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PropTech Startups Are Merging To Entice Big Real Estate Investors

Major real estate investors are still conservative when it comes to PropTech, and startups are looking for ways to legitimize themselves to an industry that still doesn’t fully understand them.


A growing number of small to midsize PropTech companies are merging to achieve scale and diversify their offerings in order to increase their appeal to investors and potential adopters in the real estate industry, according to a new report from real estate/tech law firm Goodwin. As a result, PropTech could be entering its first major wave of consolidation.

The first major PropTech merger remains one of its biggest: Online home listing service Zillow’s acquisition of its competitor Trulia for $3.5B in 2015. The industry saw five significant mergers in 2016 and four in 2017 before ticking up to seven last year, Goodwin reports, and two such transactions have already been announced this year.

By now, some applications for PropTech have become clear: smarter electric and security systems for buildings, or gathering and analyzing swaths of property data to find trendlines and such. But there is still a gap between hearing of an exciting breakthrough at a conference and integrating it into a business that didn’t change much for decades.

“There are all of these small [startups] available, and there isn’t a lot of know-how at real estate companies for what to do with their technology and how to implement it,” Goodwin Real Estate Industry Group partner Blake Liggio said. “A lot of companies are looking for one single tech platform to adopt, so the more abilities a tech company has, the more seamless its integration into real estate.”

Though few major real estate players have jumped into PropTech with a major acquisition, plenty have dipped their toes in the water — especially firms with deep pockets that can afford to absorb bad bets. Global brokerages like JLL and CBRE and massive private equity firms like Blackstone and Brookfield have formed venture capital funds to buy stakes in PropTech companies, if not acquire them outright.


Many real estate companies have bought into those larger funds to take a safer route to investment and to have access to the technologies in which the funds invest, Liggio said. Tentative or initial steps into acquisitions have become the norm in short order; a year-end Altus survey found that 53% of commercial real estate firms with at least $250M in assets have made some form of investment into PropTech.

“For the most part, larger real estate companies and REITs are experimenting,” Liggio said. “So we’ll see some real estate entities take a PropTech asset and pilot it for one real estate asset in their portfolio and see how that plays out, rather than [make] out-and-out acquisitions.”

Before long, all of those equity investments will likely hit a critical mass that pushes some investors to buy startups as a way to gain exclusive access to technology that has proven itself, or simply to take territory as competition gains in intensity. Liggio believes that the real estate industry is on the cusp of a feverish investment period.

“[With] the current pace of mergers and acquisitions, there will be at least two to three more years of this before we look back and realize that the rapid period of growth was there,” Liggio said. “There are some major doubters of the movement, but I’m not sure they’ll be able to hold out much longer.”

Related Topics: PropTech, Goodwin, Blake Liggio