Why People Will be Key to Unlocking the PropTech Opportunity
Real Estate is the world’s largest asset class (worth more than all stocks and bonds combined at c£230 trillion) and the scale of the industry encompasses residential, commercial, industrial and hospitality segments. Yet, despite its scale and complexity, the Real Estate sector has been slow to adopt new technologies and innovation.
The potential for PropTech (any innovative technology or business that plays across/within any of the real estate segments) to disrupt the industry is therefore massive. Christina Reti, Senior Client Partner at Korn Ferry, tells us more about it.
Entrepreneurs have recognised this, as have investors. This doesn’t only include VCs: traditional RE companies, as well as RE and Sovereign Wealth Funds, are all looking at how best to take advantage of the array of opportunities. In 2018, PropTech start-ups attracted more than $20bn in early-stage funding, up 32% in 2017 and this is predicted to increase again in 2019 and 2020. The range of start-ups are diverse, but roughly fall into four verticals:
- Smart Real Estate – technology-based platforms which facilitate the operation and management of real estate assets. The assets can be single property units or entire cities.
- The Shared Economy – technology-based platforms which facilitate the use of real estate assets. The assets can be land or buildings, including all property types.
- Real Estate FinTech – technology-based platforms which facilitate the trading of real estate asset ownership. The sector supports the real estate capital markets.
- Construction Tech – focused on the ‘built world’, involving architects, engineers, construction firms and facilities managers.
Given the scale and complexity of the opportunity these verticals provide, early-stage all isn’t an option when it comes to talent. A business cannot rely on a founding team of “identikit” investment bankers to thrive, nor a management team who have spent their entire careers in the real estate industry. Conversely, a group of technology experts without sector knowledge could quickly become mired in regulations and stumbling blocks the Real Estate experts could avoid. A diversified team, with a range of expertise and experiences, is essential for any start-up that wishes to succeed.
PropTech players respond
Although PropTech is still thought of as a nascent industry, the reality is that some verticals are more established and this allows us to draw some conclusions about the future of talent. The Shared Economy sector is booming, with well-known examples including WeWork and AirBnB, both of whom have already disrupted the market for talent. If we take the open opportunities on the Airbnb website, over 25% of the roles are within Product, Data Science & Engineering. The rest fall within the spectrum of marketing, operational roles (including customer service and recruitment) and finance. Over time, the balance of these roles will change – at early stage for example, we would expect product/data science roles to be a much in proportion, followed by marketing, with operational and finance roles being a lower priority – but it’s clear that these four pillars of expertise need to evolve together. Getting the right balance at the right growth stage is essential for progression from seed to Series A funding and onwards to pre-IPO.
Although PropTech is still thought of as a nascent industry, the reality is that some verticals are more established and this allows us to draw some conclusions about the future of talent.
Grasping the investment opportunity
Talent disruption is not limited to start-ups: we’ve also witnessed the emergence of innovative specialised investors, with hybrid capabilities, combining real estate and data technology expertise. This new breed of capital challenges the classical VC fund model and offers an alternative for PropTech start-ups looking to grow.
A/O PropTech is at the forefront of re-thinking the traditional investment model for PropTech. Having anchored this innovative approach in Europe, combining deep data-tech and real estate know-how with large scale owned and operated RE portfolio, it invests permanent capital to support entrepreneurs and start-ups looking to disrupt the world’s largest asset class.
As Gregory Dewerpe, A/O PropTech founder, explains: “By being a fully integrated player, with hybrid investment capabilities, deep industry knowledge and significant strategic RE portfolio, we position ourselves as a unique enabler for companies looking to reimagine, create, incubate, iterate, scale and disrupt the real estate ecosystem. Our permanent capital approach creates a complete alignment with entrepreneurs, removing structural timing limitation and potential inefficiencies from the decision-making process, allowing to us be stage agnostic and focus on investments where we can be relevant and strategic with our assets, network, and ecosystem”.
By reshaping the eco-system from within into something more efficient, transparent, accessible and connected, these new investors help to transform the sector.
Whilst no-one can tell the future, we can learn from the examples of the past. The maturation of other tech verticals (e.g. MarTech and FinTech) has already disrupted talent pools and over the years we’ve both seen and been involved in the transformative path that they’ve taken. By applying this to PropTech, we’re well-placed to anticipate the high-level changes in talent and team building that are required as the industry continues to evolve.