PropTech Today: $200m investment for a storage firm – where is the potential?

A couple of weeks ago, SoftBank’s Vision Fund led a whopping $200 million investment injection into Clutter, the US-based on-demand storage startup.

Clutter provides storage solutions for those who don’t have the space, or even the inclination, to store all of their belongings in their home.

According to the Clutter website, once in storage, retrieving your possessions is ‘as easy as ordering a pizza’. 

Who would have thought there was so much money in physical storage? The enormous potential that SoftBank clearly sees in Clutter is made even more remarkable given the subscription society that we now live in. We own fewer physical belongings today than we ever have. So how does it justify such a heady amount of investment? 

I also feel it speaks volumes about the way we now live our lives. We seem to enjoy making the world immediately around us smaller, something that can be seen in emerging trends of micro-homes and pod-based workspaces.

Some of this downsizing is being driven by consumer choice - I don’t have the requisite qualifications to guess what the psychological drive behind making our spaces smaller and smaller is; maybe something to do with the womb? However, some of it is being driven by societal necessity. 

Our population is growing and more of us are choosing to live in urban environments. As such, until we start making better use of suburban space, space is running out. 

More people now need to squeeze into space which isn’t expanding. What’s more, house prices and rent values mean that a lot of people are now priced out of the more generously-sized spaces they once occupied.

These two trends are undeniable and set to continue moving forward. Is this why SoftBank sees Clutter as such promising investment? Or might it be something more to do with the physical storage sector being, as of yet, relatively underserved by forward-looking startups?

As pointed out by Wired, SoftBank’s charismatic leader, Masayoshi Son, has an uncanny ability to know exactly where potential lies ever since he started importing Japanese arcade games to the US as a teenager.

The man affectionately referred to as Masa has always had bold visions of the future and has rarely, if ever, been wrong. All of which tells us there is wild potential in physical storage, even if the rest of us mere mortals can’t see how...yet. 

One motivator for SoftBank’s investment could simply be that storage and the moving process remain underserved sectors, especially in comparison to other areas of property in which tech has exploded.

The property lifecycle classification system that we use to categorise PropTech companies at Unissu shows that the move phase is by far the most underserved part of the lifecycle. 

Perhaps SoftBank has seen a vast field of as yet unpicked fruit and realised that good money can be made by simply getting there first. Because, while yes, there are other companies operating in the storage and move sectors, none of them have the backing that Clutter now has, and none of them have the invested interest of the one of our world’s most visionary thinkers. 

Of the 6,786 PropTech vendors currently listed on Unissu, just 48 work within the move phase of the property life cycle. With current disruption low, current levels of competition low, will this move from SoftBank be the first of many cash injections into similar companies? 

I think it’s likely, despite the fact that physical storage is the polar opposite of the subscription-based ownership and so-called space-as-a-service trends we are hearing so much about. 

Physical storage solutions garnering such investor attention seems to directly juxtapose the space-as-a-service story we are all increasingly familiar with. On one hand, we are shedding our belongings and rejecting the idea of physical ownership - when was the last time you bought a DVD, for example?

On the other hand, we now live in such small spaces that even our clothes can be left without a place to be kept. So, for those who have got enough money to justify such a luxury, the winter coat can be stored with Clutter alongside bicycles rarely ridden and musical instruments long since played.

In one sense, it’s possible to argue that Clutter is a space-as-a-service company with a business model directly aligned with, rather than juxtaposed with, this emerging movement. 

The umbrella idea of storage solutions certainly presses all the space-as-a-service buttons - will we see more residential and commercial space, especially in large buildings in premium locations, perhaps even coworking spaces, offering space up for short-term, flexible storage?

In the same way that we are going to start monetising our rooftops for 5G receivers, will we soon be monetising our closets and our utility rooms?

“We believe that storage is a vast and traditional market with huge potential for disruption,” says SoftBank. “Clutter’s technology and superior customer proposition will help facilitate future growth in expanding urban communities where space is at a premium.”

It seems to me that Clutter is a direct result of our underprepared and overpopulated cities - should space be, as SoftBank puts it, a ‘premium’? I don’t think it should. Yet it remains so.

I suppose the bet that SoftBank is making here is that cities will not change. Space will remain, or indeed become more, competitive and unaffordable. The price of storing externally will be far cheaper than the cost of actual physical living space. 

I am not sure I completely see that happening myself - if affordability continues to be an issue, and the reason for living in the existing mega (or even secondary) cities is not as important as it once was - e.g. flexible working takes off and the need to commute decreases, meaning the concept of ‘space’ will be about where we live rather than location to our work. 

Before I go off on a complete tangent about my theory on future cities, I will cut it there because, for one, I wouldn’t want to bet against Masa just yet but secondly, and perhaps more importantly, this shift will take a while.

Until then SoftBank, I am sure, will drive valuations of other similar businesses higher and thus create a bigger market in this sector as others jump on the coat-tails. I know I probably would for a quick win.

*James Dearsley is a leading PropTech influencer and commentator, and is co-founder of PropTech platform Unissu. You can follow James on Twitter here.