How the economy is changing proptech products

This story is part of Protocol’s playbook, “The Great Proptech Moment”. Learn more here.

Dave Eisenberg

Partner at Zigg Capital

When interest rates rise, new mortgage and refinance volumes decline. For proptech companies that benefited from huge home sales numbers last year (a 15-year high in 2021), this can cover many warts in a business. While we may be moving from a macroeconomic tailwind to a headwind, product development often turns to manual process automation to drive efficiency (margin gains), which becomes a necessary trade-off for reduce revenue growth. At Zigg, we’re very bullish on companies that have genuinely figured out how to automate manual workflows, either through applied narrow AI or through approaches like smart patterns. Examples from our portfolio would include companies like Snapdocs or Vesta in mortgages, Nabr or OpenSpace in construction, Spruce in securities, Juniper Square in investor reports, et al. With the recent reset of tech valuations in the public market, we expect many proptech companies to focus on products and move towards automating COGS and away from speculative initiatives designed to drive the growth of the turnover.

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Clelia Warburg Peters

Managing Partner at Era Ventures

The macroeconomic environment of the past two years has had a significant effect on the real estate world as a whole. Therefore, by extension, it has also influenced proptech.

There have been obvious impacts, like the short-term negative effects that working from home has had on flexible working solutions like WeWork or Industrious, but there are also more subtle impacts.

The desire to live in a house (instead of an apartment) in the age of the pandemic has accelerated the growth of the single-family rental industry and rapidly increased the scale of alternative financing products. Examples are Divvy’s rent-to-own solution or alternative financing tools (Homeward, Ribbon and Knock), which allow consumers to buy before they sell.

The need to find socially distanced tools to manage construction sites has accelerated the adoption of AI-based site monitoring solutions like OpenSpace.
And we’ve seen a rapid growth in financing and business creation in the proptech sector, as more dollars have been poured into venture capital in general, and proptech has emerged as the fastest growing area of ​​industry-specific venture capital.

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Ian Wang

CTO at Opendoor

Across the country, the supply of inventory continues to be at an all-time low and the market remains incredibly competitive for buyers. Homes don’t stay on the market very long and the pressure doesn’t seem to be easing in the short term. And with two-thirds of home sellers also buying, it can be a daunting time for many.

Consumers are looking for ease, certainty and transparency to navigate the entire moving process. Instead of thinking of selling a home and buying a home as separate transactions, we need to think of these people together, providing an end-to-end experience for buying, selling, and financing a home in one place. You can hail a ride, order food, and shop for groceries at the touch of a button; why can’t consumers enjoy the same convenience in real estate?

Product development in proptech should continue to address key customer issues, such as buying and selling challenges, rather than focusing on benefits that are not essential to buyer and seller success. .

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Charles Myslinski

Product Manager and Commercial Director at OJO Labs

Over the past two decades, new technologies have been introduced into just about every aspect of the real estate journey. And while this is great progress, the recent difficult housing market and other complicated macroeconomic factors – inflation and supply chain issues – have highlighted one of the major downsides. of all these new developments. In an already challenging shopping market, how can consumers navigate dozens of different terminal solutions and technology offerings?

To weather the economic moment, product managers must work to create solutions that support consumers every step of the way – from initial research to financing to home improvement – ​​and give them a solution for each different challenge they face. they could be confronted, while revealing data and information to better equip their decision-making.

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Sam Kroll

Partner at RET Ventures

The relationship between macro trends and proptech invariably begins with the relationship between the macro economy and the real estate sector.

Sticking to the residential side of real estate, a major secular trend in the real estate capital markets has been the increase in institutional capital flows into multi-family and single-family rental real estate. This trend is fueled by a number of macroeconomic factors, in particular a prolonged period of depressed real interest rates, which has caused institutional capital to seek assets that offer a constant return and are protected against inflation, such as a building in apartments.

This trend of increasing institutionalization has led to the emergence of larger national portfolios that require enterprise-grade technology infrastructure to build, acquire, finance, operate and dispose of assets at scale.

Not only has the institutionalization of real estate made technology essential for real estate operations, it has also highlighted the financial benefits of proptech. While capital flows into real estate have driven down residential cap rates, the additional operating leverage provided by a strong technology infrastructure is more important to ensure optimized asset performance – and ultimately a increase in NOI – as ballast to lower capitalization rates on new acquisitions. Access to differentiated data sets and the use of more rigorous quantitative frameworks in real estate will become requirements for investors seeking to deliver differentiated returns and win deals in this highly competitive environment.

Finally, an increasingly tough job market has left many operators struggling to staff rental desks, front desks and maintenance teams, making technology solutions for basic property management an absolute requirement.

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Lucas Haldeman

CEO at Smart Rent

The proptech industry has recently received a lot of attention from venture capital and public markets, with more and more money pouring into companies every year. In addition to those with deep domain expertise, several large, well-known companies that have traditionally leveraged technology for everyday consumer use are focusing on breaking into the industry and investing in proptech.

Key factors driving this interest include:

  • Growing awareness of climate change, carbon emissions and waste reduction requires intuitive solutions for everyday needs such as parking management, managed Wi-Fi, smart devices, AI, surveillance waste and package management. Today’s consumers expect innovative solutions and proptech can provide them.
  • Willingness of owner and operator to accept change and adopt new technologies. The pandemic has challenged owners to do more with less while delivering a great end-user experience. It is essential to centralize operations and to create and invest in equipment focused on infrastructure, accessibility and ease of use.
  • Increased interest in self-service. All major industries (automotive, healthcare, banking, and retail, for example) are embracing self-service customer experiences, and the real estate industry is finally moving in that direction with things like self-guided and virtual tours, iBuying, parking management and sophisticated solutions. CRMs that infuse AI.
  • A shift in buyer personas. We are seeing more and more proptech solution purchases being handled by operational and tech-focused leaders rather than the traditional marketing and sales-focused personas of the past.

Find out who’s who in the Braintrust Protocol and browse each previous edition by category here (updated February 14, 2022).

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