1. Search Phase
The Search phase corresponds to activities related to searching for a property – for the end-customer to buy or for real estate agents to list them.
Brokerage Services: list and search activities carried out by an individual or a firm related to the sale or purchase of a property in exchange for a commission on the transaction.
Marketplaces: companies offering a platform designed to match two populations and make a transaction happen between them.
Data, Valuation and Analytics: companies whose activity consists of providing data, analytics and valuation tools to property managers and investors in order to enhance their opportunity-screening process and automate the valuation process, sometimes using Artificial Intelligence and data science techniques.
Virtual Viewing solutions: services dedicated at offering cutting-edge viewing technologies such as 3D and VR/AR/MR, to tour a property or improve the collaboration process in a development project.
Lease Guarantee and Financing solutions: companies offering innovative solutions to have financial access to a property, either by providing a lease guarantor or securing the financial deposit required.
2. Supervise Phase
The Supervise phase corresponds to activities carried out in the day-to-day activities of real estate professionals or related to the supervision of their core activities.
Investment and Crowdfinancing: this category includes platforms that allow individuals to invest in real estate, notably using blockchain, and also crowdfunding platforms that list investment opportunities for individuals to take a part in.
Manage & Operation solutions: companies in this category are providing products and services that help manage a property and supervise the relationship between landlords and tenants.
Space-as-a-Service and Smart Buildings solutions: this category includes startups building or operating a network of shared spaces – co-working and co-living, or offering smart building solutions using Internet of Things to improve one’s use of a building.
Agent tools: companies in this category are providing real estate agents with tools to assist them in their activity.
Project Management solutions: this category refers to startups that are building products designed to help construction stakeholders manage a real estate project by offering digital and technological solutions.
3. Sell Phase
The Sell phase corresponds to the last step of the customer journey, where a property is sold through different channels.
iBuyer solutions: the term iBuyer refers to online estate companies able to purchase a house in a quick period of time at a discounted price and then sell it through an online channel.
Hybrid agents: this category gathers startups that are offering online brokerage services disrupting the traditional estate agency model, with no physical touchpoints and low-fixed costs to sell a property.
Insurance & Closing: startups in this category are offering insurance for homebuyers and legal services aiming at protecting the buyer against any risks during the selling process.
II/ Insights from Proptech Capital
From its investment theses and its convictions on where the highest growth and most innovative opportunities are, Proptech Capital has taken an interest in some of these sub-areas beyond the broader overview and done further analysis and research on relevant trends.
1) iBuyers
iBuyer solutions are one of these sub-areas.
As mentioned, the term iBuyer refers to companies able to make quick online offers at a discounted price for properties, and which then sell it at a profit through an online channel. Companies in the US such as Opendoor or Offerpad have shown that this offer could fill a gap in the market as they provided distressed sellers with a convenient and quick process to sell their property, while still having a price around 90% of the market value. They quickly gained exceptional traction and revenues, with investors confident that they would keep growing. Opendoor raised $400 million in funding in May of 2018, totalling a $1 billion dollars in equity funding, while Offerpad raised $150 million dollars in both debt and equity. Knock also raised $400m in 2018.
The iBuyer market started in the US in 2014, with the inception of Opendoor. In 2018, in the United States, iBuyer companies accounted for c. 15,000 purchases and c. 10,000 sales, for a 0.2% market share in the country. This figure comes, for a large part, from the very limited geographies in which iBuyers currently operate.
However, in Phoenix, currently the main market for iBuyers, these companies accounted for c. 6% of all transactions, showing the large potential of these companies in the US.
Their growth also led traditional actors like Zillow or Redfin to launch their own iBuyer solutions. Meanwhile, the exceptional traction of US iBuyers is contributing to the emergence of a similar trend in Europe.
Proptech Capital's analysis shows indeed that similar opportunities exist in Europe, where only few actors have this type of offer, often without having significantly scaled so far. Market trends show a growing demand for quick and efficient processes in real estate transactions, as an alternative to lengthy closes in purchases, as well as endless showings and negotiations, at a discount of 8 to 12%, which is well below those offered by traditional agents targeting "distressed" sellers. Indeed, selling a real estate asset through traditional means takes on average 4 to 6 months in Europe, with uncertainty that can make the process even longer, and a large part of sellers are ready to accept a moderate discount to avoid this. New valuation technologies using machine learning and data analytics algorithms are able to fill this gap and provide a meaningful competition to traditional real estate agents.
Below is a map summarizing the main existing iBuyers – or companies with a similar hybrid model, such as Nested – identified by Proptech Capital in the US and in Europe – i.e. a focus on the "iBuyer solutions" sub-area of the whole map:
