PropTech 101: Your strategy for getting started
The ever expanding world of proptech can be a difficult journey to navigate, however with its influence being felt in every part of real estate, it cannot be ignored. In response to this, partners of early-stage venture capital firm, MetaProp, Aaron Block and Zach Aarons are set to become authors with their book, PropTech 101: Turning Chaos Into Cash Through Real Estate Innovation.
The aim of the book is to offer insight into the industry and provide an overview of basic history, dynamics, stakeholders, and trends. Aaron Block said MetaProp’s goal is to have PropTech 101 taught in schools. The book will be launched at the MetaProp yacht party on Wednesday at MIPIM.
Here’s an extract from chapter three: “Industry strategies for engaging with proptech”
Innovation is occurring at a dizzying pace. There is an onslaught of new startups, constant news of mergers and acquisitions, and announcements of significant investments. Partnerships can be complicated and difficult to navigate. Open innovation looks a lot like chaos because, well, it is. Making sense of that chaos, however, is our full-time job at MetaProp. One of the tools we use to help real estate companies understand the space is our Proptech Engagement Funnel, pictured below.
The swirling sphere on top represents the chaotic, rapidly changing world of proptech startups. Many incumbents enter the space defensively as they note a revenue stream under threat, a competitor with a tech advantage, a changing business model, and so on. Over time, they develop offensive strategies, too, using real estate technology to gain competitive advantage, create new revenue, offering new services, and so on. Proptech no longer appears as simply a threat but becomes both threat and opportunity. As are the best sports teams, the firms that we often refer to as tier 1 innovators are adept at both offense and defense.
In our experience working with large owners, developers, managers, construction, and brokerage firms, we have noted that the successful journey to becoming a tier-1 innovator tends to happen in the three stages designated in our PropTech Engagement Funnel. The Funnel is a synthesis and visual representation of many of the ideas we have been discussing and rests on three core competencies that we will explore in the last section of this chapter.
Observe and engage. Firms need a way to see the broadest set of potential disruptors to their existing business and to important and sometimes unexpected adjacent businesses. They also need an efficient channel for two-way communications with innovators about individual and firm strategies, interests, and capabilities.
Digest and disseminate. Firms need to understand, track, and make sense of their observations. The knowledge they’re gaining must be regularly disseminated to the right people throughout the organisation.
Pilot and test. Often known as proof of concept (POC), piloting requires a mechanism for evaluating qualified opportunities and quickly engaging in small test programs that are likely to fail. (Many fast failures are the quickest route to success.) Sophisticated organisations approaching tier one status test in a designated sandbox, or proving ground, which can be organised by real estate asset (or portion of an asset), by operating unit, by team, and so on. Pilots also can also be deployed opportunistically into a business, tested when and where the fit feels right. Such test drives are a chance to learn, build relationships, and, hopefully, enjoy an early win or two. Sometimes real estate organisations can even help to mold the product to address specific business needs.
Once a pilot or test is deemed successful, larger organisations frequently require broad application and distribution of the technology in order to achieve needle-moving impact. A lot can go wrong here. Large companies can smother small ones, startups can run out of money, startup staffing might be inadequate for quick growth, and so on.
Partner, or joint venture. If a technology has the potential to scale, a real estate company must be able to connect commercially and strategically with the startup. Such collaborations can look like traditional vendor relationships or true partnerships in which the parties explore new business lines together. Partnering often overlaps with scaling. (None of these steps are strictly linear.)
Strategic investing is a powerful tool but, as with other steps in the funnel, it’s fraught with risk. Financial gain is, obviously, one important reason to invest, but other reasons are often more important including the ability to support growth, influence a team, gain exclusivity, and establish a path to merger/acquisition. Investments and the appearance of influencing investments—for example, via fund or other direct investment vehicles—is a critical competency.
- The book is due for release on 26 March and is available for pre-order on Amazon