The first week of February has seen some extraordinary goings on in the property sector, from which two stories particularly stand out and both support PropTech growth:
Zoopla has announced it will be buying Hometrack for £120m, and Trussle has received a further £4.5m in investment from some of Europe’s top FinTech investors.
As with every industry, when big news like this breaks, as many industry professionals will be applauding as will be quietly concealing concern as to what the potential ramifications of such news could be for the industry as a whole.
Let’s talk about the Zoopla acquisition first. This really is huge news, and incredibly important if only because it offers a little insight into the potential direction of Zoopla’s thinking.
Hometrack specialises in the instant and automatic valuation of property, providing information and data on the property market and is used by 17 of the top 20 UK lenders. They have quickly become the leaders in their field and, although many have tried, the depth and sophistication of their data is yet to be matched.
They cater very much for one side of the market, once a property has been purchased and supporting lenders. They support a totally different market to Automatic Valuation Models (AVM) that are client-facing like ValPal, which has seen a huge amount of success in past years supporting agents’ lead generation.
Does this suggest that Zoopla has the ability to take on the AVM providers and, in doing so, an attempt to strip income from traditional agents?
Whilst they will have this capability, I do not think it was central to the deal. I think they have intelligently observed market trends and, combined with the ever-reliable instinct of CEO Alex Chesterman, made a huge landgrab for the data that Hometrack holds. Not, as I say, to strip the competition away, but more to prepare themselves for the next phase in the Zoopla story.
In this modern day, data is power. By acquiring Hometrack, Zoopla’s data game is seriously stepping up. This is making them a more and more valuable company and they are playing the long game. Rightmove is still yet to make any notable acquisitions or investments and still holds the position as the most profitable company but I am yet to see any long-term strategy for their business model.
I feel that Zoopla are beginning to hold all the cards in the deck and Rightmove, whilst still holding the ace of spades, do not have many other cards to play alongside it.
A final note on this acquisition: one cannot help but feel that Hometrack’s Australian connection was a big temptation for Zoopla. As successful as they are, Zoopla’s influence doesn’t stretch far beyond the British Isles. Could this be a major step towards locking down the international market?
The second story we should look at from the past week is the fact that Trussle, a company who aim to take the fuss out of mortgages, has raised a further £4.5m in investment.
The investment coincides with their impressive milestone of managing £1billion worth of mortgages for UK homeowners.
Mortgages are an area of property that desperately needs disruption, and Trussle, with their ‘quick, honest and fee-free’ mortgages, are one of the major players in the efforts to do so.
The eagerness of investors to team up with Trussle is easily justified with even the quickest glance at the numbers:
According to Trussle's founder, Ishaan Malhi: “around three million of the 11 million mortgage holders in the UK are currently…paying over the odds and should be looking to remortgage to a better deal”.
Malhi has “calculated that if all of these borrowers switched to a better deal at the appropriate time, it would result in a staggering two million extra remortgage transactions each year.”
So investment was a no brainer, really. When an industry has 11 million potential customers coming over the horizon, one cannot help but feel optimistic on investment returns and therefore Orange Growth Capital have made an incredibly sensible decision.
Trussle will be delighted with this recent round of investment, and the potential for success will be acting like a triple espresso shot to the brain.
But they need to be careful, scaling up like this can be tricky and making sure they stay effective and strong throughout this period of change is essential. But if the management team handle it well, absorbing advice and experience like a sponge, then they could be heading for really big things.
So, as I said, with two mega PropTech stories in just one week, 2017 is already looking very exciting. Zoopla has made a big statement with their acquisition of Hometrack; the gaps in the services they offer are going to be filled until they can provide a seamless service throughout the entire lifecycle of a property, nullifying the need of any third party websites or application. They are well on their way to becoming a one-stop-shop.
Combined with the Trussle investment, and the message is clear. Anyone looking to disrupt the residential real estate sector needs to be working flat out to get to market ASAP. There is no time to be wasted; if a company is showing real promise, the money and attention is coming their way, more so than ever.
We are in a phase of PropTech that is going to sort the strong from the weak. Confidence is high and market demand is increasing. Potential investors need to be acting now. Not watching, not pondering, not honing. They need to be getting themselves out there and into people’s minds because if you ask me, 2017 Q1 is a major wave, and if you’re not surfing it, you’re getting crushed by it.