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Steve Melhuish, Co-founder and Vice-Chairman of PropertyGuru
With the SVCA’s 25th anniversary and silver jubilee coming up in October 2017, we have reached out to past winners to catch up and interview them about their experience after their awards.
In 2010, PropertyGuru won the SVCA’s “Best Performing VC/PE Backed Company” and has gone from strength to strength since then. Steve Melhuish, who was PropertyGuru’s CEO in 2010 and has since handed over the day-to-day operations to Hari V. Krishnan, has agreed to be interviewed for our lead-up to our silver jubilee celebrations. Steve shares about PropertyGuru’s experiences since the 2010 awards, what it has experimented on and is experimenting with, and his thoughts about the industry in 2017.
PropertyGuru won SVCA’s Award for “Best Performing VC/PE Backed Company” in 2010. Has PropertyGuru’s aim and focus changed since then? How would you describe it now?
10 years ago searching for a property was highly frustrating and lacked transparency. Property buyers had to rely on incomplete information to make a major life decision. It was complex, painful and scary - consumers were powerless. We therefore set about to address this.
Our core focus has not changed – we help property seekers make confident decisions. We set out to put the power back in the hands of the 650 million consumers in ASEAN by investing heavily in content and technology innovation which in the process disrupted an antiquated US$150bn South East Asia property market that had changed little over the last few decades.
In the first 7 years we focused on increasing transparency. We brought 1.2 million properties online - many with photos, videos, floorplans, full descriptions, pricing information etc. We published 650 articles, research and property reviews every month, create video interviews, conduct sentiment surveys and provide property price trends. With the explosion of smartphones, our focus shifted from desktop to mobile, enabling people to use their personal property advisor in their hand. Over 60% of users now access PropertyGuru via their smartphones.
Today, we’re the largest online property group in South East Asia with operations in 5 countries. Every month, 23 million people use PropertyGuru’s services to find their dream home – advertised by 50 thousand agents and developers. This results in US$15 Billion dollars’ worth of property transactions annually – higher than the GDP of Laos.
Although the market is now much more transparent, and consumers are much more empowered to make decisions – it is still not an easy process and customer expectations continue to rise. Some challenges remain around the quality of property listings, relevance of information, and complexity of the property search process. We therefore continue to invest heavily with the aim of providing property seekers with a more personalized and high quality service. We want to match each buyer with the most relevant properties, best quality content, best sellers, best financing and ultimately help them secure their dream home easier. We are investing heavily in artificial intelligence, drones, virtual reality, messaging, and data science to achieve this.
PropertyGuru was a disruptor to print classifieds back when it first launched in 2006. Now with fresh competitors such as 99.co or greyloft.com, has PropertyGuru changed or adapted its business model in response to these challengers? Also, how do you differentiate and stay ahead of the competition?
PropertyGuru has faced new competitors almost every year since starting 10 years ago. This has included major global online classified companies, large government linked media companies and new VC backed entrants. Some companies have survived; others have disappeared, declined or merged. We welcome competition - it is good for consumers, as well as educating and expanding the market for all players.
Our philosophy in PropertyGuru has always been, and remains, continual investment in innovation, content and marketing to help the consumer navigate the market and make confident property decisions.
This investment has translated into 30% per annum growth to 23 million monthly property seekers and market leadership in 5 SEA countries today. In Singapore, 80% of consumers rely on PropertyGuru - 9 times more users than its nearest competitor. As a result, sales enquiries to PropertyGuru’s real estate agent and developer clients in Singapore have increased 70% in the last 3 years.
The South-East Asia real estate markets are valued at US$150bn, and online property advertising is forecasted to grow six-fold in the next 10 years. So, PropertyGuru is in a strong position in large and rapidly growing markets. We are very grateful to be here. But that doesn’t mean we can stand still. We’re constantly innovating - our job is not done yet.
PropertyGuru has grown organically through growth and acquisition of several businesses. Can you share any lessons learnt from scaling and integrating businesses across Southeast Asia?
We realized what worked in Singapore didn’t translate from market to market. We learned that people in different countries have different property requirements and search differently. For example, in Singapore most people know the name of the condo they want to live in, and search for property by name. But in Thailand, people are more focused on neighbourhoods such as Silom, Sukhumvit or Thong Lor. Therefore to appeal to the Thai market, we needed to completely overhaul the user experience and focus much more on neighbourhoods and map searching – something much less important in Singapore.
We learnt that whilst some local customization of the search service was important, in order to scale fast we needed a single platform. In 2011, we started well by developing each new country site from a single core software code but over time as the different country websites changed, it led to 5-6 completely different code bases. This meant that software bugs or new improvements needed to be developed for each site separately – requiring additional software engineers for maintenance and new development. As such, in 2014 we decided to move to a new single platform and to migrate all countries to this over a 2 year period. Whilst the consumer front end experience is customized for each country the core platform and functionality is the same which means bugs are fixed once for all sites and new features can be rolled-out immediately across all countries (if required).
We completely underestimated the challenges of regionalization - expanding from 1 to 4 countries in 4 months almost killed the company. We grew from 60 people (solely focused on Singapore), to over 200 people regionally within 12 months. As you can imagine, it didn’t go well. In our rush to hire, we didn’t properly vet people and many “new” employees quickly became “former” employees because they weren’t up to scratch. Our staff was stretched to breaking point – trying to juggle supporting the Singapore business, build websites for the new countries, hire staff, train them, start marketing etc. Morale plummeted and innovation ground to a halt. For 2 years the existing Singapore business, as well as new markets, struggled.
There is no replacement for “living and breathing” the new markets by spending time on the ground to understand on the ground with staff, customers, partners and competitors – and this takes time and effort. For example, I personally visited Malaysia over 40 times in 2015 alone and my co-founder, Jani, did similar with Thailand. We also learned that going regional required a complete different approach to talent given the complexities of a larger, cross functional, cross cultural organisation – we needed to build a professional regional executive leadership team, develop middle management layer and moved to a regional/local organisation structure which consumed a big part of 2014 and 2015.
We have also used M&A to a limited extent over the last few years to accelerate new market entry, increase depth/breadth in existing markets or plug a capability gap rapidly. Examples include our acquisition of ePropertyTrack in 2015 (the leading property developer sales and marketing collaboration platform), acquisition of the leading Asia property awards platform as well as minority investment in Batdongsan (Vietnam’s leading property portal) in 2016.
Last year, PropertyGuru used drones to shoot views from the upper floors of a residential property project in Malaysia. What other exciting technologies and new services do you plan to implement/launch?
Given the rise in population, middle classes and urbanization across South East Asia, property developers will be busy building new homes… and increasingly condos in the major cities. But a lot of people don’t know what it would be like to live up in the sky in that location. So, we use drone videos to give buyers a sense of what it’s like living with a view from the 60th story versus the 10 story. We also use drone video to show buyers the neighbourhood so people can get a bird’s eye view of the local amenities, transit stops, and schools.
We have invested in the latest high-definition Matterport cameras in each country to create high quality virtual tours and 3D floor plans to allow people to get a better feeling for the property by moving from room to room.
15 million property photos are uploaded every month onto PropertyGuru. We are investing in Artificial Intelligence to analyze and categorize and improve these photos and listings - the goal is to make sure every picture on our website is relevant to the buyer and while it’s still aspirational, technology will make it a reality.
We’re experimenting with Virtual Reality and Augmented reality, both of which will transport you into the property and give you a realistic tour. It is the future and we will bring our users that experience when it becomes mainstream.
As consumers increasingly use messaging platforms like WeChat, BBM, Facebook Messenger or WhatsApp to communicate with friends, families, and increasingly brands; we are testing a new Facebook messaging app to help customers interact with Property Guru.
We have recently launched a service that enables consumers to view property developers’ new projects via mobile and tablet apps, compare available units in “real time”, customize their preferred unit and then reserve the unit by paying a booking fee online with their credit card.
We will shortly be rolling out personalised recommendations on our search results, which suggest other properties based on the seeker’s behaviour – which will lead to more relevant properties matched, faster decisions and better overall consumer experience.
We will continue to invest heavily in innovation and content to help SEA’s property seekers find their dream home.
After 2015’s S$175 million funding round, does PropertyGuru have any plans to raise more capital either privately or through an IPO?
PropertyGuru revenue is growing fast and as such we’ll return to profitability again in 2018 after aggressive regional expansion outside Singapore – with heavy investment in product, technology, branding and talent. As such, we have no need for additional capital to support operations. However, we may look at more aggressive M&A in future which would require some additional capital but this will likely be private placement - we have no IPO plans and are enjoying being a privately held firm (backed by great shareholders),who can plan long-term.
Lastly, any advice for budding entrepreneurs aspiring to be like you, especially in today’s economic climate?
Firstly, identify a “big pain” - a large problem that is impacting a large market and fixate on trying to solve this for the key customers. Don’t focus on a product or technology and then look for a solution/market – getting a group of your key customers to pay for your services more than once is a good test of whether you’re addressing the “pain”. Look at markets that have not yet been disrupted - government, education and financial services are some examples. Look at large macro trends that will impact us in 10 years - ageing populations, middle class demand for better healthcare or global warming/environment are some examples.
Secondly, think about timing. The Harvard Business Review conducted a major research study a few years ago analyzing thousands of start-ups to try to identify the key success factors. The single biggest factor determining success was “timing”. Clearly “timing” is critical but hard to get right. However, don’t get stressed about it - Joseph Tsai, the Alibaba Vice-Chairman said that one of their key learnings at Alibaba was that things take much longer than you expect [to reach a tipping point], but often are much bigger in the end than anticipated.
Finally, when it comes to building a startup there is absolutely no replacement for “hard work”. If you are not 100% committed, do not start. We bootstrapped PropertyGuru for the first 18 months, took no salary for the first 3 years and worked 7 days per week without vacation for the first 5 years. Building a start-up requires an incredible level of passion, energy, resilience and self-belief to survive and thrive past the critical first 3 years or so.
The SVCA thanks Steve for his time and candidness. The SVCA 25th Gala Dinner will take place on the 12th of October 2017. Bookings are open until September 1st 2017.