Proptech Providers Pivot to Keep Customers

The question of whether real estate companies are using too many proptech providers doesn’t come up often. When it does, the answer is usually found when the two first come together.

For that reason, proptech founders are intent on getting their services right — right from the start. Not getting their services provided properly from the get-go usually means having to pivot or die.

“Initially, we were primarily working with firms that did their own property management and operations in-house, in addition to collecting capital and doing the asset management side of things,” said Vimal Vachhani, co-founder and CEO at CREx Software, a Manhattan-based startup founded in June 2021 that provides real estate data integration and analytics software services for institutional commercial real estate owners and asset managers.

“We did have a couple of clients reach out initially who said, ‘The analytics out of our core tools are great, but we want to enhance them. We need some additional customer reporting,’” Vachhani said. “That was the initial solution we had built toward.”

Both parties eventually realized, however, that that  solution missed the mark.

“What the customers and we found was that what they had in their core systems was actually sufficient enough,” said Vachhani. “Our thesis was wrong as well — adding enhanced analytics on top of what comes out of these core platforms. It was a nice job, but it didn’t move the needle and really solve the immediate pain, besides maybe making the life of a CEO easier by getting something via one click versus five clicks. It didn’t justify the usage.”

By the end of 2023, Vachhani saw that CREx Software needed to pivot its services or risk more customer losses.

“A few customers ramped down their use of our platform,” said Vacchani in a rare public admission for a CEO. “The transition back to Excel-based reporting was fairly seamless for them. It highlighted a key lesson: We may have misjudged where the real pain points were.”

What CREx Software learned in making its pivot was that the true friction wasn’t in the insights provided, but in collecting data from systems and software outside the four walls of the customer’s organization, Vachhani explained. “The bigger need lies in integrations, automation and creating a foundation for analysis, not just delivering analytics.”

As a result, CREx Software found  that the market need was in centralizing data from third-party property managers and solving master data management issues. The company rebuilt its software from the ground up, targeting asset managers with 10 to 50 properties — a market underserved by high-cost solutions. CREx Software also spun off a consulting arm to address broader needs, as the pivot significantly improved the company’s traction, especially in automating investor reporting and integrating disparate systems.

Other proptech providers, such as Chicago-based WithMe, avoid being untangled from customers by providing narrowly focused amenities they hope are superior enough to displace competitors’ products.

“We make lives better through convenient, technology-enabled amenities for the multifamily industry,” said Jeff Lail, chief operations officer  of WithMe. The company provides a controlled, software-enabled printing service and premium coffee station product in multifamily common areas.

“What we offer allows residents to print securely through our application,” said Lail. “The budget is a known monthly line item for the property tech. They don’t have to be involved at all. It’s turnkey from service to fulfillment of product, and it’s all done automatically with our system. It’s uncomplicated and predictable.”

“Even with coffee, every resident gets an allowance based on what the property management company or the ownership group has agreed to provide,” said Lail. “We control that. So we’re helping untangle some of those more complicated things. Of course, you want your on-site staff doing things that bring you money, not doing things that don’t.”

In providing such simple and reliable products for property managers, WithMe has established long-term relationships with 80 percent of the top 50 National Multifamily Housing Council companies and reduced the threat of being dropped as a proptech service provider, said Lail.

Real estate companies are reluctant to talk about why and what proptech providers they have dropped, but Sienam Ahuja, founder and CEO at Bryckel AI, an artificial intelligence-driven CRE lease document platform in Mountain View, Calif., thinks she has put her finger on what causes the problem.

“In proptech, the first challenge is clearly articulating or delivering the ROI,” said Ahuja, whose company was founded in March 2023. “We are an industry where the adage ‘show me the money’ matters more than anywhere else. That’s the number one thing we’ve now learned to get right.

“The second more painful challenge is that when there is a buffet of all these new choices, [proptech users] still have to play nice with the existing incumbents. It’s so hard to integrate with the legacy tech because it was built back in the ‘70s and ‘80s. They don’t have the necessary [application programming interface] to integrate easily. If you’re going to take six months to integrate with their tech stack, you’re going to lose them because you’re not completing the workflow.”

A prolonged training cycle to get the customer’s users up to speed and spread usage throughout the organization is among the excuses to drop a proptech provider. The same goes for the provider lacking the necessary compliances — such as being software compliant — along with digital certifications.

The biggest challenge for proptech startups trying to avoid being dropped from a customer’s tech stack is real estate companies that lack an in-house digital champion, said Ahuja.

“Most of the real estate companies do not have the concept of a digital champion,” she said. “If you look at other companies, they will have a chief innovation officer, or these days they’ll have a chief AI officer or chief AI architect. I’m seeing some cases shift and now forming what they call an AI task force, which is kind of the equivalent of having a digital champion.

“In the past, they didn’t have anything like this. It was random people in the organization, business heads or whoever had the hair-on-fire problem. They’re evaluating something, they like it, but then if the other people in the company give resistance, they don’t have the bandwidth to push it through. So they cannot carry that digital transformation initiative all the way through, because that’s not their job.”

Ahuja emphasized getting the customer-proptech provider relationship right at the front of the engagement funnel.

“That is absolutely correct,” she said. “Because otherwise if you talk to other companies who buy proptech, they’ll tell you, ‘We are getting overwhelmed by the number of companies that are reaching us with their options.’ And that’s only happening because all of us are going out there — through LinkedIn, emails, newsletters, YouTube — and we’re driving these people crazy. We’re hitting up analysts, legal teams, asset managers, and all these people are ridiculously busy. They don’t have time to field calls from 40 new proptechs coming and explaining their proposition and giving them a demo. So it’s kind of unfair on both sides.”

Despite proptech making major inroads with customers over the years, the overall real estate industry remains somewhat reluctant to adopt multiple technologies, said Adam Segal, CEO and co-founder of Cove, a Washington, D.C.-based software company that combines tenant experience operations with building operations.

“In real estate technology buying there’s a ridiculous amount of tech that’s applied,” said Segal. “I don’t know if there’s a ton of untangling happening. I think there’s always been pretty strong selectivity in terms of what gets bought and what gets deployed, just based on making sure there’s a ROI.

“My general sense is that there’s not crazy adoption that needs to get untangled. Of course, there are things around the edges. Certain things don’t work. Some firms are more innovative, and those are the folks that test out the newer products, and then from there can scale.”

While Cove boasts a nearly 100 percent customer retention rate, many of its office, retail and industrial building owner-operator users make the transition to Cove from other firms that might not have such a track record. Often, these clients switch in order to simplify their tech stacks and reduce costs associated with multiple point solutions, said Segal.

To prevent being disentangled from the customer tech stack, proptech providers must acknowledge the industry’s reluctance to adopt multiple technologies, making it crucial for providers to simplify onboarding and demonstrate long-term value, Segal added.

“I think we’ve been really fortunate to have retained and to be a partner to clients,” he said. “That persona of not buying a lot of technology also means you don’t replace a lot of technology. So we focus heavily on the onboarding experience and the partnership relationship, because the product is only half the story. It’s really who’s on the other side of it.”

Philip Russo can be reached at prusso@commercialobserver.com.