In the lead up to the Australian Proptech Summit 2022, and in part two of the Proptech Investor Series, we interviewed Jonathan Hannam, Co-Founder and Managing Director at Taronga Ventures. With estimates of over $20 billion invested in commercial real estate over the last decade, we wanted to know which specific innovations are attracting investment from VCs and why?
1. Tell us a bit about yourself. Your background, current role and how did you get started in venture capital?
I studied Urban Planning and Town and Regional Planning at Melbourne University which covered all aspects of environment, economy, society as well as components of architecture and design. Upon graduation I moved to China and participated in a post graduate program in the School of Architecture at Tsinghua University, Beijing.
My first venture capital experience was in 1993 when I was the Chief Representative for the Taisun Group, based in Beijing and investing into emerging Chinese businesses across all asset classes. Over a two year period we invested into circa 20 joint ventures, including the Yantai CIMC Raffles Shipyard (now SGX listed), Jiaxing Electric, Jiaxing Motor, Beijing International Aviation Centre and the Yixing Huaxing Industrial Park. This was a period of substantial growth in China and we built some incredible companies. Interestingly these were often 50/50 joint ventures in a market where relationships mattered more than any joint venture legal agreements.
2. How different is it to build a proptech start-up today than 5 years ago?
The fundamentals of business do not change. A good idea, strong conviction, putting together a team that can deliver, managing the ups and downs, having the resilience and resources to continue when customer or investor decision making does not move at the speed you need it to – these are all unchanged.
I think there are two areas where there have been major improvements.
Firstly, technology changes have meant that concepts and ideas can become global a lot faster. For Taronga Ventures we are seeking global investment opportunities that we can expand into Asia and beyond. Our typical day begins with a couple of calls from the US and ends with European calls late into the evening. So for emerging technology companies you need to think about global scalability.
The second area of change is that there is now more capital available throughout the entire company journey – starting at angel level, through to growth capital and then as we have seen with a number of major exits or listings with substantial capital moving into the RealTech sector. In 2017 we published some research with KPMG that estimated the market would reach $20B by 2020 and it actually exceeded that. With more capital there is a much greater appetite for founders to take that first step.
3. A lot of innovation is coming from incubators and in-house labs, which have a lot of talent and resources. How can proptech start-ups compete?
We are seeing a lot of deal flow from labs and also from universities. We are actually a partner in a Construction 4.0 – a CRC (Cooperative Research Centre) with Monash University that is taking a ‘whole-of-system’ approach to create an innovation ecosystem to leverage the construction value chain to underpin the sector’s future prosperity and unlock opportunities for growth and productivity. Within our own business we have our RealTechX ESG Impact Program which supports emerging technology companies with access to customers, capital and mentorship and so far we have had more than 500 applications to this program.
4. Proptech saw an explosion of investment in 2015-18 (estimated US$30 billion worldwide) and then a loss in momentum. What does the future hold for proptech investment?
We have not seen any loss of momentum in the space but more seeing a gradual maturity of the sector. If I think back to the quality of the deal flow we were seeing in 2015 compared to what we are seeing now there is a vast difference in quality.
I would also add that the impact of Covid has forced commercial and retail landlords to rethink their entire operating models and be more open to innovation and technology. During this period, we have seen the resistance to change within many of these groups erode.
5. What are new areas for commercial proptech that you are excited about as a venture investor?
As a business we have an ever-greater focus on ESG Impact. For many corporates it is clear that they have started to address the E – with sustainability initiatives and target dates being set for net zero – although we can do more. What has been a real challenge is the Social and Governance part and that is an area where we are looking to provide real solutions, not only for our investors but also for the entire real estate sector.
6. Any book you would recommend to aspiring proptech entrepreneurs?
When we recently launched our ESG Impact Program we provided our partners with A Life on our Planet - My Witness Statement – by Sir David Attenborough. This is an incredible read and I would highly recommend it not just for entrepreneurs but for all participants in this space.
I have just been introduced to a book by Tyson Yunkaporta, Sandtalk – How Indigenous Thinking Can Save the World and it is my next read.
Read the Proptech Investor Series Q&A with:
Carolyn Trickett from JLL Spark here.
Rachael Neumann from Flying Fox Ventures here.
Shelli Trung from REACH Australia here.
Join us at Australian Proptech Summit 2022, to hear from more leaders in the proptech field and the trends to look out for.