Deploy or Die: Pressure to Fund Proptech Varies During Uncertain Times

Raising money for a proptech investment fund is difficult enough, but the necessity of deploying those funds within a certain time frame can be equally daunting.

That is especially true these days, as economic and other macro factors provoking uncertainty dominate the news, including the trade war that President Donald Trump kicked off with his April 2 “Liberation Day” announcement. Venture capitalists and other investors, then, see the investment road as alternating wildly between rugged and somewhat smooth as they seek profits from proptech startups.

“I’ve seen deployment speed up this year,” said Zach Aarons, co-founder and general partner at MetaProp, a Manhattan-based early stage proptech venture capital firm. “I think it’s still too early to say whether things have slowed down since ‘Liberation Day’ or not. There’s usually a lag in the venture markets relative to the public markets. We had this huge drawdown in the public markets. Now the public markets are positive for the year again. So I don’t know if there’s going to be a slowdown over the summer in the venture markets. It doesn’t seem like it.”

According to investment banking firm Houlihan Lokey’s 2024 PropTech Year in Review, issued in March 2025: “Despite a slowdown in activity [in 2024], the proptech market remains strong, with ~$4.3 billion in growth equity and debt financing and 90 M&A transactions in 2024. Houlihan Lokey is optimistic about growth in the proptech market in 2025 as business momentum improves and the need for consolidation across the category continues.” The firm has not yet published proptech funding numbers for 2025.

Reporting a significant increase in capital investment velocity for this year, the Center for Real Estate Technology and Innovation (CRETI), said: “Venture capital investment in the first quarter of 2025 reached $2.06 billion across proptech and adjacent sectors, with January alone contributing $902 million.”

An apparent reopening of the window for initial public offerings “is super exciting,” Aarons added, pointing to the successful IPO of commercial and residential trades company Service Titan in fourth quarter 2024, as a prime example of what he thinks will continue. “Service Titan has done really well. I think it’s trading at about a 20 percent higher IPO price, and its IPO price was a little bit higher than its last valuation in the private markets.”

A number of recent successful IPOs in adjacent sectors like fintech and healthtech also bodes well for the proptech industry’s investment market, said Aarons.

“We’re seeing opportunity,” he said. “We’re not deploying because we have to. We’re deploying because we’re seeing interesting deals. Our strategy is to stay diversified, keep the companies that we invest in, and have them use AI whenever they can as it relates to customer service and to coding, and figure out how to grow more sustainably. And, for us, it’s about not necessarily investing in a bunch of businesses that rely on real estate transaction activity to pick up for their revenue to grow.”

MetaProp’s investment strategy, which has included about 10 deals to date, some with other proptech and generalist VCs as well as family office funds, isn’t an outlier, Aarons said. “I would love to say it’s unique compared to competitors, but a lot of our competitors are co-investing in the deals with us.”

The current proptech funding scene is somewhat opaque, Blake Owens, founder and CEO of Agrippa, an AI-powered, broker-free platform connecting commercial real estate capital seekers and providers, said in an email.

With the recent launch of Agrippa sister company Augustus, a private investment qualified opportunity fund, Owens now finds himself surveying the proptech funding scene from the rare position of founder and investor.

“The true velocity of deployment is difficult to quantify, but it is undeniably slow,” said Owens. “Higher interest rates, constrained liquidity, geopolitical tensions and legislative uncertainty have pushed many investors into a wait and see mode. That said, capital isn’t frozen, it’s just more selective. Forward-thinking investors with longer-time horizons are beginning to look beyond present turbulence, capitalizing on asymmetric opportunities created by the current drawdown.

“Anecdotally, I’m seeing more momentum from non-VC/PE investors who aren’t bound by rigid fund structures. In both proptech and direct CRE investments, institutional VC/PE investors are now placing more hurdles just to reach a term sheet. As a result, I expect more founders and operators to pursue alternative capital pathways.”

Another founder — Janine Steiner Jovanovic, CEO of Dallas-based LeaseLock, an insurtech company for rental housing — is skeptical of current investor fund deployment regardless of limited partner pressures.

Although LeaseLock is not in fundraising mode, Jovanovic said she keeps an ear and eye on the proptech investor ecosystem.

“If you look at what’s happened over the last few years, the volume of deals and average deal size has declined dramatically,” she said. “From 2020 to 2023 there was a slight uptick, and from 2023 to 2024, but 2025 year-to-date has been extremely slow. Very small deals are happening and very few of them.”

She does allow that there is much more interest in funding the insurance sector, where her company at least partially resides. As for venture capital acceleration overall in proptech, however, “I haven’t seen it yet. If that activity translates into something that we can witness and measure, then that would be great. We’re all excited about that possibility. So it’s encouraging to hear that VCs are more active and that they believe there’s going to be more IPOs this year.”

From Jovanovic’s perspective, she is expecting a negative impact on some proptech companies.

“What you’re going to see is potentially some fallout for proptech companies that haven’t been funded well enough and can’t get funding that’s affordable or reasonable right now,” she said. “They might not survive 2025 simply because not everybody planned for this. I’m seeing a lot of struggling startups that might not survive the year.”

However, Jovanovic also said that she is seeing private equity firms creating funds to write smaller checks more applicable to proptech. “That’s interesting to me, because collaborating with a PE firm is very different from a VC, and the opportunity to do something on a bigger scale with a company like Blackstone is, I think, unique. I’m encouraged and excited to see that’s a possibility in the future.”

Such a future might include LeaseLock, she said.

“We have some plans for diversification at the right time,” Jovanovic said. “We’re planning to do some consolidation ourselves and finding the right partner who has the appetite to write the right size check is important. For us, it would probably be somewhere between a VC and a PE, unless we find there are PE firms now that seem to be inclined to write a somewhat smaller check. And, when I say smaller, I mean $100 million.”

The banking sector isn’t usually a big player in proptech startup funding, but John Huber, national lead for venture coverage at Wells Fargo Technology Banking, sees opportunity through the overall macro murkiness of tech investment.

“We have seen a steady decline in both venture capital and private equity investment activity over the past eight quarters since a peak in Q1 2023,” Huber said in an email. “Outside of AI, investment activity in most proptech sectors has been muted, as economic uncertainty and a somewhat tepid exit market has kept investors on the sidelines.”

Macroeconomic fluctuations are affecting proptech — “A lot!” — Huber said “Real property has always shown elevated sensitivity to macro conditions, and we are seeing that playing out now in real time, most notably in interest rates, which directly impact borrowing costs and property values. In parallel, current market uncertainty is prompting investors to be more selective and deliberate in business risk evaluation. These factors impact all asset classes, and proptech is no exception.”

Despite such obstacles, Huber sees some areas of upside in deploying capital to proptech.

“One trend we are noting is activity pick up within PE, family office and private capital funds that have activated in a significant way to support the infrastructure needs around energy transition. This is a large asset play that requires significant capital deployment, generating interest from both investment-driven and enviro-conscious communities.

“And we see a lot of enthusiasm around AI — especially in support of compliance improvement, space optimization and business transaction automation. We are also seeing enthusiasm around fintech integration, including digital escrow and mortgage automation, as well as sustainability and energy infrastructure, especially in data center buildouts.”

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