VC Investment in Proptech Surpasses Pre-Pandemic Levels: Report

Some $32 billion was poured into real estate tech companies in 2021, a 3.23 percent increase over 2019

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Undeterred by inflation, supply chain issues, and the start of another winter of COVID-19, venture capitalists invested $32 billion in proptech companies in 2021, a 28 percent increase in funding over 2020 and a 3.23 percent increase compared to 2019, according to a report released Monday.

The dramatic increase in VC proptech funding surpassed the previous all-time investment high of $31.6 billion in 2019, according to the “2021 Real Estate Tech Venture Funding Report,” produced by The Center for Real Estate Technology & Innovation (CRETI), an industry think tank and venture network.

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Companies that work in residential real estate claimed the lion’s share of investment in 2021, with 49 percent, followed by 29 percent in multifamily, according to the report.

Reflecting the maturing proptech industry, 36 percent of the $32 billion invested went to companies with Series D funding or greater, and 31 percent went to Series C companies. 

“Proptech is now a household name in both the public and private equity markets,” said Zach Aarons, co-founder and general partner at MetaProp VC. “The cat’s out of the bag. The industry is truly global, and adoption is accelerating very quickly. We have definitely experienced some choppiness in the public equity markets as the sector reaches a maturation point and analysts realize that not all businesses within the proptech sector should be valued the same way.”

The report indexed and analyzed venture investments across the greater real estate industry, including commercial, construction, residential, multifamily and other asset classes and real estate services, including brokerage and management.

Throughout the year the market continued to gain momentum in funding and showed signs of evolution as venture capital investments shifted from early-stage to those mid- and late-stage companies. The market also continued to put 2020 further behind it. 

“Following a year of uncertainty, the venture capital and real estate tech entrepreneur market is back in a meaningful way,” said Ashkán Zandieh, founder and chair of CRETI. “The continued growth of the sector has seen new investors across multiple stages enter the market, including private equity groups and institutional organizations.”

And now 2022 will likely mark another record year. 

“2021 was the year of validation and consolidation. Multiple categories saw SPACs and strategic acquisitions take place,” said Vincent Cicciarelli, vice president and partner at Lincoln Property Ventures, referring to the activity via special purpose acquisition companies. “The cordial introductions are over, and now everyone is off to the races in major categories that have emerged.”

Philip Russo can be reached at prusso@commercialobserver.com.