The proptech industry has been building momentum for a number of years, with many homegrown Aussie solutions catching the eye of investors.
But, while the COVID-19 pandemic has changed the way we work, learn and socialise, could it also have a lasting effect on the way we buy, sell and manage property?
On the one hand, in this environment, anything that facilitates business-from-a-distance is a winner. On the other, the challenging economic times are widely expected to have a depressing effect on the property markets.
This week, two protech startups announced significant funding rounds, with :Different pocketing $7.1 million, and Sorted securing $5.6 million for its tech automating transactions between property managers and tenants.
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So, is the writing on the wall for the real estate space? And does COVID-19 mean a shift to tech-savvy practices is on the cards?
Speaking to SmartCompany, Sorted founder Andrew Duncan says when the crisis hit, he didn’t really know what to expect. So his team initially took a step back from clients and leads.
“Everyone was trying to work themselves out. You had to respect that.”
But soon, he found a lot of the ongoing discussions that had been in progress started up again.
“People realised they needed more robust solutions from here on,” he says.
At the same time, Duncan says the startup is seeing an uptick in inbound enquiries.
“That doesn’t mean to say that everyone is able and ready to move — some are, some aren’t,” he notes.
“But people are looking to come out of this with improved businesses, improved business models, and not to be waiting around too much anymore.”
Speaking to SmartCompany after securing her own chunk of funding, :Different co-founder Mina Radhakrishnan says raising during a pandemic is “not ideal”.
However, she says :Different has been in a good position to weather the COVID-19 storm, thus far.
The startup’s platform facilitates and automates rent payments, maintenance requests and house inspections. And while the property industry is a people-centric one, Radhakrishnan says her business is not focused on taking that human element away. Rather, it uses technology to try to improve it.
“One of the things that has been very baked into the way that we’ve thought about the company from early days is, how we can use technology to be able to humanise these interactions,” she says.
Now, we find ourselves in a situation where there’s no choice, she notes. In the COVID-19 environment, these interactions can’t be face-to-face.
And, as a technology company, :Different has been well-placed to support clients, offering things like 3D video viewings.
“Having that viewpoint from very early on has allowed us to do that,” the founder says.
Elsewhere, Clayton Howes, founder and chief of MoneyMe, says demand for the business’ ListReady product has skyrocketed. ListReady offers financing to cover the costs of selling a home, including listing, advertising and staging, until after a settlement is finalised.
Demand for the service has doubled since February, Howes says. March was a record month for the business, and he’s currently seeing demand increase week-by-week.
“It’s just phenomenal what’s happening,” he says.
ListReady offers an entirely digital proposition that also doesn’t demand any upfront payment from the vendor. Howes says he’s always been confident, anticipating this would become the default way of listing a property.
“We didn’t expect it to be this quick,” he says.
“I think COVID-19 just accelerated that proposition.”
Focus on efficiency
Paul Naphtali is a partner at VC firm Rampersand, which led the investment into Sorted, and he now also sits on the board of the startup.
“Property holds a very venerated place in the Australian commercial psyche,” he notes.
“From a technology perspective there are so many areas to optimise.”
As an investor, Naphtali’s typically looking for opportunities to increase efficiency in a way that improves experience, he says. In this space in particular, there are many areas of business that remain woefully under-optimised and COVID-19 is driving “an absolute focus on efficiency” here and in other industries.
It’s not that real estate agents and property managers weren’t aware of, or open to, new solutions previously. It’s very possible, he suggests, that with fewer people moving house, they just have some time to look into them now.
“What’s changed is the accelerated understanding, and pursuit of a solution,” Naphtali suggests.
“We’ve got complex markets where margins are squeezed and people are not necessarily having a great time. That’s a perfect storm for a technology solution that’s simple and effective.”
And once the market embraces those solutions, he believes they will be there to stay.
“Once the genie is out of the bottle, and people realise there is an opportunity to run a business more efficiently and deliver a better experience, then it’s hard to see that swinging back.”
‘Ready to move’
This is an industry that was craving change, and a technological upgrade; all the founders we spoke to suggested everyone in the space was aware they were behind on the times.
“They’ve heard a lot from different industry leaders, and they’ve seen what’s happened in other markets. They’re certainly ready to move,” Duncan says.
So the practices they’re implementing now are likely to stick around once the crisis has passed.
“They will push on in that direction at a faster rate than they were previously.”
For Howes, what was needed was an “attitude shift”, even if it was a forced one.
Once people in the property industry shift away from the shackles of paper, forgo face-to-face meetings in the office, and realise how much ease and efficiency comes with tech, “they’re not going back”, Howes says.
“That model is gone.”
At the same time, this phenomenon isn’t unique to the proptech space. Or even the tech space. While COVID-19 has seen increase adoption of remote working and collaboration tech, as well as advances in edtech and telehealth, Radhakrishnan suggests this is a “broader societal thing”.
People are reassessing things that have always been done a particular way — such as going into an office to sign a lease, for example.
“When we are in a place when you can’t do things in the same way you’ve always done them before, you have to adapt, you have to be creative,” she says.
There are many things in business and in life that could be improved, “to make it simple and create a better experience for all parties”, she adds.
And this is especially pertinent in a time of uncertainty. At the beginning of the year, no one would have predicted we would be where we are now, Radhakrishnan notes.
“You can’t just do things the way we’ve always done it, because you don’t know what’s going to happen next.”