16.7.20

The Propcast: PropTech VC European Trends

In this episode The Propcast talks to Miguel Nigorra from Fifth Wall about PropTech VC European Trends.

Click here to listen to episode 6

The Propcast is by Louisa Dickins, Co-Founder of LMRE the leading Global PropTech recruiter brought to you in partnership with UK PropTech Association, The UK PropTech Association is a membership organisation to drive the digital transformation of the property industry.

This show will focus on connecting the proptechs, real estate funds and VC’s globally…and get everyone talking about innovation of the built environment.

16.7.20

About Our Host

Louisa Dickins

https://www.linkedin.com/in/louisa-dickins-ab065392/?originalSubdomain=uk

Louisa started her career in property working at a well-known estate agency in London. Realising her people skills, she moved over to Lloyd May to pursue a career in recruitment. She now is a Director at LMRE, who are a specialist recruitment firm driven by PropTech and recruitment professionals, and Louisa oversees their 5 core areas. Louisa co-founded LMRE and provides a constructive recruitment platform to the new disruptors in real estate. Louisa is also on the board of Directors at UK PropTech Association (UKPA).

About LMRE

LMRE believe there is a better way to recruit. LMRE focus on a more comprehensive, client led focus delivering exceptional talent to the right place at the right time. They are passionate about the industry and passionate about people's careers. LMRE spend time with each client to become and an extension of the business, and their transparency and core values help them grow with the sector. LMRE simplify recruitment and innovate with our clients and evolve the people driven, PropTech community.

About Our Guest

Miguel Nigorra

https://www.linkedin.com/in/miguel-nigorra-esteban-86688313/?originalSubdomain=uk

Miguel Nigorra is a Principal on the Strategic Advisory team at Fifth Wall, where he drives innovation and value creation transformations with start-ups and corporate partners in Europe. Prior to joining Fifth Wall, Miguel worked at McKinsey for over nine years in the Madrid and London offices. As part of the digital practice, he led teams across Europe in numerous real estate engagements. He also was a Business Development & Strategy Manager at Fon Wireless, the largest WiFi network in the world.

Miguel started his career at The Coca Cola Company and Diageo. Miguel is from Madrid, and currently lives in London. He received his BA in business administration and finance from Universidad Pontificiade Comillas, ICADE in Madrid and participated in exchange programs at Fordham University in New York and HEC at the University of Montreal. He holds an MBA from Columbia Business School in New York.

 

Resources mentioned

LMRE website www.lmre.co.uk

UKPA www.ukpa.com

Fifth Wall website https://fifthwall.com/

Fifth Wall LinkedIn https://www.linkedin.com/company/fifth-wall-ventures/

 

Insights from this Episode

  • The single largest impact we can have towards mitigating climate change are the choices we make around real estate

Miguel Nigorra

  • Anything that has to do with ESP sustainability, carbon impact emission, circular economy, are topics that are very exciting for real estate. I believe this is the next biggest trend for the real estate world

Miguel Nigorra

  • I think sustainability is going to be at the front and centre of any discussion about real estate moving forward

Miguel Nigorra

  • There are trends that are being basically accelerated, and some of the things that you would expect to see in the next three years probably have happened in a three month period Miguel Nigorra
  • There's so many interesting opportunities, so many interesting verticals that we're looking at that if anything, it's the golden age of real estate technology

Miguel Nigorra

  • Flexible space and flexible solutions are top of the list and this has been a trend for a long time now

Miguel Nigorra

  • So, Europe is following a trend very similar to the one that the US followed, probably three to four years behind in terms of growth and technology, but we see Europe as the next big opportunity

Miguel Nigorra

  Episode Transcript

Louisa 

Hi everyone, and welcome to The Propcast. My name is Louisa Dickins, co-founder of LMRE, and board director for the UK PA, and I shall be your weekly host. Each week for 30 minutes, we'll be connecting VCs, PropTech start-ups and real estate professionals globally and assist in bridging that famous communication gap we all love talking about. So, sit back, relax and enjoy the show.

Hi, everyone, and welcome to the Propcast. Today we're fortunate enough to be joined by Miguel Nigorra. Welcome, Miguel.

Miguel 

Hi, Louisa. Thanks for having us today.

Louisa 

Pleasure. I'm glad you could join us. Miguel Nagoya is a principal of the strategic advisory team at Fifth Wall where he drives innovation and value creation transformations with start-ups and corporate partners in Europe. Fifth wall is the largest venture capital firm focused on the global real estate industry and property technology for the built world. Prior to joining Fifth Wall, Miguel worked at McKinsey for over nine years in the Madrid and London offices. As part of the digital practice he led teams across Europe and numerous real estate engagements. He was also business development and strategy manager at FON Wireless, which is the largest Wi Fi network in the world. Miguel started his career at the Coca Cola company and Diageo. Miguel is originally from Madrid, but currently lives in London. He received his BA in Business Administration and Finance in Madrid but also holds an MBA from Columbia Business School in New York. So that's a summary of Miguel, a fairly impressive track record! Wow, incredible.

Miguel 

You went through my entire life in two minutes!

Louisa 

Just a little quick sum up to warm up the audience so they know who they're listening to. Well, let's, let's kickstart with this interview. I’d love to learn more about how is Fifth Walls activity going in Europe? You've been extremely busy, what are you guys working on?

Miguel 

Yes, so I joined Fifth Wall in Europe a bit more than a year and a half ago, mostly to work with our LPs in Europe. So, we like to have a few LPs that are based out of Europe, mostly the UK, France and Spain. But in the last few months, obviously COVID plays a big part of anything that any company is doing, obviously initially thinking about how to navigate the crisis, adapt to working from home, like new normal, making sure that everyone was safe and okay. And once that was over, to be honest was a couple of weeks, we have been extremely busy probably, more busy than ever working with our LPs. What I get by talking to other people, I think everyone is probably in the same spot right? Basically LPs are accelerating their innovation journeys, things that before might take six months now are taking in some cases one or two months. So extremely busy talking to our LPs, in some cases on a daily basis, supporting them on how to think about the new normal. So at the beginning it was helping them, being a good citizen, and trying to share as much information as possible around what was happening around the platform, how other LPs were thinking about the same problems when you were thinking about reopening real estate, and now that the situation seems to be more stabilised, obviously helping them think through what's next in terms of tech and how they can basically accelerate their innovation journey. So exciting times, a lot of work and probably learning how to navigate the working from home lifestyle without hurting your personal life right. So struggling like everyone, and looking forward to going to the office to be honest with you.

Louisa 

Yes there’s definitely a fine balance between that. So I guess a lot of your role is educating and reassuring and supporting your LPs, which must be quite constant as well. I'm sure they have a lot to learn.

Miguel 

So we do a lot of work with our LPs across different life support lines to some extent or two different types of support, but mostly, I will say around three blocks or pieces of work. The first one being, making sure that that we provide the right insights, trends and access to everything that is happening on the technology market around prop tech, but also around new business models and innovation. The second main activity is helping LPs execute on some of these strategies and advising them on the best way to do that. Picking the right technology is only 50% of the job. But the other 50% is actually think about how to execute, think about the different go-to market models, from trying to learn from the best case studies out there and the experience that we have in the Fifth Wall platform. And then three and foremost is we're lucky to have 54 of the largest real estate owners, operators brokers in the world. So, its making sure that we extract the maximum value out of that global consortium and we create some, as we call them intellectual economies of scale between our LPs.

Louisa 

Yes, that's quite some LP list! With your portfolio company acting in Europe, I think a few years ago, you guys invested in Appear Here, are there any other ones in your portfolio which are active?

Miguel 

Yes so there's over probably like 10 companies that are to some degree either present or active in Europe, some of them are running pilots and confidential work with our LPs and unfortunately I won't be able to disclose but there's obviously a few here that are based out of London. We're also investors in Lime, a mobility company which is obviously based across multiple markets in Europe.

Louisa 

I’ve used Lime on every European city break I've gone on, I absolutely love them.

Miguel 

That's great. To be honest with you I was looking forward to get Lime in London, and hopefully I won’t need to use my own scooter. There was news out there that the UK or the London government in this case is going to spend around was like £200 million, something like that or it might be even bigger than that, on mobility around London to turn London around, and basically find new ways of mobility and more sustainable ways of mobility. So exciting times for Lime I’m sure. And then I mean, there's other companies that are either have offices in London like VTS or Wiredscore, and there's also companies based out of Europe. So, Inhibition which is one of our recent investments is a company out of Israel that has offices in the US but also a local team in a few of the European countries that they're working on. And obviously Convene, the workplace as a service operator has announced recently there are plans to launch their first European building out of 20, which is also very exciting.

Louisa 

That'd be quite something, their product is, the way I see it is like the Four Seasons of the office world. It's incredible. I’ve been into the offices in New York, it'll be  interesting to see what they create in London. But I guess that aside, I’ve been reading just in general and sustainability is on a lot of businesses and funds agendas. Fifth Wall has been very active in that space, why are you guys specifically interested in that trend and how do real estate operators think about it as well?

Miguel 

Yes, so I think anything that has to do with ESP sustainability, carbon impact emission, circular economy, are topics that are very exciting for real estate. I believe this is the next biggest trend for the real estate world, right and the reason being is that basically 40% of all global emissions are coming from real estate, right? And what that data leads to is a remarkable fact, as a consumer investor, business leader, the single largest impact we can have towards mitigating climate change are the choices we make around real estate, things like where we live, where we work, where we spend our free time, and the carbon footprint of the building is where those activities take place. So that basically raises the question of like, what is the real estate industry going to do about it? And what is the impact that we can actually have on sustainability and climate change by adopting technology and new innovations in the real estate world, right. So there are multiple forces in the market that are shaping business, there are regulators that are enacting legislation that specifically targets real estate, I'm sure you've seen the New York's Climate Mobilisation Act and the LA Green new deal that was passed, that'd be more than a year ago now.

 But you will also see investors having clear mandates to preferentially deploy capital into companies or assets that are sustainable, right. And there's obviously the few examples there with work coming from BlackRock, APG, a few of the Nordic banks. So there's multiple investors out there, that are starting to think about this space as a relevant space. And then, obviously, for customers and tenants, you're beginning to demand no carbon performance from their landlords, right? If you think about COVID, and the impact that that would have in real estate, it's basically a way to prove some of the risks that a lot of people were mentioning, that will impact real estate. Before you assess outside of, I don't know, if you were afraid of the wildfires from the last few years, you obviously meant what disruption could be for your business, right? So you could clearly understand what that meant. Probably COVID has created the impact or has basically brought to light a few of the things that were on everyone's agenda that maybe people couldn't believe or, or couldn't see that close. I think now that sustainability is going to be at the front and centre of any discussion about real estate moving forward. So, we're obviously pretty active, pretty busy looking at this space, identifying trends and advising our LPs on how to best deal with this problem, and play an active role in the space.

Louisa 

Well, I guess watch this space and watch what’s to come. So other trends outside of sustainability, what are you seeing in tech, post COVID? Everyone's saying tenant engagement that's going to have a massive impact, like flex office, whether it's landlords and tenants are looking for, what trends are you seeing?

Miguel 

Again, the one thing is before getting into the actual trends, and I can answer that question in a minute, is there's a lot of people thinking about or talking about what's the new normal? What are the new trends? I personally don't believe there are any new trends. There are trends that are being basically accelerated, and some of the things that you would expect to see in the next three years probably have happened in the in a three month period. And in some cases, even shorter than that. And there's some trends that were already happening that that will just accelerate or decelerate right, so things that were important before might not be that important so that people will focus on really key priorities and a smaller set of priorities, and things that were probably down the list are now coming up.

But to your question about what are the top things that we're seeing out there. Obviously flexible space and flexible solutions are top of the list and this has been a trend for a long time now, but I don't see why that is going away, if anything I believe that office owners and operators are going to need to find more flexible ways of managing the space and new entrants will have advantages versus traditional landowners that might not be able to move as fast. In a world where COVID will pose challenges and how you operate the spaces, landlords may need to look at external partners to help them with some of the operations but also to bring hospitality like capabilities to the office space, right because the landlords and the tenants are going to are going to need to provide those services for final consumers. So we're going to need to convince people that they can come back to the office, that's a safe environment.

Obviously, you mentioned a few point solutions or concrete trends being affected by COVID, digital tenant engagement across asset classes, remote viewing for the brokerage space but also for people trying to leave their assets faster, access control and visitor management to ensure security and try to remove some of the pressure from the facility management team and the reception desks. And then COVID impacted technologies like cleaning solutions, so in a world where you will need to deep clean spaces a few times a day, robotic solutions could definitely be helpful especially for places like malls, airports, big industrial assets. Air quality, so anything that has to do with monitoring the quality of the air and managing the risk of the virus transmission in enclosed space, and then anything that has to do with the digitisation and automation of processes, right? In a world where you should expect people to come back to the office, but maybe work from home a few days a week, companies that don't have really streamlined digitised and automated processes that can rely on data to take decisions without being in the office, are going to have a hard time. So, I'll expect corporates to adopt some of these technologies at scale in some cases

Louisa 

Yes, well also hopefully sooner rather than later. So I guess, there’s good things have come out of this. So you talked about  accelerated  take up and for some of these PropTechs that can only mean  good news, but there's probably going to be a few losses and businesses who can't I guess survive during this and probably maybe a bit more accelerated M&A. Obviously this space is huge, but it’s survival of the fittest and I reckon some the larger ones might swallow up the less developed or less funded business, so that’ll be interesting.

Miguel 

I mean, obviously there's going to be winners and losers due to the crisis, anyone that is fortunate enough to raise capital before the crisis happened or have a robust business to either operate with a better a unit economics, not burning cash or have a robust partnership model where you can rely on big contracts, big corporates will obviously be benefited. And then yes, there could be an M&A boom to some extent. However, I will say PropTech is a relatively new space, especially in Europe, so the likelihood of seeing big M&A moves will probably be lower than more mature markets like the US or Asia.

Louisa 

Yes well, that ties in quite well with the next question, if we're looking at comparisons between US and Europe, what is the exact difference in scale types of investment? I often see investment in the US being higher than it is over in Europe. Is that the case? I’m reading about Novotel before Christmas, raising £400 million and being wowed by it. What's the difference?

Miguel 

No, I think so, I think that's totally spot on. I think that's right. So, Europe accounts for probably around, it depends on the source you pick, but somewhere between 5% to 7% of all PropTech VC deployments in 2019, that was about £2billion, around 250 deals more or less. It is a very exciting period to be in Europe, because that 2019 figures, basically were a record year, and they represented around the 20% year on year growth versus 2018 right. So we expect to see that growth happening also in 2020. If you look at Q1 before the whole COVID happened, you could already see a lot of activity and sound like a big deal happening. But it's true that the European market in terms of the scale and the size of the companies and the deals, it's relatively small compared to the to the US. to give you a few figures, there is probably the average deal size in Europe, it's somewhere between £8-£10 million, so that's probably four or five times smaller than the US.

But with our experience of Fifth Wall basically having a global coverage, we are lucky to see what is happening around the world in real time. And we also have the experience of the evolution by investing from our real estate from one and two, mostly in the US right. So, Europe is following a trend very similar to the one that the US followed, probably three to four years behind in terms of growth and technology, but we see Europe as the next big opportunity. We're experiencing most of the same trends in terms of actual technologies, actual verticals, actual start-ups being interesting. We obviously have the learnings from what has worked, what has not worked. So, we believe we are in a good position to be in this market and to advise our LPs. But then, from a corporate point of view, the need that an office owner, for example, has in New York, LA, Tokyo, Singapore, or London, or Paris, to be honest, are pretty much the same. They're not that many differences. So we believe that the corporate demand is going to be growing, there's some global players that will be driving that demand and then taking some of the trends from the US to Europe. But it's very exciting times from a both a corporate point of view, but also from a start-up point of view.

Louisa 

Yes, I will say great for you to be involved in really leading the way and maybe we're circa four years behind the US right now, but maybe we could tighten that gap around two years over the next couple years. Who knows, but sounds like we have good things to look forward to which I think everyone needs to hear about, and that things will pick up.

Okay, so are there any tech companies to look out for in the next couple of years, you spoke about air quality as well, any preference for that or thoughts?

Miguel 

For sure, so rather than talking about specific companies, so to my point about the 3/4 year behind, probably I can dig a bit deeper than that. So we expect probably to see in Europe, what we call PropTech 2.0 or 3.0 to happen, so PropTech 2.0 is a bit more like B2B models across asset classes. If you look at the PropTech market today, Europe, the residential space is obviously over indexed, right if you compare it to other verticals. We expect new companies, new start-ups, also serving industrial and logistic space, also working on the hospitality and retail spaces, and also in offices. So then basically tech enabled opco/propco models, things like co-working, co-living, ghost kitchens, vertical storage, stuff like that, that are pretty mature in the US are not as mature in Europe will obviously increase the relative importance in the market.

And then there are a set of proven technologies around how to digitise physical buildings and operations and data analytics, that obviously will keep evolving and where we are seeing very exciting opportunities, right. And then probably if you think about what's the next level, what's the 3.0, there are more next generation technologies that are gaining importance in real estate. So, things like artificial intelligence, machine learning, virtual reality, 3D printing, blockchain, advanced robotics. So all of those things that are pretty much trends that are coming from other industries will gain importance in in Europe also, right. But just to give you a sense, we track over 120 themes and probably around 200 some themes in terms of like PropTech and innovation around the built world. So it's hard to pick it's hard to pick a few, there's like so many interesting opportunities, so many interesting verticals that we're looking at that if anything, it's the golden age of real estate technology.

Louisa 

But also, so I know I'm on the recruiting side of it but I learn something different every single day. I learned about a whole new vertical, which I originally wouldn’t classify as property technology or built environment innovation. When someone mentioned ghost kitchens to me about a year ago, I was like, “what on earth is that”, and I just couldn't get my head around it. And now I keep changing my mind, I'm like “wait, no, they're really onto something”. It's interesting because no one can exactly re-imagine what I guess what the future real estate looks like, but I'm quite excited for it, I really am.

 So is there a company out there, which you wish you’d invested in? This can be a personal thing, not from Fifth Wall, it could be it could be in any industry? Don’t say Uber!

Miguel 

So, I'm going to turn the question around. I was actually reflecting yesterday on this is a great opportunity, it's basically a once in a lifetime opportunity to take stock of the work that everyone has been doing in recent years and try to rethink about the future, right? So I was doing this exercise myself of if I were to put myself in one year from now and look back, what are the things that I will regret not having done? And obviously, as an advisor, and as an investing person, you tend to think on actual companies, actual opportunities, but thinking a bit more strategically, I think that this - and I’m probably addressing the entire audience of these podcast, so like, owners, operators, people on the start-up side, investors, people on services around real estate and real estate technology - I think this is the perfect time to actually accelerate technology adoption and to launch new business models. I think if anything is a once in a lifetime opportunity to do so and it is also a great opportunity to rethink your business model and focus on the important stuff. So focus on your unit economics if you're a start-up, focus on building a competitive advantage if you're a corporate, focus on staying closer, more closer than ever to your clients if you are an advisor and hopefully build new relationships, and also as an industry to build as we discussed in the beginning of the conversation, to focus around more sustainable business models. So how can real estate change to adopt technology and sustainability and innovation at scale, to be ready for the future? So more than actually thinking about a concrete company or start-up? I think that we will all regret not having taken the right steps to set up our businesses for success in the future. This is the right time to do it.

Louisa 

I completely agree with you, how I end most Propcasts is have you got any parting bit of advice you can share with the audience, but those few steps and pieces of advice you just gave I think a lot of people will be taking pen to paper noting it down. I for one at LMRE, we've restructured our business, we've been doing a lot of those things you just meant to about keeping close your clients communication, but also looking at different ways of engaging with the audience around the world. I never thought I'd be doing a podcast but here I am talking to you! But there's loads of things you need to look at and yes, it's really interesting to see what happens. Every single conversation I'm having is being most optimistic. And I think everyone needs to rethink the way they've been operating, and very good things will come of it. I guess that brings us to the end of the episode sadly, I like to thank you so much for coming on, Miguel sounds like Fifth Wall have been extremely busy. And it's we're looking forward to seeing what's next.

Is there anything you'd like to share or where listeners can best connect to with you?

Miguel 

No, thank you very much for inviting me. I think it's always great to discuss what are the topics that are shaping the industry where some of the future trends, so more than happy to do this again in the future if you want to invite us again, or you end up doing a bigger series or conferences, who knows. On your point about changing the business model, so in terms of how to connect, I think our marketing team does an amazing job on basically making sure that Fifth Wall stays connected with the environment. So I'm going to recommend that anyone that wants to learn more about people follow us on Twitter, social media, Instagram, LinkedIn, we post really relevant and interesting insights on our YouTube channel. So anyone wanting to know more and dig deeper in some of the trends, we post a lot of content on our YouTube channel, and then obviously we share weekly or bi-weekly information on our newsletter, so anyone waiting to subscribe can do that from the Fifth Wall website.

Louisa 

Okay, brilliant. Well, plenty of platforms to connect from and also learn about this space. But thank you again for joining us on the Propcast, Miguel, and looking forward to catching up soon.

Miguel 

Thank you very much. Thanks for having me.

Louisa

Thank you for joining us this week on the Propcast and a big thanks to our special guests. Make sure you visit our website www.lmre co.uk where you can subscribe to our show, or you'll find us on iTunes and Spotify where all good content is found. While you're at it if you found value in the show we'd appreciate if you could rate and review us on iTunes. Or if you simply spread the word. Be sure to tune in next Tuesday, and I'll catch you later.

More stories that might interest you...

Thank you for submitting our contact form. We'll get back to you ASAP