05 May PropTech Webinar “How to navigate in the new reality: tips and tricks for PropTech”

In times of self-isolation and lockdowns, keeping the community together is more important than ever. On April, 27th PropTech Finland, RecoTech and KPMG organized the first PropTech Webinar “How to navigate in the new reality: tips and tricks for PropTech”. We discussed different aspects of the current situation together with nine speakers, representing all sides of the PropTech community, from the public sector to startups and investors. The discussion was moderated by Mikael Långström, PropTech Finland Chairman of the Board / Head of Digital Solutions at Rakli, and Sarah Sipilä, Director at KPMG Global Strategy Group / PropTech Lead.

In the first part, we were talking about the current situation in general and what support is available for different size of companies. Sonja Malin, the Senior Business Advisor of Helsinki Business Hub, presented some tips and tricks on how to survive the spring. And Joni Lehto, Business Advisor NewCo Helsinki, described in detail what support instruments are available for startups in Finland in general and in Helsinki in particular.

As Sonja rightly mentioned, startups possess the amazing ability to reinvent themselves and even though we are facing unprecedented setbacks, PropTech innovation will continue and in her opinion, there’s no way back to old-style business. She gave an example of how quickly startups have adapted to the new situation: CHAOS has built and launched their disaster response package in a matter of days, now using their technology you can answer the new questions of where the risk groups are located and where people are moving. 

At the same time, according to Sonja and her colleagues in Helsinki Business Hub, venture capital, especially corporate venture capital deal flow remains as strong as before in Finland and money is available even now. Currently, the investors are paying special attention to the team, its ability to make decisions and execute. And proptech startups shouldn’t forget, reminded Sonja, that Helsinki remains to be a perfect sandbox for new ideas, the projects are still going on and it is a chance for startups to test their solution.

Our next speaker, Joni Lehto, is a Business Advisor of NewCo Helsinki and currently is helping Helsinki City with processing support applications from various businesses. He knows first hand what instruments are available and how to apply. Joni has systemized this information on his personal blog page https://ecosystem.fi/corona-finnish-smes/, you can also find this information on NewCo pages  https://newcohelsinki.fi/en/sole-entrepreneurs/ and https://newcohelsinki.fi/en/corona/. According to Joni, the number of applications has multiplied during the last weeks, causing some delays, but Helsinki City quickly adapted to the situation and involved all available personnel in the process, including NewCo advisors and even librarians. So, the entrepreneurs can expect to get the support fast. Entrepreneurs are being made during hard times, and these are also the best times to look for new opportunities, said Joni. 

In the second part of the webinar, we had five startups, five stories of how they are dealing with this situation and what they are doing now.

Our first speaker, Karolina Mosiadz, COO and co-founder of Mapple, has started with a silver lining – this is the time when corporate players are forced to innovate, which gives proptech startups more opportunities. Of course, lockdowns and restrictive measures have caused a setback, many companies decided to freeze their budgets, either cancel some projects or delay them till autumn or without any date, especially in the real estate and banking sector. Many organizations are functioning in a crisis mode, focusing on the core functions and are not eager to discuss innovations. At the same time, new ways of working from home and online made them aware of their need for collaboration and information sharing tools, now when they can not just walk around the office and ask a colleague. And now, after cutting costs and laying off some personnel, companies have to do the same work, or even more, with less people and they need to make decisions fast, they don’t have weeks and weeks for analysis. In this time real estate faces the problem of empty spaces like never before, they need to come up with creative ways to find tenants. This gives a lot of room for innovative solutions and Mapple is actively using this opportunity by making its tool available for testing to urban planners and companies.

The next speaker, Topi Tiihonen, CEO and co-founder of SkenarioLabs, works with old school institutional players, like banks. SkenarioLabs provides a web-based tool for automatic valuations. Up to now, the valuation process is highly subjective, most banks rely on the personal opinion of a valuer, who does some research and sites visits to determine the value. But this approach is highly unreliable in the current situation when nobody has a clue about what will happen next. For example, what will happen with rent after summer, what will be the demand etc. SkenarioLabs provides them with some sort of a crystal ball, which doesn’t require massive changes of their IT infrastructure but gives them the possibility to continuously monitor the market and build projections for the future. Topi gave a quick overview of various tools available in their platform and jumped to the company situation. Before the pandemic SkenarioLabs’ main challenge was getting the relevant data, so they were focused on data partnership deals, which brought them several big clients and access to 70 countries. They were actively pushing, together with their data partners, to establish a global presence. They have a strong foot in the Nordics, Canada, UK, Germany and are opening Poland soon. With the start of the pandemic, everything slowed down. But this gave them time to work on their product and localize their models to specific markets. Right now the team is focusing on the core, putting all new ideas on pause. They continue business as usual and keep the team spirit, not forgetting to have fun and make each other laugh. During these weeks they developed and launched a couple of new features which their bank clients were asking for, so they can serve their main customers better. Last weeks they saw an actual increase in sales meetings. SkenarioLabs was always trying to reach decision-makers directly, and previously it was much harder, than now, when people seem to have a bit more time. Another strategy they are using now is more aggressive pricing, or, as Topi put it: ‘making our product the easiest to buy’. The outlook for the future is very positive and they are confident that they will continue growing and opening new markets. 

We are grateful to Imre-Gustav Vellamaa, CFO of R8tech, who was incredibly honest and open with us, this was an unforgettable speech. Just one hour before Imre received our invitation to speak at the webinar, he finished a very painful team meeting, where they have decided to layoff around 30% of the current team, the hardest decision in the three years history of the company… 

R8tech had 17 employees in the head office and area managers in five countries. They were growing the revenue, planned extensive R&D, were getting ready to recruit more people and participate in the number of networking events. R8tech did not have a break-even due to the growth focus. So one investment agreement was signed at the 2nd half of March to reach the completion of the bigger investment round at the end of May. A month ago the new investor called to cancel the agreement, then clients started to have problems, many revenue streams dried up, investment round slowed down and the team had to start planning anew. 

They developed seven different scenarios in 3 days and presented the selected one to shareholders and investors. The new plan, which was built around securing revenue and no growth, required them to cut their costs three times and put on pause most R&D projects. They laid off 7 people and the workload for the ones who stayed has increased. Their current investors agreed to support them in this difficult time when it was important to keep the team so you can start growing again when it is over. But there was a positive side in this lockdown also. It allowed taking some time to analyse the processes and improve the services, making some of them more efficient. 

Imre summed up their experience in four keywords:

• Quick action. What was taking one week before the lockdown, has to be done in one day now.
• Hard decisions. Don’t postpone them, but take a breath before making them. And be open to saying ‘I am sorry’.
• Transparency. Be open and honest with everyone, especially your employees, stakeholders and investors. And remember to stay positive, especially if you are a leader, this can save your company.
• Sustainability. Cut costs sustainably and remember about the long term, secure your core team and your core product.

And of course, keep your eyes open for new opportunities, even if they don’t bring immediate revenue. Also keep your clients, better give them a 100% discount now and keep them, than to sign them up again later. And stay positive!

Jarmo Limpus, COO and founder of CubiCasa, introduced a new word to describe the situation. Oulu-based company has been in business now for roughly six years and employs 70 people on three continents with main markets in the USA and a strong position in the Nordics. Their floor plan mobile application has received great success especially among real estate photographers. Jarmo said they don’t use the words COVID or corona, avoiding them at all costs in their communications. They are talking about the lockdown, much better description of what is going on. 

In early March the company noticed, that their fast growth of 10% a week has slowed down and even slightly decreased. Only last week the situation returned back on track, probably because after the first shock the companies adapted to the new reality and started looking at new technologies and services again, trying to increase their efficiency and productivity. Right now CubiCasa’s sales pipeline is bigger than ever. They themselves started to look at other industries, target segments and technology service providers (mainly 3D / 360 platforms). They expect further growth of 25-30% there, 3D open houses can become a new normal because people are not so eager to go to site visits anymore. With the global drop in new listings by 30-70%, up to 90% in some states in the US, new technologies are in demand and the previously stalled deals can finally move forward now. 

As to investors, it is easier to rely on your current ones than to sign up new deals. It is important to mitigate long term risk and diversify your operations. For CubiCasa, with multiple markets and working with different sectors, i.e. commercial, residential and vacation real estate, survival should not be a problem. Another valuable asset of the company – a vast and diverse network of people, which allows getting information quickly to understand the situation and make decisions. For example, it took Jarmo a couple of calls to his partners in the US and Spain to understand that vacation real estate is not the best sector to focus on right now. As to remote working, it has been in the company’s DNA from the start, nothing has changed much for the team which is used to working in multiple time zones. 

CubiCasa is also active in the Erasmus program, they give Erasmus students trainee positions, mostly on the business side, and this works extremely well for both. Students are getting the skills and experience in real business, while the company gets an international culture and new knowledge about different markets. As to public funding and getting support from Business Finland and ELY centre, having someone with previous experience with these applications will help you to get it done faster, said Jarmo. CubiCasa sees a bright future ahead, even though March 2020 was lower, April will be a record month for the company with 20% growth.

This extremely positive vibe, all the way from Northern Finland to Helsinki, was enhanced by Harri Majala, CEO and founder of GBuilder, another Oulu-based company, developing construction management software for residential projects. GBuilder was founded seven years ago and first came to market in 2015, and since then has become a market leader in Finland and started operations in six countries in Europe. GBuilder was in a relatively good position when the lockdown started. The company was aiming at becoming cash positive since the end of the last year and reached this target by March by pushing up revenues and cutting down the costs. This allowed them to keep going now, without making tough decisions on laying off people. 

Keeping good team dynamics in hard times is very important, as well as being very open and having good communication. Cashflow, which is always an important component of the business, is easier to get with existing clients now. Getting a new client remotely can be rather hard, but do not panic and focus on serving your client base, increase your service level and upsell if possible, while keeping an eye on your expenses and avoid doing things which are not bringing money, said Harri.

Next tip from Harri was to find support from your friends, family and VC. Some companies managed to grow without raising capital and this self-reliance was a good strategy. Though in times like this, it is actually a good thing to have some VC backing you up and supporting you, since raising money is a tough thing to do now. Negotiating powers are shifting, and many VCs expect the terms and valuations to be ‘very good’, which means lower in some cases, so it is not advisable to push for a big round these days.

As a third-generation entrepreneur, Harri has seen it all. He went through the depression in the 1990s, made it through IT bubbles and the financial crisis in the 2000s and noticed one thing all these crises have in common. It feels much worse from the inside, but once it’s over you will understand that things are not actually that bad. PropTech community must use this period as an opportunity to deliver its message to the world: it is time to change and to digitalize, you can not continue doing this manually and face to face. This is not the last pandemic, and there are other challenges in the world, which push the old way of operation to the limit. We need to change it in order to get out of this stronger and bigger than before. Stay positive, stay strong and remember that this will pass and things will change for the better!

The last part of the webinar gave us an idea of the investor perspective from Helen Ventures and a case of a successful M&A from Bo Family Group and Unrealer.

Pirita Näkkäläjärvi, Director of Helen Ventures, reassured us, that there is still money out there and some VCs continue looking for new startups. She and her team are working remotely for eight weeks already, but they keep the focus on building momentum and looking for startups they can potentially invest in. 

Helen Ventures is a new corporate VC, established half a year ago as part of Helen, a very traditional old company with a core business in heating, cooling and electricity. About a year ago Helen updated its strategy and started looking for innovative solutions in the energy sector, which could help Helen to renew. This is how Helen Ventures was started. Small but professional and highly experienced team of Helen Ventures is aiming to become a growth partner for European startups developing innovations in their focus areas. They are looking for startups with high global market potential, which are able to scale quickly, work with the energy sector and are based in Europe. Their fund is 50 mln EUR with ticket size from 300 K to 3 mln. 

Very practical advice from Pirita to the startups trying to reach out to investors now. First: present your team well, for example, make an intro video. The team dynamic is important and now, when investors can’t meet you face to face, they still want to see and understand who are the people in the team. And make an intro video about your product, a short teaser for the initial contact and a longer one for expert evaluation. Alternatively, organize a web event together with your advisors or experts, and go deeper in your area of innovation, making it easier to understand. Try to do your videos professionally, look at the camera, choose good lighting, make it easy to digest. Once you open the conversation, be proactive, make sure you are communicating in good time and don’t be shy to remind about yourself if you are not getting a response. 

While some VCs are focusing on their portfolio companies only, others are still active and are looking for new ones. But they expect you to have a clear plan on how you will use the money and be realistic with your valuation. Although some VCs are pretty strict and will never invest without an actual meeting, Helen Ventures is open to discussing this and in any case, they will work on the deal and try to push it forward as far as possible so that you can proceed to it shortly after we are out of the lockdown. Pirita’s message to the startups: *Be active, reach out, there is still a lot of money out there’

Our last speaker, Tuomas Kankaanpää, CEO and co-founder of Unrealer, presented a case of a successful M&A, which happened to close in March, in the middle of a lockdown. Of course, this process took much longer and didn’t happen overnight, it was part of a long-term strategy. 

Why did Bo Family group decide to make a deal with Unrealer? Since the day Unrealer was founded back in 2014 they had a very simple purpose: make real estate marketing better. And Bo Family group has exactly the same approach, so it was quite natural that they joined forces. Unrealer remains a separate company, it has a strong position on the market, one of the fastest-growing companies in Deloitte Fast 50, and the company was self-standing and independent from day one, never raised any funding, relying on its growing revenues, which reached 1.6 mln last year. For the Unrealer team, nothing has changed much, but now, together with Bo Family Group, they have more power and ability to change things. 

Unrealer is an indisputable market leader in Finland. Most pictures you can see in advertising for buildings under construction, i.e. which do not exist yet, were probably made by Unrealer. Bo Family Group is one of the largest property owners in the country with 23 mln in revenues. They always aimed at maximum visualization and wanted to make their marketing better. Now, by combining Unrealer’s marketing and Bo Family Group’s sales capabilities, they can offer potential clients a great portfolio of services. Another reason is Unrealer’s expertise in digitalization. By bringing the young and innovative team on board Bo Family Group will speed up its digital transformation. After one month with Bo Family Group, Tuomas actually noted that the lockdown had a positive effect on their business, with revenues growing and more clients reaching out to them. Now Unrealer is planning the next step, which they can not disclose yet, but soon. Stay tuned!

And at the end of the webinar we had some time to answer two questions from the audience, both answered by Sarah Sipilä.

Q: What are the main challenges for commercial real estate operators and owners?

A:  The main challenge probably is that the dynamic has changed almost overnight. Some segments, like most of the retail, with the exception of grocery, are basically shut down across multiple markets. This requires quickly adjusting timelines on rent, which in turn leads to cash flow implications, etc. This is the main theme now. From a longer-term perspective, the main question probably is how they will deal with new normal, new social norms of remote working and social distancing, having enough space in offices to maintain social distancing. The trend of open offices and constantly reducing the space between individual workers may have to be reversed. You will have to have more space and combine this with working from home, which some people may want to continue to do. All the changes related to COVID-19 combined will increase the need for digital solutions, like the ones we have seen today, which will accelerate the digitalization of the industry, not just in real estate, but also construction. Now, when we need to reduce site visits whether it is a building or a construction site, we probably will see more digital tools for predictive maintenance, remote maintenance and monitoring etc. And in fact, this is something that needed to happen, and now it is happening, to boost the efficiency and bottom-line for everybody, because for every site visit has a cost associated with it. This means great potential for proptech. 

Another challenge, which was mentioned earlier, is the slow down of investment decisions. This can really have a negative impact on the industry, and we may see a gap in the number of projects this fall. Everybody is trying to focus on the now and avoids the decisions about the future, but exactly this can affect the ability to go forward.

Q: Do you think that traditional real estate companies will be focused on investing in proptech or rather on cutting their costs?

A: Of course, in difficult times, we tend to focus on the core and cut all new things. We go back to basics. Though in fact, these things are not mutually exclusive, because to cut costs we need digitalization. By implementing changes step by step, we can reduce costs as we go forward. The companies that simply cut costs will not be the ones which will be successful long term. Digitalization is a way forward to start growing when the market picks up again. And the rules of the game will change too. 

We wanted to thank our speakers and participants for a great webinar and are looking forward to the next opportunity to bring the community together!