The Covid-19 pandemic greatly impacted the property sector in the UK and abroad, with traditional methods involved with buying, renting or selling property no longer working. As a consequence, there has been an increased demand for digitalisation in the PropTech sector and businesses sourcing funding from all avenues.
What is PropTech?
PropTech is an abbreviation of Property-Technology. Within the PropTech industry, companies are looking to combine platform economics and information technology with the real estate sector.
The aim of these organisations is typically to reduce the amount of paperwork which is required and also increase the security of any transactions which take place. PropTech companies help individuals to buy, sell and manage properties through the use of their technology.
Where Do PropTech Companies Find Funding?
PropTech companies can source funding through running funding rounds or crowdfunding campaigns to attract investors in the same way as startups operating in other sectors. Investors such as angel investors and venture capitalists can provide funding for CleanTech companies, however there is also funding available which is offered specifically for companies within the CleanTech sector.
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How Do Startups Traditionally Source Funding?
Usually, startups attract investors through running series funding rounds or crowdfunding campaigns when they are looking to generate investments for their business.
When the founders of a company invest their personal savings, which is referred to as the pre-seed round as it has not officially taken place. The seed funding round will usually follow, where additional investors can provide funding. Investors at this stage can include venture capitalists, angel investors or friends and family of the founders who see potential and want to support the company.
After running a seed funding round, companies can begin running series rounds, referred to as A-D. Whilst series D is usually the last funding round, companies can continue to run additional rounds if they want to generate more funding.
Angel investors can invest in all startups, including those in the PropTech industry.
Angel investors will invest in a company in exchange for an equity stake, meaning that they will become shareholders in the company. Angel investors are individuals with a high net worth who do not expect a return on their investment if the company they are investing in goes bankrupt. As a consequence, some startups prefer to accept investments from this type of investor instead of from a venture capitalist firm.
Venture capitalists are private equity firms with individuals in charge of investing the funds of the partners. This means that they invest into a startup in return for equity shares.
Companies can also run crowdfunding campaigns to generate investments. These campaigns have the ability to attract customers and investors simultaneously as they take place online, meaning they are a good way to reach many people at once.
Where Else Can PropTech Companies Source Funding?
PropTech companies have additional access to funding which is not available to startups in all sectors. The PropTech Engagement Fund can provide funding for PropTech companies, with the aim of increasing digital engagement within planning processes.
The Fund is looking to implement tools to increase digital citizen engagement to ensure people have their voices heard. The scheme has funded 12 companies thus far and each will be required to test a digital engagement tool.
In addition to this, there are a variety of grants and funding available for companies within the PropTech industry from other organisations, who will also be able to offer advice and support for companies in the early stages.
What Do PropTech Companies Use Funding For?
PropTech companies and startups can use funding in the same way as companies in other sectors. Funding can be used to conduct market research and product development alongside making asset purchases and employing additional staff.
PropTech companies will have to conduct research into their sector and also monitor trends within the real estate industry to help analyse the success and development of their products and make alterations accordingly.