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GroupEstate Feasibility Study

Periodic Reporting for period 1 - GroupEstate (GroupEstate Feasibility Study)

Reporting period: 2015-02-01 to 2015-07-31

GroupEstate is an innovative ICT business that seeks to solve a major social problem across the European Union - access to affordable home ownership. The company addresses this problem with a social solution, by providing an online platform that enables the formation of shared property projects in which groups of individuals join together to collectively build or buy real estate. By joining together, participants reduce their costs, increase opportunities, and create communities.

In January 2015, GroupEstate was awarded a grant from the European Union’s Horizon 2020 SME Instrument Phase 1 programme. The purpose of the feasibility study was to allow GroupEstate to validate its business concept, make evidence-based decisions about its product viability and expansion possibilities, and prepare to launch prototypes in other European markets.

The main findings of the feasibility study are:

- GroupEstate has a strong business concept, with a large and viable customer base in Germany.

- The company’s original assumptions about its customers and revenue strategy were found to be not viable, due to the size of the market and time required to convert a customer. Therefore, a pivot was executed to focus on a larger and more reachable customer segment, with a quicker and more scalable revenue strategy.

- Several European countries are viable new markets for short term expansion. These include Austria, Switzerland, and the United Kingdom. Medium-term expansion opportunities include Belgium, Denmark, France, Italy, the Netherlands, and Spain. Additionally, Greece and Italy were identified as exploratory markets.

- GroupEstate’s business plan is strong and presents a very good case for investors. According to the financial plan, GroupEstate will reach break-even in 2017 and will generate a profit of €1.9 million in 2018. A capital need of €1.5 million in 2015/16 was identified.

As a result of the feasibility study, GroupEstate is now in a far stronger position to capture a lucrative market, attract the funding required to enable expansion, and realize its vision of creating a scalable solution to the European problem of affordable access to home ownership.
During the six-month feasibility period, GroupEstate undertook a challenging review of every aspect of the business, scrutinizing all assumptions made during the beta phase and analysing them against real data, customer feedback, and growth forecasts.

The reporting work was divided into three main sections:
- Progress Review (including Product Review, Customer Segments, Marketing & Promotion, Revenue Model and Finances).
- Internationalization (including European Market Review, Data Analysis, and detailed country reviews for United Kingdom, Austria and Switzerland).
- Business Plan (including sections: Product & Service; Problem & Solution; Unique Service Proposition; Product Description; Technology; Functionality; Market; Customer Segments; Competition; Mkareting & Communication; Sales; Revenue Model; Development Plan; SWOT Analysis; Team; Organiation & Finance).

The feasibility study has been prepared through a combination of internal research, workshops, and advisory board meetings.

Advisory Board Meetings: GroupEstate formed a company advisory board to provide accountability, networking support and general strategy reviews. The board includes: Prof. Dr. Ingo Rollwagen; Mr. Ulf Kunze, a business development expert working for the real estate portal ImmobilienScout24; and Mr. Steffen Groß, a lawyer specializing in real estate law. The advisory board met once a month to hear updates on the company’s progress, and provide feedback. The advisors were additionally tasked with approaching potential investors and partners in their professional networks. Advisory board meetings will continue to be held monthly as part of an ongoing process of company development.

Internal Research: The company’s four co-founders were tasked with preparing sections of the report. Research was conducted as part of daily work. Information was formulated into this report and edited by company CEO Joel Dullroy. CFO Ibrahim Sawaneh created the financial modelling for the business plan. CEO Christoph Lippert and CTO Dominik Keller contributed to various chapters. Research was accompanied by workshops in which the information was reviewed and enhanced

Workshops: The company invited an external consultant to conduct a series of workshops to interrogate their assumptions, identify weaknesses, and set milestones for improvements. The consultant was Prof. Dr. Ingo Rollwagen, an experienced business advisor with a specialization in innovative social businesses. Workshop topics included platform content and technology readiness; mission, message and communication; and company strengths and weaknesses. A further workshop was held with Mr. Dennis Boehres, a startup founder and business advisor, who reviewed GroupEstate’s pricing model and revenue strategy. All workshops resulted in detailed action plans which were executed.

The end result was a Feasibility Study of 53 pages in length, and a Business Plan of 44 pages in length.
"As a result of the learnings from the feasibility study, GroupEstate executed a major ""pivot"" of its business model. The feasibility study revealed the initial assumptions about customers and revenue sources were flawed. But it also discovered another, more viable and lucrative model.
The main learning centred around GroupEstate's customer segments and revenue model. It was found that the original business assumption of GroupEstate - to serve small groups of individuals who wish to buy a single property - was not by itself viable due to multiple factors. However, during the feasibility study it was realized that the most achievable customer segment was found in the market for joint building groups.
Such joint building groups (in German, baugruppen or baugemeinschaften), already exist in many European countries. They provide a cost-effective and community-focused path to construct a multi-residence property between a group of families and individuals, usually under the auspices of a lead architect.
This led to a refocusing of the product, messaging and marketing activities to specifically focused on joint building groups.
The pivot also discovered a new revenue model. From the outset, GroupEstate planned to earn revenue by connecting group buyers to finance partners, which would pay leads or commissions to acquire new customers. The feasibility study revealed new target groups in the community building sector, or Baugemeinschaften. This sector was found to be extant, identifiable, reachable, and lucrative. It also aligned well with GroupEstate’s core mission of creating a scalable solution to affordable home ownership.
These learnings necessitated a complete revision of the company’s revenue model and finance plan. The new finance plan demonstrates that GroupEstate will reach break-even point in 2017, and will achieve a profit of €1.9 million by 2018. To achieve this, GroupEstate requires funding of €1.5 million during 2015/16.
Improvements to the product were created through a process of conceptualization, design, programming, public release, testing, and user feedback. Problems were prioritized, and enhancements were released on a rolling schedule from February 2015 until June 2015.

The internationalization section of the study involved analysing all European countries to identify viable new target markets. Data was analysed from multiple sources to create a comparison table to aid decision making. Countries that presented low home ownership levels, high housing costs, high house prices against rent, high house prices against income, high prices in real terms, and a high price to rent ratio were considered favourable.
The detailed comparison of national statistics identified nine countries (including Germany) that contain conditions suitable for a viable launch of GroupEstate’s product. These were: Belgium, Denmark, France, Netherlands, Austria, Sweden, United Kingdom and Switzerland. Two further countries were selected as exploratory markets, despite not meeting all statistical indicators. These were: Italy and Greece.
GroupEstate then selected the three most viable and reachable markets, and conducted in-depth reviews of their local conditions. These countries were: Austria, United Kingdom and Switzerland. For each of these countries, the following factors were reviewed: market trends; state of shared property trends; legal environment; competitors; partners; market entry strategy.

As a result of the feasibility study, GroupEstate was able to enhance its entire business by discovering new and viable customer segments and revenue models. It has prepared to launch in multiple European countries, armed with detailed market information and an entry strategy.
In terms of social factors, the potential for impact remains high. GroupEstate's product is one focused on improving access to affordable housing options. The model of joint building and buying can mitigate many social issues - including ageing populations, widening inequality, urban gentrification, public housing stock decline, multicultural and multigenerational integration.
GroupEstate is now prepared to launch a rapid growth strategy, including deployment in several European countries. It has professionalized and can present a detailed business plan to investors. The company will continue its operations, growing in line with the findings of the feasibility study, and solving a major social challenge thanks to the support of the European Union Horizon 2020 SME Instrument."