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  • Writer's pictureFlorian Stadlbauer

Crossing the Chasm in Real Estate

Everybody who is familiar with startups and scale-ups is aware that crossing the chasm is one of the most difficult stage a startup can face. In average data shows that only one of 200 companies are able to enter this new stage.

I believe in real estate it is even more difficult and I tell you why:

Compared to many other industry real estate got some fundamental differences which are some how hindering scaling of tech companies.

First of all, companies within the real estate industry are relatively small. For clarification I always love the comparison between the amount of companies within the real estate industry in Germany - which is 800.000 based on the ZIA figures of 2022 - with the amount of companies of the mechanical engineering industry - which is 6.700 and thus less then one hundredth of the real estate companies in Germany. Small companies always means small standardization and thus less efficient possibilities to easily raise the digital maturity.

Secondly the assets are within our industry not standardized at all. Compared to the automotive, semiconductors or computers or the logistic industry our assets not standardized at all and even worse there is no current documents and data let alone digital twins to easily bring in digital solutions.

Finally after on or almost two decades of growth many companies within the real estate industry did not invest in tech nor in knowledge and a digital mindset which would made the implementation of digital solutions much much easier.

However there is no reason to despair as there are some solutions to overcome the above mentioned challenges and to grow a proptech startup to a scale-up:

To handle the little standardization within real estate firms my advice would be to focus on solutions which got little connections to other systems and are for processes which drive massive value for the companies. For asset mangers this is for instance the transaction process which is characterized by the above mentioned focus points. And if this is not possible for a specific solution, there is no need to burry one's head in the sand: Currently more and more platforms of platforms, like Real Cube, Assetti or AssetLand are entering the market. Those solutions work like Operating Systems for real estate companies which allow them to easily use specific proptech solutions. Once more and more proptechs will connected their solutions to such platforms, network-effects might kick in and incumbents will use more and more of such platforms.

To handle the challenge of little standardization of the assets a strong suggestion would be to shape the specific solutions in a way that it is not designed for assets but for portfolios. In this case the proptech will reduce all features to a common dominator. This will bring a massive upside in, as such solutions could be than (more) easily applied to portfolios of asset managers and/or investors.

To handle the challenge of the little knowledge and mindest in regard of tech and digital transformation in real estate. The best advice would be to bring senior mangers into the proptechs which know and understand the traditional industry very well. I am already seeing this in some proptechs and based on my data I feel that such a move really pushes the startup to a new level.

All in all it seems definitely doable to cross the chasm. The only and most important rule is to really understand how the industry works and this is unfortunately and fortunately different than any other industry. But also crossing the chasm hence means that this is no art. It plain science. What do you think?

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