PropTech Is Changing Canadian Real Estate

[00:00:00] Welcome to the Canadian Real Estate Investor, where host Daniel Foch and Nick Hill navigate the market and provide the tools and insights to build your real estate portfolio. PropTech firms hit reset as real estate industry struggles. That is according to the Globe and Mail. They really do know how to write those headlines to get your attention, eh?

[00:00:25] If you haven't guessed, we're talking about PropTech today, but I can't really tell whether or not it's going to be a good episode or a bad episode based on that headline. Quick scan here. Apparently some data point is down like 62.5%. So I'm curious to see what that is. What will the fate of Canadian PropTech be? Is it coming alive with new energy or is it stumbling along like the rest of the real estate market in Canada?

[00:00:50] Let's find out. But before we do that, a quick plug. Check out real estate for our free online and in-person meetup community of over 6000 members across the country. You can see our paid event schedule that we also are doing across the country and access exclusive beta testing for some new technologies in the PropTech sector that are being developed for this industry.

[00:01:16] In addition to our free course resources, you'll also find a paid online course, which is now offering a low ticket monthly option for group coaching only. So you can meet with like-minded people every week and continue developing your skills. And as always, we do have a higher ticket option for those looking to really get some deals done this year. And if you need one-on-one coaching, we are here for that.

[00:01:40] We've literally helped hundreds of clients across the country in the last few years then, and I have a ton of fun doing it and want to keep on helping you. So if you're listening, this is your call to action to reach out to us. Now, let's get into the episode. I just cracked open the article here and it mentions two friends of the show, Colliers and of course, PropTech Collective. So what is PropTech? It stands for property technology, prop plus tech. Wow.

[00:02:10] Thank you, Dan. A truly profound observation. I'm glad you helped us out with that one. And what is Colliers? Is that a call years? No, it's not. Colliers Canada is one of the country's largest commercial real estate services and investment management companies, providing services like property management, leasing, and consulting.

[00:02:29] New prop tech companies regularly approach Colliers with tools they believe could revolutionize construction, building management, and energy conservation, according to a company executive in this Globe article. Now, in Canada, this market is expanding rapidly with more than 530 startups tracked in 2024. That's according to a recent report from PropTech Collective. And we're going to get much more into that throughout this episode.

[00:02:57] Now, Colliers created this thing called the PropTech Lab to help clients make informed buying decisions. It's an internal program that enables their property management teams to evaluate various tools and recommend the most suitable ones for specific buildings. It's almost like a technology to recommend technologies. Though it's an online portal, the program has assessed over 500 technologies in the past three years.

[00:03:23] This is everything from AI design applications to air quality sensors and comprehensive building management systems. More than 90% of the evaluated tools demonstrate potential for cost and time savings. Those are both things that all real estate investors are chasing and many conducting pilot tests in Colliers building to no cost to property owners. So win-win situation there.

[00:03:48] The whole industry is getting smarter about which technologies actually help real estate and help professionals do their job better. I was just looking at this report from PropTech Collective that they mentioned in the episode, which we've been meaning to do an episode on this report for a while. We love PropTech Collective. I've moderated a panel for them before actually at the Google offices downtown. Shout out to Daniel Moss and Rachel Yuen who got me involved in that. PropTech Collective is Canada's largest PropTech community and industry association.

[00:04:17] And they're a nonprofit organization that connects real estate professionals, technology companies, and investors to help drive innovation in the real estate industry. They're known for producing this comprehensive research report on the state of PropTech in Canada and organizing events to facilitate networking and knowledge sharing in the sector. They are like the go-to organization for this stuff in Canada. And despite all the market challenges, it appears the sector is actually making some smart and positive moves.

[00:04:44] Yeah, just to clarify, we have no real direct affiliation other than really loving and appreciating what they do for the industry. And kind of being friends of the show, this episode is really just about the findings of their report. So unfortunately, Dan, I'm going to start off with some bad news. Okay, now in 2024, Canadian PropTech companies raised about $300 million in venture funding.

[00:05:09] Now, that sounds like a lot of money, but it's down quite a bit, about 62.5% from the $800 million they raised in both 2022 and 2023. Stephanie Wood, who's the VP at Elate Partners and helped start PropTech Collective, says this isn't just a PropTech thing or a real estate thing. It's happening across the whole tech sector.

[00:05:32] Looking ahead to 2025, Wood thinks we're going to see a lot of companies joining forces through M&As, mergers and acquisitions. Plus, with AI getting better and better, that's going to shake things up even more. Yeah, M&A activity is a very common theme during recessionary periods. So I would agree that would be worth expecting. And she put it really well in the article that PropTech has gone through a reset as the real estate industry has struggled with interest rates and other factors.

[00:06:02] But they are emerging stronger because founders are focusing on more sustainable business models and investors are learning from earlier PropTech cycles and real estate customers are becoming more discerning. What's that saying? That nature is healing, right? The cash-burning days of tech startups are over, I suppose. No.

[00:06:23] And other businesses have to develop sustainable, mature cash-flowing models and not just the hope of growth. Although, I mean, the stock market might beg to differ. So instead of just trying to grow at any cost, these companies are being much smarter now, right? They're testing their strategies, finding different ways to make money, and keeping a close eye on their spending. Because you can't just keep going back to the well or rely on a market or industry that is growing at breakneck speeds like the real estate market was during COVID.

[00:06:53] So wait, are you telling me that companies actually have to make money now? That's a crazy concept in Silicon Valley. Well, it was for a while anyways, right? With the unicorns of like the Ubers and the WeWorks that would just perpetually lose billions of dollars but would still increase in valuation. I think Compass is like the biggest PropTech in the world and they're losing money still. Zillow makes a ton of money, but. Yeah. Well, there's an interesting report from Cretti. Cretti? Is that Italian?

[00:07:23] No, it's a acronym. I pronounce it Italian as a, just to throw you, but it's an acronym, of course, for Center for Real Estate Technology and Innovation. Everything's always an acronym with you. I liked it better when it was Italian. So did I. But let's, we'll just use the Italian bit then, right? So Cretti is based out of New York and they track all of this stuff. So saying that, well, overall funding is down because lending is tighter. And, you know, we know that.

[00:07:53] That's very apparent here in the real estate market and in Canada as well. Early stage investments are actually getting bigger. So get this, the average seed round in 2024 was 2.2 million, which is double what it was back in 2020. As Cretti puts it, and I love this quote, a strong vision is no longer enough. You've got to prove your worth right from the start if you want to get that funding. And I completely agree.

[00:08:21] Well, there goes my dream of selling an idea to Google for a billion dollars. Not really how it works. Aren't you supposed to know this since you actually built PropTech with an exit and currently work at a PropTech? And you still haven't changed your Instagram bio to PropTech exit and, you know, founder exit. Yeah, which I'm waiting, which I'm still waiting for. Never going to happen. I did do that, didn't I? So is this where I get to pitch these things?

[00:08:47] So if you're a realtor in Canada, check out thehabistat.com for a cool data dashboard that we built for the Toronto Real Estate Board. If you're a TREB member, a Toronto Real Estate Board member, you can actually just log into it and analyze market trends in real time. So I built this platform originally to make charts. If you know me, you might know that I'm a relative fan of charts. So I wanted to make it easier to make said charts. And then we wanted to make it easier for all realtors to make said charts because I think that transparency in data is very important in the real estate space.

[00:09:17] And it really helps us advise our clients well and build trust and make it look like we know what we're talking about. And if you're not a realtor, if you're a consumer, check out Valerie.ca, that's V-A-L-E-R-Y.ca to buy or sell your next property with AI. And if you like stocks, check out our Podfather's app, FinChat.io. Are you just plugging random stuff now? I don't know, man. I'm feeling a little left out, all right? I mean, Podfather Bredo does deserve the plug, obviously.

[00:09:46] But like mentioned like Rentals.ca who sponsors the show or Live.Rent who's going to be partnering in our real estate rodeo event or Door Insight. You can't forget Door Insight. No, you're right. Lots of amazing prop tech companies that we work with. And Dan, actually, we've started to implement AI into my mortgage business and our systems and processes over there. Yeah, you're a tech guy, man. Yeah, big tech guy. Big AI guy. I guess, baby. Yeah, I mean, look, Door Insight is unreal. It's a Chrome extension.

[00:10:13] If you haven't heard us talk about it on the show, all of our realist members use it. It's a Chrome extension that you can use to search in the – so just search it up in the Chrome website. Basically, what it does is overlays on Realtor.ca and allows you to analyze deals in real time without really doing like any work, right? You literally just analyze this deal. And it pulls all the info rate from the listing. Now, some of it isn't as accurate. So you might – if you're planning on actually buying this deal, obviously go back and do your diligence.

[00:10:43] And cross-reference stuff. But man, what a tool. Yeah, it's good for like looking at hundreds of deals very quickly. Like it's not good for modeling a deal out over like building a pro format. Like you want to do that yourself when you're getting granular. But for just sorting and trying to find deals side by side, it's really good. So I would say it's – like for me, it's been an absolute game changer for analyzing deals at scale. For sure. And if you're an investor, you know how important it is to analyze deals at scale.

[00:11:12] That's basically what you're supposed to do. Do you know anyone else – does anyone know how important it is to actually analyze deals at scale? Well, this guy, Roger Poirier, co-founder of Hazelview Ventures, the VC arm, the venture capital arm of – Yeah, that guy knows how to analyze deals at scale for sure. Probably done a couple. VC arm of Hazelview Investments, which has one of Canada's largest rental housing management and development portfolio,

[00:11:37] says his company has been approached by many prop tech companies and prop tech startups looking for capital. Yeah, he told The Globe that people in real estate will tell you as much as they want to, they're not interested in being the first user of a product. Me, just like sitting here with my hand up volunteering to be the first user of a product. Are you just like shamelessly asking for brand deals on the show now or – No, no, no, no.

[00:12:06] I'm offering to beta test. Isn't that a thing in tech? You know, admittedly, I'm not a big tech guy. You know, I guess, you know, you're the big tech guy, Dan. And again, so is Mr. Poirier, right? Going back to this article. Yeah, I mean, you and Poirier, same kind of guys. He's only invested about 2% of – sorry, Hazelview has invested in only about 2% of the prop tech companies that have approached him.

[00:12:33] Adding his company's top success story is a Toronto-based Augmenta, an AI program that designs layouts of utilities in buildings. So when people think prop tech or tech, everyone thinks like sexy stuff. But like, you know, designs, utility layouts in buildings, that is probably one of the least sexy things I've ever heard. But what, by the sounds of it, an amazing application.

[00:12:56] Now, Hazelview led Augmenta's seed financing round because the company was able to demonstrate a pilot project showing a 40% reduction in the time it takes to model electrical systems for buildings. And it's funny, you know, like you think about designing mechanicals in a building and it's like, oh no, AI took someone's job. But then I'm thinking – so my brother, he works at – is like one of the principals at one of Canada's largest landscape architecture companies.

[00:13:23] And the busy work – oh, we actually have to get him on the show now, now that once he's got some free time, this new role has been very consuming for him. But the busy work is like, that's what AI can get rid of, right? Like there's a lot of tasks that computers can do that humans don't want to and it seems like AI is doing a good job. So anyway, I'm thinking about all of these like engineers and designers who I've worked with who literally like the bane of their existence is like mapping utilities or, you know what I mean? Or like – 100%.

[00:13:51] Coloring in a design, you know, like coloring in your line work or – so maybe they're happy to have those certain tasks innovated away, right? I would hope so. So at Collier's PropTech Lab, a number of technologies have proved pretty promising, promising enough to receive immediate green lights.

[00:14:14] Collier's Canada, John Duda told the Globe and Mail that these have included ParkChamp, an app that allows users to remotely monitor available parking spots and park aids and pay for parking as well. They deployed at eight Calgary buildings that increased their total annual revenue by $1 million. Man, I'll tell you right now, anything that helps with parking, I think Canadians in major cities are going to be like, yes, please, as soon as possible. Dude, my vehicle is like twice the size of yours.

[00:14:43] If anybody gets this struggle, it is me. Like I need this for 2,500 pickup truck sized parking spots all across Toronto. I would pay – like I would pay a stupid amount for that subscription because I literally have to budget like 40 minutes before every meeting to find a parking spot. Like I spend a lot of time researching parking, way more time than I would want to admit.

[00:15:07] Okay, now I'm going to call BS on some of that because I've also seen the way that you park and I'm going to tell everybody a little bit of one of our secrets and one of our hacks, Dan, because we've both spent some time in the construction industry. Dude, if I get a ticket for you outing my spot under the bridge – I won't give a spot. I'm not going to give your spots away, but I'm telling you, I have seen this man park like literally anywhere. Okay, like Dan will go park his big truck anywhere and all you need to do is put like a high-vis – Let's be real. Okay, sorry, maybe not like the middle of like –

[00:15:37] Without harming others or causing traffic. Yes, yes. But Dan will literally park his truck anywhere and all you need to do is have like a hard hat or a high-vis vest. A clipboard and a high-vis on the dash, like just – Someone – You throw a construction going out there, you're done. You can't park there. Just, oh, I'm going to see Jimmy about the site. Yeah, Tony didn't tell you I was coming. I'll be five minutes. Throw the hazards on. Whatever. Oh my goodness.

[00:16:01] Okay, so let's go back to the energy efficiency stuff that we were talking about, which is obviously huge right now. Tons of government incentives for energy efficiency. Energy efficiency is a key factor in the MLS Select CMHC's mortgage loan, multifamily loan insurance program. Ecopilot, which is both a Canadian and USA AI-based energy monitoring system, balances building temperatures and increases energy efficiency.

[00:16:28] When it was implemented at Halifax's Maritime Center, it resulted in a 10% reduction in heating and electricity costs over a 10-month period. That's pretty damn good. That makes it pretty easy to sell your product if you can literally be like, hey, pay this much and save this much. Yeah, input-output, right? Bottom line, that's the easiest pitch ever. Let's look at another one in the energy efficiency sector here. TAP Report, a Toronto-based building inspection documentation app.

[00:16:58] When deployed to monitor 11 buildings in Toronto, in the Toronto area and Atlantic Canada, it saved at least 720 hours of work per building annually. So these numbers don't lie. And jumping further into this PropTech Collective Report, let's talk a little bit about some more of these companies, but also just generally the market in Canada.

[00:17:23] So really interesting, if you're a real estate investor, anything in location, location, location, thinking jobs, maybe where are all of these jobs? 80% of PropTechs in Canada are located in the top five hubs, including Toronto, Vancouver, Montreal, Calgary, and Kitchener-Waterloo.

[00:17:42] And Nick, give me a more detailed breakdown on that in the province count here, because it's pretty crazy, the concentration in Ontario and the GTA. Yeah, so here in Ontario, 294, so 56%, and 45% of those are in the GTA. BC also has a pretty decent startup community out there with 96, so that makes up 18%.

[00:18:10] Quebec, 69%, 13%, Alberta at 50%. I thought we see more out of Alberta. Yeah, Calgary does always feel like a PropTech city. I always hear about it. Just because it's young and yeah, but I don't know, maybe we're still young. 9% there, prairie provinces make up 2% with only 8%. Again, hoping to see more out of the prairies. And Atlantic Canada, hoping to see more from that region as well with 10%.

[00:18:39] 10%, so making up only 2%. And age-wise, a third of Canadian PropTech companies have emerged in the last five years, showing significant recent growth and innovation in the sector, despite obviously the real estate market being a challenge. Exactly. Just wait until we're in a rip and bull market again, baby. And holy, I can see this industry exploding. Now, this wave of new companies demonstrates continued entrepreneurial confidence in the PropTech space,

[00:19:06] even as the broader real estate industry adapts to, you know, let's just be nice and say, changing market conditions and not the utter rollercoaster of volatility that we've been on over the last couple of years. Yeah. Yeah. That is a really good point because the real estate industry is so often criticized for being slow to adopt to new technologies and clinging to these old traditional methods.

[00:19:33] It's often called one of the last industries to truly digitize and modernize its processes. And I think we are finally, I don't want to jinx it, but I think we're finally starting to see it happen now, especially with AI, like with the work that we're doing at Valerie in replacing a lot of the processes of a realtor with AI. I think you're starting to see it happen. Yeah. Yeah.

[00:19:53] And, you know, Dan, when we were just at BuzzConvers, we were talking to the founder of Maeve and obviously AI is just such a thing right now, such a buzzword right now. And I think it scares a lot of people. I think it excites probably an equal amount of people. And those people that are scared, I think it's just about understanding how to utilize this stuff. And that's the thing with a lot of these PropTechs. It's not, don't look at this as a, this is going to take my job.

[00:20:20] Look at it as, this is going to help me do my job better and save me time, which is really what we're all after, right? So 77% of Canadian PropTech companies were founded in the past decade, but the numbers are declining in line with how the real estate industry is slowly starting to decline. So 2024 was the lowest year since 2013.

[00:20:44] 2013, that as an entrepreneur and someone that really believes entrepreneurial efforts are something that almost everybody should try. That makes me a little sad. So I'm going to go read the amount of PropTech startups from 2012 all the way to last year, 2024. And you'll kind of see the ups and downs we've seen here. So back in 2012, remember, this is a long time ago at this point. Okay.

[00:21:08] 2020, 2012, I know it doesn't feel like a long time ago, but all I ever need to do when I, when I want to look at how old some of this stuff is, is go look at like the top songs that were out at that point. And you're just like, oh man, I'm, I'm getting old. That was a long time ago. 2012. There were 16 PropTech startups. 2013. There were 19. 2014. 2014. We jumped to 27. 2015. We jumped to 37. 2016 to 43. 2017, 42.

[00:21:37] 2018, 52 PropTech startups. Great year. 2019, 48 PropTech startups. 2020. Banger year for the PropTech community with 57 PropTech startups. And then 2021, we fall off a bit of a cliff at 37, 2022, 28, 2023. There are 30 PropTech startups and 2024 last year, there were only 20 PropTech startups.

[00:22:07] It is, it's, it's a bit of a wave, right? And even in 2017, you could see that, that dip when like from 16 to 17, when, because 2017 was a shaky real estate market. So it's probably correlated with real estate market production. It would make sense. The wave of PropTech innovation is forcing even the most traditional players to reconsider their stance, right? Like think about the commercial real estate world.

[00:22:34] Companies like Collier's who now have labs for PropTech. Like CRE, if you think, like if you're, you know, I think most people listening to the show would be more like your residential, et cetera. You know, and CRE is just a smaller market compared to the residential market. And CRE, commercial real estate, has historically, you know, if you think like the regular real estate market is archaic, this is prehistoric when it comes to tech. Really, it was, right? Like very much so. Totally, yeah.

[00:23:02] And companies are now realizing that staying competitive means embracing digital transformation, whether that's through virtual tours or blockchain for transactions or AI powered market analysis. Like there's so many new tools. And now we're seeing more technology go into the commercial space, right? About 42% of the PropTechs that were mentioning, the startups, 42% of them are to serve residential. 16% are to serve the construction side of things.

[00:23:31] And 42%, so almost half, are there to support the commercial real estate industry. And the real estate industry has historically thrived on what I would call information asymmetry. I've mentioned this a couple of times in the show, particularly in the brokerage space. Agents and brokers held exclusive access to crucial market data, comparable sales and property insights. However, with the rise of PropTech solutions and digital platforms, this traditional barrier is rapidly eroding. Think about House Sigma as an example.

[00:24:01] Like most sellers already know what their house is worth or approximately, right? They don't need the realtor to really do the price discovery for them. Consumers- Free home evaluation kind of has gone out the window a little bit. And it's cool. Like at Valerie, ours actually will pull the comps for you. It's not just an AVM, right? Every site has an AVM. It's kind of a run-of-the-mill thing. But on our site at Valerie.ca, ours literally will say, here's the three comps that we use.

[00:24:26] And it uses computer vision to compare kitchens and bathrooms and all of these things to actually find the most granular ones. So that space is developing very quickly to the point where pricing is something that a realtor probably still can do, but maybe shouldn't, right? Like that's a rule that you can probably eliminate for agents. And look, like people, this ultimately ends up having a better result for the end user because people want to pay less, right? Like everybody thinks realtors are overpaid. And the only way that realtors are going to accept lower rates is if they have to do less work, quite frankly.

[00:24:55] And so if we can eliminate a lot of the jobs, then they will, right? I mean, many will also accept it because they have to. And that's what you're also seeing right now. But in a busier market, agents will accept less money for less work. And so eliminating the jobs allows them to continue to be competitive in a declining fee environment. And who wins in that? The consumer, right? Innovation is deflationary in that way. We've mentioned that a couple of times before. Consumers now have unprecedented access to market data as a result of this.

[00:25:24] They have property histories, valuation tools. And this fundamentally changes the role of real estate professionals from gatekeepers of information to now expert advisors and negotiators and customer service providers. And this democratization of information is forcing the industry to evolve and find new ways to add value beyond just providing access to data, which is a good thing. It's a significant shift that I would say is reshaping how real estate transactions are conducted and how professionals serve their clients. And it is going to be an unrecognizable industry, I think, in 10 years.

[00:25:54] I agree. And, you know, I welcome that. That excites me. Now, another exciting thing is the Canadian product industry has demonstrated significant consolidation and growth. So there's been more than 65 mergers and acquisitions taking place across various segments of the market over the past five years. And this shows a strong appetite for strategic partnerships and market expansion.

[00:26:16] Now, in a testament to continued investor confidence, the Canadian prop tech sector companies in this space have successfully secured almost a billion dollars in funding, right? $800 million last year representing a substantial capital inflow to support innovation and scaling operations in the property technology landscape. So that is also a very good and kind of evolving thing.

[00:26:44] Now, to be fair, if you – half of that was Host Away's – more than half of that was Host Away's $500 million growth round. So if you strip that out, that's where you get that 65% decrease in – or 62.5% decrease in funding. And Host Away is a Toronto-based vacation rental management software that helps property managers and hosts automate and scale their short-term rental businesses. So like your Airbnb's providing a centralized solution for managing listings, bookings, guest communications, and analytics.

[00:27:13] Their growth round marked one of the largest funding rounds in Canadian prop tech history. And they are the largest funded Canadian prop tech, I believe, as well, which we're going to get to that list in a second. So before we get to that list, let's look at the – I just mentioned, right, all the M&As happening in the last five years. And the space is pretty active, right? So let's look at – we'll take the last five years and we'll look at the number of acquisitions per year. In 2020, there was six.

[00:27:39] In 2021, 17 acquisitions in the prop tech space. 2022, 11, 2023, 8. And last year, a whopping 18, with the majority of these being bought by U.S. companies, about half of them, and the remainder by Canadian acquirers and some other countries. So kind of a bit of a mixed bag there. Unfortunately, not all the good stuff stays here in Canada. Yeah, a lot of Canadian tech does get purchased and then scaled to the U.S. market, right?

[00:28:08] So, I mean, it is interesting. And this is something we go through at Valerie as well. It's like if you can win in the Toronto market, then you can be scaled to other markets because it's the most competitive market in the world, most realtors per capita in the world from a real estate perspective, right? So the top M&A stories are interesting, looping it back to Collier's. There's a couple of ones here that are cool. Like I think these are companies that you might have heard or companies that as a real estate investor, you might have interacted with.

[00:28:35] So Collier's bought Englobe, which was a significant entry in the engineering marketplace, and trying to add a new professional service offering to complement their core business as well. Yeah, this next one surprised me a bit. Carson Dunlop. Cooperators' acquisition of Carson Dunlop strengthened its home services portfolio, supporting its mission to build sustainable communities.

[00:29:01] The move enhanced their ability to provide homeowners with trusted advice, inspections, and industry-leading expertise. Now, Carson Dunlop is not a person. It is one of North America's leading home inspection companies and education providers. Founded back in 1978, they're known for providing comprehensive home inspection services and developing educational programs for home inspectors. Very, very crucial part of the real estate industry here.

[00:29:30] They also create technical publications and software solutions for the home inspection industry. Yeah, I mean, if you're like in the GTA, typically if there's a pre-home inspection, the most trustworthy name, like people expect to see a Carson Dunlop pre-home inspection usually. So that's an interesting one. Another crazy one, this one's huge in the mortgage space, Nesto. Yeah.

[00:29:52] Which, you know, we met the founders of Nesto at Tal Schwartz's event there, FinTech event. Yeah. And because he was on a panel there and Nesto bought CMLS. So- Crazy. Yeah. Nesto's acquisition of CMLS private mortgage lending platform creates Canada's largest tech-enabled lender. The combined entity will lead both residential and commercial mortgage sectors. So, huge.

[00:30:19] And, you know, Dan, you being on the real estate side, me being on the mortgage side, and us both having a background in, you know, a bit of construction and commercial real estate, I can tell you right now the mortgage industry is just as archaic as the construction industry, the residential, the commercial industry, right? But let's keep going. Another one back in December of 2024, so not long ago, TRAIN acquires AI and SAS HVAC management platform.

[00:30:44] The acquisition enhances TRAIN's, it's T-R-A-N-E, TRAIN's advanced building management and digital capabilities, building upon the company's existing collaboration. Is it the same TRAIN like the air conditioners? Exactly, it is. If you've looked at any meaningful amount of properties, you've definitely seen a TRAIN air conditioner unit outside of a house before. You know what they say about TRAINS, right? Oh, is it already time for Dan's bad joke of the day segment?

[00:31:13] Because I don't know if I'm ready. Can't stop a TRAIN, baby. Does anybody actually say that? Dude, I've literally had more than one of my HVAC friends say, you can't stop a TRAIN to me before. Okay, fine. Fair enough. Fair enough. Back in November of last year, November of 2024, Intact Insurance acquires Jiffy, a home maintenance platform. This acquisition will enable Jiffy to accelerate its service expansion across new jurisdictions

[00:31:43] while advancing Intact's digital engagement strategy. Building Stack, a property management platform, merged with RentSync. This integration marked a significant step toward offering an all-encompassing list-to-lease solution for rental housing. So from here, let's go into some of the report's construction trends. And there's a lot of great other pieces that we're going to go through, engineering, residential.

[00:32:11] So let's move over to that side of the report. Modular and off-site construction labor shortages are driving new approaches where off-site assembly reduces timeline costs and improves quality control. And Dan, we've seen this a lot in the ADU space, right? Specifically for laneway and garden suites where, hey, like we don't need to come build it on site. We'll just build it and deliver it to site. Now, there's also a new push for workforce tech enablement.

[00:32:38] So things like time tracking and safety technologies can boost workforce management and efficiency through performance monitoring and incentives, right? These tools become vital as labor forces decrease. We just talked about the silver tsunami where we're going to be seeing, unfortunately, tens of thousands of tradespeople leaving the industry. Let's also talk about new materials that are being introduced, right? The industry adopts, the industry can and should be adopting sustainable materials like

[00:33:07] recycled components, low carbon concretes that can reduce environmental impacts while enhancing building performances. So this isn't just an environmental play. This actually helps the building perform better. Now, smart adaptive materials are being constantly under development and constantly being slowly implemented into the actual structures. And I'll top over to engineering where AI driven innovations are improving concrete mixtures

[00:33:36] and designs. Like, you know, you hear a lot about AI and it's like, oh, they're just going to keep iterating in like this like low risk digital environment to like solve like cure like diseases or like, you know, solve like create new antibiotics and whatever new drugs. I never really thought about like it's the same thing for concrete, right? As an example, like they're like, you know, a lot of these like chemical processes. Yeah. They can just iterate in this digital environment and improve concrete mixtures and designs, material performance, automated construction processes.

[00:34:06] And so we can expect in the future to have more efficient and sustainable construction practices. Similarly, AI is transforming zoning and permitting. And we've been doing this a ton at Valerie. Like we basically have taken the entire like major streets, Toronto zoning, all of the different municipal zoning, secondary plans, et cetera, and embedded them into the into the AI is like a pine cone or like brain basically. And so, you know, if it says, if you put in all my properties on this street, like when

[00:34:34] you put in your address, it'll give you a home evaluation, it'll give you a CMA, but then it'll also say, oh, I noticed that your property is on this street. There's a chance that it's in this planning and you might actually be able to build a 10 unit building without site plan or 60 unit building or whatever. Right. And I know Al who we're doing the middle school thing with is doing the same thing, right? He's doing something similar, but his is very much more GIS based. So it's like looking at lots and lot dimensions and determining ours is really text based. So whereas his is like, you know, here's what you can actually do.

[00:35:04] And we're going to go through that actually at the middle school event, which will have passed, I think by the time this event's out, but we're going to actually, we'll have a recording, I think available of that. We're going to aim to try and do that. If we get enough demand, we'll basically take the entire day and put it into a, into like a, you know, like maybe a four hour video. If you, if anybody wants to buy a video on how to build missing middle housing in the GTA, but this whole thing can speed up the approvals process and reduce bottlenecks and urban planning and design.

[00:35:31] Generative AI is obviously revolutionizing the upfront design by generating, optimizing building layouts and structures and reducing the time and costs during the early planning stages. So I've seen a ton of people like in the planning space, really, really using this well. Okay. So we've talked to construction, we've talked to engineering and planning. What about residential trends, right? Rising housing costs are driving the adoption of creative ownership models to increase access to home ownership.

[00:36:00] And these solutions provide alternative financing structures for those that would be otherwise priced out of the market. And this is stuff like a new rent to own programs or fractional ownership programs. Now homeowners and sellers alike are demanding a more seamless and efficient real estate transactional process platforms that digitize and consolidate services, including things like financing, insurance

[00:36:25] and transaction management are gaining prominent prominence by simplifying the entire experience and reducing the stress and the friction of a transaction. Now we've seen alternative brokerage models, such as the one that you are at Dan Valerie, growing as companies explore new structures to reduce costs and increase transparency. I think that is so key. The increasing transparency part, right? Dan, as you said, let's not be gatekeepers.

[00:36:54] Let's be expert advisors. A wave of startups has emerged with solutions that streamline agents' administrative work, right? That busy work, that work, the bane of your existence, it's worth the work that no one really wants to do, allowing them to focus more on the most important thing in real estate, relationships, client relationships. It is a people business at the end of the day. Dan, talk to me about how AI is affecting the lead to the lease.

[00:37:23] It would streamline processes by automating lead gen, nurturing and follow up. And this is something we're doing a lot on the brokerage side as well, reducing the time spent on manual tasks while improving conversion rates. You're getting co-pilots like Maeve, who we mentioned, AI-powered tools who help real estate agents and enhance their productivity and decision making with scheduling, data analysis, client interactions. Home management is becoming an AI thing as well.

[00:37:50] I've been looking into this a lot because I just find it's like all your lights and whatever like with Google Home, like, you know, I think with the Home Hub talking to the AI and asking it to do stuff. I think that these advances are enhancing convenience while reducing costs for homeowners and for investors, it'll be the same thing. Like, I really do think that smart home automation is going to be a huge theme in real estate. There's a guy I've been meaning to get on the show actually who does this and he does

[00:38:19] like submetering and stuff like that. Chris, like it's kind of like low voltage, high voltage, like electrician plus you kind of just your like tech cables and the stuff that they build is just crazy. Like you could, you could basically get like monthly like bills that you could distribute to your tenants so that they know like how much electricity that they're using. And it's all just technology that's already used in like condo buildings as an example. Just nobody's ever taken it to like the individual landlord sector. Tenant screening is another one.

[00:38:47] AI enhances tenant screening by analyzing large data sets to predict reliability. And risk. This is interesting because there's that, there's that article. I think we did a, uh, an episode on it where like 50% of, or over 50% of the tenant applications for this certain building were fraudulent. And we, we actually, this is, this is pretty wild. Like everyone's talking about the CRA, the CRA verification thing with the mortgage lenders. We've built this. Like it's not hard. It's very simple to do. There's a, there's a document.

[00:39:14] I mean, accountants can already go into somebody's CRA, right? Like, you know, I'm, I'm, it just blows my mind that they've made it sound like it's a super complicated thing when the infrastructure actually already exists. Um, anyway, hit me with the commercial trends here and then we'll try and, uh, we'll try and wrap up. Yeah. Yeah. Going back to, as, as you lovingly and dearly put it, Dan prehistoric commercial real estate. Well, they are making some strides as well. And it's mostly in the building energy efficiency, right?

[00:39:43] Where we see artificial intelligence, uh, deep learning algorithms, learning to predict building energy needs. And this is a massive cost for these, uh, for these commercial real estate landlords, right? If they can figure out how to automate HVAC systems and reduce energy consumptions, they can save the building owners a ton of money while actually decreasing greenhouse gas emissions. So it's a win-win.

[00:40:06] And then there's other things like optimizing the grid, everything from identifying the optimal usage of certain floors and certain buildings to charging times for electric vehicles. And, and all of that of course increases the, the, the return on investment for those, uh, for those building owners. But it also increases the user experience for the people that are in there actually living and working in those buildings.

[00:40:31] Now it's probably worth noting that none of everything we just mentioned would be possible without money. And so it's worth noting and giving a shout out to all of the people who are backing a lot of these things. So prop tech funds are an investment vehicle focused on prop tech companies and they back startups in all of these. These things, smart businesses, digital services. This is a little bit different from like a VC, Nick, what's a VC. Yeah. Thanks for that, Dan. Nick Shunary will, uh, tell you exactly what a VC is. It is a venture capital.

[00:41:00] It's a form of private equity financing provided by a venture capital firm or fund to startups and early stage companies that show high growth potential. So VCs typically invest larger amounts of capital compared to angel investors. They take equity stakes in these companies that they invest in. They provide strategic guidance and industry connections. So it's not just a, here's a chunk of change, make it work. It's let me help guide you through this.

[00:41:27] And of course, as always, they are looking for significant returns on that investment through an eventual exit, whether that be an acquisition, like we've talked a lot about, uh, or an IPO, an initial public offering where they will hit the stock market and likely make a ton of money. And a lot of these prop tech funds are structured as, as VC funds, but with a specific focus on the real estate sector. Uh, the top ones that are mentioned in the report would be a late green soil groundbreak ventures who are involved in DMZ actually, which is an incubator that we were just chatting about.

[00:41:58] We're going to, we're going to talk a little bit about incubators, but you and I were just talking about this. Like they have a podcast studio there and we're like, Hey, we'd love to come and start recording the show there. So maybe all of our episodes will be coming from live from DMZ near you. Yeah. Um, Hazelview ventures as well. And a venture on. So let's actually look at some of the dollars behind this, right? What are the top funded prop tech startups in Canada? Well, as we've already talked about host away with a whopping $781 million.

[00:42:26] Go bolt $254 million jobber, which is a home improvement and maintenance startup $252 million. Nesto, which we already spoke about on the show here, uh, digital brokerage over $200 million certain, which is C E R T N, which is. They don't like vowels in the tech industry. Yeah. No. I mean, why have a vowel, right? Uh, why have a vowel or make any money?

[00:42:51] Um, sorry, that was mean tech startups, uh, certain, uh, which is a tenant screening and payment platform. A hundred and almost 170 million. And then Avid Boss, which is a property management company over $150 million. So well over a billion dollars in just the top funded prop tech startups. And if we look at the stage of these companies, um, 28% were pre-seed, 35% were seed, 12 were series A, 11 were series B or B plus, and 14% were exits.

[00:43:21] Now, pre-seed funding is the earliest stage of startup funding. Typically occurs when a company is still in a concept or development phase. So Dan, your big idea that you're going to sell to Google, that would be a pre-seed idea. It's pre-idea actually. You still haven't thought of it yet. That's a new category. There's no funding for that yet that I'm aware of. Um, and if you find, if anyone listening has money to give to Dan, we have several possible great ideas brewing.

[00:43:49] Companies are usually still developing their product or service. Funding amounts are relatively small, anywhere from as little as a hundred thousand dollars up to about a million. Investors are usually kind of the friends and family or the angel investor, right? Early stage accelerator type. Uh, and the focus here is on providing the initial concept and building what is known as an MVP, not a most valuable player, but a minimum viable product. And of course, valuations at this point are typically lower than in the later funding stages. Yeah.

[00:44:19] Then you get to your series A and B. A is about, uh, you know, typically companies have proven business models and revenue. Funding is usually two to 15 million. And series B is the next stage of VC financing, usually 15 to 50 million. Um, and, uh, I guess kind of going back to some of these like companies that are earlier, let's talk a little bit about those incubators. What, what's an incubator? Like, I mean, you know, you probably know what they are from like for babies, right? I guess it's kind of the same thing. Like these are baby companies. So.

[00:44:47] I, do I even need to explain? I don't even know if you do now. That was good. That was good. So imagine your company is a little tiny infant. Okay. A prop tech incubator specialize, uh, is a specialized program or an organization that supports those early stage prop tech startups. Incubators typically provide things like mentorship from other real estate or tech experts, access to a actual physical workspace and some essential resources, probably things like data storage.

[00:45:17] Uh, of course, networking opportunities with potential investors and partners and industry experts, technical and infrastructure support and initial seed funding, or at least access to potential funding networks. Yeah. So the notable incubators in Canada would include the DMZ at Toronto Metropolitan University, which is focused on innovation. Uh, we're, I'm actually going there tomorrow, literally to check out their podcast studio and meet everyone.

[00:45:44] Um, reach Canada, which is part of, uh, second century ventures, which has membership and growth opportunities, uh, startup in residence powered by Desjardins and our labs, which is a real estate venture builder, you know, with industry innovation and real estate industry members there as well. I guess we'll just, we'll wrap up here. Um, that was, you know, key takeaways from today's episode. Prop tech sector is experiencing significant transformation across residential commercial and construction segments.

[00:46:13] AI and automation are doing a huge thing. Um, if you enjoyed today's deep dive into prospect, a prop tech, and want to learn more about the intersection of real estate and technology, don't forget to check out realist.ca. We cover everything from digital marketing strategies to implementation of, you know, prop tech in your, your real estate investment business.

[00:46:33] So head over to that site and, uh, you know, meet some, some like-minded folks, uh, join our, our, uh, free meetups, join our free, free online community. There are monthly calls on the free online community and weekly calls on the, uh, on the paid, um, group coaching community. And then we do offer one-on-ones as well. So I'd love to see you in there anyway, that's about it. Yeah. One final thing. Don't let this stuff scare you. This is going to revolutionize the industry. Be part of the right side of that revolution.

[00:47:03] Don't, don't be scared. Be excited. Thanks so much for listening. As always, we'll see you soon. The content of this podcast is for educational and informational purposes only. It is not intended as financial, legal, or investment advice. Always consult a qualified professional for advice tailored to your unique circumstances. The views expressed are those of the hosts and guests and do not necessarily reflect the opinions of affiliated organizations. Daniel Foch is a real estate broker licensed with Valerie Real Estate Inc.

[00:47:31] Website is Valerie.ca, V-A-L-E-R-Y.ca. And a member of the Canadian Real Estate Association, the Ontario Real Estate Association, and the Toronto Real Estate Board. Nick Hill is a mortgage agent and partner at OWL Mortgage. License number 10317. Agent license M21004037.