Property technology, or proptech, has had its shares of ups and downs in the commercial real estate industry. The highs saw proptech companies’ global value increase from $1 billion in 2012 to $24.3 billion in 2021, according to Statista. Additionally, the global proptech market is projected to jump from $18.2 billion in 2022 to $86.5 billion in 2023, per Future Market Insights.
The lows of proptech, however, include the fact that MetaProp’s 2022 Mid-year Confidence Index, which gathers insights from proptech startup founders and investors, was an all-time low of 5.8 (out of 10).
“This means that in 2023, real estate entrepreneurs will need to put in some extra effort to stand out and succeed,” Zain Ventures founder and president Zain Jaffer recently wrote for Forbes.
Develop a long-term solution
Jaffer noted that the most successful proptech businesses set long-term goals and create initiatives that drive them. The startups that skip the goal-setting step may rise quickly, but often shut down in a few years.
“Opting for fast exits may work for startups in other industries, but this is not always viable in proptech as real estate can be slower to change and adopt new technology,” Jaffer explained. “Therefore, those seeking to disrupt the space must be committed to the long-term and possess the creativity to bring a product to market and see it succeed.”
As an example, Jaffer pointed to Airbnb, which set a new standard for traveling and real estate investing and turned vacation rentals into a $91.2 billion industry in 2021.
Create a product that people need
A truly disruptive product is scalable—it can’t be something that is helpful to just a handful of people, according to Jaffer. A good way for proptech companies to develop such a useful product is to have real estate experience or create a network of CRE professionals who can share their pain points. Both Zillow and Opendoor found a proptech solution that solved a problem millions of people of people face — buying and selling a home.
“I’ve found agents, investors and others on the B2B side will only spend on a product or service that is 100 percent essential to their work process,” Jaffer wrote. “Therefore, tech entrepreneurs need to come up with tools that are indispensable for a real estate business — not just something that is nice to have.”
Have a healthy appetite for risk
No matter how disruptive a proptech solution is, there are no guarantees that it’s going to be a hit. Companies must be willing to accept risk if they want to disrupt the proptech space, according to Jaffer. Right now may be a risky time to develop a new proptech product for example — proptech funding is only expected to reach $26 billion this year vs. $32 billion in 2021, according to Business Insider. Meanwhile, a potential recession has forced a lot of investors to be more selective about where they are putting their money.
“It’s important to accept that failure is not final and be open to work under greater risk of not finding funding quickly,” Jaffer said. “The first startup I worked on never paid me a salary and was involved in a long lawsuit. Despite some low points, I never gave up and pushed forward. This path ultimately led to Blackstone buying my company. Since then, I have launched and invested in a few proptech startups.”