“Proptech” is booming across the UK and the rental sector is seeing an explosion of companies offering new business tools to lettings agents.
From CRM systems to floor plan apps, from data analysis to startups that help renters and agents arrange viewings, the sheer number of companies pitching for agents’ business in the sector is daunting.
Hundreds of apps are now competing for the attention of just 11,000 estate agencies.
For agents who want to build a profitable dynamic business, it is a confusing time. How on earth do they decide which tech company will actually help their business grow? How do they know which startups are worth the time and money that will have to be spent to integrate a new system or app successfully?
Most smaller agents are already working with more than half a dozen suppliers, the last thing they will want to do is add more to that list.
I sense that some agents are bewildered by the vast array of new offers out there and hesitant about opting for one, in case they make a mistake. It’s not immediately clear which proptech company they should hitch themselves to, so instead they do nothing.
Doing nothing, however, is not the answer.
If your estate agency is to continue attracting business from landlords and is to be considered a reliable go-between by tenants, you cannot afford to put your head in the sand. New companies are popping up every month, started by ambitious entrepreneurs who think that they have spotted a gap in the estate agents’ toolbox that only they can supply.
Having been running my own proptech startup for four years now, my feeling is that many of these businesses, some spinning out of Rightmove and Zoopla, will not survive. Tech businesses depend on achieving scale and in some cases the problem that they have set out to solve is not big enough.
Others are clearly trying to make a fast buck. Startups come in waves and many entrepreneurs have decided that they will ride the proptech wave and hopefully it will wash them up richer. For others, launching a business is a parachute out of a large tech company from which they may feel detached, overlooked or unfulfilled.
When you launch a tech startup you need to know and ideally experience personally the pain point that you are trying to resolve.
When I left Foxtons, seven years ago, I was completely immersed in the daily lettings business. I was talking to tenants and landlords, feeling their frustration and indeed feeling the downsides of being a renter myself. This meant I had a deep understanding of the problem that my business, Goodlord, was setting out to resolve.
Tech is not some e-enabled sticking plaster that will make everything suddenly better. Just like every other business decision an agent makes, they must weigh up the return on investment and work out how quickly that investment in time and money will pay off.
Think critically about how the tech you want to use will reduce your costs, particularly as the business environment appears to be getting tougher. The bigger the estate agency, the greater the risks involved in bringing new technology on board. Switching to a new system can take months, rather than days, and with all new systems there is a risk that things can go wrong.
So what do you need?
Well, my bet is that you don’t need drone footage to rent out two-bedroom apartments in Peckham. Virtual reality may be a fun experience for your customers, but again, probably not what you need when letting a canal side apartment in Manchester. Do not go and act like the proverbial kid in the sweet shop and buy the shiniest, newest piece of kit on offer.
It is also crucial to consider whether the startup you are hitching your wagon to is going to last. Some smaller proptech companies have been raising between £100,000 and £2million in the last year. Frankly, however, that’s probably not enough to give them time to win a big enough market share.
You need a lot of investment to do things properly in the tech world. Many of these businesses will burn through this cash, before they have time to build up a big enough customer base to provide an income stream.
The sheer number of proptech companies that are launching shows that this is an exciting and fast changing sector. But not every startup out there will turn out to be the next Rightmove.
Think before you leap onto their bandwagon.