How to Pick A PropTech Winner
“That is what we want: companies whose customers can’t think of a world without their product.”
SAN FRANCISCO–JLL Spark Global Venture Fund co-CEO Mihir Shah remembers the moment when he decided he wanted to invest some of the fund’s $100 million capital pool in Dealpath, a company that produces deal management software for real estate transactions. The company was being evaluated to see if it met JLL Spark’s four main criteria for investment and Shah was doing some of the due diligence himself, speaking with Dealpath’s customers.
One customer was how things were like before they implemented Dealpath: there was no visibility into the process and much time and efficiency was wasted trying to track down information. “His excitement over Dealpath was palatable,” Shah tells GlobeSt.com. “And that is what we want: companies whose customers can’t think of a world without their product.”
Since its launch earlier this year, JLL Spark has invested in six companies including its recent agreement with Dealpath.
It is finding that compared with even 12 months ago, the number of products and the level of talent that has committed to the proptech space has gone up considerably. “If you are an investor or users you see that there are a lot more products available to you,” he says.
There is also no shortage of venture capital out there as well and Shah believes one reason potential candidates are flocking to the company is the assistance it provides after the investment. In fact, if Shah and the co-CEO Yishai Lerner do no believe that the company will benefit from its special brand of growth assistance, they will not make the investment.
“It’s not just about money,” Shah says — it is also about who will help you once you get the money, who will help you with the sales cycle and who will introduce you to potential clients.” JLL Spark does all that.
The sales cycle alone can be a tough nut to crack because, in general, the DNA for a large CRE player has not been to experiment, Shah says. “CRE’s DNA is to have a list of all the criteria the vendor has to meet before it is willing to consider that vendor. That can be very hard on a young company.”
Besides being amenable — better yet eager — for the sales and marketing assistance, these companies also have to meet other criteria by JLL Spark.
One is the founder’s X factor — does he or she have the grit, the independence of thought, that intangible ability to go the distance to attain long term success? Another is the product’s potential market reach and the third is the product itself.
As Shah and his team wades through the many companies interested in an investment, he has noticed several industry themes start to coalesce.
These include:
- Tenant experience applications. These are apps designed for the employees of the tenants in commercial office buildings, which are used to access the retail and other amenities in the building, as well as access to the building itself. Shah says there are many diverse start ups in this space.
- Smart building application. These are based on the notion that the data that buildings are generating, from energy to space utilization, can provide valuable information to building owners and tenants. IoT companies is usually a component of these applications.
- Technology that provides a platform for liquid trading of shares in a building. Think blockchain, as well as other technologies, with these applications. Through various structures they use blockchain to tokenize the building and sell off pieces of it. It is very early days for these technologies and there is no clear winner yet, says Shah.