Opinion: Proptech Success

 

Taronga Group’s Jonathan Hannam composed an opinion piece for RICS’s magazine, Modus:

 

Having managed the Real Tech Ventures Fund for four years, I often get asked how we identify businesses that can navigate the worlds of big data and new technology.

We see some recurring themes, and our present focus is on procuring opportunities in four key areas: energy and sustainability initiatives with measurable impact; data and analytics that provide customer insights; wellness; and construction technology, particularly concerning safety.

We constantly meet big corporations to understand the challenges they face, so we can secure opportunities of direct relevance to them. The test of when and how much we invest comes from that collaboration. We also like to see how an early-stage business performs when we put them in front of a major operator.

There are some key attributes we seek before investing. Like many venture capital funds, we focus on the long-term success of the founder. We work with KPMG’s High Growth Ventures team to equip our founders with the tools they need to build long-term, sustainable businesses.

We also look for companies relevant across the region and looking to grow into Asia, and beyond. During our RealTechX programme, we take the entire cohort to a new market and facilitate introductions. Our next cohort will go to Singapore, where we can make introductions to our partners, government and sources of capital.

It’s also vital that businesses can show a financial benefit to a large owner such as ISPT, which manages A$18.1bn in property assets. Or we ask what impact they will have on a specific office building.

Our investment in Ynomia, a Melbourne-based business that provides a low-energy Bluetooth-enabled tracking device that monitors the movement of machinery, people and materials, is a good example. There’s a lack of transparency in worksite management. Too many construction accidents occur, and there is the longer-term concern over building quality. The concept immediately impressed us – as did Ynomia’s founder. But it wasn’t until we shared the technology with a couple of our partners, and they immediately responded, that we completed our investment. The company now has the backing of US construction venture capital investors Bricks & Mortar Ventures.

Another example is Work Club, a Sydney-based co-working manager. It offers more than just a desk and a chair – its key difference is a focus on the personal development of the individual.

When we first met the founder, the business had already secured sites with Investa, and was looking to expand into Asia. We facilitated discussions with several of the largest owners of space in Australia, and globally. Work Club has since signed for further space in Melbourne, and is in talks with landlords across Australia and in Asia.

Large corporations have to reconsider a variety of issues when investing alongside technology entrepreneurs. Are they open to fail? The key is to learn quickly and move on. Across Asia, there is a tendency to think that failure is unacceptable. And it’s not easy for an emerging business to work with a big company. For instance, procurement policies have to change. Payment terms of 60 days to even 180 days can kill an early-stage business.

Collaboration for the sector is critical. Big companies publicly state they invest into early-stage businesses – often to stop them going to their competitors, which effectively kills the company.

Technology and innovation can lower operating costs and deliver higher returns. But long-term success will require a change in mindset from large corporations.