Crises make evident the need to have solid business models with pinpointed solutions as the foundation of a startup. Much is being written these days about how crises periods offer great opportunities. However, following previous traumatic periods such as the dot.com burst and the ‘08-’09 financial crash the companies who survived, and later thrived, were laser-focused on their value proposition. For each one that we know about for having succeeded, many, many more did not make it. Think about Airbnb; but how many remember Housetrip or Wimdu?
The COVID-19 pandemic is stress-testing a system that was long overdue for a correction. Real estate is a major casualty because despite all the recent waves of innovation with different levels of adoption, it continues to be old-fashion: land, bricks, and mortar. As humans, we have a need to congregate, to feel productive, to share, to compete, to shelter, to feel safe. Real estate provides us with the spaces where we can experience all of these.
What will drive innovation in real estate in the immediate, post-COVID-19 world? Many things, all consistent with the principles of our own human nature. Coming out of this period of social distancing and self-isolation, we will rush to do the things that we took for granted not so long ago, while also being more careful and mindful about how we go about life and what really matters to each of us. To paraphrase Gibran Khalil, that which you love most may be clearer in its absence, “as the mountain to the climber is clearer from the plain.”
Today, it is not the buildings themselves, but our relationship to them is what is prime for innovation. As artificial intelligence-driven technology continues to mature and big data becomes more accessible, making revolutionary advancements in PropTech just a matter of time. The visionaries that leverage on technology to make places feel “like home” will have an advantage in the near future. Again, think of Airbnb and how it has evolved since its origins in 2007-2008.
Ideas that make intelligent use of data about how we congregate, feel productive, while also safe regardless of where we are will definitely have an edge. Furthermore, I foresee that the current crisis marks the end of the latest era of “hot money” and “growth at any cost”. In the near future, investment tolerance for unprofitable ideas will be short, and a “fail fast and cheap” mentality will become the norm. Irrational valuations for unprofitable start-ups in mid-series funding rounds will be the exception rather than rule.
PropTech entrepreneurs should take the opportunity that the current crisis presents to fine-tune their business models. Funding will come back, and it will flow towards simple yet profitable ideas that solve complex problems through technology.
PropTechs should be masters of the problems they are trying to solve, have an implementable solution, and start small but profitable. Going forward, PropTechs emerging from the turmoil will be successful if they:
- have a clear solution to a large problem;
- possess capable teams for execution;
- are lean in their approach to growth; and,
- measure their success based on profits rather than funding rounds’ valuations.
Changes in investment and real estate will come about through technology-driven ideas about our own humanity. Develop solid solutions rather than copying an existing business, differentiate, and deliver results since early on.
