Business-as-usual is no longer adequate for the challenges of the 21st century. Capitalism is beginning to lose its 'licence to operate' and the Unicorn mindset of 'Move fast and break things' is about to break. Purpose-driven companies today will play a key role in achieving ambitious sustainable development goals. That is why it is time to welcome a new animal to the PropTech zoo, the Zebra.
Welcome to the financial zoo
Bulls, bears, rabbits, turtles, pigs, ostriches, swans, cows, chickens, sheep, dogs, deer, pigeons, hawks, whales, sharks and wolves. The financial market is a true zoo. In this jungle there is also a mythical animal, the Unicorn. A Unicorn is a private company with a valuation of 1 billion dollars. This term was coined in 2013 by venture capitalist Aileen Lee, who chose the mythical animal to represent the statistical rarity of such 'successful' companies. Unicorns were once mythical creatures, now they seem to be abundant, not only in number but also in the speed at which they can acquire the minimum value of a billion dollars to achieve this status. The world currently has 477 of these rare creatures with a total cumulative valuation of $1,409B. The chance that a young startup will grow into a unicorn is about one in 5 million.
Mantra of Infinite Growth
Despite this prospect, new startups appear daily and challenge not only established companies, but also sectors. Many startups set everything in motion for hyper growth (exponential version of SDG 8) from a 'move fast and break things' mindset, both very popular with investors. Today's startups are in a crazy race to the next bigger, even bigger capital round. The investment rounds of 2018 are the series A laps of five years ago; the series A laps are the new B laps. According to Round Hill Capital, PropTech has a CAGR (red. compound annual growth rate) of 48% over the past 5 years. PropTech companies such as Airbnb, Houzz, Nextdoor, Cloudkitchens, We Company, Compass, HomeLink, Opendoor, Katerra, Zeroom, Ke.com, Ucommune, Danke Apartment, Xiaozhu.com, SMS Assist, VTS, Ten-X, Knotel, MoFang have grown significantly in recent years and have reached Unicorn status.
In spite of this, 90% of the startups fail. The majority goes down within 20 months after their last funding round. Success still equals the amount of money that is raised, or the profit that is made when they leave the company. The model for financing start-ups and the system of rewards for these so-called 'innovations' is not creative - it wastes potential. It is uninspired. It makes founders stare at the sky, looking at a unicorn rainbow and hoping to find a large pot of gold. In the real estate sector (and beyond) the mantra of continuous, necessary and endless growth lives on, while growth is also a choice.
Taking responsibility for the future
Over-ambitious tech start-ups that paint convincing images of growth do not always translate into business success. The most powerful illustration of this was Wework's planned IPO in September 2019. The $47 billion valuation had already been widely questioned and by the time the IPO was officially withdrawn, the value had fallen by more than $30 billion in just a few days. Since the collapse of WeWork, investors have become more cautious about investing in 'hyped' Proptech startups and scale-ups. The era of 'Move fast and break things' is over.
More and more entrepreneurs and (their) employees find the current way of doing business (focused on hyper growth and move fast and break things) not future-proof. They don't want to continue on the track of individualism, competition and the extraction of value. Customers, employees and even investors are increasingly urging companies to reconsider their view of the world and take a closer look at their place in it. Changing societal values, climate change, depletion of natural resources, and economic and political instability are beginning to call into question long-held beliefs - including the idea that growth is acceptable at any cost.
Capitalism and animal extinction
Capitalism is in the middle of the autumn of its existence. And by capitalism I mean a group of legal entities with the aim of competing for resources and 'profit maximization' for the shareholders. Capitalism is based on financial capital. However, there is also social and ecological capital. Changing social values and people's pressure force companies to reconsider their focus on a narrow definition of growth.
"This capitalism is beginning to lose its license to operate" - Peter Bakker, CEO WBCSD Source: Het Financieel Dagblad, 20 March 2020.
"It's time for a new capitalism - a more fair, equal and sustainable capitalism that actually works for everyone and where businesses, including tech companies, don't just take from society but truly give back and have a positive impact" - Marc Benioff, CEO Salesforce. Source: NYTimes, 14 October 2019.
"Fixing markets isn't enough. We have to actively shape and create them and tilt the playing field in the direction of growth we want." - Mariana Mazzucato (see also What is economic value, and who creates it?)
The Business Roundtable, (an influential association of nearly 200 CEOs of North America's leading companies), redefined a company's mission (from shareholders to stakeholders focus) in 2019, marking an important turning point. Blackrock, the world's largest hedge fund, has also recently made a number of additional strides into the sustainable pouch. In the future, they will only invest in purpose-driven organisations and will put sustainability at the heart of how they invest.
These developments also include new words and storylines. Shouldn't we also look for an alternative to the Unicorn? Because if we carry on like this, all the animals will die out.
Zebras are welcome at PropTech zoo
Today I am planning the seed for a solution and I want to encourage PropTech founders, investors, real estate companies and their stakeholders to organise themselves. This movement requires a new symbol, so we claim a new animal for the PropTech zoo: the zebra. The zebra company is not really new, but it is new to the PropTech storylines we are going to develop. In 2019, others started communicating about zebra companies in the New York Times, Harvard Business Review, PC Magazine, The New Yorker and others.
What is a zebra company? A zebra company is a company whose business model is aimed at realizing a social goal with as a result the creation of profit. Zebra companies are characterized by sustainable progress and development, not aimed at disrupting current markets, exponential growth and striving for its rapid exit. Zebra companies work together to create shared value and are not in the position of winners and losers and more, more, more. Unlike inflated unicorns, zebras are real animals.
PropTech for Good and the zebra mindset
People with a 'zebra-mindset' and companies with zebra characteristics fit in seamlessly with the PropTech for Good movement. That's why we started building an alliance. In order to create maximum value for the alliance we are looking for people and companies with a zebra mindset/characteristics [Please, fill in the form if you feel attracted to this movement] :
facilitate valuable connections between impact companies, impact ambassadors and other stakeholders;
increase the visibility of these impact ambassadors/companies;
create new business opportunities to make a positive impact and contribute to creating future-proof environments for everyone.
Those who embrace a long-term vision by starting to make an impact on the world and society, and who embrace the systemic complexity of the world, face a sustainable future. Forget unicorns. The zebra mindset and zebra companies are the future.
Author:
Menno Lammers