Proptech business models and venture capital

Picture the scene. You have the same personal wealth as the GDP of Slovakia. Your world famous. You have movies made about you. Yet when you jump onto Facebook- you can’t get in to your Investors Private page!. You then search your friends list for the CEOs of the IBs on Wall Street + they have blocked you??? And worst of all, you been de-tagged from all those pics from your trip to Washington to see your pals at the Senate Committee?

We are still seeking confirmation if this is what happened to Mark Z, after Meta’s (Facebook’s parent) $220bn market valuation fall in 24hours last week (the largest one-day drop in history of a stock’s valuation)but nonetheless it must have been a tough day. (Trivia alert: Can you name the7 biggest one day falls in market cap ever? Answers at the bottom).

Tech metrics are from Venus, Real estate is from Mars…

The valuation hit, inter alia, was due to missed revenue targets+ the # of daily active users on FB falling for the 1st time ever between quarters (note we appreciate this is very oversimplified).

The almost perfectly elastic relationship between growth or usage metrics + the value of a tech company is one which is often applied but we feel should take less prominence in Proptech, owing to the underlying fundamentals of Real estate.

Real estate is ultimately transaction centric and is disproportionately sensitive to macroeconomic cycles- more so than other tech fields. Whether it be leasing a building, buying/selling assets or building something, these all have their root within a transaction-based outcome.  

As such, Proptechs can be caught in a space between:

(1) hitting metrics that they believe VCs require/are required +

(2) building out a business model that is linked to the value delivered to the customer (i.e real estate companies)- often this is nota SAAS model for example.

It is something we work closely with our Proptech clients on navigating. Adroitly managing this + stepping through the stages of growth is where the most successful Proptechs are able to unlock the huge TAM of Real Estate.

As for Meta + Facebook, will be interesting to see how things play out- given the simmering Apple conflict + the way Amazon benefitted from Meta’s demise. Might be worth Mark Z, sending a friend request to the team at My Space for some insights……

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