From JLL Spark in the US to PwC in Germany, major global investors have recently backed VC fund PropTech 1 Ventures. PlaceTech spoke to managing partner Nikolas Samios to find out what’s driving that interest in proptech and what problems in real estate the fund wants to fix.
“We know that on the European level, on national levels and now under the Biden Administration in the US, we have tonnes of new green regulations,” says Samios. “That gives the real estate industry a compelling reason to act.”
Speaking to PlaceTech at CREtech London, Samios touches on some of the recurring themes from the conference: the urgent rise in climate tech, the need for retrofits and – of course – hybrid working.
The company announced last week that JLL Spark Global Ventures had invested in its fund PropTech1 Fund I, which is expected to have a final closing by the end of 2021. The news came just two weeks after PwC Germany did the same.
The JLL Spark investment is particularly interesting because it’s the first time PropTech1 has received backing from a US-based company. The fund itself is focused entirely on European proptech, but the startups it backs don’t need to be confined to Europe: the problems they want to solve are global.
“We’re very happy about [the partnerships], because we think both of these investors – PwC and JLL Spark – have a pretty global perspective on what’s happening in the industry,” says Samios.
He adds: “For us, building up a more international network is interesting, not just for us as a fund but especially for our portfolio companies. You can imagine if we’re investing in Germany, the UK, Denmark or wherever in a proptech startup, some of them might also go to the US or might go to Asia.”
By partnering with JLL, for example, Samios says the fund will be able to expand its network of contacts, putting more companies in real estate in touch with startups working on solutions to everyday problems they face.
Trends to keep an eye on
For Samios, ESG technology, driven by growing regulations, is the key growth area at the moment.
“If you go to a large asset manager and talk to him – ‘please digitise your business’ – he’s not sure if this is a ‘nice to have’ or if this is a ‘must-have’ right now,” he says. “But if there is new regulation around the corner, and he needs to deliver this kind of transparency because otherwise there’s a fine, or he’s banned from the stock market or has to pay high interest rates, there’s no discussion about it.”
- Click here for more on discussions about ESG at CREtech London
When it comes to sustainability, Samios’s focus is on retrofits: “In most Western markets, it’s not about building sustainable high-rise wooden buildings. That’s nice and it’s also a market, but the majority of the buildings you see here on the River Thames have been set up in the 40s, 50s, and 60s.”
These have to be brought up to scratch to meet regulations, such as the UK’s Minimum Energy Efficiency Standards, which will make buildings that fall under a certain EPC unlettable.
Samios says the questions the industry should be asking are: how do you get the data you need on these buildings; how do you insulate them in an “industrialised, scalable way” and how do you get them to net zero where they create more electricity than they consume?
Beyond the environment, Samios says there is “tonnes of basic stuff” the industry still needs to get right. This includes asset managers having real-time data on their buildings’ operations.
How Proptech1 chooses which startups to back
Like everything else in proptech, choosing startups to back comes down to data. Samios says that PropTech1 gets about 50-60 investment proposals every month, and over time the fund has built up a database of more than 1,200 companies.
Five full-time analysts and investment managers – advised by 12 industry experts – sift through this ever-growing database of startups, picking who they believe will be winners in the long run.
The database also helps the companies that partner with PropTech1 wade through an ocean of digital options to find something that works for them.
Samios says: “If an LP [limited partner] says to us, ‘We’re just looking at this digital or ESG transformation challenge. We took a look at these two startups’, we can easily pull up our database and say ‘Hey, we have these 20-30 other ones. Have you talked to them already? Should we do an intro?’”
While a bit of luck does come in handy for a VC fund, Samios believes taking a comprehensive, methodological approach to the market is the key to success.
A better methodology should lead to better returns, and buy-in from the likes of JLL and PwC suggests to Samios that the industry has confidence in PropTech1 pinpointing startups that will solve a problem or two. “It seems like some people believe that we can deliver that,” he says.