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#Proptech #Startups - funding deals in September 2018 from @Proptech_Cap @Minh_Q_Tran @ChristopheReech

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#Proptech: investor insights from @ChristopheReech at @Proptech_Cap

Proptech: investor insight

By Graham Lanktree | Fri 5 October 2018

 

At the end of August, online estate agent Yopa landed £20m from investors to fuel improvements to

its online platform and continuing growth in the UK. In total, investors have poured £75m into the

platform through several rounds of funding since the  rm launched in January 2016.

 

The most recent investment in Yopa was led by dmg ventures, the venture capital arm of Daily Mail &

General Trust, which is one of a growing numbers of investors. They are among the few large, early

investors in proptech start-ups like Yopa. But while proptech is still in its infancy, it is growing – and

so too is interest from investors.

 

So what are these investors looking for and how much money are they putting into the sector?

Home ground: online estate agent Yopa received £20m from investors in August and has TV ads

featuring Mo Farah

Large cheques are expected to be written in the coming months for start-ups that investors bet will

be the next big thing.

The property industry has yet to see the level of innovation or disruption that companies such as Uber

or Apple have brought to taxis or the music industry, but some believe it might within the next 􀃣ve

years. As one investor puts it, proptech has a “huge number of applications that haven’t been touched

one bit”.

A number of investors are now focused solely on proptech. Goldacre, formerly Goldacre Ventures, is

one such company. It still holds historic family investments that David Bloom, partner at Goldacre,

says “go as far back as 34 years”, but was relaunched early this year with a view to capitalising on the

opportunities offered by proptech.

Although Bloom would not say exactly how much money Goldacre has to play with, he tells people to

“look at our track record” and the tens of millions of pounds the 􀃣rm has invested, and con􀃣rms that

the fund will take the same approach it has taken to property investment and apply it to proptech

over “the next three to 􀃣ve years”.

“It’s about maturing the product into what the sector needs. Investment is not enough”

David Bloom, Goldacre

A batch of other investors have also emerged this year and revealed plans to invest tens of millions of

pounds into new proptech ventures. In May, a new €50m (£44m) fund called PropTech Capital, led by

French investment guru Christophe Reech, was established to focus on early-stage proptech

companies. Then in June, JLL Spark announced a $100m (£76m) global venture fund to ramp up the

number of proptech start-ups it invests in worldwide.

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Figures show that other investors are getting in on the action. In 2017, global investment in proptech

􀃣rms grew by 62% on the previous year with investments totalling £8.5bn, according to data from

Venture Scanner, which tracks investments in emerging technology sectors.

The growth of sector-speci􀃣c venture capital funds is an encouraging development, according to Vik

Tara, founder of the start-up PropCo, which is behind Countrywide’s lettings management software

system. He argues that proptech investors’ success depends on a deep understanding of both the

property market and tech industries.

 

“If they don’t have domain expertise, how effective will they be?” he asks.

Lack of understanding Tara has invested in three proptech start-ups and founded two of his own. When seeking funding for

his start-ups, which include the property management tool Rentr, he says it was “very timeconsuming

when we went near traditional corporate 􀃣nance” to raise cash. He attributes this to

investors’ lack of understanding about how technology could affect real estate, although he says this

is beginning to change.

“If you’re spending all your time building the technology then actually, the 􀃣t with investors is about

how good they are at trying to understand what you’re doing,” he says.

Goldacre’s Bloom agrees that the sector is gaining momentum and that investors are striving to better

understand the companies that operate within it. In early September, he spent a day listening to

pitches from 16 proptech start-ups eager to get his fund’s investment and join its business accelerator

RElab. The start-ups had been whittled down from 150 applications and covered urban logistics,

digital retail in physical spaces, transactional platforms, legal, accounting, facilities management and

general services.

 

Home front: Yopa has received £75m in investment since it launched in January 2016

In October, RElab will be taking in six to eight start-ups. “It’s not always about whether those

companies are viable and successful; it’s also what we can contribute to them,” Bloom says. “We didn’t

take one company into the cohort because we didn’t believe we were necessary for their success.”

What the fund is looking for are start-ups that have a working product and have completed promising

initial trials. “You’re asking ‘can they capture enough market share to become de facto standard?’”

Bloom says. Of Goldacre’s approach, he adds: “It’s about maturing the product into what the sector

needs. Investment is not enough. There has to be alignment and synergy where you’re able to add

more value.”

“There are a lot of interesting (proptech) products targeting different sectors of the

market” Mihir Shah, JLL Spark

Mihir Shah, an early angel investor in Uber and former vice-president at Groupon, is co-chief

executive at JLL Spark, which was created as a division of JLL in 2017. Its initial aim was to invest in

one proptech 􀃣rm at a time. However, after a year spent looking at the sector, Shah says it became

clear proptech was growing so fast that the accelerator needed to invest in a number of start-ups

globally at the same time. The realisation led it to launch a $100m global venture fund in June.

“The world of proptech is moving fast,” says Shah. “There are a lot of interesting products targeting

different sectors of the market.”

The fund aims to back 10 to 20 start-ups this year. So far in 2018 it has 􀃣nanced six companies, three

of which have been announced.

In July, it was one of several investors that put a total of $18m into Skyline AI, which aims to use

arti􀃣cial intelligence and machine learning to help investors make better commercial real estate

investment decisions and beat industry benchmarks.

In early September, Shah announced that JLL Spark had invested in transaction and deal management

software Dealpath. Later that month, the fund contributed to $2.8m in seed funding raised by start-up

Jones, which combines software and pay-as-you-go insurance products to handle liability insurance

for contractors working on building projects.

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One thing these investments have in common, Shah says, is that they will contribute to JLL’s six core

businesses. “Is this product something that can help our businesses improve their services?” is a

question he says he 􀃣nds himself asking each time he looks at a new pitch.

When asked where proptech could have the biggest, and as yet unrealised, impact, Shah points to

smart buildings. “A building is generating so much data and, with more IT developments, will

generate even more.” Using data collection and analytics “can you save energy and provide a better

experience for tenants?” he asks, noting that there is opportunity in apps that allow employees and

tenants to interact with the building.

Blockchain tech

“Another area is the ability to allow retail investors to own a piece of a commercial real estate asset,”

he says, by using blockchain technology – which creates a permanent digital public ledger of

transactions – to 􀃤oat a percentage or share of a building to smaller investors.

PropTech Capital’s Reech – who says his fund is 􀃣nalising a pipeline of three or four deals that he

hopes will be completed by the end of the year – also sees opportunity in start-ups bringing

blockchain’s public ledger to the property sector. “That is a direction we’ll be taking,” he says,

although he will not divulge details.

Source: Shutterstock/wavebreakmedia

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He adds there is only one area “where there’s a lot of interest from investors” but where they should

be wary: cryptocurrency or ‘digital dollars’. “We’ve seen a lot of start-ups trying to use

cryptocurrencies [but] we haven’t made an investment. In my view, cryptocurrency isn’t there yet.”

 

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real estate fund

Tara agrees. He says that “we don’t have a reliable and stable cryptocurrency”, making it dif􀃣cult to

make payments if the currency’s value is always 􀃤uctuating. He has 􀃣rst-hand experience. He did a

proof of concept of signing a tenancy agreement in blockchain and using a cryptocurrency to pay the

rent but it wouldn’t work because “the payment side isn’t stable”.

Using blockchain to track transactions or 􀃣le documents only marks an incremental improvement

until cryptocurrencies become part of the equation, Tara says. For start-ups to be successful, he adds,

they need to make services “much better than what’s already out there”.

The trick for investors will be to sort the proptech wheat from the chaff and back the companies

whose software is better than what’s already out there – and will prove invaluable for property

companies seeking ef􀃣ciency.

#Proptech #RENT2018 with @Proptech_Cap in the startup competition #VentureMap