From the time I was a kid until my mid-30’s, I was a big fan of Sports Illustrated. It would arrive every week and I would typically read it from cover to cover. There were a few special issues throughout the year that peaked my interest, but nothing more than Sportsperson of the Year. It would include a huge feature on the person that they chose every year that impacted sports in a positive way. The issue would also provide a year-end perspective on sports, allowing you to look back on everything that happened in the past 12 months.
While I no longer subscribe to Sports Illustrated, there are still reports that come out that I devour the same way. My favorites are from CRE//Tech, and this week, they released the mid-year report. The same way you could get a full year of sports knowledge from that one issue of SI, you can learn exactly where we are in CRE Tech from this report.
So what’s going on?
- Funding is down. If you are surprised by this, you aren’t the only one. However, if you are paying close attention, you may have noticed that the big guys (VTS, Honest Buildings, etc.) are grabbing headlines, but there are fewer deals being announced. Why?
- There are fewer start-ups. We peaked in 2014 with over 60 start-ups being formed, but so far this year, we are below 20. Does that mean CRE Tech is slowing down? As my friend Duke Long might say, hell no!
- The industry is maturing. This is a good thing! The companies that are entering the space are doing so in a more competitive environment. Companies that are three to five years old may have already pivoted from their initial idea into something more profitable. They have made their mistakes and, if they survived, are stronger for it.
- Non-tech companies are getting in the game. CBRE, JLL, and others are working on tech tools internally, as well as partnering externally. This means millions of dollars in CRE Tech that isn’t being tracked, but will definitely lead to innovation.
So what’s next?
- I still think we will see consolidations, acquisitions, and mergers. Just because someone has a great idea, founded a company and raised money doesn’t mean they are the best person to implement the idea and run the company. Collaboration will be key in this regard.
- We will start to see some spin-offs. Now that we have some stars in the industry, we will see some employees leave to start their own ventures and leverage off of being a former-XYZ company employee, the same way we see former-Google or former-Netflix people all over Silicon Valley.
- Now that some of the users are the investors, the pace of innovation will quicken. The biggest hurdle in the very beginning (and it’s still the beginning) was adoption. Now that owners and large brokerage firms are investing in CRE Tech and adopting tools immediately, they will start to demand more and they will want it fast. Savvy investors like Fifth Wall Ventures and Camber Creek will partner with users who can help the companies they invest in scale, and scale fast!
The CRE//Tech Mid-Year report is filled with analysis, data, and profiles of companies doing amazing things. My thoughts above come from studying each report that comes out and reading between the lines.
The pace of change and innovation is amazing and we are lucky to be a part of it!