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So, What Is Proptech?

By Eduardo Orozco - alohome


By Eduardo Orozco | CEO & Co-founder - Wed, 03/15/2023 - 11:00

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Professionals in the real estate industry should probably be aware of where US$50 billion is being invested in their sector. Real estate is the world’s largest asset class since it covers everything from the land through the operation of complex hospitals, factories, housing, offices and storage, among others. Real estate is also intermingled with a huge portion of the financial services industries, and it also covers a huge range of activities from development and construction, to property management and maintenance. 

We are just at the very beginning of the digital journey of the real estate industry but the trend to go digital has quickly accelerated as a result of  technology. This technology for real estate has been broadly labeled as “proptech,” for property technology. 

Proptech companies aim to improve how properties are analyzed, financed, built, sold, rented, remodeled, operated, optimized, appraised, registered, and interchanged. As you can see, it is a broad category that involves a large range of activities and business models. Currently, there is a technology-based activity across the entire value chain for real estate. A 2022 report from Thomvest Ventures mapped 275 proptech companies in the housing market in the US alone. In 2022, Terracotta Ventures, a Brazilian fund focused on investing in proptech companies, mapped over 955 startups in Latin America. This is impressive considering most of these companies are less than 5 years old. 

The industry should really start taking notice of this trend. According to CRETI in 2021 and 2022, more than US$50 billion of venture capital was invested in real estate technology companies. Some investors are starting to make the distinction and map the opportunities across three different subverticals; fintech-proptech, which has to do with the financial services involved in real estate; construtech that has to do with technology for construction; and general proptech, which tend to be software solutions for the life chain of real estate. This massive rise of proptech companies is a deeply exciting moment for players in the real estate space. In the words of the legendary operator and investor Pete Flint, founder of Trulia and General Partner at VC Fund NFX, “It’s the ‘single best time’ to invest in real estate startups.” 

I currently operate as co-Founder and CEO at alohome.io, a proptech company developing a one-stop solution to integrate all the marketing and sales efforts for homebuilders. In my free time, I co-host the Real Tech Club podcast with the talented Jose Carlos Alemán. I make an active effort to frequently scout the trends and companies arising in the US, Mexico, Colombia, Chile, and Brazil. In this intersection of founder and proptech specialist, I am fortunate to have access to many investors as well as founders active in the proptech space. It is incredibly exciting to see the wide number of solutions and the different realms in which they are targeted. 

Going back to Pete Flint and NFX, they have published several articles on the NFX website in which they describe the evolution of proptech. They call Real Estate 1.0 the Information Revolution, which is to bring information online. Real Estate 2.0 is the Transaction Revolution in which the transaction is simplified, and frictions eliminated. We are at the dawn of Real Estate 3.0, which is the Ownership Revolution, where new models are developed to enable access, ownership, financing and transactionality. 

When I look at the pattern proposed by NFX, I see some signs that the pattern is repeating itself in the residential space in Latin America. In Mexico, it went broadly like this: 20 years ago the early proptechs were founded with names like Metros Cúbicos, inmuebles24, and other legacy platforms that were bringing information online. Then I think of companies from the last five to 10 years like TuCanton, TrueHome, Homie, and Flat, which are significantly improving transactions. And now we are starting to see major innovation around access to ownership in some younger rising companies like Briq.mx, 100 ladrillos, Morgana, Morada Uno, Yave, Pulppo, or Arrenda. And many more are joining the revolution. 

My career in real estate started 15 years ago, first as an investor in a couple of large funds, and more recently as head of Latin America for a large investor and developer in multifamily. I remember the early days in my career at MIRA 10 years ago, when our team was looking for software that could integrate analytics for the results we were getting in sales of homes, condos, and land in projects across Monterrey and Cancun to better improve our pricing and nourish future investment decisions. I was tasked with the process of searching for a reliable real estate CRM. At that point, we had only two options, a very robust and expensive software built on top of Salesforce, or to build it in-house. I strongly believe that companies should focus on their core strengths, and for a homebuilder and real estate investor, building technology is not the main focus. 

Compare those results to today, where a quick Google search on my phone for “CRM for real estate developers” resulted in 11 million results. We’ve come a long way, and this is just phase I. If I was tasked with the same challenge today, the difficulty would not be in finding possible solutions, but to rank them and test them to find the best one for our needs and integrating them into a broader technology roadmap. One of the challenges that we hear from real estate companies is that there are many solutions emerging. In a space that previously had no technology, this is excellent news.

Real estate companies went from no technology to a lot of technology in 10 years, and it poses a true challenge to select, onboard, and integrate across new solutions. In the future, this will be a major challenge for real estate companies as the evolution is just speeding up. At alohome, we are trying to get ahead of that challenge by building the central point for homebuilders in which the best solutions from demand generation, financing, and information can be managed, integrated, and analyzed in a central and cohesive way. So far, this is yielding amazing business results for our clients, and this is only the beginning. 

As I continue to nerd out about proptech, something I find truly exciting is that this revolution is not only happening in the residential space. A very exciting part of proptech is happening beyond the residential space and into commercial, industrial, mortgages, financing, and many other areas of real estate. Companies like Buzzstreet, Spot2, Around, Vertebra, and Mawi are some examples of bold innovations going beyond homes and apartments. Proptech is coming fast to every corner of the market. 

In conclusion, technology for real estate is coming in hot. While we are still in the early phases. Some theses will succeed while others won’t, but the movement to go digital and yield the benefits of efficiency have begun. This is an exciting stage where startups, real estate companies, and industry groups are still trying to find the best ways to win and grow. The future of real estate is digital, and it is incredibly exciting to be in the space.  

Photo by:   Eduardo Orozco

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