PropTech: What drives initial investments in real estate technologies?

PropTech: What drives initial investments in real estate technologies?

PropTech: What drives initial investments in real estate technologies?

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Greensoil PropTech Ventures partner discusses the industry and what venture capitalists look for when they decide to invest

Author of the article:

The financing portal

Melanie Tabet

PropTech: What drives initial investments in real estate technologies?

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PropTech, a relatively new technology sector, is helping to jumpstart the real estate and construction industries. PropTech is widely understood as a set of market monitoring tools, virtual tour platforms, and property management applications. However, early disruptors are only a small subset of the innovations that are contributing to the rapid evolution of the industry.

67 percent of all Canadian PropTech startups were founded after 2014 according to a 2021 report from the PropTech Collective. With more than 60 percent of PropTech startups are still in an early stage of funding (pre-seed, seed), the fast-growing industry is poised for venture capitalists looking to support companies that align with their investment goals. So what new net challenges and opportunities have been identified for sector growth?

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The funding portal, a leading provider of AI-powered funding tools and software, contacted Greensoil PropTech Ventures (GSPV), one of Canada’s top investors in PropTech startups to find out.

In this interview, Dave Harris Kolada, Managing Partner at GSPV, provides insight into the PropTech sector, as well as addressing what venture capitalists like Greensoil are looking for when deciding where to invest.

Financing portal: What drivers are helping the PropTech industry grow?

Greensoil: There are many factors that affect the sector now, but the main ones are:

Higher profitability: Increasing returns is a great driving force. Homeowners need new ways to generate income and differentiate themselves competitively in an era of low interest rates and rapidly rising asset values.

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Downside risk: Homeowners are also looking for ways to protect their negative risks regarding issues like climate change and climate resilience (fire, flood, air quality, etc.). Mitigating the costs of risks, such as insurance and fines / penalties for non-compliance with a growing number of emissions / energy intensity regulations, is also an important factor.

The road to 2050 passes through PropTech.

Dave Harris Kolada, Managing Partner, Greensoil PropTech Ventures

Net zero: In response to climate change, property and asset owners who manage trillions of dollars have committed to bringing their buildings to net zero carbon emissions by 2030 and 2050; this is only possible with PropTech. At GSPV, we say “The road to 2050 runs through PropTech.”

Going digital and COVID-19: The real estate sector, like all sectors of the global economy, is undergoing a digital transformation. While the real estate sector has lagged behind the corporate sector, it has reached its tipping point. COVID-19 has been a great catalyst for real estate to go digital as traditional (analog) processes no longer work. It is necessary to operate with skill and precision from anywhere and at any time. This is only possible through digitization.

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Demography: Millennials and younger generations demand more, particularly around the environment, from their suppliers, including their owners and those who build and service the properties they own. They are voting with their dollars. Additionally, they are moving toward ever higher levels of responsibility within often family-owned real estate businesses. They are driving change, both in terms of innovation in general, and with regard to carbon reduction technologies in particular.

They are also mobile first and will adopt the solution that is the easiest to use, which integrates seamlessly with other applications they use and with a user interface / UX that delights them. All of these trends are forcing the real estate industry to adopt more PropTech.

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Financing portal: What criteria do investors like Greensoil look for when financing a project or a company?

Greensoil: We look for many factors, including geographic focus, proven traction, and a competitive business model. However, above all, we focus on:

1) People: We value a high-quality team and are especially looking for serial entrepreneurs.

2) Carbon reduction potential of your technology deployment

3) Technology that we can implement in buildings built / owned / operated by our investors (our limited partners in our funds)

4) deep IP and competitive differentiation

Financing portal: What kinds of challenges do PropTech companies face when it comes to financing?

Greensoil: It can be challenging for PropTech companies to raise capital fast enough to keep up with the competition in this fast-growing, fast-growing sector. Capital intensity can also be a struggle, particularly in areas like ContrucTech.

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Navigating the needs of corporate strategic investors who are allocating large amounts of capital to PropTech startups is a key focus for many companies and can be a difficult hurdle to overcome.

Finally, there is the impact of COVID-19. This has turned out to be a good thing, as it is easier than ever to “meet” investors virtually. But over a period in 2020, there was a big drop in funding for PropTech as the industry braced for the shock. The industry has recovered very strongly, in 2021 and is now on track to be the largest year in terms of PropTech VC dollars invested globally.

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The charge PropTech: What drives initial investments in real estate technologies? appeared first in Grants101.

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