In Proptech, Angel Investors Help Answer Startups’ Prayers — Selectively

In the beginning, there were angel investors. And not much else.

Today, a variety of sources finance early-stage and especially mid- and late-stage proptech growth, with angel investors — those wealthy patrons with money to support high-risk startups — a relatively small slice of the funding pie. That may be changing, but by how much depends on which angel investor you entreat.

In general, early-stage proptech funding in particular is affected more now by artificial intelligence-powered development. 

“AI-native startups now operate with dramatically lower burn and faster development velocity,” according to a 2026 venture capital outlook from the Center for Real Estate Technology & Innovation. “Investors have taken note. The financial profile of early-stage proptech is stronger than at any point in the last decade.”

That rather optimistic take on early-stage funding is strongly supported by Michael Beckerman, a proptech angel investor and CEO at CREtech, a leading forum for the industry

“I think I was always comfortable with angel investing, because I like working with entrepreneurs,” said Beckerman, who has made nearly 50 such investments since 2015. “I’m comfortable in the very early stage of risk capital, because it’s my money and I’m willing to take big swings with it.”

A major factor for angel investors has been a shift in early-stage funding due to the explosion of artificial intelligence used in startup development, Beckerman said.

“Fast forward to this age of AI, and it’s a completely different market,” he explained. “I think it’s harder and more active than it’s ever been, and that’s for a couple reasons. One, the startups are growing faster, because the solutions have a more clear ROI where they can enhance efficiency — that is, on day one save time and labor, and have measurable outcomes on not just time, but on saving money or making better investment or operating decisions. So using agentic AI for workflow, underwriting, operating, building operations and things like that — the payback on AI investment is so much quicker than it’s been to date.

“Two, the startups don’t require as much money because they don’t have to hire all these software engineers. So it’s a lot less costly to stand up a startup in the age of AI. Some of these startups that I’ve invested in, they’ll raise one or two million bucks and they might be done because they can get to revenue really fast.”

This AI-accelerated startup development and profitability timeline is matched by a new caliber of entrepreneurs, many of whom are disrupting every aspect of real estate for the better, he added.

“The caliber of the entrepreneur that’s coming in with an AI-native toolbox is really a whole new ecosystem, in my opinion,” Beckerman said. “That’s why I think it’s very different and much more exciting to be an angel entrepreneur. It’s less lonely now than it was before AI emerged. In the past it was a community of angel investors, and then you had the VCs, and it was pretty much a tight-knit community. We all know each other. We all shared notes. Now the pool has turned into an ocean.”

That has accelerated the decision-making, Beckerman said. 

“You have to make quicker decisions on the angel side if you’re going to invest,” he said. “Before, you could watch something for six months or a year, and the opportunity still might be open. Now it’s getting a little frenetic and intense, but now you’re seeing a clearer path to a successful outcome in this age of AI in the angel market.”

Perhaps the hottest real estate sector adopting technology of all kinds to deal with its myriad challenges is the architecture, engineering and construction (AEC) continuum.

Tom Scarangello, managing partner and senior adviser at construction giant Thornton Tomasetti, was in on contech angel investing early as a founding member of AEC Angels, an investment platform for emerging technologies that try to drive innovation in the sector.

“Proptech angel investing really hasn’t gone away, but maybe you could say it’s grown up,” said Scarangello. “There’s been a lot of lessons learned, especially in our space, where we were the first believers, the angel investors. We got in early. But what we’re seeing now is that you have to do more than be the first believers. You have to be the first customers, advisers and channel partners. We’re staying much more involved, not just sitting back in many cases, but trying to identify what looks like best in class at a very early stage, which is challenging to do.”

Although Scarangello said that the overall number of angel investments being done by AEC Angels is down — something that can be ascribed to the normal cyclical nature of investing — their engagement with the technology they are looking at is up.

“Technology is changing so quickly with the advent of agentic AI and other things that are coming that engaging more in the process of early-stage target investments and helping entrepreneurs with more than just our thoughts early on in the process means getting them to understand how they’re going to drive adoption,” said Scarangello. “In the AEC space especially, adoption is always the biggest issue. There’s a lot of great technology out there, but getting people to allow this tech to work into their process that they’ve been married to for decades is some of the biggest challenges that we see.”

Along with those adjustments, angel investors need to look at how defensible the hardware and — especially — the software of startups are in the age of AI.

“Patience, especially in AEC, has always been required, but I think we need it even more now,” Scarangello said. “You need to recognize that you’re investing in this industry because you know it and understand it. You have to understand that this is not a quick-flip category. You need to have a realistic view of your go-to-market.”

Successful angel investors can be bird dogs for later-stage venture and institutional funds looking for greater investment insights, which was a major reason AEC Angels was formed, said Scarangello.

“We were being asked pretty regularly by some of the funds that we were invested in, ‘What do you think of this?’ and ‘What do you think of that?’ ” he recalled. “And the advantage we had was we could look at it from not just one aspect of our business, but all of them. Everything from the construction side, the architectural side, planning, engineering and the operation side. And, not only that, we could also say, ‘Well, this looks pretty good, but why don’t you deploy it on one of our projects as a test case or as a pilot?’ ”

Similarly, GEM Ventures, an invite-only networking community for proptech founders, executives, VCs and practitioners led by Drew Meyers, a former Zillow executive, invests in early-stage companies.

However, Heather Harmon, an operator and partner in GEM Ventures, said the landscape is rougher for proptech angel investing.

“Angel investing is declining,” said Harmon, a proptech founder in 2018, who since 2023 has also been a venture capital adviser, partner and angel investor. “The capital I see is going into mid-stage, maybe a later-stage Series A, where the company has been active for several years and has a new level of growth in front of them with an infusion of capital. Or into a Series B, where  they’re very much in a growth stage. I’m not seeing a lot of early-stage investments.”

Harmon believes the number of startup failures has curbed angel investments, if not reduced capital funding overall, particularly in the face of some entrepreneurs’ unrealistic go-to-market vision.

“Technology is changing really fast, and AI is changing how people use technology,” said Harmon. “This is changing the ideal customer profile expectations and also the expectations of investors in terms of go-to-market and growth. I’ve met with hundreds of early-stage proptech founders, and the one consistent flaw that I find is they grossly underestimate the go-to-
market, and they have this total addressable market that’s based on number of transactions or a number of real estate agents, and their ability to carve just 10 percent of that number. They’re highly unrealistic on what the cost to actually do that is.”

It can be even worse for consumer-facing applications, Harmon said. 

“This is an even bigger example of hubris,” she said. “If you take, for example, the fact that CoStar, or Homes.com, spent a billion dollars trying to convert the consumer, and they failed. They had to pull all that money back, and their investors were angry. And this is a perfect example of you having an experiment where you already had brand awareness and a billion dollars to spend on it, and still couldn’t get enough of the customer mission for that to have an ROI that mattered.”

Despite such evidence and misgivings, Harmon does see some exciting opportunities for early investment in one real estate sector.

“At GEM, we are looking at everything, but, personally, I have an appetite for robotics and contech and the innovations in the space of defining supply,” she said. “I find that is a blue ocean of opportunity, because technology has really not touched that side of the industry at the level that it can and should. There’s a lot of economic and political bipartisan reasons for these companies to be given a chance and actually have an impact in the most important issue that we have today: housing.”

Julieta Moradei, CEO and founder at Art Canvas, a Miami-based technology adoption consulting firm for real estate owners and developers, has a mixed view of the angel investing proptech landscape.

“I launched my consulting practice in 2023, and then for some time I was actually at a platform fund where I was doing both consulting and investing in the technologies that I was deploying,” said Moradei, who also has a background as a structural engineer and architect, before turning to early-stage proptech and contech funding. “I’ve heard people investing less in pure proptech, because there’s a lot of repetition in proptech. There’s only so many technologies that can be created for that very niche sector. In terms of it declining, I’d say venture capital has been really tough since 2022-2023. There’s been a decline in general, but I’ve actually seen the opposite effect over the last few years.”

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