The construction industry and real estate are about to change, and so investing in property tech (or proptech) start-ups now is a good investment strategy. That’s the idea behind Rise PropTech Fund.
The Liège-based investment company thus got the backing of key groups in the sector such as Matexi, Cordeel, Denys, Moury Construct, Eloy Group, Thomas & Piron and AGC Glass Europe, hoping to make the sector more technological, productive and sustainable. Partner Gaëtan Baudelet (left) explains how they plan to do that, and why the current economic malaise may offer opportunities, not just challenges.
Why the focus on proptech?
“Proptech is a nice area for investment. Other sectors were already experiencing a transformation based on new technology, just think of the financial sector with fintech. Construction and real estate are now on the verge of a similar transition. Indeed, the challenges are great. There is an increasing price of energy and raw materials, COVID-19 has changed the dynamics of the real estate sector, and sustainability is becoming increasingly important, as the construction sector is a major source of carbon emissions today. So innovation can solve a lot. New players are now entering the sector, and legacy companies are at risk of disruption.”
Meanwhile, you are funded by those legacy companies. Does that affect your ability to invest in truly disruptive startups?
“That’s the beauty of Rise, it’s a place where these players collaborate around innovation. In fact, several of our investors are competitors. It is a lab where innovation can take place on neutral ground. The fund also serves as a kind of R&D, and together with my partners Jérôme Constant and Frédéric Driessens, we scout the market for trends and companies that are emerging. Legacy players no longer want to be stuck in the past, and they want to embrace new innovations.”
What does your portfolio look like today?
“We currently have two companies in our portfolio. The first is a Luxembourg-based start-up called Leko Labs. They offer a CO2 negative solution where they make an enormously strong wooden structure that can replace concrete. They also do its assembly via robotics, for which they did their latest round of capital. The other investment is in French start-up Teamoty. They make software to better support construction projects.”
Is the focus more on software, or on material technology?
“We do both. We already invested in pure software solutions, but equally in a start-up like Leko Labs, which is reinventing the way we build houses. What the latter is doing is very disruptive. They assemble their structures off-site, and then put them together with far fewer people. This is the direction in which the industry needs to evolve. So by no means do we just do pure software, but invest equally in truly technological companies.”
What does the fund’s timeline look like?
“We will invest until 2026. In other words, we are still in an early phase of the fund. We have a classic 10 to 12-year term, with an investment period of 5 to 6 years. During this period, we want to invest in a 10 companies. That is a limited number, but every investment we make has the potential to fundamentally change the sector.”
How is the current economic crisis affecting your work?
“It is a difficult time for startups to raise capital. This is because startups need to have a stronger foundation before making a capital round. So we see better proposals coming in and this momentum provides opportunities for a fund like ours.
At the same time, this situation also creates challenges. During the past few years, a lot of funds raised capital. And that while now a lower number of startups are raising capital. So there is more competition, and we have to stand out in the crowd. We do that through our strong network in construction and real estate. Also, startups are growing slower today. In fact, the sales cycle got longer. Fortunately, there are no exits coming up for us in the short term, so there is plenty of time to seize opportunities.”
What does the future bring?
“Now it comes down to expanding our portfolio. In 2022, we will invest in three companies. In the coming years, on top of that, we want to give money to three to four companies every year. Once our investments are complete, around 2025, we plan to launch a second fund.”
fund invests in Late Seed and Series A rounds. Typically, this means investments of between €500,000 and €3 million.
Rise PropTech Fund emerged from Noshaq, a Liege-based private equity investment fund, and finance&invest.brussels.
Rise PropTech Fund has an AUM of 25 million euros.
The investment fund has the backing of quite a few well-known names from the Belgian real estate and construction world, including Matexi, Cordeel, Eloy Group, Denys, Moury Construct, Thomas & Piron, Noshaq Immo and AGC Glass Europe.