Soon we’ll be clinking our glasses to welcome the dawn of 2023. With a new year comes new goalposts, and that’s true for people and companies. For PropTech companies, new targets are being set in a drastically different landscape than the industry has experienced within the last few years. Rising interest rates and other economic jitters have changed the game for an industry that, up until this year, had experienced exponential growth and investment. However, that doesn’t mean that the upcoming year won’t be absolutely pivotal for PropTech startups.
In fact, one PropTech CEO may have framed 2023’s market arena perfectly. Marcus Moufarrige, CEO of Ility, a no-code SaaS platform for commercial property owners, pointed out that PropTech is still a young industry. “With a lot of overlap and gimmickry across the board, which presents a challenge for 2023,” he said. “Those wanting to stand out will need to rethink their product, value proposition, and market fit. To be unique is to have a competitive advantage, but to be usefully unique is even greater.”
Usefully unique is the key phrase there. 2023 is going to be a year with tighter economic constraints, which means that both investors and the prospective customers are going to be more cautious with their money, so if PropTech companies want to get ahead in this climate, they’re going to really need to perfect their pitch with their useful uniqueness in mind.
Unfortunately, tech companies are notoriously bad at pitching their products to customers, and that’s especially true for tech companies in real estate. Sara Shank, Managing Director and Global Head of Innovation at PGIM Real Estate, fields tech pitches day after day, though a lot of the pitches that appear in her inbox seem to completely miss the mark. “I see a lot of PropTech pitches that are overtly casual without any description of the product, it’s mainly just an invitation to talk,” she said. “And I’m like, dude, I work in innovation, that is my job. I have not memorized what your product does. You need to sit down and give me a pitch. Why do you think that I’m going to have this casual conversation with you? It drives me bonkers.”
Choosing a nonchalant approach isn’t the only way PropTech companies can self-sabotage their pitch. For Shank, it’s the glaring absence of real estate professionals working in PropTech. “One of the main issues I have with a lot of PropTech firms is that they don’t always incorporate real estate people into their teams, which means they don’t really know how to talk to real estate people,” she said. “There’s definitely a communication barrier that comes up, because technologists and real estate people are speaking two different languages. And that’s a big problem.”
Real estate has been notoriously tech-averse for decades, so you would think it would be more common for PropTech companies to hire real estate professionals to better enable themselves to engage with their consumer base. But that’s not the only reason the wires get crossed. PropTech encompasses a broad range of activities and technologies, which makes for a lot of definitional overlap. Plus, PropTech is still a maturing industry with little institutional cohesion since new technologies are rapidly getting developed and adopted. In fact, the marketing noise in the industry is so dense that smart building technology company Kastle Systems had to create a working database this year just to cut through the mumbo-jumbo and offer some market transparency.
But Shank’s biggest concern isn’t the institutional disconnect between tech and real estate, it’s a trend of PropTech companies not tailoring their pitches to the correct audience. For instance, Shank told me of one company who, when trying to integrate their product into a building, completely glossed over how their technology would affect the experience of the people inside the building. “Some of these companies pitch to occupiers and property managers,” Shank explained, “and I remember having a conversation with one of those companies where they’ve been mostly selling to occupiers and they were going to start selling property managers. And I told them, ‘You need to tell them what you’re going to touch on the building and how you’re actually going to impact the building.’” Shank was surprised that she had to give what she thinks is an obvious answer: “Yes, they want to know how your technology is going to impact the building!” Apparently, this kind of interaction is frustratingly common.
With 2023’s economic backdrop being dramatically different for the industry compared to that of previous years, PropTech startups can no longer afford to be brazenly cavalier, avoid hiring anyone with real estate experience, or completely omit explaining how their technology functions to the end user. Pitching PropTech solutions can be a challenging task, as it is when trying to pitch any other product, but making a good pitch that highlights what makes a PropTech solution “uniquely useful” is absolutely crucial. Fortunately, there are a few strategies that PropTech companies can use to effectively pitch their solutions, whether they’re pitching to investors, building owners, property managers, or occupiers.
Identify the pain points
Before pitching a PropTech solution, it is important to understand the specific challenges and pain points that the person you’re pitching to face on a daily basis. That means understanding who you’re pitching to. A property manager, for example, may have issues related to managing multiple properties, keeping track of maintenance requests, or handling tenant complaints. By identifying these pain points, PropTech startups can tailor their pitch to address the specific needs and concerns of property managers.
Demonstrate the value
PropTech solutions should be able to solve specific problems or improve processes in a way that saves time, money, or both. Remember, 2023 will be a year of heightened interest rates and a recession ready to spring out at any moment, so it’s important to clearly demonstrate the value that the PropTech solution offers and how it can help owners, property managers, or occupiers to streamline their operations and improve their bottom line.
Share success stories
One of the best ways to persuade property managers to adopt a PropTech solution is to share success stories from other property managers who have already implemented the technology. These case studies can help to build credibility and show the prospective customer that the solution has already been tested and proven to work in a real-world setting.
Offer a trial period
Many people, no matter what realm of real estate they operate in, may be hesitant to commit to a PropTech solution without first trying it out. As such, it can be helpful to offer a trial period or a limited-time promotion to give them the opportunity to test the solution and see the benefits for themselves.
Build a relationship
Building a relationship with your customer base, whether that’s owners, property managers, or occupiers, can be a key factor in persuading them to adopt a PropTech solution into their technology stack. This may involve staying in touch with people after the initial pitch, offering ongoing support and training, and being responsive to their needs and concerns.
The best time for PropTech companies to have perfected their pitch was yesterday (or in 2021 when venture capital funding was at its peak…if we’re being technical), but the next best time is today. The economic prognosis for 2023 is being characterized by slowing growth, swift monetary tightening, continued inflation, and interest rates getting pushed even higher. But economic downturns are the best time for companies to acquire resources in order to expand when the market swings back up, which means that 2023 will be a banner year for PropTech acquisitions. PropTech companies are in the perfect position to benefit…so long as they can make a good pitch.