“Tomorrow’s buildings are smart, autonomous organisms which make life easier.”
Viviana: Alex, Olaf, through the innogy Innovation Hub, you help young entrepreneurs with early-stage start-ups in the construction and property industries to build their businesses. Before we go into detail, could you briefly run us through the phases of a typical start-up again?
Olaf: Basically, your average start-up goes through three or four phases which, although distinct, can vary from area to area; sometimes, the boundaries between them are not particularly clear either, but as a general rule, stage one is family and friends. At this point, entrepreneurs find support in their immediate circles and, in some cases, from business angels who offer enough funding to get the ball rolling. The next phase is seed investment, also called ‘early-stage funding’, and in the German market, a million Euros is usually more than enough here. The next rounds are what are referred to as ‘series A’, ‘series B’ etc., with sums invested generally rising to match the maturity of the business.
Viviana: You two have focussed on early-stage funding; is there a particular reason for that?
Alex: The younger the company, the more innovative their ideas tend to be. What is more, we are often able to work with the founders to develop the products and services they are creating; what is more, a crucial element in this phase is to bring founders and established companies together, acting as the person who helps them get a foot in the door. This side of things is great fun.
Viviana: How do young companies find their way to you. Or perhaps: who finds whom?
Olaf: There are three main channels here, with events definitely being the most important: by ‘events’, we mean everything from traditional trade shows such as Expo Real or Mipim down to events specifically aimed at start-ups. The second way young companies come to us is through our network: i.e. we get contacted on LinkedIn or meet people personally. Finally, we do our own research on the internet, although this is not always the easiest way to find early-stage companies given that they are often not listed in the usual directories.
Viviana: Let’s look at real estate as an industry: what are the major drivers behind innovation in property? And what trends can you make out?
Alex: In our view, there are three categories here: affordability and availability, customer centricity, and sustainability.
Viviana: And what do they mean exactly?
Alex: First off, everybody wants to live in the city, which is why the population density of urban areas is going up all the time and space is increasingly at a premium; one consequence of this is that the costs of property are rising. As such, one challenge is to develop digital solutions which help to optimise space, and that could mean applications which measure capacity and occupancy in order to get the best use ratio out of the space available. The second issue, customer centricity, relates to our expectations and, above all, the expectations of millennials when it comes to getting information immediately, on demand. By 2025, 75% of all working-age people will be millennials, and they have high expectations of property, too, driven by companies like Google and Amazon, whose services have made us accustomed to having our needs fulfilled without delay. This category covers IoT innovations, for instance, which meld the physical structure of a building and its services without one another. What we think is important in this context is a recognition that useful innovation is generally driven by end consumers before it finds its way into B2B environments.
Olaf: The third trend – sustainability – is primarily to do with keeping to climate-change targets and the role the property industry can play in reducing emissions. Over their entire lifecycle, buildings contribute to 40% of worldwide energy consumption and 36% of global CO2 emissions; this means that applications and innovations which can reduce these figures are needed. In our view, this isn’t just a matter of building in a more energy-efficient way, but of innovations which make workspaces healthier, for example; our vision is for staff to leave their place of work healthier than when they arrived.
Viviana: We’ve spoken about three major trends which are set to have a lasting effect on the real-estate industry, but is there anything genuinely disruptive out there?
Alex: Many innovations are already in use today, and we expect automation and artificial intelligence to be behind big leaps forward. The whole IoT space is going to develop at break-neck speed in the coming years, with forecasts of 26 billion connected devices out there by 2020 already. The next step will be consolidation, before another wave of innovation rolls over us in the form of machine-to-machine communication, i.e. 50% of devices will no longer be talking to people, but to other devices, meaning that many things start to just happen in the background: tomorrow’s buildings are smart, autonomous organisms which make life easier.
Viviana: Comparing the property industry to other sectors, where are the differences? What makes real estate different?
Olaf: We see the slow pace of the digital transformation in our industry as a major problem, but there is actually an even more decisive issue: property is doing too well, making too much money without needed to innovate. Another limiting factor in real estate are silos: there is little-to-no communication or data-exchange between the companies involved in planning, construction, sales, and management.
Alex: So what is striking is that there two things which, at first sight, don’t seem to match up. On the one hand, the property industry is, when it comes to progress in the digital transformation, in the last third of the field – the Industry Digitization Index gives it a score of 38.6, for instance, while media and telecommunications get 51.2 and banks and insurers 53.1 points. On the other hand, however, there is an above-average level of activity in the PropTech sector, and the established industry is showing recognition inasmuch as there is a lot of communication between these two spheres. From our point of view, that means that, while the progress of the digital transformation to date has been slow, we see a lot of potential for a very speedy shift.
Viviana: Last, but not least, what would be your advice to established, perhaps very traditional property businesses? And, on the other end of the scale, what is your advice for start-ups?
Alex: That’s not a hard question to answer: companies on both ends of the scale should talk to each other regularly because they can learn so much from one another. If this exchange doesn’t happen, start-ups can end up developing in a vacuum: for young companies working on new solutions, it is very important to understand what the customer benefit is in order to make sure their product fits the market. For larger players, complacency is to be avoided: assuming start-ups won’t make it anyway and refusing to take them seriously can be dangerous. WeWork, for instance, shows just how quickly start-ups can become contenders.
Viviana: Thank you for talking to us.
innogy Innovation Hub believes that new technologies, business models, and consumption patterns will redefine the energy market of the future. We believe this future will be driven by four core global trends; decarbonisation, decentralisation, digitisation, and democratisation. innogy Innovation Hub’s mission is to drive this vision for the future of energy by being a sector disruptor: by identifying the game-changing technologies, ideas, individuals and businesses that will help build that future, wherever they are, providing funding, mentoring and a platform for co-creation, collaboration and convergence.
In the focus area ‘Smart & Connected’, the innogy Innovation Hub is looking for game-changing ideas set to disrupt the building industry.
Through investing in disruptive individuals, start-ups and early stage businesses, the innogy Innovation Hub has created a €150m portfolio (as of October 2018) and provided opportunities for more than 80 start-up and scale-up companies to collaborate. It is headquartered in Berlin, with teams across Europe including in London, Warsaw, and Essen, as well as offices in California (Silicon Valley) and Israel (Tel Aviv). The innogy Innovation Hub is funded by innogy SE, a leading German energy company, with revenues of around €43 billion (2017), more than 42,000 employees, and activities in 16 countries. For more information, visit: https://innovationhub.innogy.com
Subscribe to our Blog!