Proptech Founders and Investors Sour on the Sector: Survey

The positive outlook so prevalent a year ago has rolled back, at least in the near term


Even as many proptech startup founders, venture capitalists and traditional real estate companies agree that the industry needs technological innovation more than ever, macroeconomic headwinds have caused them to temper their enthusiasm for the sector, at least in the near future.

This is according to MetaProp’s Mid-Year 2022 Confidence Index, which the Manhattan-based early-stage proptech venture capital firm released Sept. 28. The index assesses the views of proptech startup founders and investors through a series of questions posed quarterly.

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Based on a scale of 1 through 10, the investor confidence index came in at 5.8, the lowest investor rating to date, and well below its all-time high of 9.3 achieved just six months ago.

Similarly, the startup confidence index was 4.2 out of 10, and as with investor sentiment, it was the lowest to date, receding from the survey’s all-time high of 8.3 a year ago.

“The tech market has been atrocious,” said Aaron Block, co-founder and managing partner at MetaProp. “The proptech market has been impacted, as any one would have imagined. The good news and silver lining is that commercial traction and fundamentals remain strong.

“But there’s no sugarcoating the fact that the broader tech market has adversely impacted proptech at this slice of time.”

Asked how real estate fundamentals could be strong with interest and mortgage rates spiking and fears of a recession still looming, Block said, “Let me put it in terms that I think are clear to traditional real estate folks. We’re in the equivalent of a cap rate expansive environment. At the same time, the quality of the buildings are getting better, the quality of the tenants are getting better, and rents are going up.

“So it’s two stories: Your buildings may temporarily be worth less because of a cap rate expansive environment, but the fundamentals of what makes a valuable building are going in the right direction. So, as the capital markets swing back, you’re going to see some big winners coming out of this category.”

The survey asked investors for their views on the proptech market over the next year.

Notable among their responses was that, despite the economy, 62 percent expect to make the same number of proptech investments over the next 12 months, a departure from the last index in which 71 percent of respondents expected to make more investments.

In addition, 73 percent of investors expect to see more mergers and acquisitions in that time.

Of the investors responding, 35 percent are interested in investing in startups that impact the multifamily industry, a record high for the category. Conversely, and perhaps not surprisingly given the effect of remote work, only 10 percent are interested in investing in startups that impact the office industry, a record low for the category.

“The turmoil in the public tech markets has officially arrived in the venture capital markets,” Liza Benson, partner at Moderne Ventures, a proptech venture capital firm, said in the MetaProp survey. “The days of 50X+ revenue multiples and pre-emptive deals have ended. We are seeing many companies that took valuations based on forward multiples come back to market with convertible notes at significant discounts and down rounds.

“While the real estate tech space is still in its infancy, the pressure on valuations will create market dislocation that will slow down the pace of deals at least until 2023.”

Sentiment among startup founders and CEOs was similarly morose.

In the coming year, 71 percent of startup founders believe it will be harder to raise capital, up from 27 percent six months ago, leading to 52 percent of CEOs stating that without raising additional capital, they have less than 12 months of runway.

New entrants to the proptech market will be down, as 55 percent of founders expect their space to be as or less competitive in the coming 12 months as opposed to the previous 12 months, a record high for the index and up 21 percent from six months ago.

“Whether or not the velocity of M&A in the single-family rental space changes, the market environment will put pressure on SFR management firms to adopt technologies and products that drive up revenue per unit and reduce operating cost per unit, making more room for SaaS products that either reduce operational overhead or enable new services to be offered to residents and to the asset owners,” Ethan Lieber, CEO at Latchel, a property management software startup, said in the survey.

“SFR and multifamily operators have a nice tailwind helping them as rent prices are increasing at breakneck speed and the average wealth of renters is increasing too,” Lieber said. “This means property management operators can leverage new resident services to drive up revenue per unit with little friction, allowing proptech companies that target resident services to expand more quickly with higher adoption rates.”

Philip Russo can be reached at