Like many things In life, building great businesses is a matter of timing. We've seen dot-com-era multibillion-dollar failures like Pets.com and Webvan reincarnate a decade later as Chewy and Instacart, this time as runaway hits.
The same could be said of real estate tech companies, but startups in this category haven't gotten the same opportunity and attention as their peers in other industries.
For decades, proptech has received the short end of the club. The real estate sector is the largest asset class in the world with a value of $ 277 trillion, three times the total value of all publicly traded companies. However, fintech firms received seven times more VC funding than real estate firms.
These lower levels of investment were previously attributed to the slow rate of technology adoption and digitization in the real estate sector, but this is no longer the case. Real estate companies are embracing innovation faster than ever. Now, 81% of real estate organizations plan to use new digital technologies in traditional business processes, and spending on technology and software is growing more than 11% annually. Technology adoption even accelerated during the pandemic as businesses were forced to adapt quickly.
Historically, the strength or weakness of the economy in general and the real estate sector have been closely linked and correlated. While some may point to the negative impact of COVID-19 on some parts of the real estate industry as proof that proptech can only thrive in boom times, I believe building a successful proptech company is less of an anticipation of economic growth and markets. and more for timing and taking advantage of the right tech trends. In short, this is as good a time as any to start a proptech company if you know where to look.
History is littered with examples of companies that have done just that. Let's take a look at three:
Procore
- Founded: 2002.
- Initial Drive: Used by celebrity housing projects in California.
- Turning point: 2012 (people start using iPads and smartphones on construction sites).
- Today: valuation of $ 5 billion in May 2020.
Procore was founded in 2002 in the aftermath of the dot-com failure, well before widespread WiFi and five years before the iPhone. The company saw the ability of software and technology to transform the construction industry long before professionals did. His team faithfully and stubbornly continued to do so during the financial crisis, but only had $ 5 million in revenue by 2012. Here's where timing comes in: By now, iPads and smartphones had become more common on construction sites. , allowing for widespread adoption.
By understanding this shift in the market and adapting to it, Procore strategically priced its product as a subscription, rather than by the number of employees, as was typical in the industry. In this way, early customers like Wieland and Mortenson convinced their subcontractors and temporary employees to use the product, creating a flywheel effect that spread Procore to other projects and customers. Fast forward to date, Procore now has more than $ 290 million in ARR and is worth over $ 5 billion.
Procore's persistence and agility ultimately allowed him to capitalize on the right trends and technology changes, despite what initially seemed like an untimely decision to start a software company in a recession. Procore is now on an exit path from the business as it continues to acquire new era proptech companies such as Avata Technologies, Honest Buildings and BIMAnywhere.
Zillow
- Founded: 2006.
- Initial Traction: Launched with 1 million website visits.
- Turning point: 2009 (financial crisis mentality).
- Today: Public - $ 27 billion in market capitalization.
Zillow was founded by the co-founders of Hotwire and Expedia. While this may not seem relevant, the vision of bringing transparency to consumers is the connecting line, the mission is to provide access to siled data and knowledge to previously twisted industries. Before Zillow, homeowners didn't know how much their home was worth. With Zillow's Zestimate, consumers can put a price tag on every rooftop across North America.