Venture capital from Taronga Ventures is giving innovative sustainable tech solutions the boost they need to transform the property industry. Co-founder Jonathan Hannam will be a highlight of our Moonshot 2030 eco proptech event on 23 November. And he’ll also be a judge on our pitchfest for great startups to round off the day – in person!
The way we build and operate buildings has evolved very little over the years.
The industry is notoriously slow to innovate, with the protracted, complex task of delivering a new building not the sort of activity that bodes well with experimental technologies or systems that might cause delays or cost overblows.
For companies looking to sell technologies to the real estate sector, it’s a tough gig. With the property sector in Australia dominated by large, established companies, it’s a hard sector to break into as a fledgling startup, no matter how promising the technology is.
As such, the industry has so far missed out on a lot of the innovation that has already made many other industries more productive and efficient, generating savings and, pertinently, lowering environmental impacts.
Now, venture capital is helping more of these new technology vendors penetrate the real estate sector.
Taronga Ventures, founded in 2015, invests in technology to modernise the built environment. It was started when co-founder and managing partner Jonathan Hannam noticed that the real estate and construction sectors were struggling to innovate.
“We wanted to establish something that would be the bridge between emerging technology business and their potential customers.”
He says despite a sluggish start, innovation in the industry is now gathering pace.
“What’s happening now is larger companies are realising it can reduce costs, that improving efficiency can lead to better performing assets.
“Now companies are looking at innovation as a differentiator.”
“There are a few different prongs to the Taronga Ventures operation, including a venture fund backed by the big names in property, such as Dexus, CBRE, PGIM, Grosvenor and Mitsubishi Corporation. In total, this amounts to over $500 billion real estate portfolio that will actually benefit from the emerging tech that these companies are financing.”
“This collaborative arrangement means we are really solving problems that our partners want.”
For property owners, they get to be among the first to implement the successful technologies and leverage the first mover advantage.
The model has delivered an outperformance so far with an internal rate of return of 72 per cent. “It’s a good start for a fund… we are very niche and have quite a different model from a generalist fund that might invest in 1000s of deals.”
“The benefit we deliver for investors is not so much the fund return but what we deliver at the asset level. If we deliver operational costs, it’s a substantial benefit for the corporate.”
We now know green is good for business
Hannam’s organisation is all about fast tracking the transition to net zero. As a real estate investor, he says this is easy now that there’s an abundance of research showing that the capital value of an asset can be improved by being “smarter, cleaner and connected”.
“ESG isn’t a risk, it’s an opportunity – this is a way to generate additional revenue that will lead to financial gain.”
Hannam has watched a sharp rise in interest from investors when a solution with sustainable outcomes is presented, adding that Australia’s commercial real estate industry is already ambitious on sustainability. Most of the key players are targeting net zero by 2030, at the latest.
One of most exciting companies in the investor’s ecosystem on the environmental front is US-based company Carbon Cure, which has developed a technology that can inject carbon dioxide into the cement-making process where it becomes permanently embedded.
The technology is able to reduce the emissions released by making concrete – which is currently responsible for an alarming eight per cent of global emissions – by about 20 per cent, and without sacrificing the durability or performance of the product. In fact, Hannam says it becomes stronger due to the chemical reaction that takes place.
Another company of note is Voyage Control, which “replaces the clipboard” typically used to track construction site logistics such as delivery and materials inventory. By improving the efficiency of this process so that less material and effort is wasted, Hannam says it’s possible to reduce some of the scope 3 emissions associated with construction.
In the field of improving the efficiency and quality of construction is another company, OpenSpace, which uses an off-the-shelf 360 degree camera to record everything that happens on a building site. It produces a digital rendition of the work to be sure it’s being done correctly, which is good for building quality as well as insurance premiums.
“So imagine with the Opal Tower and you could peel back construction like an onion and find exactly where the problem is.”