By : Idriss Goossens, Founder at PropTech lab, Co-Founder at the European PropTech Association
What is PropTech?
Real Estate is the largest asset class of the world. Yet, it has – for decades – stayed very conservative, and reluctant to change. This is now changing, with the consolidation of the PropTech market. According to the European PropTech Association, “PropTech refers to any innovation (technological, technical or business model) in the real estate value chain, across all asset classes”. This ecosystem could be segmented in 5 categories, covering the complete life-cycle of real estate projects:
(1) Investing & financing: covering all the alternative financing solutions (crowdlending solutions…), and all the tools easing the investment decision (big data and analytics…);
(2) Designing & Building: covering the execution of the construction work (collaborative platforms, new construction materials, 3D printing, BIM…);
(3) Marketing & Transacting: covering the marketing & transaction phase of real estate (listings, 3D visuals, immersive experiences,…);
(4) Managing & Operating: phase covering the property management, rent management, facility management;
(5) Living & working: covering the end-users experience (all the services for end-users, community apps…). According to the last report of the same association, Europe is the most active region in the world in terms of number of actors with an ecosystem of 3123 companies. Although bigger in terms of players in comparison to the US (around 2000 businesS), Europe still doesn’t have its own PropTech unicorn. Currently, we monitor 37 PropTech unicorns, 76% of which are based in the US, and 24% in Asia. The main reason for this is the decentralisation of the European market: every country has its own juridical framework, culture and industry standards. The expansion is more challenging than in the US or China, considered as a single market.
An ecosystem gradually reaching maturity?
Similar to FinTech, PropTech can be seen as a momentum. The momentum of digitization and modernization of the construction & real estate value chain. It means that year after year the ecosystem is becoming more mature, start-ups increase their market shares, hire more FTE’s, and expand. The current pandemic hasn’t slowed this gradual consolidation. On the contrary: we can see that COVID-19 has largely accelerated the adoption of PropTech. Last year, we estimated that the consolidation of the sector – the moment where the construction & real estate sector are completely digitized, or modernized, and when there is not much space left for new solutions – would happen in the next 5 years, but this could now happen in the next 2 years, due to the COVID-19 effects. Nonetheless, as Thomas Vandenbergh – Chairman of the Innovation board at BESIX, CEO at A-Stay, and Board at proptech lab – says: “the consolidation of proptech is not a one-time event like a tsunami, but rather a gradual change, like global warming”. It means the consolidation of PropTech happens technology by technology (IoT, bim, drones, 3D printing…), core business by core business (architect, engineer, general contract, developer, broker, property-facility-asset manager, investor…), and asset class by asset class (resi, office, logistics, retail, healthcare, hospitality, infra…).
We can see that COVID-19 had an accelerating effect even on themes that had a low activity prior to COVID-19 (low number of companies, and low growth rate).
Investors’ profile, and investment trends
The PropTech space is becoming a global category of investment. There is a growing amount of vertical funds (we currently track 19 of them, compared to 12 in 2019), but we also see more and more generalist VC’s being active in that space. Construction and Real Estate Corporates are investing as well – opportunistically or structurally through a company based CVC investment vehicle, or as LP in an external fund. If we compare the PropTech space against FinTech, we see that the first has roughly 2 years of delay in terms of amount of capital deployed.
If we look at the amount of capital invested in EU PropTech, we see that 2019 was a record year, with almost €3Billion invested, although decreasing to EUR 1,2 Billion in 2020 – due to the economical conjecture. Comparing the EU with the rest of the world, we see that European funding represents around 8% of the global PropTech, on average year-on-year. Our predictions are that 2021 will be a record-breaking year in terms of value of capital deployed.
In our PropTech Lab we track 1622 investors who backed EU-based PropTech startups between 2018 and 2020. Although spread across the globe, the majority of European investors are located in London and Paris. Venture Capital represents half of all investors on the EU PropTech market, followed by business angels (17%) and accelerators/incubators (9%). The Corporate Venture Capitalists (CVC) and Private Equity firms are not to be neglected as they respectively represent 8% and 6%. We think that the segment of CVC will grow, as investing in PropTech becomes one of the most common real estate corporates’ axes of innovation strategy.
RELEVATION, the first ever digital fundraising summit for PropTech Startups, will take place on the 23rd and 24th of June as an online event to match PropTech startups/scale-ups with investors. Speakers include: Patric Gresko (EIF), Thomas Schneider (Isomer Capital), Zain Jaffer (Bluefield Capital), Gregory Dewerpe (a/o proptech), Raimund Paetzmann (Zalando), Dave Harris Kolad (Greensoil), Jonathan Hannam (Taronga Group), Ron Schuermans (Aconterra), Kaustubh Pandya (Brick & Mortar VC).