Latest PropTech Index Shows Investor Confidence Still Runs High as Industry Matures
Despite the fallout from WeWork in 2019, venture investors now see the PropTech sector going through a healthy normalization and rationalization period, as strong tailwinds persist for the sector moving into 2020.
Aaron Block, co-founder and Managing Partner at New York City-based MetaProp tells The World Property Journal, "The Investor Index was driven down from an all-time high of 8.8 at Mid-Year 2019 to 8.0 at Year-End 2019. This decline can be attributed to a combination of market forces including the failed WeWork IPO, as well as the uncertainty of heading into an election year but most notably, investor deal volume is beginning to level off. This trend is supported by our finding that only 45% of investors plan on making more investments in 2020, compared to 2019, down from 64% six months ago. Although this is a considerable drop-off, as the market matures, we're seeing PropTech deals being done at a later stage and at a higher dollar amount, causing the total number of deals to plateau year over year. It's important to note that strong portfolio performance, robust deal flow, and increasing M&A activity have kept investor optimism high for 2020."
The two major PropTech market takeaways
Investor confidence continues to ride high behind robust deal flow, increasing M&A expectations and strong portfolio performance. The fallout from the failed WeWork IPO, as well as moving into an election year brings some uncertainty to the space which may explain the drop from 6 months ago.
As the space begins to mature, we're seeing PropTech startups hire more employees and hit elevated yearly revenue numbers. With startups continuing to flood in the market, consolidation will remain high. An increasing sentiment in the ability to raise capital is met with concerns of bloated valuations from around the space.
"The Global PropTech Confidence Index shows continued strong investor interest in PropTech," said Christopher Beach, REBNY's Chief Technology Officer. "This report demonstrates that New York City remains a global hub for technology development and innovation, providing the solutions needed to address the challenges facing the real estate industry."Year-End 2019 Global PropTech Confidence Index Highlights:
- 80% of Investor respondents expect to see either more acquisitions or about the same number of acquisitions in 2020 compared to 2019
- 81% of Startups expect it to be either easier to raise venture capital or about the same in 2020 compared to 2019, up from 45% at Year-End 2017
- 45% of Investors plan to make more investments in 2020 compared to 2019, down from an all-time high of 64% six months ago
- 42% of Startups said it was either likely or very likely that their company would either be acquired, go public or have a major liquidity event in the next 3 years. This number is up from 28% in Mid-Year 2018
- 16% of the Startup respondents are founded by females, an all-time high and double the number at Year-End 2016
- 86% of Investors said that PropTech companies in their portfolio are currently performing above expectations or meeting expectations in terms of customer growth
- 34% of Startup respondents had $1+ million in total annual revenues in 2019, up from 24% a year ago
- 42% of Startups are targeting mixed-use assets for commercial deployment, a major increase from 23% at Year-End 2017