!
In addition, it is notoriously been one of the most energy-intensive sectors — the UN estimates that it accounts for 36% of global energy use. Consequently, policymakers and international committees are trying to address this issue by introducing more strict regulations. We expect to see a drastic shift in the next few years, both in terms of processes and new digital innovations.
One thing is for sure — technology has a vital role to play if we want to progress and future-proof this sector.
FUTURE OF WORK
Over the past decade, the typical workspace has become almost unrecognisable — shifting from closed cubicles and static spaces to open plan offices, designed to facilitate a greater level of collaboration. Businesses have recognised office spaces can be built as a strategic tool for growth, rather than just as an amortised asset. In addition, flexible working and hot-desking reduces the average office space needed by employee, which leads to significant cost savings for companies, in some cases as much as 30%!
This, together with the introduction of coworking spaces has led to a change in the way people perceive their workspace and what they want to get from it. Property managers have recognised this and are focusing more on the depth of services they provide — ranging from freebies, to gathering complete ecosystems under one roof.
We feel that there is still a lot more room for the industry to evolve — it’s not just about free coffee and beer on tap! Two of our portfolio companies, Office App and OfficeRnD are working hard to define what the future of work will hold, but we feel there are even more opportunities to explore.
FUTURE OF RETAIL
If there is one area where technology have been consistently scrutinised, it’s the adverse effect it has had on traditional brick and mortar stores. Year on year, e-commerce steadily grows at the expense of traditional stores — lower prices, greater availability of goods and next-day delivery options have made purchasing online a no-brainer for a lot of consumers.
That said, e-commerce still only represents about 12% of retail purchases and new online brands are beginning to appreciate that online will never be a direct substitute for offline. As a result, a lot of online-only companies are expanding their offering and setting up physical locations.
The best example of this is the same company that is often seen as the biggest perpetrator for the fall of the traditional retail model — Amazon. In the first quarter of 2018 they saw revenues of $4.26bn from their physical stores alone and other companies such as Casper and Bonobos have followed suit.
The focus here is not on transactions anymore, but rather on experiences. Seeing something in person and being able to touch it is something that no online retailer can ever emulate. Ultimately, it’s not about which channel will prevail, but rather how can they complement each other. We’re very excited by the potential here and have already entered the space, with our investment in Decology, the AR interior design app.
INDUSTRIAL TECH
A few years ago, free same-day delivery would have seemed like a futuristic concept, but we have quickly grown accustomed to this fast service, and we now take it as a given. This puts an enormous strain on logistic companies and existing processes are often no longer viable.
Micro-fulfillment — localised small warehouses — forms part of the solution. However, It’s not enough to be able to ship fast, you also need to have the capacity. In 2019, online retailers will require an additional 50–60 million sq. ft. of distribution space and that trend will only grow.
This has led investors to compete for previously obsolete industrials buildings, however there is only so much of them. In addition, a lot of these buildings are being repurposed by developers for residential and mixed-use projects. In some urbanised areas, this issue is already posing great challenges — Australian developer Goodman built a 27-story warehouse in Hong Kong with trunk ramp access to the first 13 floors. At Pi Labs, we want to hear from more teams revolutionising the warehouse and logistic industry.
COMMERCIAL REAL ESTATE
We recognise that commercial real estate is amongst the least digitised segments of the overall real estate sector, as new technologies often reach consumers before they get to large commercial real estate investors. We are interested in start-ups digitising everything from CRE valuations, capital raising, debt financing, transaction execution, compliance, investor reporting, portfolio performance monitoring, investment management, asset management, and more.
LEGAL TECH
With building regulations becoming more and more stringent, being compliant is proving a challenge for developers. The market has recognised this as a valid pain point and we have already seen an increasing number of start-ups appearing in the sector addressing different parts of the lifecycle of a building — from inception and due diligence, right through to the exit and sale of the asset.
We believe that there is a significant gap for legal solutions in the PropTech sector and can’t wait to hear from companies innovating in this area.
We have now officially opened applications for our next programme, which is scheduled to commence in the first week of March. In terms of content and structure, it is a 15-week programme and emphasises on business & product development, product strategy and investment. By creating an ecosystem of mentors, partners and industry leaders, we aim to significantly accelerate the go-to-market process for early-stage PropTech companies.
Applications for our programme will close in December, so if you’re working on a PropTech solution and are thinking about next steps, please make sure to send us your application. Alternatively, if you would like to learn more about our offering or just want to have a chat, please don’t hesitate to get in touch with me at boyan@pilabs.co.uk.
