May 2, 2022
Increased interest rates and market volatility have done nothing to decrease venture capitalists’ appetite for property technology (proptech), The Real Deal reports. A record $4 billion was invested in proptech during the first quarter of 2022, a sign of “investor confidence” in the sector, according to investment bank Keefe, Bruyette & Woods’ recent report.
The multibillion-dollar investment in proptech is a 41% jump from the fourth quarter of 2021 and a 31% increase from the same time period of last year. Proptech also saw a record year for fundraising in 2021 when investments reached $11.7 billion.
These record-setting investment numbers appear to be the result of investors’ rising tolerance for risk. Early stage and seed investment went up 122% year over year. Meanwhile, mid- and late-stage fundraising rounds dropped by 14 percent in terms of dollars committed.
Additionally, first quarter fundraising increased because investors have a positive long-term outlook for proptech adoption and growth — despite the public’s waning confidence in the sector. Proptech stocks underperformed during the first quarter as many investors put their money behind more established businesses as inflation rose and the Federal Reserve’s interest rate outlook became “more hawkish,” according to the KBW report.
Meanwhile, Proptech stocks dropped 20 percent during the first quarter on average. The S&P 500 and Nasdaq Composite saw 6 and 11 percent dips, respectively. Proptech companies that went public either through a merger or SPAC (special purpose acquisition company) suffered the most, The Real Deal reports. Such companies fell an average of 47 percent during the first quarter and many were trading below their $10 per share buy-in prices at the end of March.
“We’ve kind of been washing out the sector over the last several months,” said Ryan Tomasello, KBW’s research director in The Real Deal article.
Right now, the market conditions are ideal for M&A (mergers and acquisitions), according to KBW. M&As have recently helped reset company valuations and performance expectations. For example, there were 57 proptech M&A deals announced worldwide during the first quarter — a 16 percent jump from the fourth quarter of 2021 and consistent with 2021’s quarterly average.
Some of these deals included SmartRent purchasing maintenance and resident service software SightPlan in March for $135 million and smart home startup iQuue for $13 million in January, per The Real Deal.