Proptech is a fast-moving and fast-growing sector, with the Real Estate Innovation Network identifying 1,622 proptech start-ups in Europe alone and investment in the sector just shy of $20bn. 73% of people surveyed in KPMG’s annual Global Proptech Survey 2018 saw digital and technology innovation as an opportunity – and if you look at the ways in which they have developed, proptech’s VC market share was 15% in 2017, treble that of the previous year.
The sector refers to unicorns, billion-pound pre-IPO valuations of businesses, as experts in the industry, but do high levels of investment necessarily equate to high business acumen? Perhaps what is rarer are those companies who have focused on the delivery of customer-centric solutions, allowing organic growth, and work at understanding the needs of their business rather than simply chasing investment.
When AOL founder Steve Case launched his second $150M ‘Rise of The Rest’ fund to back entrepreneurs, the cynic in me prompted the question: “Do start-ups always need backing to be a true success? Are start-up, accelerator and TV programmes such as BBC’s Dragon’s Den presenting a picture that successful business can only be sustainable with VC or equity backing? Is organic growth in a business obsolete?”
If you look at start-ups that have flourished in recent years such as Airbnb and Houzz, their support has initially been driven by growth and traction. VCs put $12.6bn into the real estate tech sector in 2017, treble that of the previous year, with these two companies leading the charge. Ultimately business success is founded on profit and that’s what counts where businesses are looking for investment to IPO.
The property unicorns such as PurpleBricks have also lost their shine. They had big name investors knocking at their door as a result of positioning themselves as disruptors, experts in a growing and changing industry. But high levels of investment do not always equate to the delivery of a service or product that meets the needs of users.
Entrepreneurs should take the time to understand the definition of themselves: they are people who set up a business or businesses, taking on financial risks in the hope of profit. Therefore, by definition they are not interested in publicity, being a thought leader, or expansion. These are all sub factors to the ultimate goal, which is to make profit. Understanding your target audience, refining the customer experience and adding credibility to your proposition are all key factors and they should be taken seriously, but start-ups need to learn to develop their ideas gradually and learn to crawl before they run.
Keeping this in mind, entrepreneurs intending to start a business should ask a series of key questions: firstly, is the idea they have worth pursuing? Secondly, is the idea worth taking some risks?
Start-ups have spent a lot of time and energy on campaigns around tenant engagement, placemaking and customer experience, but how much of this is just a marketing strategy on paper, talking the talk but not actually walking the walk? Ultimately, if the fundamentals of a product are not there, the cracks will eventually appear, and no marketing strategy or PR gimmick can cover that up.
If you truly believe that what you are creating will be a success for the long term, take the risk and back yourself and become a new breed of unicorn of the independent kind. Self-belief is what makes entrepreneurs attractive to backers and investors and should be given a better hearing in the business courtroom.
Guy Windsor-Lewis is CEO and founder of Locale