I was asked a question by a German journalist yesterday. What is the biggest lesson German and European PropTech founders can learn from US founders?
It’s all about attitude and scale, I answered. US founders seem pre-programmed to try something new and don’t have the concerns about failing. Secondly, they have a different attitude about scaling the business.
This, I said, is then reflected in the attitude of the venture capitalists (VCs) who are essentially funding this PropTech explosion from past years.
US VCs are, by general characteristic, bullish about the sector and have been interested in the scale of the businesses they invest in and how their user base is growing.
By contrast, European VCs have been more focused on sustainable business models and profitability. A generic perspective, but true of my experiences in the last few years.
I am not actually sure there is any correct thesis when it comes to investment in a particular company and have seen examples from both camps that suggest there is an argument for both philosophies.
Having said that, one might suggest the US is more boom and/or bust and they will take a punt on new business models if the vision is there - which perhaps is one reason for the growth of the sector there. Meanwhile, the European model is more conservative and steady, meaning the crazy valuations you are seeing in the US are not reflected here.
However, it does raise one question, which I pondered on this morning, about scale and the nature of businesses as they return from a Covid-19 lockdown. After all, this is, in reality a reset. There has been an opportunity for reflection, for planning and for a restart.
Over a coffee, I read with interest the PR exercise of Rightmove suggesting it had its busiest day ever with over 6 million visitors. Whether you like Rightmove or not (or indeed whether you believe the reasoning mentioned in the comments of this article), these are incredible figures.
I also read with interest the move of Rightmove's ex-Head of Innovation, Hannes Buhrmann, to HouseSimple. I had met Hannes several times and always found him very amenable to change. He was always looking for ways to get Rightmove to actually innovate - no easy job, I am sure.
It wasn’t the move that I was particularly interested in but the figures that when into the press release that Graham quoted in the article. Since turning free, listings have increased 156% and market share increased from 0.21% to 0.61%.
Whether you approve of the model or not, these are solid figures of growth and HouseSimple has seen the possibility of making a sustainable business purely around referral fees. Some will disagree, but this is their direction of travel. Ultimately, time will tell.
Therefore, my question really is could this be a time to investigate this change in model for the short-term, post-lockdown? To kickstart the market and capture market share?
I remember well how Foxtons launched in new office locations with a 0% offer to sell or let homes.
Not only could you start to investigate different business models around pricing, but also you can become the hero in your area. “We recognise we have all considered our current homes and are perhaps considering the next steps. Let us help you. Sell for free,” etc.
Ultimately, if, and this is a big if, you believe the Rightmove figures, there is a huge amount of the population currently considering their options and thinking of moving. This is going to become a ‘land grab’ to obtain valuations and get properties onto the market.
My advice? Use any means possible to succeed here. Commission offers, PropTech valuation tools (live chat, price checkers…the list is endless).
The aggressive agent will take market share. This is the chance to gain scale, so think about the pain points of those customers. What are they looking to do right now and help them do it. Can you monetise another way in the short-term?
Before anyone suggests I have not gone insane, I realise I can’t understand the economics of everybody's business, but I would suggest it is going to be tough regardless and those in a stronger position than others should consider this.
Don’t be defensive, go on the offence to consolidate your position in the local market. This is the time to consider it even if there is short-term pain.
We see this time and time again in tech-enabled business models. They want scale. At times of difficulty, and importantly, when they know they have product market fit (i.e. people are using the product and it works and are willing to pay for it), they look to scale quickly to remove the competition. They go on the offensive.
This links in with news from YourKeys this week, which is offering housebuilders use of its deal progression platform, for free, until October.
“Our immediate objective is to get our product into the hands of as many housebuilders and estate agents as possible to help them digitise their processes and continue operating during these tough times,” stated the Founder, Riccardo. YourKeys knows it has a product/service that works for customers and now is the time to scale.
This is the same for other similar firms. TwentyEA took a look at its prospect marketing platform and made it free to access (minus transaction fees) for a year for small agents with less than five branches.
Kate Bilany, its sales director, stated: “Things are likely to get even harder for smaller agents once the current pent-up demand subsides and the market is impacted by the inevitable economic downturn caused by lockdown.”
“That’s why we wanted to offer our help for more than just a few months and do something that can really save agents money in the long-term”.
They know the product, they know it works for the customer, they are grabbing market share as the smaller agencies look to become bigger ones. They are looking at long-term scale and support.Eyespy 360 did it to great fanfare when it signed up a global deal with RE/Max Integra just recently.
Its freemium model has gone crazy in these times and when you see the quote from the RE/Max representative, Christopher Alexander, you see why: “As the world moves through this pandemic and finds new ways to do business, we know there’s no going back.”
I could go on about more tech-oriented firms bringing in freemium or free models during difficult times but it would make for a rather boring column.
My point here really is it is time to go on the offence. Become the local leader by listening to what your customers are looking to do. All the indicators point to there being a little bubble of optimism before some tricky times. Get out ahead, become the leader and support the community.
What are you going to do to lead your local market as the restrictions lift?