A short post, leaning on a wonderful story by Nike’s co-founder and current chairman emeritus, Phil Knight, to explain the concept of domain knowledge, and the challenges and opportunities for businesses playing in high-barrier-to-entry domains.
CRE Tech Investing
CRE Tech Investing
A collection of articles hopefully relevant to investors in general, and more specifically for those passionate about building a commercial property empire out of technology. Get the facts about CRETech to help you pick the winners.
For investors passionate about building the next commercial property empire out of technology. Get no BS information about CRETech to help you pick the winners.
CRE tech investing has it all for astute investors:
- The high IP barrier to entry / fat moat means there is lower competition
- Sticky customers running on SaaS means nice recurring cash flows
- The network effects and massive efficiencies that the tech delivers to users translates into tollgate-style business
But this all comes with shed loads of risk! Ask the guys at SoftBank, who got hurt by the WeWork fiasco. For starters, WeWork, while disruptive, is not a tech startup.
The bad, and ugly
Genuine tech startups in the CRE space are even harder to understand than WeWork!
For starters, since data is the oil that CRE runs on, every business with aspirations in the space needs a data underpin. Secondly, because of the pen-and-paper industry inefficiencies, the idea will generally involve an -as-a-service (-AAS) business model. Thirdly, CRE is bewilderingly complex, and, amplifying this, still maturing in terms of industry data best practices, standards, definitions and protocols. Fourthly, CRE industry players are generally great negotiators, with the worst of them used to preying on the knowledge disconnect of industry outsiders.
The result of this? CRE tech investing is a minefield of risk for outsiders!
Can it get worse? Yes. Industry outsiders, who don’t have the time to amass domain IP, can, with the best of intentions, sometimes torpedo their portfolio companies. While practices and processes are fold, unfortunately not all strategy is transferable across different industries. For example, what works in banking may not work in CRE. A great example of this is Vinod Khosla’s view that 70% to 80% of VCs add negative value to startups.
Gmaven, with this section of work, is following our mission. We aim to bring fairness to the industry, and stop outsiders getting screwed. We hope you find our efforts valuable!