If you are about to start or are already running a technology company, I suggest you consider focusing on the real estate industry. Real estate is one of the world’s largest economic sectors, both in asset size and transaction volume.
Yet, it remains fragmented and ripe for innovation.
If you are reading this, you are probably in Asia, which is good news because this region alone accounts for about half of the global total property value.
Now, let’s put the asset values aside for a moment and look at transaction volume. If you estimate that each property turns over every 20 years on average, real estate worth about US$11 trillion is bought and sold on an annual basis.
If you make a very conservative two per cent estimate of advertising and commission costs on those transactions, you arrive at US$200 to US$400 billion a year.
Is the barrier to entry in the real estate industry too high?
We have established that the real estate market is large enough. Still, perhaps you worry that other innovative companies are already in place and represent an insurmountable obstacle to new startups.
In a perfect world, ruled entirely by logic and reason, this would be true. In our world today, it is not.
When ranked by assets or volume of transactions, many leading industry players have found they can do perfectly well in the current environment without investing much in technology or innovation.
Look at real estate agents. A good agent can make decent money with the most basic of tools. In the past two decades of disruption, other industries with larger margins were targeted first, with real estate largely overlooked. But this state of affairs will not last forever.
Innovation and disruption are coming to the real estate industry. Why shouldn’t you be the one to bring them?
Worldwide, there are only 1,724 proptech companies, according to the PropTech Global Trends 2021 Barometer. Fewer than 10 per cent of these are in Asia, and most Asian proptechs are in China and India. They are not distributed evenly across the region.
The relatively small number of proptech companies and their concentration in the US, which accounts for 59 per cent, leaves the field wide open for innovators in Asia.
How to decide where to focus
The real estate industry is multifaceted and immense, meaning there is a surplus of opportunity for the clever entrepreneur. To help you decide where to focus your attention, it can help to divide the world of proptech into these four conceptual categories:
An “investing” startup might provide tools to enable real estate investors to evaluate opportunities more effectively.
In the “building” category, you might offer technologies to facilitate construction management.
In the “managing” space, your startup might focus on providing tools to real estate agents, property search for buyers and renters, or the management of investment properties.
And companies in the “living” category might focus on facility management or home IoT solutions such as security or energy management.
There are uncountable other opportunities besides those mentioned above. Yes, there are some excellent proptech businesses already operating in each of these categories, but much territory remains open to your claiming a stake.
In fact, real estate search (“managing”), according to the Barometer, accounts for 56 per cent of all global proptech investment since 2000.
With so much investment concentrated in a single sub-sector of proptech, there is a tremendous need for investment and innovation across nearly every other area.
Choose where to focus based on your capabilities, technology and knowledge. In general, seek to enable market participants to increase their scale efficiently or to make better decisions, two use cases that rely on data and technology to implement.
But remember, one of the most common reasons that Asian startups fail is that they do not solve a real problem for their target users or customers.
Don’t put technology first. Don’t put a buzzword first. And don’t put what you wish were true ahead of the real problem that industry participants may be willing to pay you to solve. In this way, founding a company is the ultimate act of humility. You must put aside your own desires and instead provide what your users and customers want.
Hey there, big spender
Let’s look at real estate developers as an example.
Most money spent on property marketing and advertising in Asia has come straight out of the pockets of developers. They run a highly capital intensive business, and their decisions can bind their company’s resources for years at a time. Sales is a volume game for them, and their advertising and sales budgets can run as high as 15 per cent of total development value.
For all of these reasons, developers are among the most forward-looking adopters of innovations and technologies and excellent potential customers for any proptech that can improve their decision making or development and sales process.
Before agents were making wide use of virtual reality, 3-D walk-throughs and international marketing platforms, developers were employing these techniques in their sales centres.
Juwai IQI is not alone in focusing on the segment. Our super-app Atlas has given our agents a 41 per cent productivity gain. With time, we will further facilitate the transaction by integrating finance and title transfer.
That is just our path. The opportunities in proptech are practically endless. I encourage you to find your own.
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