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Proptech funding has fallen 14% in the first half of the year and is down more than 86% from its H1 2022 peak, a result of the overall tight lending environment, according to the Center for Real Estate Technology & Innovation.
Venture capital investment in proptech has clocked in at $4.4B so far in 2024, down from $5.1B during the first half of last year, CRETI reports.
2021 and 2022 were the boom times for VC interest in proptech, and the industry got $13.1B and $32B by this time of year, respectively. But last year was turbulent for proptech, and funding dropped 42%.
Investors are cautious about investing in proptech, as heavy hitters in the past failed to meet their ambitious growth targets.
Startups like Zeus Living, a short-term rental operator backed by Airbnb, and Veev, a unicorn proptech homebuilder, closed down in 2023 after raising millions in funding. Here, another short-term rental company, closed in January after two years in operation.
The biggest proptech VC deal in 2024 to date comes from construction company EquipmentShare, which raised $600M in an April debt round.
Investors are becoming more disciplined — and/or anxious — in their funding decisions, CRETI founder Ash Zandieh told Bisnow in December.
But startups are hopeful. Ninety-one percent of those surveyed are looking to raise capital, 45% within the next 10 to 12 months, CRETI reports.
More than 60% of startups are seeking early-stage funding, so investors have their pick of opportunities. Those wanting to get in on the ground floor of the next big thing know there are major risks attached, but also the best return potential, CRETI said.
Growth-stage funding is a safer bet, but only 28% of companies hoping to secure funding within the next year fall into this category. These companies have proven business models on their side, as well as the pitch to scale and grow to larger markets.
In a new era of proptech, defined by high interest rates and cautious investors, startups need rock-solid pitches and clear paths to profitability to get funding, Zandieh said.
Investors are also looking for secure risk management features, artificial intelligence capabilities and tiered pricing structures from the companies they spend on, according to CRETI. The latter provides a more stable and predictable return on investment.
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