It has been all systems go for the private property technology capital markets in the year since PERE’s inaugural Proptech 20 ranking. As this year’s ranking tally demonstrates – at verging on $10 billion raised in the last five years – the leading cohort of proptech fund managers has grown by 80 percent in that timeframe.
Leading the way, New York-headquartered Fifth Wall has well surpassed the $2 billion mark and is edging closer to $3 billion, while China’s Hidden Hill Capital, a business backed by Singapore-based logistics giant GLP, is rounding on $2 billion. Hong Kong’s Gaw Capital Partners’ technology division is closing in on $1 billion, meanwhile, and is among another three firms to have passed $500 million.
These sorts of amounts are more widely associated with the real estate markets served by this subsector. But that is testament to the drive exhibited so far by institutional-level organizations to modernize the built environment and, in their mission to be sustainable, explore the better use of technologies.
The capital has been deployed at increasing velocity, too. According to proptech venture capital organization the Center for Real Estate Technology and Innovation, funding for property technologies increased 5.65 percent in H1 2022, compared with 12 months prior. The Center says $13.1 billion was invested during the half in technology companies targeting “commercial, construction, residential, industrial and other real estate sectors.”
The second half of 2022 onwards could paint a different picture altogether, as spiking inflation and rising interest rates may mean the private real estate managers and investors behind much of the funding captured by the Proptech 20 divert resources to tackle near-term cost pressures.
Certainly, the constituents of the ranking are sanguine about a possible fundraising slowdown. They are not overly concerned, believing the secular purpose for investing in proptech will ultimately outweigh the need for private real estate firms to hunker down amid today’s broader economic uncertainty.
Many on the Proptech 20 are on second, third, fourth or even fifth funds and, for some, their vehicles feel more like private equity offerings than venture capital. Indeed, a manager now needs at least $100 million to make the ranking this year, up from $34 million in 2021.
Our research even now extends to well over 30 managers, giving us hope that, alongside the capital aggregated, the ranking itself can extend in size in year three.
Whether that happens, however, is in the hands of the market. The next 12 months could be pivotal in demonstrating whether proptech investment was the icing on the cake or remains a meaningful bite of the cake itself for institutional private real estate.
Read more Proptech 20 analysis here.
The Proptech 20 ranking is based on the amount of proptech direct investment capital raised by firms between January 1, 2017 and June 30, 2022. Where two firms have raised the same amount of capital over this period, the higher ranking goes to the firm with the largest currently active pool of capital raised since 2017. If there is still a ‘tie’ after taking into account the size of a single fund, we give greater weight to the firm that has raised the most capital within the past year.
We give the highest priority to information we receive from, or confirm with, the proptech managers themselves. When the proptech firms confirm details, we seek to ‘trust but verify.’ Some details simply cannot be verified by us and, in these cases, we defer to the honor system. In order to encourage co-operation from firms that might make the Proptech 20, we do not disclose which have aided us on background and which have not. Lacking confirmation of details from the firms themselves, we seek to corroborate information using firms’ websites, press releases, limited partner disclosures and other sources.