PropTech startups are solving some pressing issues in the real estate industry today. From making it easier to find and lease apartments, to improving energy efficiency in buildings, these companies are coming up with creative solutions to longstanding problems.
In this article, Tzvete Doncheva from PropTech1, gives the latest insights about the industry, their current investment strategy and the type of startups they typically invest in. Find out what makes a project attractive to them and how they evaluate each potential investment.
What Caused A Huge Spike in The Number of PropTech Investments?
Tzvete believes that this spike in the number of proptech investments is due to the digital transformation of the sector.
“A huge industry, traditionally latent to change that’s reached a point when (digital) change is no longer optional.” - She explains.
The past decade has seen a huge increase in PropTech investments. This is largely due to the fact that the real estate industry is finally starting to catch up with other industries when it comes to technological innovation.
A number of factors have contributed to this change, “ranging from rising climate-focused regulation, changed consumer behavior (the customisation of real estate) and the need to establish a better connection between people and places,” she adds.
What Factors Do Investors Consider When Evaluating New PropTech Investment Opportunities?
According to Tzvete, when it comes to PropTech investments, PropTech1 looks at a variety of factors in order to determine whether or not an opportunity is right.
● Product - “Your ‘problem/solution’ statement should be a must-have, rather than a ‘nice-to-have’ in the industry,” Tzvete says.
● Team - Your team's previous experience should be directly related to the solution you’re building, showing expertise in the field.
● Traction - It would help to validate that third parties also benefit from using your product.
● Market - How big is the market share you’re going for? What’s the market share you’re envisioning?
● Terms - What does your current cap table structure and company valuation look like?
● ESG - Alignment to the firm’s ESG values and cultural fit.
“Venture is a people business and we are most happy to back founders we like and can see ourselves working a long time with.” Tzvete adds.
Why Should Limited Partners Consider Investing in PropTech Funds Rather than Direct Investments in PropTech Startups?
“An investment in a PropTech fund enables Limited Partners to cast a wider net on the PropTech ecosystem and approach it at a greater scale,” she says. She further explains that this in turn means access to:
- More deals (a larger deal flow pipe)
- Potentially better returns (diversifying the risk by investing in a portfolio built by a team of experts)
- A network that’s usually taken years to build.
Tzvete made it clear that at PropTech1, they very much like to go after building a ‘community’ with their investors, founders and partners.
What Are Some Proptech Investment Trends from The VC Viewpoint?
“Our definition of PropTech is broad and includes areas like ConstructionTech or UrbanTech as well as solutions relating to energy and infrastructure. We’re able to break it through the prism of global trends we see.” Tzvete explains.
Tzvete reveals that the team at Proptech1 looks for PropTech companies that are addressing global trends and problems. Some of the current areas of interest for the team include smart materials and climate resilience.
What Are the Best Strategies for Proptech Startups to Build Relationships with Leading VCs?
Tzvete says, “Relationships with VCs, just like with any stakeholder, take a while to build”
Here are Tzvete's suggestions to building relationships with VCs:
1. Do your research and know who to approach depending on the geo / stage / thesis fit.
2. Start early – try to get an additional way in (building a personal connection / via an intro).
3. Keep your eye on the long game – relationship building takes time, so don’t expect immediate results.
Tzvete is always on the lookout for new and innovative startups that can add value to her team. Below, she shares her top tips for founders looking to get their foot in the door with PropTech1 Ventures.
1. Can you add value to the team?
Doncheva says that one of the things she looks for in a founding team is their attitude and willingness to go above and beyond to add value.
2. Know how and when to (stop) following up
It's important to know when to follow up with investors, and when to back off. The golden rule of thumb is to follow up three times in a week's time.
3. Be the best in what you're building
This one is self-explanatory; but worth repeating nonetheless - your startup needs to be solving a real problem in a unique way. You also need to have a clear understanding of your market opportunity and competitive landscape.
For more (hopefully actionable tips), you may check out this not-so-recent but still-so-relevant article on how to perfect your ‘cold outreach’ approach to a VC investor and get a response.
Where to Build Relationships with the Leading VCs
Whether you seek a business partner, an investment, or simply want to get your business idea off the ground, networking is key. You need to be in the right room, talking to the right people and making the right impression at the right time.
Luckily, 0100 Conferences hold regular private equity and venture capital networking events so that you can have a better chance of meeting people who are relevant to your business. Click here to find the nearest conference to you and start building meaningful relationships now.