Over the last few months here at propmodo.com, we could not help but notice a number of our favorite companies opening up satellite offices in London. Notably, Hightower, CompStak, VTS have all announced new ventures into the European market. Even MetaProp NYC, the New York centric incubator, announced a partnership with London based Royal Institution of Chartered Surveyors (RICS). Obviously, there is much to be gained by opening up a technology to the 95.5% of the world’s population that lives outside of the U.S.A. There are also risks involved with taking a new product to a vastly different market. Failure to gain traction could be at its best a waste of time and resources and at its worst a serious blow to a brand image in the eyes of customers and investors alike.
A few questions kept coming to mind as news came out about these companies opening up new offices within months of each other. Why now? Why London? What research lead to the decision to expand?
In order to answer these questions, and to try and get a general idea of how an American tech startup goes about establishing itself in a foreign landscape, I interviewed Nick Romito of VTS, Aaron Block of MetaProp, Brandon Weber from Hightower and Michael Mandell of CompStak about each of their foreign expansion efforts.
Interestingly, a few short days after I finished transcribing my interviews, with London still on the forefront of my mind, The United Kingdom shocked the world by voting to leave the European Union. In order to take advantage of this coincidence, I followed up with my interviewees about this new development and compiled their thoughts here.
During my conversations with each of the guys, similar themes kept developing. They were all quick to explain the main differences when working with the European markets. Besides the obvious linguistic nuances (they let space in London, not rent), there are some unique dynamics at work. One has to do with compensation. As Aaron of MetaProp NYC put it “Brokers make a hell-of-a lot more money here [in the U.S.] than anywhere else.” Brokers in Europe, and in most other places in the world, are paid with a salary plus bonuses, so they tend to get less total commission than their American counterparts.
Even though European brokers have less at stake monetarily from increasing workflow through technology, the guys all echoed that London has been more receptive than many American markets were a year and a half ago. They attributed this to the other major difference between American and European commercial real estate landscapes. That is that leasing deals in Europe have between 2 and 4 different agencies working together, not just one broker like in the states. That means some information has to be shared between companies, while other data sets are meant to remain proprietary.
Since bigger teams are needed to rent…ahem, let space in London, there seems to be a more collaborative corporate culture. “Their focus on collaboration is over and above what you would see in other markets which only enhances the value proposition of a platform that allows broad teams and organizations to collaborate,” said Brandon of Hightower.
Michael Mandell had quite a lot of good things to say about the capacity for sharing in the London property scene as well. After all, his company CompStak is run on data that is shared by its users in return for access to the powerful market data that his team’s algorithms aggregate. He also stressed that since London has a relatively small number of large brokerage houses adoption can be slow at first but can quickly be a substantial piece of the total market.
Their focus on collaboration is over and above what you would see in other markets which only enhances the value proposition of a platform that allows broad teams and organizations to collaborate.
When setting up these interviews, I expected to hear about aggressive expansion strategies and plans for world domination. These guys’ organizations are evaluated by their growth, so they must be pursuing it at all cost by forcing change on stagnant markets and causing disruption, right?
This was not the case. Instead, I heard a lot about existing customers, with large international portfolios, that were clamoring for these tech companies to expand their services to foreign markets. Every one of them cited that the expansion was customer driven. Real estate technologies are being pulled by thirsty foreign markets, not pushed by our American grown companies. The market saturation at home can be seen as a proof case for partners in other countries. As Nick Romito of VTS put it, “When products perform well in the U.S., one of the most competitive and well publicised markets, they tend to have credibility with users abroad.” While proving a technology in a heated American market is important, Nick was quick to point out that, “You can’t go overseas and half ass it.”
All four of the interviewees has used partnerships and extensive research to help ease the transition into a new environment. MetaProp NYC achieved this with its RICS partnership I mentioned earlier. The Hightower team spend six months researching London and identifying the most high value potential partners. VTS flew entire teams of brokers to New York for product development sessions. CompStak was introduced to a barrage of new potential partners after it won an audience choice award at the prestigious MIPIM conference in Canes, France last year.
Even though all of them had quite a bit to say about the differences between the U.S. commercial property market and those in other countries, it was clear from the tone of each of my interviews that there are even more similarities. After all, true innovation is universal. It crosses borders, spans cultural divides and adapts to new systems, political, commercial or otherwise. Good tech companies know the value that can be unlocked by bringing a product to a global user base. For now, for these “prop tech” companies, London is calling. If the success of the these organizations from their recent forays in London is any indication, I tend to think we have only started to see commercial real estate technology’s rise in the global property scene.
Get a full rundown of all four of my interviews plus commentary on BREXIT’s implications for real estate technology with a subscription to propmodo.com’s new Insider service. In it I share strategies and methods used by the founders and talk about everything from the universality of good design to the guys’ plans for further international expansion.