Time Era: February 2019
The first step for any startup journey is to find the right idea. But how do you know if your startup idea is right? How do you know it could be successful? How do you quantify that? As Peter Theil says, “going from 0 to 1 increases your chances of having a unicorn on your hands” this is because you are the first to build your particular idea in a yet established market. “Going from 1 to N is simply reinventing the wheel”, yes you may create a profitable startup, but is it going to be a unicorn? Unlikely.
The Early Days
We, Tinashe and Matt, the co-founders of Property Deck, have always been innovative and forward-thinking. Going through school together we both were entrepreneurial and massively interested in technology. Most days we would talk about becoming tech entrepreneurs and starting a successful business together. We had many attempts and learning opportunities during our early days. Whether that being starting a local gardening business, a phone repair company or developing an MVP (minimum viable product) bidding system for unwanted hotel rooms.
We both then went off to university. Tinashe to study computer science and Matt to study business. Post university we both still had a strong desire and passion to start something together. We got to the stage where we sat down over a couple of weekends and brainstormed all of the problems either we’ve had in life or major problems that family and friends have had. After all, most successful startups provide a solution to a problem, they have more than just a random startup idea.
The Initial Thought Process
We’d both worked incredibly hard in our early careers enabling us to buy our own houses at 23. Now both 28 years old, Tinashe is a lead on a successful software tech team and Matt is a fledgeling HR Director. We’ve both experienced massive problems when buying and selling property particularly related to the estate agents and conveyancers. We began to question family, friends, colleagues and other people we knew about their experiences of the process of selling or buying their homes. This coupled with the research we conducted and the reputation the property buying and selling process has as being the most stressful time in life, told us that there could be a strong need for a solution to this problem.
We then worked out that the primary professions in the property transaction process, being estate agents, conveyancers and mortgage brokers could be to the root cause of the problem. Not all of them, but some of them at least.
This got us thinking that perhaps selecting the right estate agent, solicitor and mortgage adviser could be critical to the successful buying and selling of a property. In addition, we realized that all 3 professions have quite a low barrier to entry with a low set up cost and that, in some instances, the day to day running of the process was provided by standard administrative staff. Unfortunately, this has led to substandard estate agents, conveyancers and mortgage advisers providing a poor service to the market. This could be one of the main reasons why the property transaction process has the stigma it has.
Refinement Of The Startup Idea
So how could we create a solution with the use of technology to essentially match homebuyers and home sellers with the main professions and services in the property industry? Tinashe, with a strong background in software development, could write the code to build a solution and Matt with the business background could drive and steer the business.
We then began to research into ways to bring 2 sets of people together, digitally of course. We needed to matchmake them. In our case bringing property buyers and sellers together with property professionals. Other solutions bring 2 sets of people together successfully, Airbnb, Eventbrite and Thumbtack and recognisable examples. Our marketplace idea was born!
We decided to flip the market on its head. Why not put the customer in a position where the estate agents, solicitors and mortgage advisers compete over them? Lets give the power to the customer. We worked out that the estate agents and other professionals need the work however a good proportion of them don’t provide even an adequate service let alone superior experience.
Considering the sale of a property is the largest transaction most people ever make, it surely would make sense to have some quality performance information about the professional you are hiring to represent you. Every other industry has marketplaces, so we just thought: Why not estate agents?
Property Deck was born. A customer focussed property marketplace that would partner with only the best performing and reviewed estate agents, conveyancers and mortgage advisers. Thus growing the chances of a better experience for the customer by increases the probability of obtaining the right price when selling, stress-free communication with all parties involved and genuinely getting the best-suited professionals for the customers’ individual circumstances.
Now we had decided on the startup idea, we needed to establish if it was viable and had the potential to grow into a sustainable startup business. It was never just about making money for us. Yes, it is important to build a healthy business however we also had overarching plans and aspirations to create an organization that would provide some good in the world and change peoples lives for the better.
Before we researched any potential competitors or thought about writing a business plan, we needed to establish what type of market the UK property market is. How big is it? How many transactions occur annually? How many residential houses are there in the UK? How many estate agents, conveyancers and mortgage advisers are there? Off the top of our heads we thought the property market had to be one of the largest in the UK that is constantly growing with the population of the country. We mean everyone needs a roof over their heads right?
To answer these questions and to establish if our startup idea could be viable with plenty of room to grow in its market, we needed to establish the size of the below:
- TAM (total addressable market)
- SAM (serviceable addressable market)
- SOM (Serviceable obtainable market)
We will run you through how we calculated these figures in the next article. Here is something important to remember or to keep in the back of your mind as a guideline if you plan on going for investment in the future, as we are with Property Deck. As a general rule of thumb many venture capitalists (VCs) won’t consider your startup for investment unless it is entering a market that has a total addressable market (TAM) of at least £1 billion. You will then need to realistically show potentials VCs with clarity, as a minimum, how you can scale your business up to the level of £100 million in revenue over the course of 5 – 7 years. These figures seem a bit steep, huh? Theres a reason for that which we will talk about in more detail later on. Don’t worry if this seems daunting, we’re only talking about VCs. There are plenty of other investors out there that invest in startups much smaller.
See you in the next article!