Pi Labs, a London-based venture capital firm investing exclusively in proptech companies, is expanding into Asia-Pacific by opening a satellite office in Hong Kong.
Faisal Butt, who founded Pi Labs in 2015, tells PERE that the decision to expand into Asia reflects the region’s role in facilitating the growth of technology companies on a global level. “The European companies we’re investing in must be building for a global audience. This decision is really part of our vision to help our portfolio companies go global and capture that global TAM [total addressable market].”
To have somebody on the ground in Asia act as a gateway between the portfolio companies and their customers in the region, Pi Labs has appointed Akina Ho, a real estate and technology professional with more than 20 years’ experience, as an adviser. She will be based in Hong Kong.
Ho is an adjunct professor at Hong Kong University of Science & Technology. She previously helped build the venture capital arm at Hong Kong-listed real estate company Great Eagle Holdings, where she served on the company’s investment committee. She is also co-founder and adviser for the Hong Kong Proptech Alliance, in addition to co-founder and lead ambassador for Asia-Pacific at the AllStarsWomen DAO.
A significant component of Pi Labs’ investment thesis is to back companies focused on the development of technology to help decarbonize existing buildings, or to reduce embodied carbon in construction materials. As such, Butt sees an opportunity to tap growing interest in sustainable real estate in Asia-Pacific.
“The Asian real estate groups are very open to innovation and are quite forward-thinking,” he says. “They are very much interested in digitalizing their portfolios and their operations, and sustainability as a topic has recently become quite a high priority for them, whereas it was not five years ago.”
Additionally, while competition for proptech capital is increasing as the subsector grows, especially among US venture firms – as evidenced by PERE’s latest Proptech 20 ranking – this is not the case in Asia. “It’s a relatively uncrowded market there,” says Butt. In addition to helping portfolio companies to globalize into Asia, setting up an outpost in Hong Kong “will help us to build more relationships with strategic and institutional capital in the region.”
The political tensions between China and Western economies were an issue two years ago, says Butt, but sentiment in Hong Kong has improved since then. Recently he has seen a “very buoyant mood” in the market. “After a very long covid lockdown, perhaps the longest lockdown any major global city experienced, there is an eagerness to do business and to transact and invest and deploy.”
Further down the line, Butt expects to open Pi Labs’ mandate to invest globally, at which point the Hong Kong office will also help the firm to source the best deals in Asia. “The longer-term vision for Pi Labs is to be a global investor that’s focused on the built word and early-stage investing, so this hire in Asia is a first step toward that long-term vision.”
Full divestment
Also this week, Pi Labs announced the full divestment of its first fund, Pi Labs Fund I. According to Butt, it is the first proptech fund to have been fully exited, which he describes as “a milestone for the industry.”
Fund I has delivered a 10.24x return on investment, which Butt says outperforms the top decile of venture capital funds since its inception in 2015 by 220 percent when compared with Pitchbook performance data. “These crystallization events and delivering these types of returns is exactly what’s going to bring institutional capital into the sector. To cross that chasm between strategic capital and institutional capital, this is what’s needed.”
The firm made its final exit late last month when it sold its equity position in OfficeRnD, a Bulgaria-based company that provides a software solution for coworking spaces. The stake was acquired by US growth equity firm Blue Star Innovation Partners.
Pi Labs closed its third fund, Pi Labs Fund III, on $90 million in March 2022, against a target size of $50 million. According to PERE data, Dutch pension investor APG Asset Management was the cornerstone investor in the fund, and German real estate manager Patrizia also committed capital to the vehicle.
Butt expects to be entering the market with Fund IV next year.
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