Business model matters — Enablers like Fixflo, Apply.Property and Rightmove vs Disruptors like Emoov and Purplebricks — Proptech Weekly #24

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Friends, Feudal Landlords and Commoners,

There’s been a flood of AgentTech these past few weeks. It seems many entrepreneurs are pivoting from their ‘agent-killing’ ambitions. I’d like to call this the Fixflo-effect. They are, after all, the leading light amongst the current crop of Proptech start-ups.

Let me tell you a story about two chaps from Edinburgh. Both super smart, talented and ambitious. They built some beautiful tech to dis-intermediate lettings agents. It was even very memorably branded. But alas they discovered the market was too small and too difficult commensurate with the effort that would be required. Fast forward a few years and that very same duo, wisdom in tow, are tackling a more focused problem and distributing their software in a very lean manner to lettings agents (yes, the very same people they wanted to put out of business).

There’s a key learning here: business model matters. Look at how Emoov and Purplebricks, even at scale, have no profitable light at the end of the tunnel. They’re entirely reliant on investor capital to sustain them. Then look at Rightmove with their 75% profit margin, and even Fixflo which has been (very) profitable since close to inception. It comes down to unit economics. Does it cost more to attract and service customers than you make from them? If so, look for a better market to focus your efforts on. Like the two chaps from Edinburgh, who went from the ambitious Advancetogo to the no-brainer market-fit of their new product apply.property.

Please feel free to relay news, tips and comments @realpundit

Rayhan’s PropTech picks XXIV

Upcoming Events

SPD host The Future of Offices — 9 Mar — Link
LendInvest Proptech Meetup — 10 Mar — Link
The 2nd Crowdfunding and Marketplace Lending Forum For Real Estate — 10–11 Mar — Link
Propteq Europe 2016–2 Jun — Propteq.com
Realcomm 2016–21–23 Jun — Link

Zumper acquires Padmapper (Medium)

Take one super loved, bootstrapped start-up. Add tons of VC funded competitors. Turn up the monetisation heat and some inevitable mixing will happen. Consolidation in the rental listings space is the only way these start-ups can possibly win. Look at Zoopla’s path to a £900m market cap in the UK, and you’ll see a clear blueprint for creating shareholder value. The question with this tie-up isn’t whether it’ll work, but which start-up is next. RentHop seems a prime candidate. Here’s the Medium post from Zumper founder Anthemos and coverage from The Real Deal: Link and Link

Rightmove reports 85% UK market share (PrimeResi)

And has OnTheMarket’s launch to thank. The well-intentioned industry ‘Mutual’ quickly signed up agents with the promise to ‘split’ inventory between Rightmoveand Zoopla. But on launch we all discovered what cowards real estate agents really are, with only Chestertons choosing to ditch Rightmove… but soon after reversing on Zoopla and returning to Rightmove when they saw no-one else would join them at the edge of the abyss. We’ve learned a lot in the year since OnTheMarket launched: 1. it isn’t going away; 2. Agents can’t live without Rightmove; 3. They absolutely can operate without Zoopla. Here’s Rightmove’s eye-watering performance: Link

Realogy’s 2015 net income increases 29% to $184m

Between the profitability of agents and portals, you see the reason why ‘disruptive’ Proptech has largely failed. And why AgentTech will be the theme for the foreseeable future. Serving thousands of agents is far more certain and profitable (as is Realogy’s business model) than competing with them to market to millions of consumers (the model of say Redfin). Realogy really is a great example of where AgentTech ends up: comfortably profitable. Link

Designing a new seller lead tool (1000watt)

People selling homes are the lifeblood of estate agents. Which is why the expensive staff are sent for ‘valuation’ visits and the cheaper, often untrained staff are left to ‘deal’ with buyer enquiries and viewings. For the longest time estate agent websites have been reminiscent of the 90s. But there are people guiding agents to a better online life, like real estate industry marketing consultants 1000watt. Some of their agent websites are truly revolutionary, with a focus on showing off people above property. Their latest client efforts are just as incredible: a valuation tool to end all valuation tools: Link

RealtyShares closes $20m funding

Crowdfunding is a marketing no-brainer: own property from as little as you can possibly afford. It’s just not the most ‘efficient’ method. Compare trading your own shares (research and all) with buying a index tracker fund. The vast majority of money is in those funds, rather than people picking stocks themselves. You’ll find the ones that win in this space take on that learning: Link

Previous Weekly Commentary from The Real Estate Pundit:

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Gary Chimwa put on the excellent Future of Property Tech conference in London. It was big!

There were three big themes: agency, mortgages and VR. 

The conclusions were:

The future of agency looks much like today (i.e. full of a long tail of agents) 

The future of mortgages looks much like today (it’s so tightly regulated); 

And the future of VR looks much like today (gadgets for excitement at events, but no mainstream application). 

These aren’t negative comments. It’s just the current state of property technology. Specifically there really isn’t much tech.

May 27, 2016

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May 9, 2016

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I don’t set out to be so extreme in my views.

I just want to promote those doing good work and I find it hard to hide my dislike for those who lack credibility and a credible approach.

What am I getting at? Pi Labs.

May 9, 2016

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Apr 25, 2016

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Apr 25, 2016

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This blog was started to highlight the people behind the Proptech.

This week I’d like to focus on seven start-ups from Seattle to Sydney that you’ve never heard of but really need to investigate.

Apr 25, 2016

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Apr 18, 2016

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You have to feel sorry for the investors. 

Which start-ups would you really back with a significant amount of capital?

Exactly.

Apr 18, 2016

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Apr 14, 2016

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Apr 14, 2016

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CB Insights released data on Proptech fundraising in the first 3 months of 2016.

If you’re a start-up founder in the UK whose name isn’t Dan Gandesha, you don’t figure on the list.

He can’t be the only Proptech founder with true ambition and the graft to back it up.

But numbers don’t often lie, and he’s the one growing his business and raising money in a way that’s making everyone’s head turn.

And I can’t stress enough how getting people talking is so damned important.

Apr 14, 2016

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Apr 1, 2016

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why do both investors and entrepreneurs not get that bigger is better? 

Bigger funding allows for bigger companies to be built to bigger exits with larger amounts of people benefiting and giving back as angel investors. Everyone wins.

Yet the ideas being funded in the UK are small. And their capital raisings are meagre. It makes me wonder what is the point of giving a company so little money that they can’t do anything but think about the next raise.

Where’s the hype going to come from in Proptech?

Us. Proptech founders. 

If the sector is under-capitalised, then the human capital needs to come together, help each other and create that rising tide of Proptech.

Apr 1, 2016

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Mar 24, 2016

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First, the most exciting PropTech company in the world has just announced some incredible news.

And no, I’m not talking about WeWork’s mammoth fundraising. While impressive, it doesn’t really change the world. You know, like how OpenDoor are re-imagining the process of buying and selling a home.

Mar 24, 2016

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Mar 24, 2016

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There’s been a flood of AgentTech these past few weeks. It seems many entrepreneurs are pivoting from their ‘agent-killing’ ambitions. I’d like to call this the Fixflo-effect. They are, after all, the leading light amongst the current crop of Proptech start-ups.

Mar 24, 2016

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Mar 24, 2016

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While Trump’s experience is more overt, it’s important to note that Boris has poured more money and support into property than any previous mayor (or UK politician since the 1980s). Politics and politicians matter: they move markets and capital with extraordinary effect.

Mar 24, 2016

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Mar 24, 2016

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One question keep cropping up: Why is Proptech not as hyped/written about?

The vast majority of proptech was founded on the notion of ‘disrupting high street agents.

While ‘agent-killing’ isn’t the sole endeavour of proptech, it is high on the priority list of most proptech founders.

That doesn’t bode well for others, the ones who want to ‘enable’ the incumbents, rather than disrupt them.

Mar 24, 2016

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