Today was LMRE’s first joint event with Round Hill Ventures; a panel discussion on scaling with Europe's PropTech leaders.
Over the course of the morning, Tushar Agarwal (Hubble), Arnie Sriskandarajah (Round Hill Ventures), Chris Namih (Knotel), Tripty Arya (Travtus) and Miroslav Miroslavov (OfficeRnD) gave valuable insights on how to scale a PropTech start up successfully and some honest first hand experiences of what not to do.
So, the definition of Scale up is something that’s grows at 20 percent a year…
When you scale and take on more people like Hubble, who grew from 24 to 54 people last year, this can cause huge operational challenges. Everyone is new, everyone is asking the same questions so how do you solve this?
Tushar mentioned that in order to address this you need to readdress the organisational design which takes on average 12 weeks, and 12 weeks to see this positive change occurring. Hubble use cross-functional squads or groups, so one person from product, one from sales etc looking at solving one task. This ensures each team has an input in the solution.
What slows down scaling?
Cutting through traditional real estate stakeholders. We all know it takes forever speaking to all people in businesses, especially across all the areas of large real estate corporates. Arnie mentioned that many people in these businesses are not too familiar with b2b sales and breaking down the industry is tough with long sales cycles. VC’s can often hold the key to breaking down these barriers by creating a clear decision-making tree within their LP’s. It is of course in the interest of both the LP, the VC and start-up to make decisions quickly and if you are going to fail, fail fast and move on.
How can you go about this?
Chris and Tushar said, speak to everyone and master your product. Once you have a few good case studies then you are well and truly on your way! Hubble goes out and speaks to everyone, and they have also mastered their product which helps. If you have clarity about what you are doing, and the product solves the market problems, it goes without saying that the sale process is easier.
However, it is not just on the PropTech side. It is also down to the client you are pitching to.
The real estate Industry is old, slow and difficult. Assets are big and hard to manage so real estate institutions, landowners, agencies are careful with what they do with them and how they operate them.
Arnie mentioned it has a lot to do with how they interact with tech companies. Real estate companies want to improve margins and recognise opportunities in value chain, but these traditional real estate stakeholders aren’t used to how to engage with the companies. It is down to PropTech’s to push against risk aversion and make innovation happen and there is a big education piece that is continuously needed.
So, even if your product is good you must look at the challenge up the value chain and we need to focus on that education piece. There were key people in the room like Naqash from PGIM and chair of REIM tech who want to bring in more tech into business.
When to scale into other geographies?
Many start-ups are under pressure to scale globally and across geographies. This is often due to investor pressures or the chance to own the market swiftly.
But, as Tushar mentioned you do not need to scale globally; you can focus on one geography and be extremely successful like Zoopla and Rightmove who are perfect case studies of billion-dollar businesses. But dependent on the market need, and what you specialise in you do not need to be in all geographies. Companies are often under so much pressure to scale quickly before someone else does, however there is huge value in working out your company’s marketplace.
Hubble are growing quickly in the UK market and are extremely successful and operate out of one office in London. However, a different platform; OfficeRnd benefits hugely from global expansion and needs multiple offices to run and is a 24-hour service.
Arnie mentioned that from an investor perspective, starts up’ need to understand the core business model needs, then they can work out if they need to go global. RV have 12 operating offices which helps give their business intel on market cultures, law, introductions, and customers for their cohort and help companies soft land.
Tripty has a small team based in the UK focussed on winning business from the key players in the US. The sheer scale of the operators means that focussing on a couple of key clients rather than chasing many smaller clients proves more effective.
Tripty mentioned a new ideal of ways of scaling sustainably and the need to think about what the actual problem is and how do you internally solve it.
Tripty mentioned there are 4 things
She gave Blackstone as an example of a great client. They have a tech team who they can communicate with, a business that needs help and appreciate and will work with them to develop the right product for them. She also mentioned that the worst thing that can happen to a start-up is a bad client. It can cost a lot, waste time, damage your reputation and then have a client who does not understand or respect the effort you have gone through.
It’s not surprising that if you have a strategic investor, with market intel and connections that it will help in warming up and make a friendly intro.
Whilst scaling how do you keep the culture?
Going back to previous comments, Tushar, suggested and is trialling cross-functional squads. This was pioneered by Spotify. This is when each of the different teams has individuals from marketing, product, sales etc working together and giving each team an objective to hit. The effects of making this change have been great and you can see the whole team collaborating and communicating.
How to interview and hire correctly?
A question we always get asked at LMRE, but Chris gave some great advice; keep the interview process short, but involve the whole team. This ensures that you find someone who fits in with the culture, understands the job and you keep the candidate interested. Anything that drags out often doesn’t end well.
Tushar mentioned about being honest about the things that can go wrong in a start up from day to day and see if people still want to join after that but also ensuring probation is taken seriously which relays back to having a solid structure in place.
Arnie mentioned about going with your gut instinct over the first two weeks of employment and giving your staff every chance to succeed.
From our point of view there is one common theme with successful scaling companies, they hire quickly and efficiently. There is never going to be the perfect candidate for each role. Both Knotel and Hubble would have made mistakes along the way, but they moved quickly in their hiring process and trusted their team with the workload and growth of the company.
One of the hardest jobs of a founder and senior manager is to learn to let go and delegate
What else can be helpful when scaling?
Chris mentioned about early adopters and targeting healthy growing markets. Knotel started with businesses who needed to scale and were moving from co working. From this, he used early adapters to provide product and price points, and great case studies for their target enterprise clients.
If you target growing markets, that will continue to pay for your product for years to maintain healthy margin
Mentors - finding a founder one step ahead of you in a similar vertical and a later stage development or founding round can be helpful. Miro pointed out that having mentors and advisors to understand problems in the real estate industry can be instrumental in helping you to build the right product and company.
Apologies for an unusually long blog!
Thank you to all that came and thank you especially to the panel. Apologies for the coffee drying up and looking forward to seeing you at our next one in early 2020.