The proptech sector in London is awash with hopeful, T-shirt sporting CEOs who energetically promote their firms and promise buyers, sellers, tenants, landlords or estate agents a brighter future if they embrace their tech.
Tens of millions of pounds have been invested in consumer and business-to-business proptech in the UK and globally there could be 8,000 firms who fall into this category according to proptech expert James Dearsley, which is many more than originally thought.
But there are estate agents who think that proptech has reached ‘bubble’ proportions and that, with the exception of a handful of notable successes, there are too many shiny new products in the market. Are they all really going to succeed, many ask?
Technology can improve the sticking points that make property transactions in the UK so slow and unpleasant for all, and it can enable agents to sell and rent properties faster and more efficiently.
But many property industry experts – and even some of those within proptech – concede that the initial wide-eyed belief that the industry is an open goal for tech was wrong.
Proptech is digital online technology based services that offer estate agents and/or their end-users (landlord, tenants, buyers or sellers) a service that enables them to complete a property transaction or service in way that’s either easier or quicker than before. These tend to fall into several categories roughly identified as: marketing, lead generation, house/flat/etc rental or sales transactions and property management.
Selling and renting homes proved not to be as easy to unravel and reinvent as some of the earlier proptech players imagined.
“We believed we were bringing something new to an industry that looks after the biggest asset class in the world but was under served by technology,” says Tom Mundy, Chief Operating Officer at lettings platform Goodlord.
“I think that was a fatal error to make. The last four years have seen many companies like us thinking they can do it better than an old industry, and that all we must do is to make software that can make their lives easier.
“But a lot of companies have failed in this field because actually it’s a really complicated industry that is run by emotion, money and regulation and I don’t think many people realised that when they first came into the sector. “So we’ve spent the past four years learning the nuances and subtleties of the property market.”
Tom says the proptech companies who succeed will be ones who develop the services and tech that solve real problems for estate agents.
“We’ve found our space and we’re driving at three core appeals for our customers; does it save them money, does it make them money and does it provide a better experience and make them more efficient,” says Tom.
While Goodlord is still feeling its way into the rental market, there is one company that has undoubtedly got a tight grasp.
Fixflo, the property repairs and maintenance reporting app, now counts over a third of the lettings industry as its customers and claims to have processed 1.8 million repairs and has relationships with 13,000 contractors.
Its co-founder, Rajeev Nayyar, believes the hype around proptech is ahead of the business reality and that, despite the success of his company, the sector is in its early days.
“The industry is still digitalising an analogue process and to use the Industrial Revolution analogy it’s only now that automatic looms are beginning to be used in the wool mills,” he says.
“There is a misunderstanding among some investors who think proptech looks like a hugely lucrative sector where the tech used is behind the curve compared to say, dating.
“But the processes in property are driven by legislation, honed through hundreds of years of experience and eminently sensible.
“What proptech can do is take out the friction points and meet the new consumer expectations rather than building everything again from the ground up.”
One thing all the experts agree on is this; the huge public uptake in technology outside the industry has sowed the seeds of change within it.
“Consumers have altered over the past five years and their expectations have changed because of the apps they use every day like Deliveroo and Uber,” says Rajeev. “They want things to be available at a click of a button; the industry has been behind that expectation on service delivery, but it is catching up.”
Proptech consultant and blogger James Dearsley, who recently won funding to set up a global proptech registry called Unissu.com, says too few people in the property sector really understand what is going on in proptech.
“There are so many companies around the world and everybody is jumping on this bandwagon but no one really understands which are the right solutions to use and there is a lack of understanding about the breadth of proptech and where it’s coming from,” he says.
It is something he hopes Unissu will help address. It is to be a global resource and showcase for the sector and promote the idea that proptech is, by definition, global; as the creep of Purplebricks across the world illustrates.
“Estate agents are only just beginning to realise that they can do things differently by becoming a tech-enabled business; their model doesn’t need to be disrupted and instead they simply need to innovate,” says James.
Proptech CEOs tend to fall into two categories. These are either industry insiders leveraging their contacts like Ed Mead and his viewings platform Viewber or Jon Notley and ZeroDeposit, or entrepreneurs who have had direct experience of the problems the housing market faces and see an opportunity to shake things up.
Examples of the latter include Babek Ismayil (who use to work in the City) at sales progression platform OneDome and Orla Shields (a former advertising exec) at local authority licensing tracker GetRentr.
One proptech player who does have experience of the industry is Jon Werth, whose estate agency LiFE Residential four years ago established a proptech investment arm and was one of the original backers of Goodlord.
Called LiFE Ventures it has subsequently invested in app-based key management service KeyNest and GetRentr as well as several non-property tech firms.
Jon’s estate agency is unusual because it completes a double act both investing in and using the services it backs within its business. This offers its proptech start-ups both cash and often their first large customer too.
“I started in the industry when there was no technology so to embrace it seemed like the natural thing to do,” says Jon.
“In the early days LiFE Residential was too small to back anything but [now] proptech excites us and, having met all of our landlord clients around the world, I ask myself this one question all the time; how can we make things better and keep them engaged. And tech was always the key differentiator.”
But outside of this tech inner circle, many estate agents struggling to raise finance for their own business plans often eye the apparently huge pools of investor cash on offer for proptech entrepreneurs with bewilderment.
Unlike their businesses, these proptech firms offer the potential scale available to those who can relatively rapidly persuade thousands and maybe millions of consumers or estate agent branches to use or pay for their offering.
Most proptechs are funded either on a wing and a prayer – known as bootstrapping – or via seed funding from high-risk early investors and then sometimes by venture capital (VC) cash from huge funds.
“If you go down the venture capital route then you may get more money but less strategic investment and growth help – the ‘here’s loads of money; make it work’ sort of approach,” says James Dearsley.
“The trade-off is more money for less help or less money for more help.”
Goodlord’s Tom Mundy disagrees. His company is currently in the Series A phase of VC backing and has a high-profile backer, German fund Rocket Internet.
“Rocket are company builders and they know how to do that and they bring both expertise and scale that is unparalleled in Europe,” says Tom.
“We’ve raised over £10 million over the past four years from UK, German and US investors which just goes to show how interesting this space is.”
But Rajeev from Fixflo says onlookers should treat the huge numbers often quoted in press releases when some proptech firms launch with some scepticism.
“While a company might say they’ve raised millions, it will be given to them in tranches based on success and hitting their numbers,” he says.
Babek from OneDome says he approached funding differently and has put his own money where his mouth is to back the business.
This he says was to “get it to the point where we had the first customers and feedback, and then we were lucky enough and humbled to have some very serious people from the industry show strong interest in our vision – including our investor and chairman Sir Nigel Knowles, the former global CEO of law firm DLA Piper.”
The future of proptech may not be as shiny as some of the players would have estate agents believe. One thing is for sure though, it’s a case of survival of the fittest.
“They’re all registered as marathon runners now; it’s all about who finishes, who does well and who does it without collapsing,” says Jon Werth.