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Why proptech is a game changer

Proptech is just technology for real estate, so why is it so transformative?

WeWork didn't ruin proptech

The rise of proptech as a viable industry over the past few years has been an exciting change for the real estate industry. 2019 saw $10 billion invested in proptech by some of the most prominent venture capital firms in the country. Today, most articles that discuss proptech have to reference the recent troubles faced by WeWork. While the excitement, valuation, and ultimate re-valuation of WeWork as one of the most prominent proptech giants has certainly impacted the industry, there are a few things to consider before overestimating the impact it will have:

  • Softbank, WeWork's biggest investor, takes massive bets that investing hundreds of millions into companies will result in quickly building sustainable value. The public markets, as WeWork saw, takes a different approach and favors more profitable enterprises. Softbank has made similar bets in other industries, so proptech shouldn't be singled out for WeWork's inability to confirm the model.
  • WeWork was never really a proptech company. WeWork's business was never to develop and sell technology, which is why it was a hard sell for WeWork to get a 'tech valuation'. Companies receive a technology valuation -- i.e., a higher valuation based upon the multiple of earnings -- because once a company develops technology it can be sold over and over again. Service industries, like lawyers, can only sell their services once (although some argue lawyers do appear to bend space and time to bill their time more than once, but we can address that in another blog topic). WeWork was not selling technology over and over, rather using technology to efficiently devise and maximize space for leasing at premiums. In short, WeWork is and was a real estate company.
  • Real estate needs technology and is still playing catch-up. The industry in general has been slow to adopt technology, which means there are many opportunities for proptech companies to innovate and offer new technology.

Technology keeps getting better and better

With each new wave of technology innovation, new proptech products will continue to enter the market with a greater ability to service customers. New technology will not only provide real estate professionals with the ability to become more productive, but also will seek to make it easier to do so.

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