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Will 2024 be a repeat of the past dotcom bubble crash of 2000/2?
In true Dickensian style at this festive time the next three articles, we will explore what shape the Proptech Industry is in. Discussing its past, present and future, and leave it to you to decide before the chimes of 2024 sound, how you plan to de-risk your operations in the coming year, much like the fictional character Ebeneezer Scrooge did in 1843 following his epiphany prompted by three ghosts.
The Ghost of Christmas past 2002 The dotcom bust of the 2000/2, also known as the dotcom crash, was a dramatic and sharp decline in the stock prices of technology companies, which occurred from 2000 to about 2002. For those too young to remember or too old and ‘wise’ to feel that it has any relevance here is a quick overview of what happened and its impacts.
Buildup to the Crash Throughout the late 1990s, there appeared to be an unending technology boom, which spawned a rapid rise in the growth and investment in Internet-based companies, often referred to as “dotcoms.” The era was marked by a surge in startup companies that promised to revolutionize various industries through technology, even gently touching the real estate industry, which had been continuing its same safe and trusted analogue business models for more than 30-years.
So whilst Property Technology, Proptech, was greatly in its infancy at this time, a marginal player, with cloud computing etc not being widely adopted until 2004 and onwards, the dotcom crash when it came would also dampen the ardour for the digital transformation of real estate for another decade.
Speculative Investments were rife in the 1990’s with investors, drawn by the potential for substantial profits and the fear of missing out, deploying huge sums of capital into these startups, many of which had yet to turn a profit or even establish a viable business model.
This drove and fed market exuberance, the stock market saw massive growth, with indices like the NASDAQ soaring to unprecedented heights. Driven by the belief that the Internet would continue to grow exponentially and that traditional business models would be outdated and new technologies would replace the legacy status quo.
The Crash Then came the peak and turn, and by early 2000, the situation began to change. The NASDAQ reached its peak in March 2000 and then started to decline sharply. This led to a massive market correction as investors realized that many of the dotcoms were overvalued and far from profitable, a massive sell-off occurred. Which led to a significant market correction, with many companies seeing their stock values plummet, with some even going bankrupt. There were other economic factors at play too, such as interest rate hikes and the broader economic slowdown also contributing to the crash.
Impacts The lessons learnt were harsh, multiple Company failures, with a large number of dotcom companies failing during this period, known as the “dotcom bust,” with large notable names disappearing or restructuring significantly. Worst still this narrative fed into a more global economic slowdown with a mild recession in the early 2000s.
Investor confidence evaporated, and there was a significant loss of investor confidence, particularly in technology stocks, which took years to recover. Which led to some regulatory changes, the need for improved financial disclosure and accounting practices, contributing to a slew of new laws to protect investors at all levels.
Not all bad News The dotcom bust served as a cautionary tale about speculative bubbles, the importance of sustainable business models, and the need for rational investment practices. While it led to significant losses and a period of economic difficulty, it also paved the way for a more mature and arguably a more sustainable era of tech growth and development. The companies that survived, or those that were founded in the aftermath, learned valuable lessons about growth, profitability, and innovation, shaping the future of the technology industry.
With 2023 seeing companies such as WeWork and FTX Trading Ltd burn brightly and then burn to the ground with one protagonist getting a golden parachute and the other possible several lifetimes in prison, I am sure that readers can see that there are a lot of parallels going on here with what is happening in the Proptech niche, and what happened twenty two-years ago with the dotcoms.
Proptech Unicorns are evaporating, follow on funding is not happening and down rounds and the shuttering up of many big operations are becoming more prevalent. All of this playing out against a backdrop of high interest rates, the end of cheap money and a cold wind of realisation that some companies need to get into the black very soon to survive what may be around the corner.
Can Generative AI save the present Proptech Industry
Until recently, if you wanted to raise funding or thought to be in front of the tech-curve apparently you needed to be knee deep in Web 3.0, Blockchain or Crypto, as all were hot favourites to power the digitisation of the real estate industry. It was proposed that a new iteration of the web could unshackle previous business models and trade could take place in a frictionless and safe environment. But as 2023 draws to a close and we look around this new dawn has yet to happen and many of the promising stable of Proptechs in all verticals seem to be stalling and appetite and belief seems to be ebbing away.
The Ghost of Christmas present What definitely is a huge new force ‘trending’ in Property technology (and the larger technology space) is Generative Artificial Intelligence, but the big question is whether, as the industry grapples with retro-fitting this new ‘tool,’ will it prove to be just a passing phantom with little substance or a solid and sustainable strategy that can power and build back value into companies that need a pivot that leads them to the finish line before the cash runs out and so do the lights.
What’s all the noise about For those who have been living on the moon and have not heard about it Gen AI or Generative AI, is a subset of artificial intelligence that focuses on creating content and data that didn’t previously exist, offers a multitude of applications and benefits to the Proptech industry. Though not an exhaustive list here’s where it’s being used and its potential impact.
Gen AI is utilised in: 1. Product development and enhancement. 2. Innovation, it can generate new ideas for products or improve existing ones by analysing trends, customer feedback, and market needs. 3. Design: In fields like architecture, AI can propose novel design options, speeding up the creative process and introducing new styles and concepts. 4. Content Creation 5. Media and Entertainment: Gen AI can create written and other forms of content, changing how media is produced and consumed.
6. Personalized Content: AI can tailor content to individual user preferences, improving engagement and user experience. 7. Software Development. 8. Code Generation: Tools like GitHub Copilot use AI to suggest code snippets and entire functions, increasing developer productivity and potentially reducing bugs. 9. Testing and Debugging: AI can generate test cases and even identify potential bugs in software, improving quality and speed of development. 10. Data Augmentation and Simulation.
Gen AI is further utilised in: 11. Training Data: Gen AI can create synthetic data sets for training other AI models, especially useful where data is sensitive or scarce. 12. Simulation: In fields like autonomous vehicles or drug discovery, AI can simulate environments and scenarios, speeding up research and development. 13. Customer Experience and Engagement. 14. Chatbots and Virtual Assistants: it generates human-like responses and interactions, providing customer support and personal assistance.
15. Personalization: AI can generate personalized recommendations and experiences for users. 16. Marketing and Advertising, Ad Creation: AI can generate creative and targeted content for ads, adjusting to market responses in real-time. 17. Market Analysis: it can predict market trends and customer preferences, helping companies to create more effective marketing strategies. 18. Process Automation: it can automate routine tasks, freeing up human workers for more complex and creative tasks. 19. Optimization: AI can optimize logistics, energy use, and other operational aspects, saving costs and improving sustainability.
Challenges and considerations While generative AI offers immense possibilities, it also comes with challenges, including ethical considerations around data use and privacy, the potential for misuse in creating deepfakes or spreading misinformation, and the impact on employment in certain sectors. Ensuring responsible use and governance of AI is crucial as its role in technology and society continues to grow.
What is certain Generative AI is a powerful tool that’s transforming the Proptech industry, driving innovation, efficiency, and personalized experiences. As the technology continues to evolve, its applications and influence are expected to grow, opening new possibilities and shaping the future of how we interact with technology and data. It also operates on a second level, in my day job as consultant and adviser to Proptech founders, I know that typically a start-up can go from MVP to exit in six years often 10, but with Gen AI, it is conceivable that a lot of that time can now be condensed, so the need for a shorter runway and also lower costs to get that perfect Saas model worthy of a multi-trillion dollar exit.
In the future all Proptechs will look like this
For the longest time I have been told that Proptechs focus on a pain point and solve it, scaling this into a Saas that produces known and repeatedly growing ARR. To me this is not what I have found to be the case, it is so much more.
The Ghost of Christmas future Proptech has been universally described as the digital transformation of real estate. Where property and technology collide, producing a shockwave of future change, powered by venture capital, cloud computing and new technologies, which seeks to modernise, create efficiencies, and drive profits. Changing forever the legacy, and paper driven processes in all verticals of the property asset class.
This is a half-truth, because more than anything Proptech is also a philosophy. A heightened consciousness of what can be done in the global playground of real estate; using new tools which in themselves, ‘allows the new order of things to be even further re-imagined and come into being’. Using an analogy if real estate is a horse as a vehicle for human travel. Then Proptech would re-imagine it as a Tesla car, but the new technologies of AI and Big Data would further push the consciousness of a start-up tech team to come up with a space rocket. But probably not one of Elon’s.
With 5G and satellite technology on the horizon, within a decade there will soon be very little left that resembles the pre-pandemic real estate sector. In the way it digitally performs, and goes about its business, and the mind sets that run it.
From my own perspective after just seven long years in the industry, having now met 973 founders and worked with over a hundred of them spread across the globe, the only certainty in the world star map of Proptech, with London only second to New York in the proliferation of Proptech start-ups is nothing is certain.
At present around the world the real estate sector is sparingly deploying investment into: – Artificial Intelligence (AI) and of course Gen AI, Big Data, Building Information Modelling (BIM), Internet of Things (IOT), Virtual Reality (VR), Augmented Reality (AR) and the Shared economy. And then as a bit of a side bet, it is spreading the capital around on anything else that is scalable and might be the next big thing.
What is future scope and potential of Property Technology Because property is the largest and most valuable asset class in the world, necessarily a technology industry which seeks to tame and transform it has an almost limitless opportunity to make huge returns for all stakeholders both financially and on a social economic basis.
And when talking about property I am talking about all of its verticals, and touchpoints. So Property, its Conception – Planning – Design – Construction – Selling – Leasing – Management – Operations – Maintenance. The following is not an exhaustive A TO Z list but gives a hint of the ground it now covers and I feel we are still very much in the foothills:-
A to C 3D Modelling, 3D Printing, Accelerators, Agent Matching, Agent Services, Analytics, Artificial Intelligence (AI), Asset Management, Auction, Augmented Reality, Augmented Valuation, Big Data, BIM, Biometric Security, Bitcoin, Broker Free Listing Search, Build-Buy-Manage-Rent-Sell, Cad, Chatbot, Coliving, Commercial Real Estate, Compliance, Construction, Construction Management, Contech, Conveyancing, Co-Working, CRM, Crowdfunding, Cryptocurrency, Customer Experience (UX), Cyber Maturity.
D to O Data Protection, Data Valuation, Design, Development, Digital Twin, Drones, ESG, Facility Management, Fintech, Funding, Geolocation, Geospatial, Home Services, Indoor Mapping, Infrastructure & Sensors, Investment & Finance, Investment Management, Investment Platforms, IoT, Lead Generation, Legal Tech, Leasing Management Software, Lending – Mortgages, Lending Peer to Peer, Lending Tech, Lettings, Listing & Search Services, Location Based Services, Logistics, Long Term Rentals/Sale Search, Management & Maintenance, Marketing, Marketplaces, Money Transfer/Remittance, Mortgage Tech, Modular, Online Agent Brokerage, Online Agent Lettings, Online Agent Sales, Online Agents, Open Banking.
P to Z Payment Operations, Payments/Billing Tech, Platforms, Portals, Portfolio Management, Property & Infrastructure, Property Management Solutions, Property Marketing platform, Property/Building Management, Real Estate Investment, Real Estate Marketing Solutions, Real Estate Tools, SaaS, Sales & Marketing, Shared Economy, Shared Services, Short Term Rentals, Smart Building, Smart Buildings, Smart Cities, Smart Cities & Mobility, Smart City Sustainability, Smart Homes, Smart Real Estate, Smart Services, Software Providers, Space as a Service, Start-ups, The Shared Economy, Valuation Tools, Venture Capital, Virtual Reality and Virtual Viewing.
A big thank you for all your help in 2023 from Andrew Stanton CEO of Proptech-X and Proptech-PR
As 2023 draws to a close I would like to thank personally the hundreds of companies and PR organizations, industry leaders, and many of my 100K network of followers who daily feed my knowledge base about what is happening in all sectors of real estate both in the UK and globally over the past year.
I would also like to thank the many founders and organisations that work alongside me in my day job at Proptech-PR a consultancy for Proptech Founders, whose industry knowledge adds and powers my own. And if one thing stands out in my mind as to what success looks like – it is the size of the community that you are part of, if you want to grow something the more voices and brains that you can engage with the quicker you get to the truths that make the daily grind a lot easier.
And of course I would like to thank all of my readers who follow me over various social platforms and through this publication Proptech-X, which Zara says is really her daddy’s counter-culture blog, but is in fact read by some of the most powerful people in global real estate.
See you all in 2024 – see you in the future.
And remember if you want to get on a call to discuss how I can help you – just book a free call using this LINK
Andrew Stanton is the founder and CEO of Proptech-PR, a consultancy for Founders of Proptechs looking to grow and exit, using his influence from decades of industry experience. Separately he is a consultant to some of the biggest names in global real estate, advising on sales and acquisitions, market positioning, and operations. He is also the founder and editor of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.