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PERSPECTIVES

Investment flows to private Proptech while public firms flounder



At mid-year, Proptech firms are finding that they are not immune to the general tech market correction. Fundraising has slowed — though that might be expected coming off a record-breaking year. SPACs, once the darling of the industry, have hit a brick wall. But by all accounts, this is just a temporary setback for an industry poised to take advantage of opportunities for years to come.

 

QUICK TAKES

  • There were 2,234 Proptech companies in the US in 2021 (Unissu)

  • Most popular cities for Proptech companies in 2021: New York (351), San Francisco (275), Boston (91) (Unissu)

  • Global Proptech market size is predicted to be valued at $86.5 billion by 2032, up from $18.2 billion in 2022. (Future Market Insights Global and Consulting)

 

2021 and Q1 2022 found the private Proptech sector awash in venture capital. According to a report by the Center for Real Estate Technology & Innovation (CRETI), 2021 saw $32 billion of venture capital invested in private real estate tech companies, a record-breaking amount. Forty-nine percent of the capital went to residential Proptech firms and 7.6% to commercial, with the rest split among construction, multifamily and other.


Using a narrower definition of Proptech (and so totals were smaller), a report put out quarterly by Keefe, Bruyette & Woods reached the same conclusion — 2021 was a record-breaking year — and saw fundraising in the first quarter of 2022 signaling an even bigger fundraising year to come.


However, that signal of even better things to come looks to have been premature. The sector is still attracting more than its fair share of venture capital — $13.1 billion in H1 2022, which was 26% of all global venture capital placed, according to CRETI — but it is no longer on track for another record year. Investors still view Proptech companies as growth opportunities too good to pass up, but rising interest rates, a volatile economy and a poor showing by public Proptech companies seem to be having an impact.


And speaking of the public companies, despite large amounts of capital flowing into private companies in 2021 and early 2022, public Proptech companies have seen a decline in value during the same period. On average, Proptech stocks fell 20% in Q1/22 compared to the overall market decline of 6%. Companies that went public via the SPAC route have fared even worse, falling an average of 47% in Q1/22 and most trading well below their initial offering price.