What It Takes to Build a PropTech Company That Will Change Real Estate
The PropTech industry has had a wild ride over the past couple of decades. Between 2000 and 2019, a total of 1,724 PropTech companies raised $84.4 billion in funding globally, demonstrating the growing interest in real estate technology among both entrepreneurs and investors. Despite what some may believe, this recent boom does not mean that the market has been saturated and the industry is about to plateau. To the contrary, the PropTech market is expected to grow from $18.2 billion in 2022 to $86.5 billion in 2032. From an entrepreneurial point of view, this means that there is still a lot of potential for disruption and room for innovation in the intersection between real estate and technology.
While thousands have tried their luck in this exciting industry, those who have succeeded in shaking real estate in a meaningful way amount to no more than a few dozen. This raises the question: What does it take to start a PropTech company that will change the face of real estate?
In this article, I’m taking a look back at both the companies that I have started and invested in to trace the key features and circumstances that have made them successful in disrupting the real estate industry in a significant manner. To build a powerful PropTech startup, you need to focus on these 5 things.
1. Address a Real Problem and Develop a Real Solution
First and foremost, to build a company that has the potential to be the next big thing in PropTech, you need to find an existing problem or challenge in the way in which numerous people conduct business in real estate. In other words, you have to put your finger on an issue which, if solved, will boost the productivity, profitability, and/or sustainability of a vast portion of the market.
To what extent you will be able to shake the real estate industry depends largely on how big the problem that you are trying to solve is. While it may seem basic, this is something I’ve seen founders get wrong. You won’t last in the business if your product is a novelty or nice-to-have. It needs to be a no-brainer solution that changes individual lives.
I’ll give you a quick example here. Think Airbnb. Lacking cash is a problem which millions of Americans face. Renting out a spare space from time to time is feasible and doable for the majority of them. Match this with consumers’ desire to experience their destinations more intimately than whT hotel accommodations can provide. Thus, building a platform that matches hosts with guests had the potential to revolutionize the short term rental market—and it did.
2. Focus on Scalability
When evaluating the problem you’ve pointed out and the solution that you’re proposing, scalability should be your guiding principle. The growth trajectory of your PropTech company—just like any other enterprise—will be to a great extent determined by the number of people who can benefit from it. It’s basic math—it doesn’t make sense to put thousands of hours of work and millions of dollars worth of funding into a product that has the potential to attract the interest of only a few customers.
The first step in assuring a scalable product is to study the market. You need to conduct thorough market research and analysis and allow the numbers to guide your decisions. It’s important to have an estimate of how many customers you can find and how much they will be willing to pay for the solution you are proposing.
Having a solid market size and financial projections will also be key for bringing investors on board. And as you can imagine, investors want to ensure they will receive a significant return on their investment—this is not a calculation to overlook.
3. Build a Strong Team
I’ve said it many times, but I’ll say it again—a company is only as good as its team. In recruitment, it’s imperative to focus just as much on soft skills as technical skills. Characteristics like enthusiasm, ambition, leadership skills, communication capabilities, working collaboratively, dedication to the company’s mission, creativity, and willingness to learn and improve are as important as how good of a software developer, a marketer, or a salesperson someone is. The former are not usually skills you can learn as easily as hard skills—but they will determine how far your hard skills can go.
However, as a future PropTech company leader, you have to realize that building a successful team that will help you take your startup where you hope to take it does not end with the hiring process. Building the right company culture, motivating your team members, and sharpening their skills is something to work on continuously. In everything you do, be guided by the principle that an organization is only as good as the team behind it.
4. Apply Agile Methodology in Your PropTech Company
As an aspiring entrepreneur in the real estate space, remember that a PropTech company is above all a software company. The agile methodology has become the norm in software development, and it’s a solid basis on which you can build your team and your processes. Due to the nature of agile software development, startups that adopt these methods are 25% more productive and 50% faster to go to market, and this is something that you definitely want for your firm in a competitive industry such as PropTech.
The principles of constant communication with stakeholders, openness to changing requirements, and constant in-team collaboration are crucial in building a startup and a product that are ready and equipped to continue disrupting real estate. Endorsing agility will ensure that you are aware of the changing needs of your existing customers and that you can adapt your product according to these new needs and requirements.
5. Grow Your Network
As a PropTech entrepreneur, you need a wide, strong network of various individuals from your industry as well as related industries. Start working on relationships with the right people from day one in your entrepreneurship journey—and watch it become 100X easier to blaze forward.
Who you know and who knows you will determine how easily you can access funding, hire the right team, and reach new prospects. It can provide many door opening opportunities that will make or break your PropTech company. My advice to any entrepreneur is to put deliberate effort into introducing yourself to other entrepreneurs, investors, and others in the real estate tech community. Visit local meetups, attend global events, reach out via LinkedIn, ask your current network for new introductions, and use social media to continue expanding your network.
The exponential growth we’ve seen in PropTech in recent years is truly just the tip of the iceberg. There’s still plenty of room—and need—for changing the ways in which the real estate industry operates. Areas like the MLS, lead generation and nurturing, and the tokenization of real estate are just a few of the niches which will benefit significantly from more startups leading technological advancements. If you want to start building the next big PropTech company, remember to focus on the 5 principles discussed above to boost your chances of revolutionizing real estate.