Real Estate

16 Challenges When Launching A PropTech Company

There’s no doubting the fact that property technology (proptech) is an innovative approach to real estate marketing. From developers and investors to property management companies, proptech has the potential to benefit every party involved in the buying and selling process. The proptech sector has been experiencing strong growth since 2014, and especially since the pandemic in 2020.

While technological evolution is entirely necessary for growth in the real estate industry, implementing such changes and advancements comes with some major challenges. Here, 14 experts from Forbes Real Estate Council weigh in on the biggest challenges facing entrepreneurs launching a proptech company today. 

1. Stakeholders Having To Embrace Technology

From my time with Redfin, ZipRealty and Movoto, I learned one of the critical challenges that many startups face: too many stakeholders must embrace technology for it to be effective for innovation. Also, prioritizing the stakeholder that stands the most to gain and having the most to lose is the first step in the right direction. They must communicate, inspire and educate for these advancements to happen. – Maximillian Diez, Twenty Five Ventures

2. Providing Value Proposition Proof

Proving out your value proposition is a major challenge. While the real estate industry has started to embrace tech, the industry at large is traditional and slow to adapt. To earn the trust of industry professionals, one must demonstrate early on how adoption will save time and money or improve service quality for its users. – Jim Hegedus, Water Street Partners


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3. Creating A Disciplined Growth Strategy

One major challenge is creating a disciplined growth strategy to ensure success. The addressable market is so large that there is a temptation to chase shiny new objects, which can distract from the game plan. Real estate is complex, compliance-driven and local. The ability to focus on scalable growth over superficial growth separates successful proptech entrepreneurs from those with just great ideas. – Min Alexander, PunchListUSA

4. Balancing Tech With Supporting Emotional Needs

While the real estate model has dramatically shifted in the last decade, home buying and selling have remained emotional processes with the human component at their core. Entrepreneurs need to balance the technology with supporting the right decision making and emotional needs of customers throughout each transactional milestone, providing a high-tech, high-touch solution. – Amit Haller, Reali

5. Improving Distribution 

The key challenge is distribution. For business-to-business startups, the CAC (customer acquisition cost) to LTV (lifetime value) ratio can be out of whack. The solution? The startup must be a partner instead of a vendor. That means a relationship with clients where you ask more questions than talk. The offering must then iterate to solve the specific problems you’ve learned about. This improves CAC and LTV in the long run. – Trevor Hightower, Craftwork

6. Finding Product-Market Fit For Sustainability

Finding your “unique insight” or your “special sauce” is crucial. While opportunities in proptech abound, finding product-market fit is critical for long-term sustainability. Most software-oriented products require considerable access to capital to build. They also need to be adopted from a market segment that is either not being served currently or is underserved by technology. – Fred McGill, SimpleShowing

7. Dealing With Inertia

Inertia is one of the biggest challenges proptech companies will face in the real estate industry in that companies move slowly without reaching a real pain point. Cost and time savings are typically the biggest incentives to adoption, especially when technology can reduce or eliminate staff time at the rental community level. Even with real value and NOI, patience will be needed to build share. – Ellen Calmas, Neighborhood Pay Services / NPS Rent Assurance

8. Networking

Like anything in real estate, business is relationship-based. Your network is your net worth. Learn how to connect with the movers and shakers in the industry and gain their network of professionals to help on building the technology. Getting a few key customers and partners to sign up for your early customer feedback loop is crucial to understand the complicated workflow. – Elisa Zhang, EZ Real Estate

9. Launching A New Solution

Launching a new solution on the market without a proven track record is difficult. That’s why it’s critical for startups to create strong relationships within the industry to help illustrate how their solutions offer substantive value to users. Leveraging this industry knowledge can help develop a solution that actually addresses customers’ pain points while also building brand awareness. – Oli Farago, Coyote Software

10. Finding Smart Ways To Integrate Tech

Change management is the No. 1 challenge with real estate industry technology adoption. The winning real estate companies have found smart ways to integrate technology into the customer/resident and employee experience to create three wins of delivering a superior customer experience, providing both the buyer and seller with greater control and insight and lowering costs of execution. – Elik Jaeger, SuiteSpot Technology

11. Evolving Technology Until Customers Accept It

The biggest challenge for young proptech entrepreneurs is having their company achieve product-market fit. Evolve your technology to a point where you know the customer will accept it. Until your business achieves product-market fit, as a young proptech entrepreneur, you are technically still iterating your technology to get it accepted. – Saurabh Shah, InstaLend

12. Expanding To More Than One Market

It’s easy to start and produce products and value in a local market, but the biggest curveball for entrepreneurs will be trying to expand to more than one market. There are a lot of proptech companies that will raise capital, do well and prove their product fit within a market, but it gets extremely challenging when they try to expand into multiple markets. – Kori Covrigaru, PlanOmatic

13. Not Understanding Real Estate At The Onset

The cardinal sin for anyone embarking or launching a property technology company is not understanding real estate at the onset. You can package goods and services with sleek marketing and promises; however, the fundamentals of real estate have not changed. Accept the known unknowns and become competent. Technology makes life easier, but only if you understand the industry you’re trying to disrupt. – Charles Argianas, Argianas & Associates, Inc.

14. Creating A Distinct Value Proposition

With so many new proptech companies flooding the market, creating a unique value proposition is the biggest challenge entrepreneurs will face. It is no longer sufficient to claim to digitize or consolidate real estate transactions on a centralized platform. There must be a distinct benefit to users that will capture their attention and allow your technology to stand out in a crowded space. – Megan Micco, Compass

15. Generating Tangible ROI And Impact 

Showcasing how your solution can generate tangible ROI and impact is a challenge. Technology is meant to enable stronger experiences and more efficient business outcomes, but entrepreneurs must think from the lens of a commercial real estate owner to understand what would motivate them to want to try a new solution. At the end of the day, showing a clear opportunity to grow revenue or reduce cost is key. – Benjamin Pleat, Cobu

16. Creating Upgradable And Adaptable Tech 

The big challenge for most proptech companies is to create technology that is adaptable and upgradable as the field is evolving. Currently, during Covid times, there has been significant disruption and growth including the adaptation of the technology. It would be a great idea to learn customer demand and have real-time feedback on the creation of the new offerings. – Chander Mishra, Blue Ocean Capital LLC