Proptech funding falls 14.3% to $4.37B in H12024
Venture capital investments in proptech and proptech adjacent companies dropped 14.3% in H1 2024, with total funding reaching $4.37 billion, down from $5.10 billion in H1 2023.
91% of proptech and proptech adjacent companies anticipate raising capital, with 45% targeting the next 10-12 months.
Early-stage funding continues to be a bright spot, with 63.7% of companies seeking to raise early-stage funding.
Introduction
Venture capital flows into proptech and proptech adjacent sectors have continued to decline, reaching $4.37 billion in H1 2024, a drop from $5.10 billion in H1 2023 and a staggering fall from $13.13 billion in H1 2022. According to a survey of 1,088 proptech startups, 91% are planning to raise capital, with a significant 45% targeting the next 10-12 months. This trend highlights the ongoing challenges and strategic shifts within the industry amid a tightened funding environment.
The data also shows a noticeable focus on early-stage funding, with 63.7% of companies seeking investment at this level. Growth-stage and late-stage funding rounds accounted for 28% and 8.3% of the surveyed startups, respectively. This distribution underscores the continued drive for innovation and market entry in the proptech space, despite the overall decline in available capital.
Weekly Funding Insights
The weekly funding data for H1 2024 presents a mixed picture of the investment landscape. The total weekly median funding amount stood at $115 million, while the average weekly funding was $168 million. These figures indicate a relatively stable flow of capital, though the volumes are lower compared to previous years.
Weeks with significant funding dips are interspersed with occasional spikes, such as the $254 million in Week 6, which stands out against the more subdued $95 million in 2023 and $624 million in 2022. The deal volume also varied week by week, with a median of 13.5 deals and an average of 14 deals per week.
Major Funding Rounds
Several significant funding rounds have marked H1 2024, demonstrating investor confidence in selected high-potential ventures:
EquipmentShare: Secured a substantial $600 million in a debt round. This US-based proptech construction tech company managed to attract considerable investment, underscoring its robust business model and growth potential.
Hometree: Raised $326 million across two debt rounds, with major investments from BlackRock and Barclays. This UK-based proptech company focuses on home energy solutions, highlighting the growing interest in sustainable and efficient home technologies.
Bilt Rewards: Attracted $200 million in a venture round led by General Catalyst. This US-based proptech startup offers innovative solutions in the rewards and loyalty space, reflecting the market's appetite for new financial technologies.
Point: Secured $141 million in a debt round, led by Atalaya Capital. This fintech company provides homeowners with an alternative to traditional home equity loans, showcasing the diversity of solutions in the proptech sector.
Guesty: Raised $130 million in a Series F round led by Kohlberg Kravis Roberts. This funding highlights the continued growth and potential of property management technologies.
Anticipated Capital Raises from Proptech and Proptech Adjacent Companies
A recent survey of 1,088 proptech startups provides a revealing glimpse into the capital raising plans of these companies, underscoring the sector's dynamic nature and its continued thirst for investment. The data indicates that a substantial 91% of the surveyed startups are planning to raise capital in the near future.
Stages of Funding
The survey further categorizes these startups by their funding stages, providing deeper insights into where the bulk of capital is likely to flow:
Early Stage: A dominant 63.7% (693 companies) are seeking early-stage funding. This high percentage reflects the sector's vibrant innovation ecosystem, with numerous startups in the nascent phases of their business cycles.
Growth Stage: 304 companies are looking to secure growth-stage funding. These companies have typically moved past the initial hurdles of startup life and are now focusing on scaling their operations and market reach.
Late Stage: 91 companies are in the late-stage funding category, indicating a smaller, yet significant, portion of the market that is seeking substantial capital injections to solidify their market positions or prepare for exits.
The overwhelming majority of early-stage funding seekers underscores the sector's emphasis on new and emerging technologies. These startups are poised to drive innovation and potentially disrupt traditional real estate and construction paradigms.
Funding Trends and Strategic Implications
Decline in Total Venture Capital
The marked decrease from $13.13 billion in H1 2022 to $4.37 billion in H1 2024 highlights a more cautious approach by investors. This trend suggests a prioritization of quality over quantity in investments, reflecting broader economic uncertainties and a tightened financial environment.
Early Stage Dominance
With 63.7% of surveyed startups seeking early-stage funding, the sector remains rich with innovation and new market entrants. This emphasis on early-stage investments indicates a vibrant ecosystem of new ideas ready for initial market validation and growth.
Predictions
Implications for Investors
For investors, this anticipated wave of capital raising presents numerous opportunities. Early-stage investments, while inherently riskier, offer the potential for significant returns if the startups successfully navigate the initial growth phases. Growth-stage investments provide a chance to support companies with proven business models, looking to scale and capture larger market shares. Late-stage investments, though fewer in number, offer opportunities to participate in more mature ventures that are closer to liquidity events.
Emphasis on Recurring Revenue Models
VCs will likely prioritize proptech startups with recurring revenue models over those with usage-based revenue streams. This preference is driven by the stability and predictability of recurring revenues, which are crucial in a challenging economic environment. Proptech companies with tiered pricing structures and premium offerings may attract more interest, as they can demonstrate potential for revenue growth and customer retention.
Focus on Compliance and Risk Management
VCs will continue to demand robust compliance and risk management capabilities from proptech companies, especially those operating in regulatory gray areas. As regulatory frameworks for third-party programs and unsecured consumer lending evolve, startups that can demonstrate strong governance and risk controls will be better positioned to attract investment.
Real-Time Payments and AI Integration
Real-time payments and artificial intelligence (AI) are expected to be significant areas of focus for VC investments. The ongoing implementation of real-time payment systems like FedNow and the modernization of European payments will drive investment in payment-as-a-service providers. Additionally, the promise of AI in enhancing proptech solutions will continue to attract substantial VC interest, with startups leveraging AI likely to seek larger funding rounds in the near future.
