Fundingportal sat down with Greensoil PropTech Ventures to get real insights on what investors are looking for
PropTech, the relatively new tech sector, is helping propel the real estate and construction industries forward. PropTech is widely understood as suites of market tracking tools, virtual tour platforms, and property management applications. However, the early disruptors make up only a small subset of the innovations that are contributing to the sector’s rapid evolution.
67% of all Canadian PropTech startups were founded after 2014 according to a 2021 report by the PropTech Collective. With more than 60% of PropTech startups still in early stage (pre-seed, seed) financing, the rapidly-growing industry is primed for venture capitalists looking to support companies that align with their investment goals. So, what net-new challenges and opportunities have been identified for sectoral growth?
Fundingportal, a leading provider of AI-driven funding tools and software, reached out to Greensoil PropTech Ventures (GSPV), one of Canada’s top investors in PropTech startups to find out.
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In this interview, Dave Harris Kolada, Managing Partner at GSPV, provides insight into the PropTech sector, as well as addressing what VCs like Greensoil are looking for when deciding where to invest.
Fundingportal: What drivers are helping the PropTech industry grow?
Greensoil: There are many drivers impacting the sector now, but the main ones are:
Increased returns are a huge driving force. Property owners need new ways of generating revenue and competitively differentiating themselves in an era of low interest rates and rapidly rising asset values.
Property owners are also looking for ways to protect their downside risks regarding such issues as climate change and climate resilience (fires, floods, air quality etc.). Mitigating risings costs such as insurance and fines/penalties for lack of compliance with a growing number of energy intensity/emissions regulations is also a strong driver.
The road to 2050 runs through PropTech.
Dave Harris Kolada, Managing Partner, Greensoil PropTech Ventures
In response to climate change, property and asset owners managing 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 & COVID-19
The real estate sector, like all sectors of the global economy, is undergoing a digital transformation. While real estate has lagged the enterprise sector, it has reached its tipping point. COVID-19 has been a huge catalyst for real estate to go digital as traditional (analog) processes no longer worked. There is a need to operate with skill and precision from anywhere at anytime. This is only possible through digitization.
Millennials and younger generations demand more – particularly around the environment – from their vendors, including their landlords, and those that build and service the properties they own. They are voting with their dollars. In addition, they are moving into increasingly higher levels of responsibility within often family run real estate companies. They are driving change, both in terms of innovation generally, and with respect to carbon reducing technologies specifically.
They are also mobile first and will adopt the solution that is easiest to use, that is seamlessly integrated with other apps they use and with a UI/UX that delights them. All these trends are forcing the real estate industry to adopt more PropTech.
Fundingportal: What criteria do investors like Greensoil look for when funding a project or company?
Greensoil: We look for many factors, including geographic focus, proven traction, and a competitive business model. However, first and foremost, we are focused on:
1) People– we value a high-quality team and are particularly seeking serial entrepreneurs
2) Carbon reducing potential from deployment of their tech
3) Technology we can deploy into the buildings built / owned / operated by our investors (our Limited Partners in our funds)
4) Deep IP and competitive differentiation
Fundingportal: What types of challenges do PropTech companies face when it comes to funding?
Greensoil: It can be challenging for PropTech companies to raise capital fast enough to keep up with the competition in this very high growth and fast-moving sector. Capital intensity can also be a struggle, particularly in areas like ContrucTech.
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 obstacle to overcome.
Finally, there is the impact of COVID-19. This has become somewhat of a positive as it is easier than ever to “meet” investors virtually. But for a period in 2020, there was a big drop in PropTech funding as the industry braced for impact. The industry has bounced back very strongly, and 2021 and is now on pace to be the biggest year ever in terms of PropTech VC dollars invested globally.