Goldacre | The tipping point has passed

After working in stealth for a couple of years, venture capital firm Goldacre is beginning to make moves to back early stage, tech-led businesses focused on making the built environment smarter.

Although Goldacre may sound like the new kid in town to some, the VC was borne out of £2.5bn family office Noé Group, which also houses a real estate advisory business, Capreon, and partners with the likes of BAM, Knight Frank, Landsec and more.

PlaceTech spoke to Fionnuala Hogan, managing director of investment at the venture capital firm, about the fund’s plans and how to save the planet while improving the industry.

Eye of the storm

Hogan and her team are currently facing hundreds of applications for the firm’s second cohort for its Relab accelerator. Last year, the firm invited six companies on a 12-week programme to enable startups to gain market feedback through direct access to property environments and to tenants, retailers and asset managers. For the 2019/20 cohort, the number is being upped to 10-12 startups and invitations are expected to go out on 19 December.

“We are surrounded by companies and information and applications,” exclaimed Hogan. “We’re seeing some exceptional companies. As the focus of the market starts to shift and deepen, we’re seeing more companies looking to solutions that are driven by environment and sustainability concerns.

“We’re starting to see a move to much deeper applied AI. There’s still an issue in real estate about digitisation, and sometimes the data isn’t there in the first place to move to applied AI, but we are beginning to see some interesting companies in that space.

“Innovation in design, construct, develop, is coming in at some speed. We’re seeing companies using AR and VR technology in design, fantastic application of robotics, patented new materials in construction, as well as practical but essential construction management type applications.”

Ups + downs

One such firm is ShapeDo, which helps developers manage construction projects in real-time and received investment of $506,000 from Goldacre after taking part in the first cohort.

What does Goldacre look for in its investments? “A strong team which has the capability, resilience, drive, motivation, and the relevant experience and openness to take the company on a journey, through the ups and downs,” explained Hogan.

On ShapeDo, Hogan said: “It’s quite a simple product, but a simple product that doesn’t exist right now in the way that they can do it. In its simplest form, you have thousands sometimes hundreds of thousands of drawings as you go through the construction process. There is nothing that enables you to take drawings of different times in different formats, quickly and easily compare them and see what has changed.”

She added: “They are also working quite deeply on adding an AI layer because as they build their product they’re collecting a lot of interesting data in terms of the changes that happen and the consequences of those changes, which enables them to start to build a layer of informed decision-making, and move into predictive decision-making in development and construction.”

Tipping point

Talking about the biggest news events of 2019, Hogan asked the question many do, “Do we mention the WeWork word?”

“It is quite a defining moment and oddly enough, I think it’s a real positive. Different markets have different timings and I sit in the European market with quite a strong legacy into Israel as well. I think sometimes the US can be a little bit ahead of us in terms of timing of certain things, so if I was sitting in the US, I might not have quite the same view.

“However, sitting where I am, this has been quite a defining year for that relationship between digital tech and the built world. We had the zeitgeist move into a space where instead of people talking about innovation being important, thinking change is in the periphery or something to happen in the future, we’ve moved into a space where everybody is on board.

“WeWork was helpful because it forced the entire market to change. It took someone to do it in a different way with the enablement of tech to force that change. Before WeWork, you didn’t have that ability to completely flex your leasing space. Now, no landlord would even begin to think about researching a building without encompassing flexible working space and different leasing models. The whole capital investment valuation side just got out of control.”

Hogan has over 25 years’ experience of corporate advisory, investment and financing. At investment bank Kleinwort Benson, she was part of the team leading the first listings of software companies on the London Stock Exchange, working with the LSE to develop the listing rules.

She believes there’s a tipping point around change in an industry, and it’s now been crossed over in real estate. “We’re in a place where there’s realisation, acceptance and understanding, and a bit of excitement around the possibility that some technological innovation will offer into the built environment.

“Real estate is trickier than people credit it for, for the simple reason we’ve got long capital cycles. Therefore, making that decision about when and how you apply, or invest in new technology and new ways of doing things, is quite hard. If you’re new into a market, you don’t have any sunk costs, you don’t have any existing portfolio.

“But if you’ve already got an existing portfolio and you don’t provide tech investment today, then tech will have moved to a completely new place in six months’ time. That puts you in quite a difficult place because you can’t keep renewing it every six months.”

New funds

In 2020, Goldacre is looking to accelerate the pace at which it grows its investment portfolio. According to Hogan, the firm is quite broad in what it’s looking for.

“We’re interested in anything to do with smart cities and smart buildings, but also the interconnected infrastructure. The big areas of focus for us now though is the design, construct and develop area, where there’s so many exciting use cases happening,” said Hogan.

She added: “One being deeper predictive maintenance, particularly when you start looking at how you manage buildings and wider urban spaces in the context of environment and sustainability, energy management, water management, all of these things that are absolutely critical, not just to building management but to the survival of the planet.”

A change to the cohort of Goldacre’s second accelerator will see each of the companies receive £100,000 on their way in, totaling more than £1m of investment.

Hogan also has an aspirational twinkle in her eye: “As we start to ramp up the number of deals we do, we are probably going to look to move from direct investing to raising a fund, perhaps in the second half of the year.”