Proptech funding may see big dip in 2020

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U.S. proptech funding will likely fall this year to its lowest level since 2016, but should rebound in 2021, a new forecast indicates.

Based on analysis of Venture Scanner data, a report from the Deloitte Center for Financial Services predicts 2020 proptech funding could decline to $7.3 – $8.3 billion. The final tally depends on the speed of the U.S. recovery from the coronavirus pandemic, the report’s authors say.

It would be the lowest total for U.S. proptech funding since 2016, when the sector raised $4.9 billion. Last year, the sector raised a record-setting $15.5 billion.

While the pandemic has pummeled proptech funding this year — registering a year-over-year drop of 41.5% — it’s on track to bounce back significantly in 2021, the report indicates. The forecast envisions total U.S. funding next year of $10.9 billion to $17.2 billion. Anything above $15.5 billion would be a record amount.

Proptech startups that shift toward pandemic-driven offerings may stand a good shot at sharing in next year’s pool of VC.

“Technology-induced innovation is the ethos of the proptech industry. As workspaces and the lines between ‘live, work and play’ may look and feel much different post-COVID-19, real estate company operations will likely need to evolve to meet new demands,” the report says. “This could create new business opportunities for existing proptechs, but some proptechs may need to revamp their business models and reinvent solutions.”

One proptech company that has revamped its business model is Sonder, the report says. Before the pandemic, Sonder focused on short-term rentals in the hospitality space, depending on leisure and business travelers to drive business. During the pandemic, the company pivoted to temporary housing for students, families and medical workers. In June, Sonder raised $170 million in Series E funding.

“Proptechs could take different approaches to evolve, spot and capitalize on new opportunities,” the report notes. “They can expand their target customer segments, and consider adding complementary products and services through strategic alliances or M&As.”

On the reinvention front, the report cites Openpath, a provider of mobile software that allows keyless access to workplaces and other spaces. In the midst of the pandemic, the company tailored its technology toward wellness verifications, temperature screenings and contactless elevator systems.

Among the proptech innovations that the report foresees enjoying greater demand because of the coronavirus are:

  • “Smart” cleaning and monitoring.
  • Virtual appraisals.
  • Touchless property navigation.
  • Digital lease transactions.
  • Remote property management.

“Since the onset of the pandemic, there has been accelerated demand for property management solutions that enable smooth and safe re-entry into physical spaces,” the report notes.

Within residential real estate, the report highlights an uptick in demand for tools like smart home solutions and tech-enabled furniture rental. In that segment of proptech:

  • UpKeep, an app-based provider of maintenance management, collected $36 million in Series B funding in May.
  • Home automation platform SmartRent raised $60 million in Series C funding in May.
  • CasaOne, an on-demand home furniture rental company, received $50 million in debt financing in June.

Earlier this month, FinLedger reported that proptech funding had declined by about 6% in the first half of 2020, according to a report from the U.S. arm of global investment bank GCA. But GCA, too, projected a pandemic-fueled rebound.

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