By Mathias Flattin & Dimitri KrempAXELEO CAPITAL launches the first open European Proptech & Contech mapping to give founders a broader view of Europe’s clusturized markets, ease arbitrages, partnerships among competitors and help the ecosystem reach a European scale.1600+ amazing companies - of course non-exhaustive – we all need to start somewhere 😀Dear Contech & Proptech community,Our early-stage fund « Axeleo Proptech I » was launched last year with the intent to bring value to European Construction and Property technology startups, at a very early stage by investing but also by building a bridge between real estate and startups. These two infrastructure related verticals are also called “the Built Environment”. After 12 months of operations, we are proud to announce that we have officially met 1600+ qualified startups from the European ecosystem and invested in 6 companies – more details here.The incubation phase is DONE. Since we first drafted the project of our Proptech fund in 2018, we have been witnessing a continuous improvement of the ecosystem to tackle “THE first asset class in the world”. Entrepreneurs are more seasoned, Corporates are more and more open to implement new technologies from startups, and very important : significant acquisitions are now happening everywhere.We've gathered all these 1600+ companies in the mapping below : please register with your company name and email to access it. And of course, don't hesitate to share!

Mapping proptech by Axeleo Capital

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Reach European scale

After a first mapping of French Proptech in 2020 we‘ve spent a year to crawl into European Proptech, to be called and introduced to passionate experts, entrepreneurs but also corporates eager to build a productive environment from this very young new trend. If we are to change the biggest asset class in the world, we think the ecosystem could benefit some more cohesion, European wide. So, to help maturing a continental corporation of Proptech and Contech, we have decided to open our dealflow and publish the mapping of the 1600+ European Proptech and Contech, we have identified on the past 12 months. NB : to shorten we call both Contech and Proptech with the generic term “Proptech”, until the Contech community grows bigger…! The hyper local rule makes European Proptech a very fragmented community, with several startups - sometimes one per country- addressing the same needs with similar products. As a startup, you may find some competitors in that mapping, maybe you know them, maybe you don’t. Market segments are always very deep, so the problem is not about competition, there is plenty of room to build national players in the beginning. But if you are aiming for a huge acquisition some day you need to be a European leader as quickly and efficiently as possible. As VCs, we have the same target: we want to build a European wide network because we know we are smarter when we combine our skills with other European teams, such as networks, limited partners, mentors, portfolio companies and learning curves. These past 12 months, we’ve met some very professional teams and co invested with some of them. We share a lot of insights with most of our peers and we are open to coinvest in financing rounds with them. So as founders, we warmly recommend you to take a look at your competitors, try to understand what they do and their differentiation, get to know them and - why not - work with them. Gather forces to avoid dispersion and be able to face the corporation with bigger means, knowledge, efficiency… Because corporates from the industry you address are often bigger than the whole Proptech ecosystem. RE players often remain national as well, so try to be multinational from seed stage, test your acquisition channels on a couple of countries, you will diversify your customers and you may find some interesting arbitrages with more favorable markets in some countries. A developer told me once : “In real estate there is food for everyone, you never die from starvation: you die from indigestion”. Only the smartest make it to the success, and no one will make it alone. So remain open, share advices and gather forces to shoot for the multibillion industry. Of course this list is non-exhaustive! Some companies are too late stage for us, and some others have not met us yet, basically! Feel free to check it, discuss it, tell us what we’ve missed, ask us questions… And if you want to interact  : click here. It is pretty easy to read: there are 5 categories depending on the infrastructure’s stage of life the startup addresses.

Why is Proptech growing now?

There has always been startups involved in real estate, some of them even made amazing exits before the Proptech era, but only a few… Why ? Europe is home for some of the best innovators, but receptiveness of real estate players to detect and adopt innovative solutions has been missing for several years. Startups and Corporates do not operate on the same time scale and real estate is a corporation, with powerful players often quite conservative. Real Estate players are dealing with huge amounts and sometimes innovation can seem pretty secondary regarding the profits these players generate… So commercially speaking, it can be very complicated for a Startup to sign deals with historical players. Years ago someone told me “real estate: either you’re in, or you’re out”… clearly, the « Prop* » is harder to get than the « *tech ». So why would it change now? Since the first draft of our fund project, our thesis has been based on the idea that only external factors can change the industry. We raised that fund because we think there is a momentum, an unprecedented combination of pressures in favor of change in the industry.

1. Reaching the limits of the model

The Profits are huge in real estate, at least in value, but when you take a look at the margins, it is not the same deal. Real estate is “capital intensive”, it is made out of brick and mortar, by people with heavy machinery and very low scalability: “every building is a prototype”, as we say, at the opposite of the digital era we’ve been experiencing for the past 30 years. The heavy means combined with the long-term cycles have slowed down the necessary evolution of the market and the capacity to test and integrate innovations efficiently:  

• Limited investments in R&D - 24 times smaller than average other industries (according to Ernst&Young study in 2019) ….
• Generate a lack of productivity – barely 1% per year, 3 times lower than average other industries …
• Pushing margins down – before COVID19, various studies explained that cost increased 5 to 6 times faster than price index for construction on the past 10 years. That was during the bullish period of pre-COVID19, because from April 2020 to February 2021, shortage of materials generated a cost increase 24 times faster than prices according to the American association of General Contractors.

On top of that, some serious sustainability concerns have become unbearable and create this momentum, favorable to a deep transformation of the industry.

2. We grow faster than we build

On the demographic side first: in 2050 we expect the global population to reach 9.8 bn people (+30% in 30 years) and 75% of them will live in the cities. As a result, urban population will grow by approximately 80% by 2050 (from 4.1bn to 7.3bn citizens). How to double the size of our cities worldwide in 3 decades with the current model of conception/building/asset management without inducing huge negative impacts on social, environmental, and even sanitary concerns ?As of today the lack of efficient solution results in a very worrying fact : According to the World Economic Forum, 40% of urban sprawl worldwide is taking place in slums. 4 new houses out of 10 are built with used materials, no sanitation service, no heat, no electricity, no clean water. We grow faster than we build. It means real estate needs to become scalable, sustainable efficient and more productive if we want to support this rapid pace of human growth and avoid serious sanitary downturn.

3. Social shift pressure

Real estate may be the last supply centric market: the assets are conceived by the offer and it is a “take it or leave it” for the demand (acquirer, tenant, user…). However, the world is now welcoming the digital natives in the adulthood…! Most of them (more than ever) are nomads, they make career change frequently, they look for a meaning rather than money only, they care about positive impact. They claim their independency, the right to use things without buying them, they care about the user experience, not the ownership (sometimes buying a house is not even accessible for them anyway). Since they were born, digital natives have been used to consume heavily digitalized products and services, highly customized and “as a service”. For product and service suppliers, it requires a customer-centric approach, which is at the opposite of the supply centric approach of real estate. And now that their older brother or sisters (from gen Y) reached C-level positions, nothing can prevent them from getting that.

4. Real Estate is our biggest leverage to solve global warming issue

Real estate is the largest asset class in the world, it weighs an approximated 3x the global GDP. Each year, estimates suggest that we pour 3 tons of concrete per human. Built Environment emits up to 40% of greenhouse gases globally, in which 11% from the construction itself and 28% from running the building. It also consumes 49% of resources. Construction and Property companies clearly are our biggest leverage to solve global warming issues. However most of the current asset valuation methods do not take into account sustainability concerns. Asset management strategies are done on a shorter time frame than the expected global warming outcomes.  In the UK for example, sources converge on the fact that 20 to 30% of the asset are to worth nothing in the next 30 years if no heavy renovation work is done to adapt them to climate change. As a result, cities can no longer expand horizontally, they need to decentralize (see the concept “15 minute city” in Paris, or “20 minute neighbourhood” in Melbourne) and grow vertically to avoid urban sprawl, mobility issues, clusturization. Many solutions already exist to address these issues : Offsite construction, sustainable energy production/balancing, green cements, innovative raw materials, energy management tools, circular economy (only 1% of materials are reused in new construction), air quality, data sovereignty… To gently push everyone towards more efficient solutions, governments write new norms and policies at European scale, despite powerful lobbies. Norms to impose a significant part of recycled fixtures and materials, to optimize energy consumption in the building or of the construction itself.

Time for a change

One can discuss these statistics, but everyone must admit that Real Estate players have a big challenge in front of them.How to double the size of the cities by 2050 while handling social, environmental, and sanitary pressures as low as possible? How to industrialize real estate to make it more scalable and avoid negative impacts from demographic growth? Real estate industry must adapt to become more scalable, efficient, and sustainable. Innovation is an answer, and the good news is : these technologies already exist, elsewhere in other industries: Robots, blockchain, marketplaces, 3Dmodeling, AI, etc…This momentum stimulates the adoption of startup technologies by traditional players through partnerships, direct investments, and investment in dedicated funds such as Axeleo Proptech I, to implement profound changes. 3000 brilliant startups, mainly at early stage, which require VC funding (see our mapping). We now just need real estate players to adopt them. Surprisingly sanitary crisis had this particular outcome to accelerate this transformation and demonstrate how startups can be key for corporates to find resiliency but also move towards more a sustainable model. Not too bad for a flue!

A clusturized ecosystem

The VC ecosystem is maturing, several new funds have appeared during the past 18 months. Nevertheless, generalist VCs are not always familiar with the investment thesis. It is hard to move from comfy “vanilla SaaS deals” to hybrid Contech and Proptech deals, combining operation costs (people/robots/materials/stone) and long-term sales cycles. VC’s allbirds shoes were not designed for mud. As of today, the hyperlocal rule of real estate is still limiting the synergies at a European scale. In construction a developer works with local general contractors who hire local sub contractors to build something that will be sold to local people. In the property market everyone knows that location is the only criteria, which requires to know the area perfectly. As a result, the maturity of each ecosystem in each country is highly heterogeneous and remains a patchwork of clusters where startups often address the same market need in parallel from a country to another. By understanding each market European wise, Proptech ecosystem could use some more efficiency. Some value propositions have several competitors in each country and every country has its own awareness, regulations, value chain… From a VC perspective some interesting arbitrage can be done, some topics require evangelization in some countries while they are completely developed in others and pushed by local authorities/laws.So here are the companies we met on the past 12 months.Enjoy, comment, share.

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About AXELEO PROPTECH I

Axeleo Proptech I is a seed fund dedicated to European Proptech and Contech. AXP1 invests from 0.1M€ to 1.3M€ in seed/series A funding and up to 3M€ in follow-on rounds (Series A/B). The fund is managed by Axeleo Capital, an independent venture capital firm focusing on seed stage financing thanks to vertical expert funds and an accelerator building individual operational sessions for founders. Based in France, Axeleo Capital is managing 80M€.