A dynamic sector, consisting of young and innovative businesses that often collaborate together. Their employees? For the large part millennials, born between 1980 and 1999. A considerable desire to grow, but a certain difficulty in finding funding. In a nutshell, that’s the picture of the proptech industry in Italy in 2021 painted by Milan Polytechnic in conjunction with the Italian Proptech Network and neprix. Their report, issued on an annual basis, has now arrived at its fourth edition.

What is a proptech?

The neologism “proptech”, a contraction of the words “property” and “technology”, was used for the first time in the United Kingdom in 2014. The expression describes the set of solutions, technologies and tools utilized to innovate processes, products, services and markets in the real estate sector.

There are currently 184 proptech entities in Italy. This number does not only include startups, but also more consolidated businesses that provide highly innovative products and services in an industry which by nature is linked to procedures and ways of operating that are not always easy to rethink.

Thirty per cent of these proptechs (52 out of 184) were formed between 2018 and 2019, with the number falling between 2020 and 2021 due – analysts explain – to the effect of the pandemic and the period of consolidation that the sector is going through in this country.

Four macro-clusters, but services win out

Seventy per cent of proptechs were set up in the north of the country, 13% in the center and 5% in the south. The remaining 12%, on the other hand, were formed abroad by Italian entrepreneurs who, for a variety of reasons, decided to start up activities overseas.

There are four macro-clusters, with a generally homogeneous distribution: professional services win out (32%), followed by real estate fintechs (27%), the sharing economy (22%) and smart real estate (19%).

While in 2019 real estate fintech was the most populous cluster, by the start of 2020 professional services had already begun to prevail. In contrast, the smart real estate category (businesses that deploy technology in managing properties) has ended up last in all editions.

Young businesses that work together

The Milan researchers sent out a questionnaire to the identified companies covering a wide-range of dimensions: from geographical mapping to funding, from the propensity to collaborate to growth prospects. Only a fraction of the total replied (65 businesses in total, of whom 48 completed all of the survey): a sample, however, considered representative and sufficient to provide at least a summarized picture of the situation.

Three-quarters of the analyzed companies have fewer than twenty employees. Young people abound: one out of three businesses stated that 90% of the staff it had taken on were millennials. But there is no shortage of senior professionals either, persons key for the network of relationships they bring with them as well as their knowledge of the market and ability to obtain funding.

Three innovation waves

The literature describes three separate waves from the standpoint of innovation in the real estate sector. The first saw the introduction of software such as AutoCAD, the second the development of online platforms based on e-commerce models and the third, still in progress, the entry of new approaches into the real estate industry, such as those connected with blockchains.

From an analysis of the replies provided, it can be deduced that on average every organization uses 2.6 technologies to develop its own solutions and projects: a figure representing an increase over 2020, when the average was 2.3.

Going further into detail, 69% of Italian proptechs (33 out of 48) employ systems for collecting and handling large quantities of data (big data analytics, data science and data sharing). These are followed by systems designed to improve over time (artificial intelligence and machine learning, chosen by 54% of the sample). Few businesses, though, have aimed at innovating materials, modelling, 3D-printing or robotic automation.

“The technologies currently being used have all reached the ‘plateau of productivity’”, the analysts are saying. “It can therefore be concluded that while proptechs introduce a great deal of innovation they use consolidated technologies, which other sectors are already superseding”.

Difficulty in obtaining funding

The study photographs a young sector. Twenty one per cent of respondents stated that they find themselves at a “pre-seed”, or “embryonic” stage, with funding obtained from friends and relatives. The “early growth” category, businesses lying between incubation and acceleration, contained 29% of the responses, compared to 23% in the “growth” class, consisting of companies that face the market head on. Only 4% said they were at the “exit” stage.

Compared to 2020 (IPM, 2020), the number of entities saying that they have obtained two or even three rounds of funding has increased: this is further proof that the sector is consolidating. A sector, though, which from many sides is expressing the difficulty it is finding in obtaining the funds needed to grow.

In fact as far as the factors inhibiting the route to success are concerned, businesses pointed to the low propensity of the sector to innovate (83%) and the weakness of the national proptech ecosystem (83%). Three out of four operators (77% of those interviewed) complained about the lack of a technological and digital mindset in end customers.

Better to collaborate

Collaboration is believed to be essential. Half of those interviewed (48%) stated that they had learnt from external partners (21% through collaboration with research and development centers). Sixty nine per cent believe that space-sharing can be very useful, while 38% already operate through co-working: this approach, companies say, facilitates the process of sharing ideas and interacting with different businesses. But this isn’t true for them all: one out of three companies prefer to use the traditional office. According to analysts, their reservations are connected with privacy and intellectual property.

Conclusions

In general, according to the proptechs surveyed the sector is not yet fully mature: on a scale of 0 (not at all) to 5 (a great deal) the average score is 2.2.

“Taken as a whole, the development of digital skills is still very slow in this country; as Milan Polytechnic we would like to be able to make a positive contribution, in collaboration with industrial partners such as neprix: the aim of our Proptech Monitor is to support the dissemination of good practice and encourage the possibility of a synergic exchange of innovation and growth; this “hub” driven by ideas, where methodological process, experience and structured knowledge facilitate the circulation of opportunities, is growing, and we are sure that it will led to interesting results, both for research and the market”, commented Prof. Andrea Ciaramella – Department of Architecture, Built Environment and Construction Engineering.