Online agents are a model from up to six years ago and start-ups are now unlikely to attract investment.
The claim has come from the CEO of Pi Labs, the proptech venture capitalist which hot-houses property start-ups.
Dominic Wilson was responding to a question from EYE as to why the four latest ‘proptech’ firms it is currently backing appear to have little to do with property.
At the latest demo day by PiLabs, four different businesses that it is mentoring all pitched successfully for extra funds.
The businesses, however, on the face of it appear to have little to do with property.
Instead, they are looking to innovate in hotels management, gardening and finding cooking premises for food businesses.
Each of the companies – ShareDining, Unified, Unitpal and Grabagardener – ended their pitch with an amount of additional funds they were looking to raise to power future business growth.
Investors in the room included Eyal Malinger – formerly of Countrywide and now investing on behalf of Beringea, which backs high-growth businesses.
After the pitches Malinger commented on why he hadn’t made a proptech investment in 18 months.
He said: “People building the companies in proptech don’t have the experience or the domain knowledge.
“Young and passionate entrepreneurs are more suited to consumer solutions – but by and large these are b2b (business-to-business) problems.”
The unique selling proposition of each business seemed to confirm this theory:
ShareDining looks to ‘liberate’ unused commercial kitchen space e.g. cafes that are open in the day and closed at night. By renting out the kitchens in their down periods, ShareDining professed to deliver increased profitability for schools and cafes, as well as making it easier to start up food businesses.
Unified connects hotel staff to guests on a mobile platform with the aim of reducing poor customer service. They stated that a one-star reduction on Tripadvisor leads to a 10% reduction in yearly revenue.
Unitpal, similarly targeting hotels, reduced staff training from three weeks to two hours by building a modern ‘property and revenue management’ system.
Finally Grabagardener connects local people to local gardeners who are background-checked. The company
takes a 17.5% commission which currently brings in £40k transaction of revenue per month.
Out of the four, Grabagardener seemed to be the furthest advanced, also raising the most money in their ask for £750k from investors.
But why is Pi Labs (Property Innovation Labs)investing in what does not look like proptech?
Dominic Wilson, CEO of Pi Labs, armed with $10m raised during the summer, told me: “We look at the whole value chain of real estate – for example, statistical evidence of having a nicer garden improves the value of your home.
“Ultimately we’re about investment in companies who are improving utilisation and monetisation of assets – could be a fintech or insurance or a home services product.
“Proptech started as buildings but there’s so much more to that.
“We are investors in people and companies, and work hard to find those opportunities – with a global outlook.
“We give people the opportunity to show us that what they’re doing can have an impact on property – if a founder feels really passionately, then we’re happy to entertain that and dig into it.
“The value chain of property starts with planning (before buildings are built), and goes through construction, acquisition (including renting), operations, utilities and finally financial products.
“This cohort is very different – who wants to do another online estate agency model?
“We ourselves are in the business of finding out what we don’t know. That’s ultimately why the value of Pi Labs is so strong. We dig in to what we don’t know and find out more.
“It’s now almost 2018 and we have to widen the envelope – online agents are a model from 2011, 2012 and 2013.”