By the Data: Proptech Investment Trends in Q3

Photo by Omar Prestwich on Unsplash

As a venture capital firm focused heavily on tech solutions for single-family and multifamily rental property, we keep a close eye on the flow of capital to the real estate tech space as part of our day-to-day operations. Sensing something of a market vacuum for this sort of data, we recently decided to increase the rigor with which we track this investment activity, with the goal of both enhancing our own familiarity with these trends and presenting them to the broader market.

A few weeks ago, we presented the first of what we expect will be many quarterly reports on rent tech trends at this year’s virtual NMHC OpTech conference. Considering the event was held virtually due to COVID-19, it is not surprising that the contents of the report demonstrate how investment activity has been affected by the pandemic.

We hope you’ll review the entire report, which is embedded below, but some of the most salient takeaways include:

  1. Reassuring Resilience for Early-Stage Deals. The pandemic hit the country hard in the final weeks of the first quarter, and it was not surprising to see that that led to a deal slowdown in Q2. In fact, with just 23 early-stage deals, the “rent tech” space had by far its slowest quarter since we began tracking it in 2018. But things bounced back nicely in Q3, once investors had time to take stock of the pandemic and assess their new reality. This resilience is due in large part to the ways in which many real estate-related technologies are “pandemic-friendly” and facilitate social distancing and working from home.
  2. Funding for “next-gen property managers” has seen a decline. This category refers to companies that sub-let apartments within multifamily properties, typically renting them out for short stays, and includes startups like Vacasa and Sonder. With the larger hospitality industry’s struggles in 2020, it was no surprise to see this segment struggle as well. In fact, with investment volume declining by about 50% in Q1-Q3 (as compared with the same three-quarter period in 2019), it saw one of the most significant slowdowns across the proptech arena. It should be noted that while activity has slowed, it has not stopped altogether, as some companies which leverage a unique approach to collaborating with their multifamily partners have actually thrived over the course of the year. Our portfolio company Kasa, which raised a $30-million Series B funding round in Q3, is a prime example.
  3. The number of early-stage companies getting funded is declining. Even as funding activity bounced back in Q3, the overall trend is hard to miss. Since peaking in Q1 2019, the number of early-stage funding rounds has been heading south. While this may initially seem to point to the market losing interest in these tech companies, that’s actually not the case — the dollar value of real estate tech investment and VCs’ own fundraises remain strong. However, as the cohort of these companies matures, a greater portion of that capital is concentrated toward later-stage funding rounds, and the number of early-stage companies raising capital has taken a dip. With tech adoption increasing across the industry, we at RET remain bullish on the prospects for early-stage technologies, and we will continue to work with our strategic investors to fill the gap and fund the most compelling rent tech startups.

For more insights into proptech and rent tech trends from the year, you can view our full research report.

The official blog of RET Ventures.

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