“Collaboration is evolution, and vice versa. PropTech 2017 will see rates of collaboration increase as more companies look to improve their teenage-stage products.”
The above is from a piece I wrote earlier this year looking at the Journey of PropTech in 2017, and I still stand by this point. If PropTech is to deliver meaningful returns to the people who have invested in it then some serious heads and business models must collide.
Some companies must recognise that they don’t really have a viable business model and others will find that they don’t have the cash to compete in a ferociously competitive market.
Egos in PropTech need to be put aside and businesses strategies need to be aligned for the good of the industry. Consumers, and the property industry itself, are looking for sensible and well thought through propositions with clear benefits.
At the moment, there are simply too many different offerings, different tech stacks and different sales pitches aimed at securing the consumer or the industry’s money.
However, these consolidations and collaborations have to be the right fit otherwise they will be a disaster.
I read with interest the Estate Agent Today article about whether smaller agencies will consolidate in light of the recent eMoov fund raise - which drew from a TechCrunch piece questioning whether possible merger discussions between rival online agents like House Simple or Tepilo had been taking place - and this caused me to question why any such merger would make sense.
Indeed, my colleague Eddie Holmes let loose a veritable tweetstorm which was less than positive about the prospect of a successful merger.
I think that any merger would be a bad idea and is really only likely because the remaining businesses in the market - outside of Purplebricks, YOPA and eMoov - are looking desperately for any way to salvage something from the unenviable positions they now find themselves in..
To truly analyse whether a merger - or indeed an investment in a technology business - is worthy of discussion you need to work through your “3Ts” - tech, team and traction.
There is no point undertaking consolidation unless the outcome is something which improves all of these criteria. Let’s look at them in turn.
Many of these businesses are somewhat disparagingly referred to as ‘call centre agents’.
Uncomfortably for them, while they have all developed technology to some extent in the past 18 months or so, there is an element of truth in that description and they simply haven’t processed anything like the volume of transactions on their tech platforms as Purplebricks and, more recently, eMoov.
There is almost certainly nothing unique in any of the technology deployed by remaining online agents. Therefore, acquisition of good technology is unlikely to be a sound reason for consolidating.
None of the agents outside the big three have any significant traction worthy of taking serious notice. Despite years of efforts, they haven’t gone into anything remotely resembling ‘hockey-stick’ like growth.
There is no apparent magic growth strategy that would warrant a consolidation move.
Again, not a pretty picture. With businesses variously either being devoid of a founding management team or possessing a shareholder table that makes it impossible to invest due to issues like dilution and control, there simply isn’t any compelling logic here to undertake a merger.
Even if it did make sense, how would any merger work practically?
Who in online agency has any experience whatsoever of merging businesses and dealing with issues such as culture and operations?
The remaining businesses in this market, outside Purplebricks, eMoov and YOPA would be well advised to find themselves a niche and accept that the big prizes have already been handed out.
Anyone considering investing in them should also review their decision against the “3Ts.”
Collaborating with similar businesses as markets mature makes perfect sense. Blending different yet complementary teams, technology and traction with customers can be a key to success. It needs to be done in PropTech, of that there is no doubt.
I expect to see a lot more of this in the coming 12-18 months as PropTech grows up and companies realise that they are better together than apart. But online agency is not the place to look for successful outcomes.
*James Dearsley is a partner in PropTech Consult, digital transformation specialists for the real estate sector.