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Proptech entrepreneurs whose aggressive mentalities helped cement their place in the real estate industry have had to resign themselves to a more cautious mindset in recent months.
These firms have switched their focus to newer product offerings, and in some cases have laid off staff to adjust to the new economic realities in the slowing housing market, four CEOs of major proptech startups discussed Tuesday at Inman Connect New York.
“For the last couple of years, it was all offense, and now that offense has to be grounded with some defense along the way,” Pacaso co-founder and CEO Austin Allison said on the panel.
Tighter capital markets in recent months have limited what these proptech companies have been able to do during the downturn. That was the consensus of all four panelists, including Allison; Court Cunningham, founder and CEO of Orchard; Drew Uher, founder and CEO of Homelight; and Tim Heyl, CEO of Homeward.
“I think what’s changed is capital is no longer free, and so everyone has to get to profitability,” Cunningham said.
Uher said these venture capital sources that have aided the rise of so many real estate tech firms have grown increasingly antsy with the prospect of losing money in the proptech space.
But they aren’t entirely out on real estate, Heyl said. They’ve just been pickier about which companies they want to back.
“The debt providers that are investing into real estate, they’re not all of a sudden not wanting to invest into real estate,” Heyl said. “They just want to make sure they’re investing with solvent companies that have plenty of runway, and they want to make sure their investment is safe.”
As the seller’s market has deteriorated and shifted in favor of buyers, it has also changed the types of products that the major power buyers can pitch to consumers, Heyl said.
“Today, in most markets, competing with cash is not a problem that needs to be solved,” Heyl said. “Right now the problem that needs to be solved is, how do sellers know that their home is going to sell, and when it is going to sell, and how much is it going to sell for?”
Allison’s luxury second home co-ownership company has been forced to roll out more creative products — such as one called PacasoNow that requires only a 5 percent down payment — in an effort to reach more customers, he said. It’s an innovation that probably wouldn’t have happened had the market not entered this downturn, he said.
As these proptech firms move forward, they will have to continue to navigate both the constrained capital markets as well as the shifting dynamics between buyers and sellers.
“The power pendulum has swung in lots of areas,” Heyl said. “Sellers had all the power on the market, and buyers were heeding that power. And now that has sort of swung.”
