Technology advances humanity. People adopt technology if it aligns with their incentives. The incentive of proptech is to increase profit. You increase profit by building valuable products or services. Valuable products and services increase profit by increasing revenue or decreasing costs. This is the purpose of proptech.
You increase revenue by amplifying existing revenue streams or creating new revenue streams. You reduce costs by achieving the same effect of existing workflows in a less expensive way, whether by simplifying workflows, consolidating workflows, or creating new, more efficient ones. When properly applied, technology helps with all of these.
Real estate is a systems problem. It’s death by a thousand cuts. Thousands of workflows and operations go into real estate, from acquisitions to leasing to operations to accounting. These impact the revenue and costs of real estate.
Perspective
Many prop-tech companies focus on their personal experience (the tenant/resident side) vs the owner and operator side. Real estate involves owners, lenders, managers, vendors, and residents. When only exposed to the resident side, you assume that’s the core of the problem. In reality, the core issues are unseen by residents.
Proptech startups are uniquely soft in value add. They help with a better bidding process, lease renewal, or unit turn. Entire companies are devoted to features that are nice to have.
A better resident experience may lead to a slight increase in revenue. It may not. The factors one considers when renting tend to be the location and details of the unit, then the property and its amenities. Only after that do people think about management. Management can help retain tenants, but a faster lease signing process or a better apartment bulletin board has little value.
The intersection of those who understand the core problems in real estate and those with the capability of building to solve the problems is almost zero. This is why we launched our design program to meet with top real estate groups and iterate with them. We’re building for the entire industry.
High to Low
Many prop-tech companies built for non-institutions and planned to transition to institutional use cases. Going low-end to high-end sounds like the right path, as it works in other industries. In payments, Adyen is more for institutions, and Stripe is for smaller companies, but massive companies like Amazon use Stripe. The same could be said for Box and Dropbox. However, real estate is different.
The workflows of an institutional group are different than the workflows of non-institutions. An institutional real estate owner-operator will have multiple people whose only job is to renew leases. They call tenants and renew leases in the software all day. Their workflow needs to be optimized for only doing that one thing all day. Institutional workflows differ from non-institutional groups, where it’s common to have users jump from domain to domain.
The sales process for an institution vs a non-institution is also completely different. It’s a longer sales cycle, but it’s also a bigger sale and may even entail partner groups who help with implementation.
We’ve realized that when it comes to prop-tech, you can go high-end to low-end, but you can’t go low-end to high-end. So, we’re starting with institutions. It sounds crazy, as it’s a more extensive feature set with greater compliance and security requirements, but it’s what the industry needs.
The market is pulling us towards institutions for a reason. The opportunity is there, and we’re going for it. Our purpose is to be the OS of real estate– we do that by solving the hard problems.