As a partner at McCarthy Tétrault LLP and Co-Founder of MT>Ventures, Aliya Ramji is a recognized leader in corporate law and startup culture. High-growth startups rely on her unique blend of legal expertise and business acumen to help them seize opportunities, navigate challenges and grow successful businesses. In the article below, Aliya highlights some of the legal challenges faced by PropTech companies and shares how we can overcome those obstacles.
Real estate was already ripe for disruption, but new challenges like physical distancing have only accelerated the need for technology-enabled solutions. While we’re excited about the new wave of PropTech solutions, we caution startups about rushing into the market without the proper foundation.
Our company, MT>Ventures, specializes in working with high-growth startups to scale their businesses and seize their greatest opportunities. As a division of McCarthy Tétrault LLP, we have deep experience helping our clients traverse the legal landscape and ensure their company is well-prepared to launch, scale and succeed.
Through this experience, we also learned that obstacles are inevitable. Every startup will face its own set of challenges but with the right guidance, you can save yourself from unnecessary growing pains. Below, we’ve outlined three common errors PropTech startups make in their early stages and what you can do to set yourself up for success.
Don’t Create Solutions in a Vacuum
A problem that we commonly see with PropTech startups is that they try to develop their solution in a vacuum. They hunker down in a workspace and arise with this “genius” idea that hasn’t been informed by the people who will be using the product. Industry expertise and user experience are incredibly valuable, and when you fail to consider that in the preliminary planning phases, you’re putting a lot at risk – including product adoption, investment opportunities and future acquisition.
From a legal perspective, creating in a vacuum also means that you’re not thinking through the nuances and regulatory issues that arise with PropTech solutions. The housing, commercial real estate and PropTech sectors are highly regulated – which is why they are so ripe for disruption. Things have been a certain way for so many years that oftentimes, we’re transforming existing policies or finding innovative ways to work within the systems. In either case, you need to be aware of the landscape while you create and build.
As you start building out your products or services, take the time to understand the distinct issues affecting a space. For example, find out what building operators are struggling with and then uncover any regulatory hurdles that would affect a potential solution. This is where partners like MT>Ventures and R-LABS deliver added value. From our collective experience, we are well-positioned to help you think through the challenges, inform your solutions, and expedite a product launch.
Prepare Yourself for an Exit
Something that entrepreneurs don’t like to talk about it the early phases is their exit plan. Everyone wants to build the next big Canadian Unicorn. We’re so busy breaking barriers and growing solutions that we fail to think about what could happen years down the line. Whether it’s a partnership, IPO, or acquisition, you need to know what the ideal scenario is for your business, and just as importantly, what happens when it doesn’t go to plan.
Take partnerships for example. They’re a great option for rapid growth and can provide complementary skills and experience to your existing team. But what happens when the vision changes or a partnership doesn’t work out as expected? You need to think through these circumstances from the onset so you can unweave yourself from the other party and end the partnership amicably.
Because these conversations can be difficult to have, a third-party can bring a lot of value to the table. This is where partnerships with innovation labs and accelerators come into play. We can look objectively at your partnership and consider the strategic opportunities that would benefit the business and its stakeholders. But we also want to help you think through potential obstacles and give you an idea of what around the corner. Dissolved partnerships are not something we hope for, but it is something we should plan for.
Be Diligent with Data
When it comes to legal challenges, the number one issue for PropTech companies is data. We’re seeing everything from drones managing real estate to AI-operated buildings to cloud-controlled sensors and systems. With that much data floating around, we need to be very diligent about privacy, usage and storage.
First, you need to tackle privacy. Whether it’s commercial or residential real estate, there are a number of reasons a company may collect personal information. It might be to complete an individual transaction or a larger dataset for property management but in either case, you need to protect yourself and your clients against the legal implications of data collection. We advise our startups to know their customers’ preferences and only collect what they need for their business. It can be tempting to take in every tidbit but the more you have, the more information that can be compromised.
The second half of the equation is security. It’s a lot easier to manage data if you’re exclusively dealing with one client, but if you’re collecting and storing data across multiple servers or in different jurisdictions, the legal landscape becomes much more complex. Data privacy laws differ from country to country, and in some cases, even province to province. At MT>Ventures, we work with clients to ensure compliance with not only PIPEDA legislation, but we also ensure that our clients are aware of other obligations such as the GDPR when they’re ready to scale globally. Again, it’s about applying best practices early on so you can more easily scale in the future.
Future-Proofing Solutions
While it’s easy to get caught up in the excitement of a new solution, don’t rush into the market before you’re ready. The best business advice we can give is that you dedicate yourself to the planning phase and find strategic partners who can help you future-proof your business.
Today, there are several prominent organizations with the expertise to support your growth and the experience to help you navigate challenges and opportunities. Whether it’s at the ideation stage with R-LABS or the seed stage with MT>Ventures, find a strategic partner who understands your business and knows what it takes to successfully launch PropTech companies. This is the collaboration you need to put yourself on the right path and bring disruptive solutions to market.
