Scale vs Scalability — A look at innovators Opendoor, Wework and Nested — Proptech Weekly #25

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Friends, Feudal Landlords and Commoners,

Wow! It has been a rapid-fire two weeks filled with Proptech news. I’m going to focus on two stories.

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.

But first a little recap. Opendoor started life as a project called HomeRun and launched to the public in Phoenix Arizona in mid-2014.

Their proposition was a genuine techgasm: Opendoor instantly values your home via an online form and — upon visiting to make sure all is as you said it is — would honour that initial instant valuation if you accept. If you think that’s great, the kicker is they’re able to buy your home within 72 hours. Booyah!

They quickly grew to buying a home a day in Phoenix alone.

If revolutionising selling wasn’t enough, they fixed up their homes to the ‘Opendoor standard’, complete with keyless entry. For the first time, buyers could book a property viewing from their smartphone and visit the home any time night or day. Yes, you heard right: 24 hour viewings. Like f*&^*&g magic!

Obviously introducing the world to the best way to sell your home AND the best home buying experience ever wasn’t enough of a quantum leap forward for the Opendoor team.

This week they’ve announced a part exchange programme called TradeIn. While not too disimilar to their original innovation, the marketing ploy is genuinely expansive. Being part of a ‘chain’ is terrifying for many. For many more, it results in them losing out on the home they had their heart set on. 

This is one reason why I rate Opendoor: genuinely painful problems people experience are being eradicated by this ingenious team of technologists and marketeers. These guys are the vaccine for the painful residential real estate market. 

The second reason is a relative thing: while WeWork is raising silly money because it has potential scale, Opendoor is genuinely scalable. At it’s core, it’s just a valuation algorithm that can scale infinitely. And of course I say ‘just’ with asly grin on my face.

The second announcement is related. Matt Robinson, co-founder of Fintech darling GoCardless, is launching an online estate agent.

It’s called Nested and will guarantee to buy your home if they don’t sell it within a certain time period (currently 90 days).

When I first heard about this, I felt deflated. Here was an experienced entrepreneur launching what felt like a ‘poor man’s Opendoor’.

But then it hit me: this is actually an online agent doing it right.

This is the very first online agent likely to be sustainable. Their business model viability comes from charging 2% + vat, rather than the usual online fare of “if you tell me you’ll sell my property for less, you’re telling me you’ll sell my property for less.” 

And as the perfect foil in the crowded world of estate agency, they have a gimmick people can genuinely feel is a differentiator.

There’s a third point to consider: Matt Robinson has form. He founded the uninspiring GrouPAY before pivoting into the ‘woah that’s big’ GoCardless.

I’d bet he takes this currently drole concept and refines it into something equally ‘woah’. 

What’s pertinent about both these stories is they are genuine Proptech: working toward making real estate agents obsolete.

Fundraisings

Summarising them here for easy reading: 

WeWork raised $430m: Link
Housing.com raises Rs 100 crore ($20m): Link
RealtyShares brings in $20m: Link
LendInvest brought in an additional £17m: Link
PropertyPartner brings in £16m: Link
NoBroker (India) lands $10m: Link
YourWelcome raises £400k: Link

People moving

Stephen Jury asked to leave Emoov; finds himself in high demand: Link
Former CoStar MD Paul Marples joins Datscha: Link

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

Rayhan’s PropTech Weekly XXV

Upcoming Events

SPD Insights: Future Cities — 13 Apr — Link
Realogy FWD Application deadline — 18 Apr — http://realogyfwd.com/apply/ 
Future Property Tech Conference — 19 May — Propertytech.co
Property Portal Watch Bangkok — 1–3 Jun — Link
Propteq Europe 2016–2 Jun — Propteq.com
Realcomm 2016–21–23 Jun — Link
Inman Connect SF — 2–5 Aug — Link

Meet WeWork’s founders: Mr and Mrs Adam Neumann (Fast Company)

These two are the real ‘je ne sais quoi’ behind WeWork. The secret sauce. The new Colonel (KFC), if you will. This is what Antony Slumbers goes gaga over: Link

The Future of ZipRealty (Real Estate Magazine)

When Realogy bought competitor brokerage ZipRealty, many thought it was a defensive play to keep the technology out of others’ (read: Zillow’s) hands. This in-depth piece gives an insight into what technology is to come from the largest real estate company in the world: Link

GoCardless’s Matt Robinson announces his Proptech start-up Nested (ThePitch.fm / Property Industry Eye)

See above. I’d also add that ThePitch.fm podcast is awesome. Love the format. It’s a great listen: Podcast Link PIE Link

Eddie Holmes’s Proptech Podcast episode 2

This one wasn’t so entertaining. First one must’ve been a fluke ;) Link

Scientists say future building materials will be grown (The Memo)

Mind. Blown. Might as well sell your cement and steel shares now: Link

Mitula acquires Nuora (Property Portal Watch)

Vertical property search classifieds group continues to make good use of its IPO funds, after previously acquiring Lokku/Nestoria: Link

Opendoor’s TradeIn is a part exchange for your home

My initial reaction on reading this story was to be completely taken aback in awe. Read and you’ll understand why: Link

Previous Weekly Commentary from The Real Estate Pundit:

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May 27, 2016

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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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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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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.

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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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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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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.

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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.

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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.

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A new year brings renewed optimism. 2015 was supposed to be the year of Proptech. It wasn’t.

Many are predicting 2016 will be the year Proptech becomes ‘the next big thing’. It won’t be.

What will be the big thing in 2016?

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