JLL And Starwood's PropTech Venture Is Searching For Unicorns
“Our aim is to find the first PropTech unicorn. Ambitious, I know. But I think we can do it."
JLL U.K. CEO Guy Grainger is setting a high bar for Concrete, the PropTech joint venture that comprises JLL, Starwood Capital, shared workspace company Fora and startup investor Seedcamp.
Whether it finds a $1B startup or not, the venture is of note because of the innovative combination of companies it brings together: one of real estate’s biggest private equity firms, biggest services firms, a tech-led office owner and a long-established tech startup expert.
Concrete has made four investments already (see below), is in the process of making a fifth, and could ultimately invest in as many as 20 early stage PropTech companies, making it one of the largest backers of startups in the sector.
The combination of expertise provided by the different parties is designed to help PropTech companies break into and grow in a real estate world that is seen as more closed and controlled than other areas of business.
“The Seedcamp philosophy is that we provide immediate access to smart capital, a lifelong community of support and a global network,” said Taylor Wescoatt, entrepreneur in residence at Seedcamp and director of Concrete. “We wanted to take a page from that book and create something specifically for PropTech.”
Seedcamp specialises in providing funding and expertise for early stage startups and has invested in and worked with more than 250 since 2007. It operates principally in Europe but has contacts across the globe.
Wescoatt said for companies at this stage of their development, expertise is as important as capital, and this was likely to be even more the case in the real estate world.
“Seedcamp’s experience is that the advice and network we can provide them with is what startups value most,” he said.
“In real estate you have a lot of big players and big interests that control big parts of the market. For startups in this sector, they may have their tech chops, but this partnership can help them to make introductions and access the right people in the real estate sector."
The partnership also provides feedback on what will and will not work based upon its experience of the market and how contacts in the industry take to an idea.
Wescoatt said Concrete is always looking for more innovative real estate companies to partner up with, particularly in the retail, residential, industrial and leisure sectors.
Starwood’s involvement in Concrete is of note because while real estate investors have backed individual PropTech companies, this is one of the first examples of a real estate private equity firm doing a formal, albeit small, program of investment in technology startups.
“We can see that the world is changing fast around us,” Starwood head of European acquisitions Zsolt Kohalmi said. “FinTech has done a lot to change the financial industry and grown quickly as a sector, and the same thing is happening in the PropTech sector. We want to be at the forefront of that rather than behind the curve.”
Kohalmi said PropTech is likely to have a particular impact on the way space is used, the way data is gathered and used, and the way transactions take place — areas that line up squarely with the investments Concrete has made so far.
“Things like co-working are changing the way tenants use buildings, and property is becoming more service-orientated,” he said. “The kind of information we can gather about property is changing, and there are terabytes of information available now and how that is measured and used will change."
He pointed to early stage efforts to increase liquidity to the sector and match up owners and sources of capital through digital platforms.
Wescoatt said the property sector is ripe for disruption, but pushed back on the conception that real estate is a benighted industry completely resistant to change.
“You could argue that any industry is resistant to change, and with real estate it’s just not true any more,” he said. “If you look at companies like JLL, they have made big investments in this sector. Brokers may not have armies of data scientists yet, but when you go into these companies no one is saying that they have never heard of what we’re talking about.”
And how about this idea of the PropTech unicorn? (WeWork has been the only one in the commercial real estate space.)
“Where that happens is on the consumer side, so you’ve seen companies like Purple Bricks raise a lot of money because they can demonstrate tremendous growth. In the non-consumer space it’s harder, but if you have good clientele and can demonstrate a good value proposition and margin and good growth there is no reason why not. VTS is well on the way.”
“It comes at a cost in terms of time and money, but it will be worth it,” Grainger said. “Finding that unicorn, whoever does it, will be of benefit to all of us.”
Concrete’s Investments
HubbleHQ
An online platform for those looking to connect companies that want to rent office space with those that have it. HubbleHQ focuses on co-working, shared offices and private serviced offices within specific hubs in London that are the kind of spaces startups and small companies are looking for.
OpenSensors
This company has created a platform that allows data provided by different sensors in a building or built environment to be linked up, and the information they are producing to be analyzed and interpreted. It is being used by building owners and city planners to see if the assets or areas they manage can be better utilized.
Beagle.ai
Beagle is an artificial intelligence tool that can analyze thousands of leases and extract data from them, allowing the user to gain a sense of how their contract terms are structured so they can decide the best way to proceed with a portfolio strategy.
Proportunity
Proportunity uses machine learning to try to accurately forecast house prices and up-and-coming areas — an analytics service doing through AI what property experts have tried to master for decades. Savills is another investor in the company.
