Deal in focus: Octopus leads £1.25m seed round for Property Partner

"When I look at crowdfunding as a theme – and it is an extremely powerful theme – it presents clear opportunities, but there are also risks and concerns," says Jo Oliver, director in the venture team at Octopus Investments. "Does the crowd always understand the asset; the risks and challenges? Particularly with complex financial assets, those risks and challenges increase."

If crowd funders, on the whole, lack the expertise and resources of more traditional investors, Property Partner, Octopus's latest investment, sits in a market with which many in the UK are au fait. The company is preparing to launch its platform in the coming weeks, which will allow people to make investments of £50 and upwards in buy-to-let properties.

"Property is an asset class that is well-understood," says Oliver. "Not perfectly understood, but well understood by the vast majority of people. It is also a very large ticket item for most people. The ability to invest in the property market in a simple, low unit-cost basis – where users can build diversified portfolios – is an extremely attractive proposition."

Octopus has a well-publicised history of investment in property-based assets. In June, portfolio company Zoopla, a property website, floated with a market cap of £919m. Oliver believes Zoopla has "democratised the house-buying process" by providing users with increased visibility of the market, thereby removing the traditional reliance on estate agents.

"When the internet really took off in the late-90s and early-2000s, many people thought property was a vertical that would be disrupted very, very quickly. It is highly inefficient, in terms of both cost and quality of service," says Oliver. Property Partner, he says, will have a similar democratising effect to Zoopla. It will allow people to spread their risk across different areas, invest on a "fractional basis" with a "dramatically reduced" level of effort.

Snappy deal
In keeping with the theme of rapid investment, the timespan from Octopus's initial interest to deal completion was a particularly short one. "I'm pleased to say we went from first formal meeting to completing the deal in less than five weeks," says Oliver. "For us, that's pretty much a record." The process was an archetypal case of deal-sourcing through an existing network. Oliver explains; Octopus's Fred Lardieg was providing Property Partner's founder Daniel Gandesha with a reference for Thomas Remmert, who was in the process of being appointed CTO. Remmert had undertaken various technical due diligence work for the VC. Thus, informal discussions began between Lardieg and Gandesha about the plans for Property Partner.

"Our investment philosophy is pretty simple," explains Oliver. "We're looking for fantastic opportunities, addressing significant problems within £1bn-plus addressable markets, ideally on a global basis. But above all else it's about the team we are investing in. It is the team that actually executes on the opportunity, so when we come across someone we know who is working on a team, that is a great head-start for us."

Following the investment, Property Partner will look to expand its existing team. "We're hopeful and confident the team will really drive through on the opportunity, which we see as being very significant," says Oliver. "Continued development of the platform is going to be another main use of the funds. We want to make sure we test the proposition and get it right as quickly as possible." While the company will allocate some funds towards marketing, Oliver is adamant this will only take place on a "sensible basis". The focus will be on ensuring a profitable and efficient marketing strategy.

Zoopla experienced the benefits of a resurgent UK property market over the past few years. Should Property Partner enjoy the same good fortune, Octopus could once more be onto a winner.

Advisers
Equity – Shoosmiths, Al Pete (Legal).

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