Proptech’s Moment: 2025 Could Be the Breakout Year for the Sector

Iconiq Growth emerged as the biggest beneficiary of ServiceTitan's IPO, with its 15.5 million shares valued at $1.6 billion

Image Source: CNBC

The stunning success of ServiceTitan’s IPO, which delivered $3.6 billion in value for its venture backers, has reinvigorated discussions around IPO opportunities for sectors traditionally overlooked. Among these, proptech—a fusion of property and technology—has the potential to become the next darling of the public markets, if investors are willing to take a closer look.

For years, proptech companies have struggled to escape the confines of private portfolios, overshadowed by flashier sectors like fintech and biotech. Yet, the landscape is vastly changing. Increasing digitalization in real estate and a rising emphasis on operational efficiencies have set the stage for proptech’s breakthrough.

The ServiceTitan Playbook: Lessons for Proptech
ServiceTitan’s IPO is a blueprint for the kind of growth and strategic vision that proptech companies need to emulate. The 12-year-old cloud software provider for contractors and trade businesses endured a decade of venture rounds, raising $1.5 billion across 10 funding cycles, according to Crunchbase. The pivotal $500 million round in March 2021 marked a valuation of $8.3 billion, but some questioned whether such lofty valuations would hold under public market scrutiny.

Fast forward to December 2024, when ServiceTitan priced its IPO at $71 per share, soaring to $101 by the end of its first trading day and closing the week at $105.27. Its market cap? A staggering $9.3 billion. The IPO proved skeptics wrong, and its success was a resounding endorsement of patient capital strategies. Investors like Iconiq Growth, Bessemer, and Battery Ventures reaped windfalls, a validation of their long-term commitment.

The parallels for proptech are compelling. Like ServiceTitan, proptech startups often address deeply entrenched inefficiencies in legacy industries. For example, AI-powered property management platforms, construction tech focused on cost control, and tools improving tenant retention offer immense potential. Yet, these companies remain largely private, waiting for their ServiceTitan moment.

Why 2025 Could Be Proptech’s Time to Shine
Analysts are optimistic that 2025 will see a resurgence in IPO activity, driven by improving economic conditions and recovering valuations. A cautiously optimistic macro environment, accommodative monetary policies, and a rebound in liquidity have fostered confidence across sectors. Proptech, buoyed by these tailwinds, is poised to capitalize.

The EY Global IPO Trends 2024 Report highlights a 37% year-over-year increase in IPO volume in the Americas and a 45% rise in proceeds to $33.1 billion. The EMEIA region has been even more impressive, with IPOs up 71% and proceeds soaring 64% to $53.2 billion. George Chan, EY’s global IPO leader, notes that “heightened liquidity, valuation levels, and investor confidence” are setting the stage for a robust 2025.

Further bolstering optimism, S&P Global Market Intelligence predicts a “resurgence” in tech IPOs, with smaller and mid-cap companies leading the charge. Luri Struta, a senior research associate, observed, “[T]he current environment presents the most favorable conditions for a recovery of IPOs in the past three years… making an IPO a more palatable exit option for investors who have been sitting on the sidelines.”

Why Proptech Is the Cool New Frontier
What’s often missed in the broader IPO narrative is how proptech uniquely addresses post-pandemic realities: hybrid work models, affordable housing crises, and a heightened focus on environmental sustainability. Tools that optimize leasing strategies, streamline construction management, and embed AI into building operations are no longer nice-to-haves—they’re essential.

The challenge for the sector lies in branding. Proptech has yet to achieve the cultural cachet of fintech or SaaS. Yet, the time is ripe for change. Venture firms and founders must aggressively pitch proptech not as “real estate technology” but as the tech sector solving the trillion-dollar inefficiencies of real estate—an industry as essential as finance or healthcare.

Final Thoughts
ServiceTitan’s IPO success isn’t just a milestone for venture capital; it’s a signal that the public markets are hungry for compelling growth stories in overlooked sectors. Proptech, with its intersection of technology and necessity, is uniquely positioned to seize the moment. The question is: will the sector’s players and backers rally to make proptech “cool” enough to attract investors on the scale of fintech or biotech?

If 2025 does indeed usher in a wave of proptech IPOs and private market activity, it will validate years of investment and cement the sector as a cornerstone of innovation.

Next
Next

AI-Powered Proptech: Venture Capital Investment Trends in 2024