Feature: PROPEL BY MIPIM
A capital idea While VC funds increase their exposure to proptech and drive industry consolidation, traditional property firms are also allocating bigger budgets to digitalise processes
A
n anecdote from Nick Romito, co-founder of proptech firm VTS, succinctly illustrates how much attitudes to proptech have evolved in the past decade. “When we first started, there was no proptech,” he says, describing the lead-up to launching his leasing, marketing and asset management platform in 2012. “Our first investor meeting was with a venture capitalist, and my co-founder Ryan Masiello and I were really excited. Well, we told the guy our idea… and he said it was the dumbest thing he had ever heard. That was very motivating!” Romito says. “Fast forward to today, and it would be hard to find a venture capital firm which doesn’t have some sort of exposure to technology.”
The latest numbers tell the same story: investment capital can’t get enough of real estate’s digital dimension. Over $32bn (€28bn) was poured into technology for the built environment in 2021, according to a report from industry think tank, The Center for Real Estate Technology & Innovation (CRETI). The data, while representing a 28% increase on 2020 and a 3.23% increase over 2019, also reveals changing investor tastes, as residential real estate applications received around half of all investment. Reflecting the industry’s evolution and greater maturity, most financing went to Series D companies, at 36%, while Series C companies attracted some 31% of the share. Raj Singh, managing partner of JLL Spark, says: “Over the past year, the growth of the overall
Aaron Block, MetaProp co-founder, says that proptech has proved it can adapt to real estate’s dynamic needs
startup landscape combined with a difficult fundraising environment led to greater consolidation in the sector. In 2020, M&A activity was at a record high of $21.9bn, and in just H1 2021 it was already above $18bn. We expect to see a focus on mergers, acquisitions and IPOs in the year ahead, especially M&A, as established players seek the scale and scope required to serve the largest of commercial customers.” Zach Aarons, co-founder and general partner at MetaProp VC, adds: “Proptech is now a household name in both the public and private equity markets. The industry is truly global, and adoption is accelerating very quickly.” However, he warns would-be investors that expert insight is still required: “We have definitely experienced some choppiness in the public equity markets as the sector reaches a maturation point and analysts realise that not all businesses within the proptech sector should
be valued the same way.” Singh similarly suggests that the 2021 SPAC craze may well be due a reset. “Although this trend will likely continue into 2022, the SEC has become more deliberate in its examination of candidates, which will slow things down significantly. The trend may also gain (or lose) strength based on how last year’s SPAC mergers perform as they deSPAC and start trading as public entities.” Conversely, for Brendan Wallace, founder of venture capital firm Fifth Wall, the real estate industry should be contemplating taking bigger risks. 2021 was quite a year for the firm, with $1.1bn in new commitments across Fifth Wall’s funds, over 25 new portfolio companies, and the addition of 27 new team members. Speaking recently at Propel by MIPIM in New York, Wallace noted that car innovator Tesla “was a R&D company for more than a decade, before it became a car manufacturer” and
MIPIM PREVIEW • 45 • February 2022 MIPIM_Propel_+D2_+S.indd 3
02/02/2022 09:53
