Stanton’s Autumn Proptech Overview
Proptech, (Property Technology), having exploded in the UK in 2017 with 60% of new startups in the sector clambering to be the next big thing – is seven years on now maturing. All the hype about revolutionizing the real estate industry in the UK, and driving disruption with technological innovation and changed consumer behaviour, is now quietening down and the real work is being diligently done.
Efficiency based Saas services based on useful and repeatable revenue models in the proptech sector has seen significant growth, marked by an influx of investment. And due to squeeze on funding last year, the rise of innovative startups with commercial ideation hard baked into their core DNA.
Is there a surge in growth and Investment?
Amongst the huge amount of write-downs and failed Proptechs in the UK, for those businesses who are getting it right there has been a notable surge in investment and growth. Venture capital funding for Proptech startups has been robust, with substantial amounts being funnelled into companies that are reshaping various aspects of the property market.
These startups range from those focused on property management and real estate marketplaces to others specializing in construction technology, commercial realestate and ESG solutions. This influx of capital reflects strong confidence in the sector’s growth potential.
London, is still only second to New York as a hub for Proptech innovation. A vast swathe of my clients still sit within a five mile triangle of the city, though of course teams post Covid-19 are global. London hosts a wide array of Proptech startups and scaleups, from well-established companies to new entrants exploring niche areas like tenant experience platforms, AI-driven property valuations, and blockchain-based property transactions. This dynamic ecosystem fosters a vibrant community of innovators pushing the boundaries of what technology can achieve in real estate.
Adoption of innovative technologies
Our consultancy Proptech-PR has worked with 136 founders, who have a combined market cap of £1.47Bn, 70% of them are based in the UK. We have also met over 1,000 Proptech Founders and critiqued nearly 450 decks, so we get a huge amount of market intelligence, and from this we note two very distinct camps are emerging.
The first camp are what I would term ‘Idealists’ heavily focused on the product, forever pushing for the next iteration. These businesses have low adoption rates, with ARR levels that hardly change from year to year.
The second camp the ‘Realists’ who in significant numbers are leveraging artificial intelligence (AI) and big data analytics to power their operations and get paying clients to become ‘sticky’ adopters of their service.
Data is old News; it is what you do with it that counts
In the first wave of Proptech, Founders thought that providing data to their clients was the big payday, they felt that a data-driven approach would empowering stakeholders to make more informed decisions and de-risk operations. Now in 2024, the UK Proptechs who are really scaling realise that they need to deliver the whole package. Automate the solution for the client, by providing the workflows based upon the data. Clients like an on button, minimal onboarding and a Saas that removes their pain, they do not want lakes of data that tells them what their problems are. (Warning client placement Inventorybase, Ascendix, MadeSnappy, tlyfe, Sprift and Roome😊 apologies to the 130 I left out)
The Shape of things to come
Virtual and augmented reality (VR/AR) tools have also gained significant traction, especially in the wake of the COVID-19 pandemic. As remote working became more prevalent, so did the demand for remote property viewings and virtual open houses. VR and AR technologies allow potential buyers and tenants to explore properties from the comfort of their homes, enhancing the customer experience and broadening the reach for real estate agents.
Blockchain technology is another area generating excitement within the Proptech sector. Blockchain’s potential for secure, transparent property transactions and smart contracts is attracting interest from both startups and traditional real estate firms. By streamlining the buying, selling, and leasing processes, blockchain can significantly reduce the time and costs associated with property transactions. (Warning client placement Coadjute😊)
Evolving Market Dynamics and Emerging Trends
Several key trends are shaping the future of PropTech in the UK. One of the most significant is the impact of remote work on the real estate market. As more companies adopt flexible working arrangements, the demand for both residential and commercial properties is shifting. Proptech companies are responding by developing tools and platforms to help property owners and managers adapt to these changes, such as flexible workspace management software.
Sustainability is another major trend influencing the Proptech sector. With growing awareness of environmental issues, there is increasing demand for sustainable real estate practices. PropTech solutions are focusing on energy efficiency, smart building management, and sustainable construction methods, aligning with broader efforts to reduce the carbon footprint of the built environment.
The biggest winners
Whenever I am advising Founders who want to hit upon a service that can potentially scale into a company who will IPO I always say go for Regulation or Compliance, as these two like death and taxes cannot be avoided and are definitely driving profitable innovation in Proptech.
As the UK government introduces new regulations around data protection, tenant rights, and building safety, clever Proptechs are developing solutions to help property stakeholders navigate these challenges. Tools for ensuring compliance with regulations, improving data security, and enhancing tenant and landlord communications.
Is Rightmove another wounded digital dinosaur?
Rightmove faces the same existential problem that all portals face, they are a digital advertising billboard, but the second a portal wants to maximise its profits and offer property services it robs its clients of revenue. For example, agents are losing the first bite of the cherry when new applicants register for financial services via a portal upstream of being passed to an agent who listed inventory to capture that new sales lead, and all of the rich data that portals gain is being sold off through the backdoor with none of the revenue going back in the fiscal hopper to the client agents.
On one level the data rich playground of Rightmove and all portals could go full throttle, but the more they encroach and offer agency services, the more they alienate and choke off the income of their clients. Rightmove’s biggest problem is that it charges far too much for far to little, in comparison Zoopla and OTM charge far too little given the level of ‘new’ services being rolled out.
To my mind realestate is speeding up so quickly, playing out across a background of digital transformation that the tech savvy and hungry client will soon be ‘doing’ property operations themselves aided by technology, the last refuge for estate agents is that they hold the prize – the inventory – the property asset that the buyers and tenants need, without this would the public interact with agents given the slowness of service in a digital age – unlikely – and the moment the public can do property themselves, self list and self sell and let, well that glittering inventory no longer needs to be listed on property portals owned by the Murdoch family.
The evolution of agency marches hand in hand with the tech led fourth industrial revolution that is touching all of our lives, it may be dystopian and shaped by a handful of people, but it is coming, ready or not.
Have you ever wondered why Rightmove has failed to change its UX in any significant way? For millions of people who search for property they are using the same outdated filters that belong to 20 years ago, price, bedrooms, postcode, yet when the modern generation digitally graze for other goods and services on other commercial sites, these modern digital purveyors race towards the needs of their potential client, upselling and seeming to guess every want and need of a paying client.
Rightmove has not re-invented itself, and its perceived arrogance – remember the ‘Say no to Rightmove’ movement that gained huge traction in a few days back in 2020, was the first warning that Rightmove was out of step, and needed to stop buying back its shares and paying large dividends, and instead get back to some R&D. Innovation that adds value to the offering rather than charging more for the same should have been the c-suite strategy.
Whichever way the present REA group possible acquisition ends up, in many ways Rightmove has like Countrywide PLC before its assets were bought by the Connells group, become a ‘wounded dinosaur who failed to digitally transform its operations.’
Countrywide PLC was of course a huge multi-dimensional property services company, but it ran a lumbering analogue business, thinking itself to be a property business, rather than a data and digital company. Ironically, Rightmove is one of the very first proptechs (propterty technology) behemoths, so its DNA is very much data, but in a quarter of a century it is now finds itself set in digital aspic, unable to move quickly, and when the CoStar Group meteorite hit, it was counting its 70% profits rather than building an effective moat to stop opportunists like the Murdoch family.
Rightmove share price rises 23% as REA Group circles
Rightmove whose fortunes have been in the doldrums, as they failed to re-invent themselves, instead just inflating the annual cost of agency licences, has been thrown a lifeline in the shape of a formal announcement that the REA group, owned majoritively by the Murdochs vehicle News Corp wants to buy them.
It would be ironic if REA became the new owner as over 60% of REA is owned by News Corp which is of course an American mass media and publishing company owned by the Murdoch’s, so Rightmove which was set up as a digital antithesis of the power held by traditional print newspaper publishing, might go full circle and be owned by the Murdoch’s.
Interestingly News Corp shares went retrograde on this Rightmove news, (it might be a sign) though of course the instant upside for Rightmove is a whopping 20%+ uplift in their share price today.
What is more interesting is to tease out if the newish CEO Johan Svanstrom coming in to Rightmove in February 2023, 18 months ago was part of a strategic play to get the company ready for sale, which would show long term planning, or was it just co-incidental. Then of course we have the fact that Alison Dolan the Chief Financial Director at Rightmove resigned on the 29th of May 2024, which supposedly wrongfooted the Rightmove Chair. Again is this just co-incidence.
Well the clock it ticking and in a month we will see if a formal bid lands or this is just the first round of what may be a protracted campaign, for sure the CoStar Group has mixed up the portal landscape in the UK, the other interesting thought is will Zoopla be next in line for a sale, watch this space.
Andrew Stanton Founder & Editor of 'PROPTECH-X' where his insights, connections, analysis and commentary on proptech and real estate are based on writing 1.3M words annually. Plus meeting 1,000 Proptech founders, critiquing 400 decks and having had 130 clients as CEO of 'PROPTECH-PR', a consultancy for Proptech founders seeking growth and exit strategies. He also acts as an advisory for major global real estate companies on sales, acquisitions, market positioning & operations. With 100K followers & readers, he is the 'Proptech Realestate Influencer.'
