2023 Proptech Venture Capital Report

Real Estate Sector Trends

The real estate sector in 2024 is expected to be shaped by a blend of societal shifts, technological advancements, and evolving consumer preferences. Key trends in this sector are poised to redefine the landscape, focusing on sustainability, adaptability, and inclusivity. Investments are increasingly channeled into projects that not only offer financial returns but also contribute to social and environmental objectives. This paradigm shift is seeing the real estate sector move beyond traditional boundaries, embracing innovative approaches to meet the challenges of urbanization, environmental sustainability, and changing lifestyles.

This sector's evolution is also reflective of a more profound societal transformation. As urban populations grow and environmental concerns become more pressing, there is a rising demand for real estate solutions that are sustainable, flexible, and accessible. Proptech innovations are at the forefront of meeting these demands, offering new ways to build, manage, and interact with physical spaces. The trends identified in this sector are indicative of a larger movement towards a more integrated, sustainable, and human-centric approach to real estate development and management.

Expert Insights

• Travis Connors, Co-Founder & General Partner, Building Ventures
  "Broadly speaking, private market investment interest in any sector is cyclical and quickly becomes over-inflated. 2021 witnessed the peak of irrational exuberance from the underinformed into Proptech startups. Rather than view the recent decrease in overall funding amounts as a negative signal, one need only look at the level of Pre-Seed and Seed investment to realize that the entrepreneurial energy unlocking real value in the sector is strengthening. A better, more sustainable, more resilient future requires reimaging how we design, build, and operate the built world, and the founders who will make that difference are only getting started."

• Brendan Wallace, Co-Founder & Managing Partner, Fifth Wall
  “2023 proved to be a significant pendulum swing from the record-high investment days of 2021. In 2024, I anticipate that we will continue to see a flight to quality, as investors & entrepreneurs turn more cautious — focused on stable, lower-risk investment opportunities."

• Ashkán Zandieh, Co-Chair and Founder, CRETI
  "In 2023, we've entered a discerning chapter in proptech's evolution, which demands a more keen eye from investors and founders. The U.S. maintains its lead as the epicenter of proptech innovation, echoed globally, with the U.K., India, and other nations contributing to a diverse landscape of opportunity and innovation."

• Daniel Fetner, General Partner, Alpaca VC
  "While 2023 was obviously a difficult year for proptech companies seeking capital, it was also a forcing function for companies to get their financial houses in order. I personally take pride in witnessing our companies make resilient and strategic decisions, prioritizing capital preservation amid challenges. While often difficult, I think these decisions have made for more sound business models, more attractive margins, and more sustainabe real estate sector in 2024 is expected to be shaped by a blend of societal shifts, technological advancements, and evolving consumer preferences. Key trends in this sector are poised to redefine the landscape, focusing on sustainability, adaptability, and inclusivity. Investments are increasingly channeled into projects that not only offer financial returns but also contribute to social and environmental objectives. This paradigm shift is seeing the real estate sector move beyond traditional boundaries, embracing innovative approaches to meet the challenges of urbanization, environmental sustainability, and changing lifestyles.”

• Shahriar Shams-Ansari, Co-Chair, CRETI
  “Market activity has been relatively muted at the growth stage, with a persistent but narrowing bid/ask spread as companies re-set their value expectations or grew into exuberant valuations from 2021/22. However, we continue to see promising adoption of technology solutions at all stages by the real estate ecosystem, as well as strength and momentum in earlier-stage fundraising. Accelerating venture interest in climate and AI, both of which have significant use cases in and adjacencies to Proptech, suggest the sector should be well-positioned for capital inflows in the years to come.”

• Nish Patel, Managing Partner, Inertia Ventures
  ”Tightening credit markets have created headwinds for not only real assets, but also PropTech companies - especially business models that rely on balance sheet origination or transaction velocity for scaling revenue. As we see better price discovery and rate stabilization going into 2024, the players resilient enough to survive will be the beneficiaries.”

• Alex Shtarkman, Vice President, Revolution
  ”Proptech is not immune, and in some instances, more acutely impacted by the VC market correction. Many companies have “kicked the can” by raising bridge rounds to avoid repricing, but that capital is due to dissipate in the coming quarters. Some will achieve breakeven and ride out the venture market storm, but many startups will have no choice but to shut down or fundamentally recapitalize and restructure. Net, net this dynamic should result in a brighter future for proptech – less “noise,” fewer features and more platforms, clearer buying/implementation decisions, and greater demand for tech spurring opportunities to innovate against evolving real estate pain points.”