16 Challenges of Launching a PropTech Company

There is no doubt that real estate technology (proptech) is an innovative approach to real estate marketing. From developers and investors to property management companies, proptech has the potential to benefit all parties involved in the buying and selling process. The proptech industry has been experiencing strong growth since 2014, and especially since the 2020 pandemic.

While technological evolution is imperative for growth in the real estate industry, implementing such changes and improvements poses some major challenges. Here, 14 experts from the Bids For Real Estate Council weigh in on the top challenges facing entrepreneurs starting a proptech business today.

1. Stakeholders who need to embrace technology

From my time at Bids For, ZipRealty, and Movoto, I learned one of the critical challenges many startups face: Too many stakeholders need to embrace technology to be effective for innovation. Prioritizing the stakeholder with the most to gain and the most to lose is also the first step in the right direction. They must communicate, inspire and educate for this progress to take place. – Maximillian Diez, Twenty-five Ventures

2. Provide value proposition proof

Proving your value proposition is a major challenge. As the real estate industry begins to embrace technology, the industry in general is traditional and slow to adapt. To gain the trust of industry professionals, one must demonstrate early on how adoption will save time and money or improve service quality for its users. – Jim Hegedus, Water Street Partners

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3. Creating a Disciplined Growth Strategy

A major challenge is creating a disciplined growth strategy to ensure success. The addressable market is so big that there is a temptation to chase shiny new objects, which can distract from the game plan. Real estate is complex, compliance-driven and local. The ability to focus on scalable growth rather than superficial growth separates successful proptech entrepreneurs from those with only great ideas. – Min Alexander, PunchListUSA

4. Balancing Technology and Supporting Emotional Needs

While the real estate model has changed dramatically over the past decade, buying and selling homes have remained emotional processes with the human component at the core. Entrepreneurs must balance technology with supporting the right decision-making and emotional needs of customers during every transactional milestone, and provide a high-tech, high-touch solution. – Amit Haller, Realis

5. Improving Distribution

The main challenge is distribution. For business-to-business startups, the ratio between CAC (customer acquisition cost) and LTV (lifetime value) can’t be right. The solution? The startup must be a partner rather than a supplier. That means a relationship with customers where you ask more questions than you talk. The offer should then be repeated to solve the specific problems you learned about. This improves CAC and LTV in the long run. – Trevor Hightower, Crafts

6. Finding a Product Market Suitable for Sustainability

Finding your “unique insight” or your “special sauce” is crucial. While there are many opportunities in proptech, finding a product-market fit is critical to long-term sustainability. Most software-oriented products require significant access to capital to build. They also need to be adopted from a market segment that is currently unserved or underserved by technology. – Fred McGill, Simple Showing

7. Dealing With Slowness

Inertia is one of the biggest challenges proptech companies will face in the real estate industry as companies move slowly without reaching a real pain point. Cost and time savings are typically the biggest incentives for adoption, especially when technology can reduce or eliminate staff time at the rental community level. Even with real value and NOI, patience will be needed to build parts. – Ellen Calmas, Neighborhood Payment Services / NPS Rent Assurance

8. Networking

Like everything in real estate, doing business is based on relationships. Your network is your asset. Learn how to connect with the movers and shakers in the industry and tap into their network of professionals to help build the technology. It’s critical that a few key customers and partners sign up for your early customer feedback loop to understand the complicated workflow. – Elisa Zhang, EZ Real Estate

9. Launch of a new solution

Bringing a new solution to market without a proven track record is difficult. That’s why it’s critical for startups to create strong relationships within the industry to illustrate how their solutions deliver substantial value to users. By leveraging this industry knowledge, a solution can be developed that actually addresses customer pain points while building brand awareness. – Oli Farago, Coyote Software

10. Finding Smart Ways to Integrate Technology

Change management is the biggest challenge in technology adoption in the real estate industry. The winning real estate companies have found smart ways to integrate technology into the customer/resident and employee experience to create three wins for delivering a superior customer experience, giving both buyer and seller greater control and visibility and lowering execution costs. – Elik Jaeger, SuiteSpot technology

11. Evolving Technology Until Customers Accept It

The biggest challenge for young proptech entrepreneurs is getting their company to achieve product-market fit. Evolve your technology to a point where you know the customer will accept it. Until your company reaches product-market-fit, you as a young proptech entrepreneur are still technically iterating your technology to get it accepted. – Saurabh Shah, InstaLend

12. Expanding into More Than One Market

It is easy to start and produce products and value in a local market, but the biggest challenge for entrepreneurs will be trying to expand into more than one market. There are many proptech companies that are raising capital, doing well and proving their product fits in a market, but it becomes a huge challenge when they try to expand into multiple markets. – Kori Covrigaru, PlanOmatic

13. Not understanding real estate at first

The cardinal sin for anyone starting or starting a real estate technology company is not understanding real estate at the outset. You can package goods and services with tight marketing and promises; however, the fundamentals of real estate have not changed. Accept the known unknowns and become competent. Technology makes life easier, but only if you understand the industry you’re trying to disrupt. – Charles Argianas, Argianas & Associates, Inc.

14. Creating a clear value proposition Creating

With so many new proptech companies flooding the market, creating a unique value proposition is the biggest challenge entrepreneurs will face. It is no longer enough to digitize or consolidate claim real estate transactions on a centralized platform. There must be a clear benefit to users that grabs their attention and makes your technology stand out in a crowded space. – Megan Micco, Compass

15. Generate tangible ROI and impact

Demonstrating how your solution can generate tangible ROI and impact is a challenge. Technology is meant to enable stronger experiences and more efficient business outcomes, but entrepreneurs need to think through the lens of a commercial property owner to understand what would motivate them to want to try a new solution. Ultimately, showing a clear opportunity to increase sales or reduce costs is critical. – Benjamin Pleat, Cobu

16. Creating upgradable and adaptable technology

The big challenge for most proptech companies is to create technology that can be adapted and upgraded as the field evolves. Currently, during Covid times, there has been significant disruption and growth, including the adaptation of technology. It would be a great idea to know the customer demand and get real-time feedback on the creation of the new offering. – Chander Mishra, Blue Ocean Capital LLC

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