Proptech at Mid-Year: VCs and Principals Weigh In

They see consolidation in the industry and more care in investing ahead — and continued demand, including due to ESG efforts


Last year was quite a year for proptech. SPACs were in, investment soared. The pandemic seemed to have — to use a tired verb — accelerated commercial real estate’s adoption of technology in big ways. 

All that has changed in 2022. Investment has slowed. Growth too. And SPACs? That trend is fading. But there are still about six months left in 2022. What’s going to happen? 

SEE ALSO: Lease Deals of the Week: JME Grabs 17K SF at 469 Seventh Avenue

PropTech Insider polled venture capitalists, proptech company principals and industry analysts on the recent past and the near future. Here’s what they said. 

Ryan Masiello, chief strategy officer and co-founder, VTS:

“We’re in the early stages of a modernization boom for the industry, where landlords are spending more or will be spending more offensive capital in the next two years; probably more than they have in the last 10. In order to support that and make sure that people can interact with the experience they’re trying to create, the building obviously needs technology to do that. So tenant experience has been really the focal point for the industry.

“[Inflation] will create even more urgency behind the modernization boom because tenants are still in this place where it’s hard to get people to come back to work. Companies are going to have more leverage around bringing employees back to the office, whether it’s a three- or five-day workweek. You’re gonna see a lot more of that in the second half of the year.”

Christopher Yip, partner, RET Ventures:

“The most significant thing that’s happened is the broader tech market pullback, which ultimately flows through to proptech. In the public markets we see many of the public proptech names quite impacted. Stocks are down 90 percent. I suspect we’ll see some pullback from a funding and valuation perspective. We’re still seeing a lot of early stage companies, a lot of entrepreneurs still trying to solve problems in the industry, which is great. The funding environment for a lot of those founders will be harder in the second half of this year than it was certainly last year.

“We’re going to see consolidation. That’s in the interest of many of our LPs, of startups’ customers who want to see fewer vendors. They want to see more end-to-end solutions; more platforms, less point solutions. There’s also an acceleration around solutions for construction tech, because that’s where we’re seeing a lot of macro trends intersect: supply chain backlogs, labor shortages, inflation. Data and transaction technology are also increasingly essential; as interest rates and cap rates climb, everybody has to sharpen their pencils to make sure of their underwriting on investments, acquisitions and developments.”

Mike Sroka, CEO and co-founder, Dealpath:

“The first half of the year, the macro volatility headlines dominated, with public equity markets down year to date, increases in inflation and rising interest rates, a terrible war in Ukraine, and social and political unrest domestically, as well as all movements back into the office. It felt like every week has brought more change and that really did consume the first half of the year.

“I expect that will impact a lot of things: valuations, product market fit, value, investments and innovation. However, those haven’t really become as visible yet. The first half of the year was all about macro volatility headlines. The second half of the year is about the micro effects and responses. We see clearly movements towards an emphasis on efficiency and predictability over growth at all costs; a high likelihood of increasing strategic combinations and the adaptability of businesses to where solutions fit in this environment.”

Kevin Danehy, CEO, Willow Technologies:

“The first half of the year was absolutely marked by a correction in the financial markets; importantly, in the capital markets. No surprise there. There’s a flight to quality, as has happened in the last seven or eight economic corrections.

“The next six months, or six to 12 months, are going to be marked most directly by showing concrete evidence of traction with real customers and a real ability to generate revenue and profitability; a direct link between proptech, climate investment and the future of how these changes are going to occur. ESG climate investing is only going to be in our minds more, as the collision between a climate crisis and global real estate industries produces a final recognition of how technology can be a solution here. It’s occurring, and we’re in for one of the most disruptive periods and inflection points in the real estate industry.”

Zak Schwarzman, general partner, MetaProp VC:

“The Nasdaq is down 30 percent from its peak in November 2021. Public SaaS valuations have fallen significantly. Valuation multiples for SaaS companies are now back down to pre-2016 levels, at about 6.5 times revenue. That’s a big drop from recent highs. So it’s an across-the-board valuation reset. It’s how much credit is the market going to give you for your revenue and growth projections. If you look at proptech stocks in the public market, your average enterprise value sales multiples is down significantly across the sector, but there’s a divergence. There is the incumbent proptech market, in which stocks are down about 40 percent on a multiple basis from their highs in November.

“But, the new entrants, many of which were de-SPACs, are down 65 percent. So what you really have are a lot of companies that debuted at the height or near the height of the market, and are now subject to public market scrutiny during a period in which the public markets are willing to give a lot less forward credit. Those companies are coming under increased scrutiny and their valuations are being rationalized to the comp set that the public market thinks they should be judged against.

“While those numbers are obviously down and a negative headline, the overall storyline of valuation rationalization across the public proptech market — which has expanded considerably, more than doubled — is a necessary development as the sector continues to mature. The private market benefits from having good, strong and diverse comps in the public marketplace so that entrepreneurs and venture investors can clearly understand how emerging companies in the sector will eventually be valued on a multiple basis.”

Grant McCullagh, director, Thornton Tomasetti, and managing director, TTWiiN:

“During COVID we saw a three-part perfect storm driving proptech. This included an ongoing surge in new IP into market, a rapidly growing user base hungry for margin improvement adopting products, and an ever-increasing inflow of capital at all levels, from angel through Series B financings. With all that, we believe one of the most significant trends in proptech and construction tech this year has been the focus on ‘best-in-class’ IP within each of the subsectors. Consequently, one now needs to continually assess which of many similar companies will ultimately be successful and then act accordingly.

We see two developing trends. The first is an increasing focus in proptech and construction tech; startups are looking into industry-based strategic investors able to bring not only capital but also potential important sales channels, client/user contacts, and even hands-on product development counsel, testing, etc. Secondly, considering the increasing awareness around valuations, we see a continued focus on operational topics to ensure sufficient runways to next-phase financings. Having said that, with much left to accomplish in our large and deep industry, we see continued real velocity ahead.”

Arie Barendrecht, founder and CEO, WiredScore:

“Was the pandemic the shock the real estate industry needed? Absolutely, yes; we now find ourselves looking at the aftermath, deciphering how to positively rebuild our sector for future success. Sifting through pre-, post- and ‘during’ COVID-19 solutions, it quickly becomes apparent that, for almost all landlords, this translates as ‘which tech stays and which tech goes.’

“Now more than ever, landlords must prioritize smart technology that preempts the changing requirements of those occupiers interacting with it. Nowhere is this felt more acutely than in relation to ESG priorities. Landlords need to understand how technology positively impacts not only their own goals, but the goals of their occupiers. We must encourage the implementation of technology as an enabler for achieving meaningful outcomes such as ESG targets, rather than an addendum, and measure and improve accordingly through globally recognized standards such as SmartScore.”

Christophe Garnier, CEO, Upflex:

“One of the biggest trends is everything related to employee experience, meaning flexibility and choice. The employee’s workplace is going to change in the next months and years to come, being more tailored to the needs of what employees are expecting from their experience and their employers.

“The investment community has become very shy. So I think we’ve been very lucky as far as Upflex is concerned to be able to close this round before the storm. We already see our friends faltering in the proptech industry, having a hard time raising money. That’s definitely one of the first effects from these new economic conditions.

“We’ll definitely see a lot of growing demand for hybrid workplaces. It’s already clear that the traditional commercial real estate demand is going down dramatically. We will continue to see a growing interest for flexible workspace because of the economic conditions for the rest of the year. That’s for sure. In the meantime, we’re seeing an interesting trend in and a growing interest in the sustainable workplace in general. Everything related to CSR [corporate social responsibility] is becoming top of mind for many employers.”

Ashkán Zandieh, co-chair of the Center for Real Estate Technology & Innovation:

“In our 2022 Real Estate Tech Venture Funding Mid-year report, we found that venture capital investments in proptech continued to be a bright spot for investors, despite economic headwinds. In the first half of 2022, $13.1 billion was invested in proptech companies, a 5.65 percent increase in funding compared to the first half of 2021.

“It remains to be seen, but, at these levels, the proptech industry is on pace to match or set a new record in venture funding. While I’m bullish on the financial health of the private proptech venture market, it’s worth noting that there is some choppiness in the market, which makes landing a little rough for companies across the board.”

James Dearsley, co-founder, Unissu:

“I am getting the impression that the industry has a dichotomy of conflicting emotions toward proptech and 2022 has really started to show this coming through. Globally there seems to be a negative reaction to the term itself — proptech. There seems to be an interpretation problem about the benefits proptech will deliver. It is almost as if executives in real estate firms do not want to be tarnished with the proptech term.

“On the other hand, there is also a dawning realization that the primary issues surrounding the sector — achieving sustainable development goals, affordability, workplace utilization, to name a few — are only going to be solved by an underlying dependence on technological innovation. This is causing a glaring narrative problem within the proptech sector. Let’s stop talking about the actual tech, and start talking about the problems the industry is facing and how technology will support the solution.”

Jindou Lee, CEO and co-founder, HappyCo:

“There has been significantly more investment and capital coming from customers of proptech startups. Not just in terms of total amount of capital deployed. The total number of real estate firms starting to invest in proptech companies signifies that the industry is starting to come of age. This will have both a positive and a negative impact on the industry. The positives are that there will be more options in the market with more startups solving different facets of customer’s businesses and leading to more innovation. The negatives are that it will create a lot of small startups and point solutions that result in more fragmentation of solutions, making it even more difficult for real estate firms to figure out the good from the bad solutions.

The shifting economy will greatly impact fundraising for proptech companies. Startups are already selling into an industry where deal cycles and technology rollouts are long. So we will see a bunch of proptech companies running out of capital and either having to shut their doors, slow down the rate of spend on R&D/innovation, or sell to better-capitalized companies. I think there will be plenty of consolidation in the market. However, whenever we see markets are in a downturn, it often creates new opportunities for disruptive business models to challenge the status quo.”

Patrick Ghilani, CEO, MRI Software:

“In the first half of the year, we saw two clear trends: organizations moved toward the hybrid office and started seeking holistic workspace solutions that increase visibility over how space is planned, used, and optimized; and our residential clients showed greater demand for risk management software to fight increasingly sophisticated fraud as prices continued to rise and occupancy stabilized.

“In the second half of the year, at a high level, we do expect to see further consolidation among proptech providers as valuations shift downwards and the venture market tightens. Operationally, we expect continued demand in line with the first half of the year along with an increased need for solutions that support tighter fiscal management and scenario planning in light of potential economic headwinds. A shortage of employees, changing budgetary considerations, and complex data across many systems will force organizations to streamline processes and improve efficiencies, two objectives accomplished most easily through proptech.  Artificial intelligence, as a key strategic element, is becoming increasingly critical to success as we move forward.”

John Vivadelli, executive vice president of Workplace Solutions, Tango:

“The first half of 2022 saw a gradual shift from concerns about COVID safety in the workplace to the most effective ways to attract employees back to the office. In the second half, economic uncertainty looms as the most significant force that will drive workplace trends. In response, workplace occupancy management technology must have flexibility, being able to adapt quickly to changes in how and where people work.

“To make effective operational and financial decisions in an uncertain economy, organizations need technology that encourages employee engagement while measuring space occupancy and utilization. Whether they have the agility to address these questions — both in their thinking and in their processes — is the real question.”

Vincent-Charles Hodder, CEO and co-founder, Local Logic:

“Clearly, the financial markets, and proptech specifically, are being hit by the current inflation and hike in interest rates. Investor sentiment took a hit and VCs are dragging their feet as they try to assess the market. Proptech remains one of the hottest investment sectors, but the conditions have cooled greatly from the fever pitch and volume of late 2021. We have also seen layoffs in proptech across many different company types. On the flip side of that, the SFR market and investor market is continuing its spending spree and showing very strong signs of growth.

“The topics I am keeping my eye on for the rest of 2022 include ESG legislation, crypto regulation, and the findings of the House subcommittee on SFR [single-family rental] companies. The delta on multiples between founders and VCs will continue to close in regard to proptech valuations. There will be more of a focus on profitability vs. growth potential. More founders will find themselves in difficult positions after raising at inflated valuations, and this will lead to more acquisitions by strategics and consolidation within proptech itself.”

Benedikt Köppel, co-CEO, Locatee:

“In CRE, we are seeing a real, but very specific, return to the office in this first half; and, as a consequence, a significant demand for proptech solutions that help occupiers to enable workplace experience and attract employees back. 2020 was all about health and safety. 2021 was very much about frictionless access. 2022 so far is clearly about the meaning of the office, what the office has to offer, and how the office is used and should be used.

“Our first prediction for the rest of the year is the continued priority in attracting employees back to the office with a superior experience. A majority of corporations, particularly in North America, have opted for a relatively progressive policy: almost 9 out of 10 large organizations are mandating three days of office presence or less, according to our research, but they are intent on providing an office experience that is satisfying, productive, and leads to a higher frequency of presence. The second is going to be the importance of ESG objectives in the strategy and operations of corporate real estate. ESG strategy and decision-making in corporate real estate is no longer guided mainly by cost factors, but increasingly by employee experience.”

Sarah Liu, partner, Fifth Wall:

“In Q2 we started to see a pullback in proptech funding at the earlier stages, matching that in the broader venture market. However, while the financial engineering has changed, the fundamental opportunity remains largely intact. Technology adoption in real estate, construction and the broader built world continues to accelerate, and, counter-intuitively, mounting pressure on margins may actually be a tailwind. Of course, the wealth won’t be distributed equally — as the venture tide continues to ebb, we will finally see who drives real ROI and who doesn’t.”

Jonathan Klein, founder, PropTech Consulting:

“The paradigm shift from brick-and-mortar to virtual office and retail spaces for employees and customers is underway and will revolutionize the global economy. Metaverse development has undergone a metamorphosis in 2022 from an abstract concept to a highly sought-after commercial real estate asset category. With the conversion of properties into digital twins, prospective buyers get a real-time, operational analysis, replete with accounting and leasing details, so that companies can plan and transact globally.

“The ability to build, use, and capitalize on NFTs is core to the success of a worthy commercial metaverse investment. Disruption in the brick-and-mortar economy and next-gen blockchain technology has enhanced demand for metaverse commercial real estate property, with a forecast of promising revenue streams.”

Kyle Waldrep, founder and CEO, Dottid:

“At Dottid, the first half of 2022 saw owners/operators desiring for solutions that enable a hybrid work environment both internally and for tenants. Properties owners need teams to be able to communicate quickly across departments to drive transaction efficiency. On the tenant side, owners and operators have looked for metrics tracking the return to the office and have dived deeper into ESG reporting.

“Looking ahead, owners will need tools and functionality that drive cash flow as the macroeconomic conditions continue to be uncertain. Getting tenants back to the office with events and creative amenities is happening across the country and tenant experience apps like HqO and Equiem will continue to lead the charge in capturing this data for owners. Overall, collaboration is crucial. With economic uncertainty as a cloud, teams will need to do more with less, track more data in a centralized location, and be able to report to investors with ease.”

Shegun Holder, co-founder and principal, WorkEverywhere: 

There was one winner: Airbnb. Their decisions to adopt a full embrace of remote work and lead the further transformation of their product into the experience economy with the introduction of Categories, will go down as truly monumental changes for proptech. The biggest news will be which high-flying company collapses and truly surprises us. ‘As the tides go out, we will see who is truly swimming exposed.’”

Sonu Panda, CEO of Prescriptive Data:

“The most interesting thing we’ve noticed in the proptech world is the emphasis on sustainability and the transition into climate tech. We’ve always focused on energy reduction, which leads to carbon emission and cost reduction ROI. It’s been interesting to see most, if not all, proptech companies now leading with sustainability messaging. We believe there are six main drivers pushing real estate owners to focus on sustainability, causing proptech companies to lead with sustainability messaging: (1) regulatory mandates, (2) investors rewarding ESG/sustainability, (3) consumers demanding climate transparency, (4) enterprise carbon zero commitments, (5) energy price volatility, and (6) unpredictable weather.

“I predict investment into proptech will not slow, especially in sustainability, ESG and tech that enables a remote yet connected workplace. Second, we will see operational technologies merge with tenant- and leasing-focused technologies. The NYSERDA RTEM + Tenants Program illustrates how real estate owners are looking to connect core building technologies with tenant technologies. Third, we will see the rise of owners who are using machine learning technologies to gain massive competitive advantages. This will include everything from analyzing property valuations on the acquisition side to using AI to optimize buildings in real time, improving NOI.”

Philip Russo can be reached at