We have better data on emerging markets in this year’s barometer when compared to previous years. This year, we found 7,691 companies had raised $408.82 Billion USD with the help of 16,865 investors from 95 countries between 2012 and 2023. In previous PropTech Barometer reporting, we found just 2,405 companies raised $74.2 Billion USD from 1,809 investors in 66 countries between 1999 and 2021. Even still, improved data cannot account for all of the changes. Therefore, we attribute the significant difference to a combination of our improved dataset and the growth of the industry, especially as PropTech has begun to work in ever increasingly in developing markets, particularly in the People’s Republic of China and India, as well as their neighbors. With each passing year, the spread of technology into real estate markets is penetrating further than before.
Our current data indicates PropTech investors have hit record highs in recent years. There were more than three thousand active investors in the 2022-2023 fiscal year, substantially down from the more than four thousand active investors recorded in the 2021-2022 fiscal year. Nevertheless, examining the longterm trends of investor make-up suggests the field of investors remains quite healthily diverse.
Additionally, although the vast majority of investments occur in the United States and the People’s Republic of China, followed by European countries like the United Kingdom, France, and Germany, we see emergent PropTech markets in countries. In Latin American markets like Colombia, Peru, and Brazil join Southeast Asian markets like Singapore, Vietnam and Indonesia, along with African markets like Nigeria and South Africaand Southwest Asian markets like Israel, the UAE, and Turkey in becoming innovators in the PropTech industry. In future years, we may look to such countries as leaders in their regions, and even, possibly, the global PropTech community.
Figure 13 the global distribution of PropTech investments excluding the United States, to give us a better sense of the current top investment markets. Of course, we should not be surprised to see the People’s Republic of China (PRC) at the top of the list, along with the United Kingdom – since London is often referred to as the capital of global finance. Then, we find Germany — the European Union’s largest market as measured by GDP — and Switzerland, an established and well-known market for global finance
Figure 14 shows the bar graph of the top countries in terms of PropTech investments from 2012 through 2023. The top five include Spain (attracting $990 Million USD in investments in the 2021-2022 fiscal year and a total of $10.56 Billion USD since 2012), Switzerland ($13.5 Billion USD), Germany ($17.16 Billion USD), the United Kingdom ($23.90 Billion USD), and China ($58.41 Billion USD). Other important markets include Australia ($8.15 Billion USD) and Canada ($5.76 Billion USD). Another tier of countries, including Brazil, India, and France, have attracted between $3 and $4 Billion in investments in the past decade, while a third tier of countries, including Singapore, Japan, Sweden, South Korea, Hong Kong, the Netherlands, and Italy have attracted between $1 and $2 Billion in investments. Finally, the countries that have attracted more than $100 Million in investments, but less than $1 Billion, are quite diverse, including Israel, Colombia, Lithuania, Austria, Mexico, Indonesia, Vietnam, Portugal and South Africa.
Over the course of the past five years, the shape of PropTech investments by company category has changed substantially. Beginning this measurement in Q3 of the calendar year in 2018, B2B companies attracted the most capital, with more than $6 Billion USD. However, the longer term trend is for B2C PropTech companies to attract more investments, totaling over $86 Billion in the five year period and Information Technology (IT) companies attracting over $96 Billion in investments. Overall, the data also suggests there is a close relationship between the number of deals by company category and the capital invested, especially since Information Technology and B2C companies had the largest number of deals during the five year period in question, with 152 and 167 deals respectively.
Figure 16 is an illustration of the investments received by individual companies completed deals and their categories to give a bit of a long term perspective on the Global PropTech market. Here we see that major players from this past year, such as China Vanke in the Building category, HTA in the Investing category, ICE Mortgage Technology in the Managing Category, and KE Holdings in the Living category are also among the top fundraisers of the past five years.
Overall, the Managing category of PropTech companies are still seeing some of the largest and most significant deals, in part because this may well be the market segment that has most readily adopted to the digital transformation. The relative financialization of the US and UK markets, coupled with the innovations of FinTech, help to explain why Investing has been the consistently second most substantial category. The data illustrates that the technological revolution may still well have the greatest space to innovate, diversify, and disrupt the Living and Building spaces, as these are the spaces where the least disruption has occurred in the real estate market – relatively speaking – thus far. However, with interest rates relatively high in many markets, it is unclear at present what forms of financing will take over, although there is a pervasive sentiment that leveraged buyouts and debt financing are on the decline in the current cycle.
Overall, the vast majority of deals covered by the press reporting on the PropTech industry are large Mergers & Acquisitions or significant VC funding. The data also supports this focus, since Mergers & Acquisitions represented the most significant capital invested by deal type in the past five years, totaling over $73 billion in M&A deals, representing 25.49% of all deals. A second tier of deals, being Growth/Expansion, IPO, Private Secondary Transactions, Reverse Mergers, and Prive Investment in Public Equity (PIPE) deals remain quite significant, as each of these categories represents more than $10 billion of financial deals, and together they represent 29.63% of all deals. By the time the trend of market consolidation emerged, as we had predicted in last year’s barometer, and by the end of the 2022 calendar year, deals were significantly smaller in the PropTech industry. As of the first quarter of the 2023 calendar year, Reverse Mergers, strikingly, became the largest category of deals, totaling over $5.18 billion, while PIPE and Later Stage VC deals remained significant, totaling over $2.36 billion and over $1.39 billion respectively. We take the data that M&A dropped to just around $1.07 billion of all deals as a further sign that we have entered a period when the market consolidation has already occurred.
Over the past five years, examining the total capital raised by fund type in the PropTech industry provides important insight into the financial dealings of an industry that is typically described as one of the least transparent in the business world. The top five categories of funds during the period in question were Buyout funds, Venture – General funds, Growth/Expansion funds, Real Estate Opportunistic Funds, and Direct Lending. Of these, Buyout funds totalled over $1 Trillion, while Venture – General funds totalled around $606.29 billion. Growth/Expansion funds totalled around $330 billion, and Real Estate Opportunistic funds totalled around $228 billion. Finally, Direct lending funds totalled around $196.56 billion. This overall picture is very different from that which emerges when we examine the key quarters of Q3 2020, Q4 2020, and Q2 of 2021, when compared to Q1 of 2023.
