Not unlike many other sectors in India, the real estate brokerage space is pretty fragmented. The best option for a person looking to buy a house is to ask friends and family or reach out to a local broker. And especially if a person is someone who’s looking to buy a house for the first time, not only are they confused and anxious about the biggest financial decision of their life, they also don’t know who to trust. This was the pain point which PropTiger targeted and was started in early 2011 by three exceptional individuals.
Dhruv Agarwala, Kartik Varma and Prashan Agarwal have more than 3 decades of cumulative work experience with MNCs as well as startups. Dhruvand Kartik, classmates from Harvard Business School, previously co-founded iTrust Financial Advisors which they exited by selling to the Karvy Group. Dhruv was previously the CEO of GE's Infrastructure business in India while Kartik was a senior member of the investment team at Ziff Brothers Investments and then at Europe’s leading hedge fund. They teamed up with Prashan, a graduate of IIT and ISB, along the way who previously started Allcheckdeals, an internet real estate brokerage business.
The three of them got together and decided to build a business to help middle class Indian families who are first time home buyers. “We wanted to provide a solution to a person in India who is looking to buy a house for the first time and has no one who they can reach out to for honest, transparent and independent advice,” says Kartik. They were targeting people earning in the range 7-15 lakhs per annum and could afford a house costing anywhere between INR 30 -50 lakhs.
One thing was for sure, there had to be a strong interplay between the online and the offline world. “We had to build a technology platform which has a comprehensive list of all new property launches and under construction homes with available inventory and could be used by families to do their information discovery and research. After this, the transaction would happen offline through our highly trained real estate professionals who help the client with documentation, negotiation on price and location and after sales service towards installment payments towards their home purchase,” says Kartik. This in turn required scale on both accounts- online and offline.
As it is with any business, execution is a very key aspect of building a business. The trio wasn’t doing it for the first time and this experience helped them to setup operations quickly. Starting up with an initial investment from some HNI’s in early 2011, they put a core team in place and built the technology platform. The challenge was to list detailed information about as many projects as possible which will enable the user to make a correct choice. Simultaneously, they opened sales offices in different cities across the country where there was abundant supply of new homes and where they could use their hybrid online and offline model to help clients.
Investors began to take notice of the strong foundation that PropTiger had managed to build in this space and were impressed with the monthly volume of transactions that management achieved very early on in the company’s inception. Pretty soon, leading VCs like Accel Partners and SAIF Partners put in a Series A round worth $5 million to facilitate the next phase of growth and support a deeper presence across the different offices. Currently a team of more than 450 people are employees of PropTiger across 8 cities in India, across different functions ranging from sales, technology, marketing, customer service, operations and headquarter functions. Management believes that they are still in the early stages of a decade long boom in residential housing driven by middle class India’s desire to own and live in their own homes.
More on the Funding Game
Funding rounds are always exciting and especially a bigger round makes people sit up and take notice. “Raising funds can often be challenging in any part of the world, and India is no different,” says Kartik. It took PropTiger close to 6 months to close the Series A round which is pretty much the time it takes in India. “As more VC funds and investors start participating more actively in funding start-ups, the ecosystem will develop further and this will hopefully get into a virtuous cycle,” says Kartik.
And raising a round of funding was particularly not as challenging because of their backgrounds. They’ve all done it before and this brings them a whole lot of credibility when approaching the VCs. From their fund raising experiences, Kartik shares some advice:
- You will improve your negotiating position if multiple VCs are interested in you.
- Picking an investor is like dating. Don’t be desperate and fall for the first VC that indicates that they are interested in you. Do your thorough research on a prospective VC to understand what they have done in the past, how they have treated entrepreneurs and what value have they added to their portfolio companies.
- Take money only if you really need it. Once you have taken money from an investor, the clock starts ticking for the investor to show their investment returns, and you will constantly face scrutiny and pressure from the investors which sometimes might not be consistent with how you expected the relation to develop with your investor.
Growth, some numbers and metrics to track
The core intention behind a technology platform is to scale it up. PropTiger has been successful in doing this and has built a large enough listing and good enough customer service. 400-500 clients transact apartments on a monthly basis currently. This number predominantly depends on the season as if new project launches occur in a particular month, volume is closer to the higher side of this range.
Crossing a GMV (worth of all property transacted) of INR 2,500 crores in the last financial year, the prospects for PropTiger are strong and the core business is profitable. To keep a track of their monthly performance to improve their efficiency and profitability, here are the three main metrics they track:
- Cost of generating a lead
- Conversion costs
- Productivity of a single sales employee
“The future plans are pretty straight forward- not to make any major mistakes and keep on improving what we have been doing across all functions within the company to continue to keep our clients happy through the home buying process. We don’t intend to open up offices into other cities just for growth’s sake but will penetrate deeper in the cities we’re already present in,” concludes Kartik.