Breaking Property News 26/08/24
Daily bite-sized proptech and property news in partnership with Proptech-X.
CEO Andrew Stanton gives advice for proptech start ups and scale ups
Often I am asked what it is that I do as CEO of Proptech-PR ‘A consultancy for proptech founders’, well part of it is giving founders insights and strategies for building successful proptech businesses. As a consultant and analyst specializing in commercial growth, operations, and sales strategies for proptechs I often encounter the same critical flaw: a lack of what I call “commercial ideation.”
Having met over 1,000 founders, critiqued over 450 decks for them and had 134 founders as direct clients whose companies have a combined market cap of £1.47 Billion, I know if a brand will be a cash burner or a cash generator, if a business will get investment or has the capability to scale and get to exit. (Picture Andrew Stanton CEO of Proptech-PR & Founder Proptech-X)
The Most Common Flaw in Proptech Startups
The most frequent mistake proptech startups make is developing solutions without a clear understanding of whether anyone will pay for them. Many founders are so focused on building their product that they neglect to verify market demand. This oversight often leads to difficulties in acquiring clients and securing funding. The result? A product/service nobody wants.
Startups tend to spend time & money, sometimes years and millions of pounds/dollars developing something while operating in “stealth mode,” only to discover upon launch that there is no demand for their product. They should have conducted more market research from the beginning. Before investing significant resources, they should have asked potential users, “Would you pay for this?” If the answer is no, it’s a sign to pivot or stop altogether.
Validating Your Business Idea
Particularly in today’s economic climate, where funding is super-tight, validating a business idea is more crucial than ever. Startups should determine if there is a repeatable demand for their service. If they cannot confidently say that customers will pay consistently, they shouldn’t proceed.
It’s harsh but true. Many founders need to hear the blunt reality rather than have their ideas blindly supported. They need to ask the hard questions from the beginning: “Would you pay real money for this idea?” If they get a lukewarm response or vague encouragement, it often means that the idea doesn’t have the commercial legs to stand on.
Building an MVP: A Real-World Example
A classic example of validating an idea before building it is the story of the first person who struck on the idea of selling shoes online. Instead of creating a full-fledged e-commerce website from the start, he ran adverts asking people if they would buy shoes online. When people responded positively, he bought shoes from stores and shipped them directly to customers. This approach confirmed the demand for his business model without significant upfront investment.
In the Proptech industry, similar principles apply. Startups should approach their potential customers with a direct question: “Would you pay £200/$200 a month for this service/solution?” If the answer is no, or if there is hesitation, it’s a sign that the product might not be viable. Too often, founders build first and then try to push their product onto the market, only to find little interest and tight revenue streams.
Building a Community Before a Product
If I were to start a new business today, my first step wouldn’t be building a Saas product. Instead, I’d spend 18-months building a community and getting to know everyone involved in the field. This community would include potential customers, mentors, and industry experts who could provide valuable feedback and guidance.
For example, suppose you’re developing a control system for commercial real estate. In that case, you should connect with relevant stakeholders on platforms like LinkedIn, not to sell to them but to seek their advice. This approach helps you understand the market’s needs and builds a network of potential early adopters and advocates for your product.
The Power of Relationships in Business
Having a strong network leverages knowledge at pace, when I talk to clients, I often don’t even discuss the technology; it’s all about their route to market and user acquisition strategy. Your tech might be world-class, but if you can’t acquire users, it’s irrelevant.
Relationships and networks are crucial in launching and scaling a business. The right connections can help you raise funds, acquire customers, and build credibility. If you’ve spent years building trust within a community, reaching out to them when you launch a product is much easier. They already know and trust you, which significantly lowers the cost of customer acquisition.
The Cost of Acquisition and Understanding the Market
Many founders underestimate the importance of customer acquisition costs. They might think spending £150 to acquire a customer for a £79/month service is sustainable business model, and they may not factor in churn rates and the need for a steady influx of new customers. Understanding these figures is essential for building a viable business model.
There’s a clear divide in Proptech between founders who come from a property background and those from a tech background. Property professionals often have the most compelling ideas because they’ve experienced the pain points firsthand. However, they might lack the startup and tech know-how to market and sell their product effectively.
Building a Sustainable Business
Ultimately, the key to building a successful proptech business is balancing innovative ideas with practical business strategies. This involves validating your product idea early on, building a strong community, leveraging relationships, and maintaining a keen focus on the numbers.
If you have a good idea but lack business experience, seek mentors and advisors who can guide you through the startup process. And remember, always ask yourself: “Will people pay cash every month for this service?” If the answer is yes, you’re on the right track. If not, it’s time to rethink your approach.
Andrew Stanton Executive Editor – moving property and proptech forward. PropTech-X
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