Investor appetite for proptech falls as M&A market fires up

The number of investors looking to cash in on proptech has fallen, with over half expecting more M&A activity to occur over the course of the year, new research shows.  According to Metaprop’s Global PropTech Confidence Index in partnership with the Real Estate Board of New York and RICS, which surveyed over 2,300 investors and proptech companies, 45% of investors plan to make more investments in 2020 compared with 2019. This is down 15 percentage points compared with this time last year, when 60% of investors were expecting to make more investments into proptech in 2019 compared with 2018.  Most investors are expecting the M&A market to heat up this year, with over half (53%) expecting more proptech start-up acquisitions to occur.  The hottest area that proptech investors are eyeing up is smart buildings, with 30% of investors stating this technology is what they are most interested in investing in. Other areas investors are most interested in are: finance and investments (27% stated this area is the most interesting to them); and the architecture, engineering and construction sectors (with 18% claiming this was the most investable area). One anonymous investor who filled out the survey said WeWork has had an impact on investment decision making. They said: “The valuations relative to scale are becoming disproportionately bigger fuelled by strategic dollars. The impacts of WeWork are reverberating through the asset class. Expect to see a tougher fundraising environment from institutional VCs.” Meanwhile, 19% of the circa 1,600 proptech chief executives surveyed said they were expecting it to be harder to raise capital over the course of 2020 compared with 2019. The majority (58%) expected it to be about as easy to raise capital as it was this time last year. MetaProp co-founder and managing partner Aaron Block said: “The entrepreneurs, investors and industry observers want to know how to make sense of proptech’s substantial tailwinds (financings, exits, etc) and WeWork’s setbacks. They want to understand how these market dynamics affect sentiment.   “To me, this period’s results demonstrate proptech’s resilience. Both proptech investors and proptech start-ups clearly believe that technology-led innovation will remain a growth engine and value driver for the real estate industry. I’m particularly encouraged by the investors’ consistent optimism.” To send feedback, e-mail lucy.alderson@egi.co.uk or tweet @LucyAJourno or @estatesgazette