Prop\Tech Weekly #47 – “Why is there no tech in UK Proptech?”| Rayhan Rafiq-Omar
Friends, Feudal Landlords, Commoners,
Consumate self-promoter Aaron Block was in the UK to host the MIPIM start-up competition.
In a very brief chat he made a statement that summed up proptech in the UK: “Where’s the tech?”
Almost everything on display could be better described as business model innovation, rather than technological innovation.
The original proptech companies – online estate agents – struggle for profitability, and have to spend their way to scale, precisely because there is so little tech involved in their businesses.
But let’s not be downbeat as there are shining beacons that point the way:
OpenRent – while every other non-traditional estate agent has a call centre, OpenRent don’t need one. Their model is genuine no-frills, yet the technology keeps customers moving through the system efficiently. If you want to see the future of online agency, these guys are it. It’s very clear what they are and who they serve: DIY landlords who don’t want to use an agent. OpenRent don’t pretend to offer viewings or anything beyond listing, referencing and contracting. It’s an authetic tech play.
Fixflo – more simple than OpenRent is the patented genius of Rajeev Nayyar – use pictures to guide tenants into giving property managers the right information. No more exchanging of 10 emails and several phone calls, just to figure out the pilot light is off. If you’re in lettings and don’t use Fixflo, you’re probably throwing money down the drain.
Rightmove – probably the most profitable company in the world by gross margin percentage. Their use of technology is so simple, an insider describes Rightmove as just 4 web pages: homepage, search page, results listings and property details. It is because of this simplicity that Rightmove is so effective at marketing estate agencies – that’s right, it’s not a typo: Rightmove is advertising estate agencies, not property. It’s a key reason why the online agency business model is flawed. Portals don’t sell property. They advertise agents.
Opendoor – is the absolute epitome of simplicity: it’s just a valuation algorithm. So accurate is their valuation of property, that people trust Opendoor. And in case you haven’t taken a look around, trust in real estate makes them seriously differentiated. These guys will be the biggest proptech company out there.
There are others Proptech businesses which are massively funded, so have built tech as shiny, sexy lead generation gimmicks. What I mean is that their businesses could largely operate without the tech. While there are some efficiencies to be gained, there’s a lot of operational cost the other examples above just don’t have – and therefore the margin isn’t the same.
Lendinvest – super branded provider of bridging loans. The tech serves as a big tick in the shiny ‘this is what the future looks like’ box – but their business would be just as big without the tech.
Property Partner – I’m conflicted because I’m a big fan of the tech they’ve built – their secondary market for property shares is a thing of beauty – but their current business model isn’t mass market and therefore the tech is more of an open beta for when their real business model takes over.
The last one is interesting because the future could very well be a tech business – but currently their business is beholden to a very expensive operation to source property. When they achieve the stated goal of being the “stock market for global real estate” and others are sourcing and ‘listing’ properties, that’s when Property Partner could become Rightmove-esque in its profitability.
So when Aaron Block asks where the tech is, I say: follow the money.
Building technology is risky and expensive. And did I mention it’s risky?
And right now, there’s so little money in Proptech – and that’s why there is so little tech.
There are rumblings of Proptech VCs looking to take a view on the sector – but it may be that the next big thing follows the Zoopla model: if you can’t innovate, just create value through M&A.
Next week we’ll look at the potential deals that could excite and light up this nascent industry.