Investor Confidence In Proptech Plunges To Record Low, Report Finds
The proptech industry, once a darling of the venture capital investment world, has seen its fortunes flip in less than a year.
MetaProp's Investor Confidence Index, a metric that tracks the sentiment of investors in the proptech sector, reached a record low of 5.8 out of 10 in its latest report released Wednesday. At the end of last year, the Investor Confidence Index stood at a record high of 9.3.
The change in perceptions of proptech comes as the Nasdaq has fallen by roughly 25% from its peak late last year and as public valuations in the software as a service category have fallen below 2016 levels, according to the report from proptech venture capital firm MetaProp, which surveyed more than 4,000 investors and startup founders.
"This is the first issue of the Index that is being published during such a strong and ongoing market correction," MetaProp Managing Partner Aaron Block said in an introduction to the report. "Investor and startup sentiment reflect a pullback from prior highs."
Last year, publicly traded proptech firms saw their valuations rise faster than the overall market, and by year-end just 27% of startup founders believed it would be harder to raise capital over the next 12 months.
But six months later, 71% said they believe it will be harder to raise capital in the coming 12 months, indicating a profound shift as the market has soured.
More than half of founders said they have less than 12 months of capital on hand, indicating without new funding some may be eyeing a merger or liquidation.
Today, just 10% of investors are interested in investing in the office startup sector, a record low for that category. A valuations plummet, 73% of investors expect to see mergers & acquisitions in the proptech space.
"The turmoil in the public tech markets has officially arrived in the venture capital markets," Moderne Ventures partner Liza Benson said in the report. "The days of 50X+ revenue multiples and pre-emptive deals have ended."
JLL Spark partner Laurent Grill told Bisnow in June he was seeing valuations drop by more than half, and he expected some companies to fold.
Despite ongoing valuation concerns, there are still investors willing to plow ahead in the sector. Just 12% of investors polled by MetaProp said they expected to make fewer proptech investments in the next 12 months, with the majority saying they would make the same number of investments.
Most will be looking to invest in firms centered around single-family, multifamily or mixed-use, with firms at the seed or Series A stage drawing the most interest, according to the report.