2022 The Future of Proptech Venture Capital
New York, NY — The Center for Real Estate Technology & Innovation (creti.org), the real estate technology industry’s think tank and venture network released the 2022 Future of Proptech Venture Capital Report, a survey of 275 real estate technology investors, across all stages, sectors, and geographies. The survey found impending trends and opportunities within the real estate technology industry, including the most over-invested and emerging sectors in proptech.
Total capital invested, $10 Million - $20 Million, is expected to increase by 66.8% in 2022.
27.8% of VCs invested in commercial real estate technology companies in 2021, yet the sector only received 7.6% of total funding.
VCs invested in 1-5 companies (42.9%) in 2021. The total number of investments per company is expected to increase in 2022.
CRM (50%), Tenant Experience (42.9%), and iBuyer (42.9%) solutions are the most crowded and over-invested sectors.
Decarbonization (71.4%), Alternative Energy (57.1%), and Construction (50%) solutions are all emerging sectors to watch in 2022.
“2022 is already shaping to be a new breakout year for the proptech industry,” said Ashkán Zandieh, Chair at the Center for Real Estate Technology & Innovation. "The new proptech 3.0 movement has many excited about the future of our industry as we begin the next chapter and evolution of real estate technology."
Fifty-seven percent of the survey respondents anticipate a surge in capital allocation in 2022, a growth of 60%. The increased amount of capital is expected to flow into mid and late-stage companies across emerging sectors, including Decarbonization (71.4%), Alternative Energy (57.1%), Construction (50%), Real Estate Finance (35.7%), and Materials Technology solutions (28.6%).
"Proptech innovation and investment are poised for acceleration in 2022, as remote and hybrid work and the evolving complexities it presents in the commercial, residential, and hospitality sectors are here to stay," said Alex Shtarkman, Vice President at Revolution Ventures.
Amongst late-stage investors, clean technology and decarbonization was the most popular technology in 2022. In fact, 100% of late-stage investors plan on investing in decarbonization solutions in the new year.
"I think we will see the lines blur between ‘proptech’ and ‘climate tech’ in 2022 as the definition of ‘proptech’ expands," said Jeanne Casey, Global Head of Proptech & Innovation at Nuveen. "Real estate owners and operators will recognize that technology will be play a major role in achieving net-zero carbon milestones in the years to come."
The financial "ammenification" of real estate has been a steadily growing trend in both residential and commercial real estate. Adoption and acquisitions in the Real Estate Finance proptech sector is expected to drive a strong increase in real estate finance and insurance technology solutions. As the sector continues to mature more M&A activity is expected to fully bring these technologies in-house by institutional organizations, fueling the tech-enabled movement of larger organizations.
"We will see fintech continue to advance into the real estate workflow, as it has in other industries," said Raj Singh, Managing Partner at JLL Spark. "Until recently, the fintech revolution that has re-shaped banking, e-commerce, and retail, among other industries, has largely passed us by. Now, however, a number of startups are bringing loan origination, crowdfunding, factoring, rationalization, and advanced UI/UX to bear on the large and high-value assets that our industry is built on."
The commercial real estate sector seems to be an anomaly compared to its peers. According to survey respondents, 27.8% of VCs invested in commercial real estate technology companies, yet the sector only received 7.6% of total funding in 2021. Measured against residential, construction, and other sectors, adoption amongst large family offices and institutional organizations has surged since 2021, while consolidation and expiration of select proptech service categories has increased.
"2022 will see commercial real estate adopting innovations that have been proven out in residential over the last 3 to 5 years," said Sarah Liu, Vice President at Fifth Wall. "I also expect 2022 to be the year of SMBs. After years of enterprise-oriented innovation, there is now a cohort of players who are developing either 'lighter' software that is easier to adopt, or B2B tech-enabled services that enable leaner SMBs to compete with enterprise peers with much larger technology and R&D budgets.
About CRETI
The Center for Real Estate Technology & Innovation is a non-bias think tank in real estate technology. We provide non-bias and metric-based insights on real estate technology and venture capital for technology investors, entrepreneurs, professionals in the greater real estate industry.
