Everywhere I go, investors and entrepreneurs want to talk about proptech. That’s not a surprise – the industry is growing like never before, gaining momentum and generating major venture capital interest, and I don’t blame people for wanting to engage with it.
“With broad and flexible definitions for this budding sector, defining the proptech customer is also complicated.”
The problem with proptech, however, is that it’s becoming one of those terms that is an overused catch-all, where so many different things get lumped into one definition. As it stands, people use proptech to refer to everything from construction tech, collaboration tools, IoT devices, tenant experience apps, amenity apps, operations and property management platforms, marketplaces, and more.
Within this broad scope, many proptech companies aren’t your conventional technology companies. Instead, they’re service businesses with tech-enabled platforms, strategically deploying services using technology to help them scale. This coincides with a major shift in how we define technology as an industry. It’s becoming less of a vertical, and more a force of change that moves horizontally across industry sectors, business categories, and functions.
With broad and flexible definitions for this budding sector, defining the proptech customer is also complicated. Is it the employees in a commercial building? Is it the individual or business leasing space in a building? Is it the building owner, the developer, or the property manager? The answer depends on the technology you’re developing and who is paying for it; so before you begin, take time to identify who your target buyer and end user is, and who gets the ROI.
Why is proptech important?
However you define it, the proptech industry presents huge financial opportunities for emerging and existing companies in real estate, development, construction, and technology. But being a unique and novel industry, it presents some unique and novel challenges.
Here are three ways to navigate it.
1. Focus on multiple customers
Whether you’re focusing on residential, commercial, or B2C, keeping your end-user top of mind will drive your bottom line – just don’t forget who is paying for your product.
In many cases, the user and the buyer are not the same, and successful proptech companies need to focus on both. For example, consider a company like Ecobee. Its smart thermostats and home automation devices are geared toward consumers or tenants, but its website also appeals to building owners and managers. For early proptech entrepreneurs, start by working with one set of customers and find ways to appeal to various groups as you grow.
2. Disrupt with care
One thing that makes proptech such a compelling opportunity is that it’s infiltrating industries that had previously resisted the influence of high tech. In fact, only 10 percent of global real estate CEOs claim they are concerned by how quickly technology is changing in their industry, compared to 38 percent across all industries. This makes it possible for forward-thinking companies to start with the “low-hanging fruit” by looking for opportunities in areas where the industry is already used to paying.
Once you build some foundational customer traction and awareness in the industry, you can move upstream to different customers and business models as you grow. A perfect example of this is Canada’s latest unicorn, Sonder. The company began as a subletting solution, mainly for student apartments, and today is a competitive alternative to Airbnb.
3. Grow your network
Unlike technologies that are industry-agnostic, proptech is very much tied to aspects of real estate. Companies will find that they are collaborating, competing, and selling into a fairly small, tight-knit community where everybody knows everybody. This can serve you well. If one or two companies adopt your technology and advocate for it, chances are high that they’ll help you open doors to the other organizations they do business with.
To break into this industry, you’ll need to think intentionally about how you’re building your community and sharing your value proposition. Start by finding someone who will be your champion, as engaging a few early adopters that are well connected in the industry can be an organic way of gaining acceptance in the community. And as you do this, with a small amount on your cap table, consider attracting strategic investments from real estate companies. Alongside the venture capital dollars flooding into the proptech ecosystem, we’re also seeing developers and building owners becoming partners in proptech-focused funds, or setting up their own.
Businesses taking on proptech are bound to face challenges as they try to break the mold of the traditional real estate space. Understanding the complexities between the end user and buyer, being strategic in how they disrupt and developing support within the industry, these businesses can position themselves as leaders in this developing landscape.
Interested in learning more about proptech? Read our PwC Emerging Trends in Real Estate Report. Want to talk further in person? Always happy to chat—drop me a line at firstname.lastname@example.org.