Recently we received the results of an interesting survey conducted by Union Investment and the German Tech Entrepreneurship Center (GTEC). The respondents were some 100 PropTech startups from around the world. Just over half of them complained about “slow and cumbersome decision making processes,” citing this as the main problem in effectively collaborating with established real estate companies. For 68% of the survey participants “accelerating decision processes” featured highest on their wish list, followed by an increased proclivity for risk taking and for embracing various collaboration models on the part of the established companies. “Regulations, IT security, and extensive documentation requirements along with a variety of established processes combine to an obstacle course for startups,” explained Jörn Stobbe, Union Investment’s CEO.
But, he added, “decision processes can not be changed in a disruptive manner.” Startups should understand that complex decision processes and an already often-practiced openness to enter various types of partnerships don’t contradict one another, but rather go hand in hand. “Pilot projects are the most efficient way to get to know one another and find out, where the customers’ actual pain points are,” said Stobbe. Indeed, for almost three quarters of the survey respondents, pilot projects were the most important way to test their ideas and start communicating with customers. Other preferred means of communication with established companies include joint ventures and expert sparring. Co-investments, the development of Minimum Viable Products (MVPs) and joint events, on the other hand, were less sought after. When asked in what specific phase PropTech startups see the biggest potential for a successful collaboration with established real estate companies, almost half cited the building usage phase, 34% the development and 21% the investment phase.
At Ruby Ventures, we are particularly interested in what motivates PropTech startups to enter partnerships with established real estate players. The answers to the survey, combined with the facts we see on the ground help to debunk existing myths. While only 31% of the survey respondents said they were interested in tapping into Big Data and only 43% hoped to gain access to capital and regional markets through such partnerships, a whopping 80% of the survey respondents explicitly mentioned the access to an extensive building portfolio as their main motivation for collaboration.
Why Startups Seek Partnerships with Established Real Estate Companies. Photo Credit: Union Investment
At Ruby Ventures, our own extensive real estate background, building portfolio, and network, combined with our ability to act quickly and our appetite for taking well-calculated risks, puts us in a good position to select and partner with the most promising PropTech ventures and guide them to success.