This 30-Year Tishman Vet Is Now Going Big Into Proptech
After a 30-year career at one of the world’s top developers, many real estate professionals would be happy with a comfortable retirement or a few cushy non-executive directorships. Not so former Tishman Speyer Senior Managing Director Michael Spies.
Having left Tishman in January, after pioneering the firm’s business in Europe, Spies is making waves in the world of proptech. He has set up his own investment firm, Fuse Ventures, joined the board of well-known tenant engagement firm Equiem and, most recently, joined one of the largest investors in the proptech world, Navitas Capital, as a venture partner.
Navitas, whose backers include JLL, Equity Residential, AvalonBay and Saint Gobain, is raising its third venture capital fund targeting real estate and construction technology. At $100M, it will be one of the largest yet raised in the sector.
It is a fascinating moment to be making the jump to full-time proptech professional. The coronavirus crisis has the potential to turbocharge the growth of the proptech sector, as real estate has its arm twisted into fully embracing digital ways of working. But at the same time, as a recession bites, funding is not easy to come by and many proptech firms are going to the wall.
“As a developer, you have to be thinking about where the world will be in five years’ time, so it’s a logical extension for me,” Spies told Bisnow on a Microsoft Teams call alongside Navitas co-founder Travis Putnam and Managing Partner Louis Schotsky.
He also relishes diving into new markets — he set up offices for Tishman in 14 cities across Europe, including in Berlin just a few years after the fall of the Berlin Wall.
Spies said his interest in the tech side of real estate stems back to his return to New York with Tishman in 2016, when he helped establish the firm’s venture capital investment drive and establish its innovation division, which led to the creation of ZO, its in-house flexible office platform.
With his full-time move into proptech, he aims to provide the perspective of the real estate end user to tech firms, helping them refine where market opportunities might lie, and the kind of product property companies will really want.
“A lot of people think this is a time of disruption, but you need to know how real estate owners and operators actually think,” Spies said.
As a venture partner with Navitas, this will be one of his primary roles, as well as helping European firms bridge the Atlantic and vice versa.
“We want the best entrepreneurs and founders to come to us and work with us as partners, not just be a capital provider and cheque book.”
Navitas is one of the longest established venture capital firms in the proptech space. It was founded by Putnam and former Bancroft Capital principal Jim Pettit in 2011 and has invested in well-known real estate and construction tech firms including Matterport, HqO, Openspace and Honest Buildings. It has also exited six of its investments, including the sale of workplace management app Comfy to Siemens. Exits are still relatively rare in the world of proptech, because of the relative infancy of the sector and the fact that real estate firms have been slow adopters of technology, Putnam said.
As a result of the lockdown induced by the coronavirus pandemic, some proptech firms have seen huge spikes in interest in the services they offer. Schotsky cites Matterport, which uses image-capturing technology to create cloud-based 3D models of real spaces to allow people to experience them without visiting; HqO, a tenant engagement app, which during lockdown has allowed building owners and occupiers to stay connected with office users; and Openspace, a company that allows developers to view activity on construction sites, including reviewing archive footage.
“A lot of companies, like Matterport for example, in this period have seen explosive growth in terms of subscriptions and customers,” said Schotsky, a former Equity Residential director. “A lot of companies in real estate are being forced to do more with technology, and digital adoption is accelerating.”
But it is not all good news for proptech.
“It’s like a bell curve,’ Schotsky said. “About 20% of the companies are seeing this explosive growth. Then there is about 60% that are pretty well capitalised, and will just see it through. Then there is another 20% that have seen demand disappear and don’t know when it’s coming back, or might have been planning to raise new funding in Q2 2020. The funding market is just brutal. It’s a relationship business, and people aren’t going to write a cheque for someone they haven’t met.”
Navitas is focusing its attention for new investments on areas like artificial intelligence, firms that digitise processes that were previously undertaken manually and smart building technology. It has so far avoided investment in space-as-a-service sectors like coworking, co-living or shared apartments.
“They were sectors that were having difficulty before COVID,” Schotsky said. “There are a lot of real estate companies masquerading as tech companies for valuation purposes. I’m not saying we never would, but as a VC investor it can be hard to make the underlying returns in a lot of those sectors.”
Putnam said he expects a greater number of exits for proptech investors in the coming months and years, as the sector matures and new players look to buy firms. Large tech firms like Google, Amazon and Microsoft are increasingly eyeing the sector as a new area of opportunity, he said, as are incumbent real estate firms like JLL, an investor in its funds.
He said initial public offerings, rare in the proptech space so far, will also be more common in the near future.
“The coronavirus has the possibility of bending the curve upwards for proptech,” he said. “I think you will see more public market exits, whether that is through IPOs, direct listings or purchase by special purpose acquisition companies. We’ve got three or four companies in our own portfolio where we’re looking at that possibility.”
And for Spies, he is relishing the chance to bring his experience to bear in a sector that is just beginning on its journey.
“It’s a new age of opportunity for owners of real estate to understand what technology can bring.”