Article:

The Proptech Market in Israel – What to Expect in 2020

18 November 2019

Avichai Cohen, Business Development Specialist at Tech & Global Cluster |
David Wertheimer , Partner in the Technology Cluster |

The proptech (property technology) market has been snowballing in Israel in recent years. The number of local companies in this field has more than doubled in the last five years; over a hundred proptech companies in various stages of growth are currently active in Israel. In the previous year, the major real-estate companies have come to recognize the importance of proptech and its inherent potential. An excellent illustration of this process is the collaboration emerging this year between WeWork and the property company Canada-Israel.

2020 forecast for the proptech market

What new developments should we expect in 2020? The penetration of fintech into most aspects of the financial industry in recent years left the property industry as the last bastion not yet overtaken by the Tech Revolution. The lag is no coincidence; property is often seen as an industry of traditional business models, characterized by complexity, a slow pace, and with extensive regulation, a far cry from the habitual modes of thought and action at the typical startup. The property industry absorbs new technologies more slowly than other sectors, despite its recognition of the importance and advantages of participation in the Tech Revolution; consequently, this process is in its earliest stages.

Trends observed in 2019 appear to be poised to continue and intensify in 2020. The rapid pace of development in the Israeli ecosystem is likely to generate a workable model for property companies to embrace the transformative opportunities found in the tech market. This connection would serve the best interests of both Israeli property companies, which operate in a highly competitive and densely populated market and developing startup companies raising capital in the Israeli proptech market. Relative to other verticals in the Israeli ecosystem, this market has remained almost entirely off the radar of foreign investors. Thus, property companies will gain an opportunity to distinguish themselves from competitors and position themselves as innovation leaders; startups will be able to access financing on an immense scale, from a prosperous worldwide industry, worth $280 trillion, on the search for additional investment channels.

The ideal business model

The nature of this market, as I described it above, requires a unique working model. The perfect business model creates collaboration between traditional property companies and startups, mediated by a pivot, who is familiar with the local and global ecosystems, serving as a liaison. A model promoting such collaboration can lead to the formation of a support system for startups through incubators, accelerators, investment funds, etc. This model would allow startups to obtain broad support in the form of financing, as well as skills, mentoring, business development, and – most importantly – exposure to direct and unmediated information from the property company itself. That is a valuable resource that can help the startup understand the needs to which it should respond, while also supplying fertile ground for a proof of concept.

A property company that decides to embed this model will also gain a connection to an extensive network of tech companies that may be able to assist in its progress towards technology integrated with an organization-wide interface or offer innovative solutions to problems it is currently facing. A relationship with growing tech companies may well turn out to be a highly successful way of investing capital.