Why falling in love with a new technology isn’t a solid basis for a business

One observation I’ve gathered from more than 25 years of working in online real estate is that too many proptech entrepreneurs become so infatuated with a technology that they try to build their businesses around it.

Targeting market gaps is one of the first things every business student learns. That’s why entrepreneurs should build their businesses on providing something that people want but don’t have yet, instead of around a flashy new piece of tech.

Photo credit: stockasso / 123RF Stock Photo.

The technology-first approach is most obvious in the blockchain space. It’s the classic case of a solution in search of a problem, and fans have been searching for something useful that the tech can do in the Asian proptech scene for the past 10 years – without material success.

While blockchain may be elegant and fascinating, it will ultimately remain a niche technology if the market does not need this so-called solution.

Case in point: An article published in May 2018 heralded the Hong Kong blockchain companies to watch. Now, the only thing left from one of them is a message on its website that begins, “To all creditors…” One other company closed down in March, and the website of another blockchain business contains nothing more than offers to sell its domain name.

For years, hyperbolic headlines have claimed that blockchain will enable fractional ownership and thus revolutionize real estate ownership. Yet not one big player has found a compelling enough reason to use blockchain for this purpose. The fact that using blockchain would mean recording transaction and investor details in a decentralized public ledger probably does little to encourage investment platforms and their users to embrace it.

Indian commercial property platform Propshare Capital is probably the most successful fractional ownership vehicle in Asia. It has closed more than US$70 million of investment in institutional grade commercial real estate. Notably, it does not rely on blockchain.

Early on in its trajectory, my real estate firm Juwai IQI had also settled on a technological solution first before finally understanding the problem we were trying to solve. We had created a property search technology on our portal that worked beautifully, similar to the search tools you would find on the best domestic property portals around the world. Unfortunately, it left our own users mystified.

We hadn’t sufficiently considered our users’ needs: They neither were domestic buyers nor have the same level of general market knowledge as the locals. They were overwhelmed by the number of listings, often didn’t know the names of the suburbs or neighborhoods, and sometimes preferred to search by intent rather than location.

We fell in love with the search technology, which kept us from working to solve the actual problems that had plagued our users. Our role was to help them find suitable properties, yet our early search tool was not suited to this task.

In other cases, some proptech entrepreneurs fall in love not with a particular technology but with saving cost. They display an excessive focus on doing things cost-effectively rather than delivering a better outcome. This is another classic pitfall in proptech, and in the startup community in general.

Free or freemium listings portals are a typical example. They attempt to compete with advertising-supported real estate portals by offering free listings to property marketers, but these players soon find out that promising savings is not as compelling to users and customers as they expected.

One Thai real estate listings portal, for instance, claims to enable its users to advertise and discover Thai properties at no cost. But a glance reveals the limitations to its services, similar to those in other freemium portals. The most distinct one: It only has a few thousand listings, meaning it cannot attract a huge number of users.