Over the course of the past 20 years, the major players in the PropTech industry have been in the United States. Of the $461.95 Billion USD that has been raised for investments in the PropTech industry, $304.767 Billion of those funds were raised in the United States. Another $52.90 Billion USD were raised in China, with major European players, being the United Kingdom, Germany, and Spain, having raised $23.88, $13.86, and $13.38 Billion USD respectively.
Figure 15 shows the top ten deals in PropTech in the past two decades. Importantly, some of these deals are by companies that have very robust businesses. For instance, SoFi first became well-known for their student-loan lending operations, although they later emerged in the PropTech ecosystem, first as a provider of mortgage refinancing and secondary lending, and even more recently as a provider of primary mortgages. Consequently, when SoFi went public through a special-purpose acquisition company (SPAC) deal, raising $2.4 billion at a $9 billion USD valuation, the company secured a spot on the list of top PropTech deals for years to come. Similarly, the Intuit acquisition of Credit Karma in 2020 sits neatly at the intersection between the FinTech and PropTech industry. Since Credit Karma is well-known for their credit scoring technology, and most of the household debt in the United States is tied up in mortgage debt, it’s easy to understand how integrating Intuit’s suite of financial software with Credit Karma’s scoring technologies has major implications for more junior investors, who are looking to make waves in the real estate sector. While the Better and Wanda deals have been reported on above, this year’s Wanda deals outpaced last year’s Healthcare Trust of America (HTA) deal such that it became one of the largest ever deals. Here, HTA is primarily a provider of investment strategy and big data analytics to investors, while simultaneously managing their own investment portfolio. Somewhat similarly, Wanda Real Estate Group is a major developer of inter-regional projects in the People’s Republic of China (PRC), aiding in the transformation of older urban areas into contemporary metropolises.
While the Top 10 deals in the past decade look relatively mixed, if we broaden the scope to the Top 20 deals, as illustrated by Figure 16, we can see a distinct trend emerge: more than half of the money being raised in these major deals is being generated for the Managing category of companies. In part, this is likely because not all the managing deals have their value more closely tied to the value of the assets that they manage, and therefore are more consistently able to achieve greater valuations. At the same time, there is incredible technological innovation in the Building category of companies, but we just don’t see the technological innovation and patents themselves as major disruptors, somewhat surprisingly. Indeed, the only Building company on the Top 20 list is Zoomlion Intelligent Aerial Work, a company that has developed an enormous fleet of smart construction equipment. Intelligent construction equipment, such as Zoomlion’s products typically offer a combination of contemporary scientific advancements in robotics, sensors, and controllers, as well as software solutions that combine the use of Big Data analytics and AI, along with other technologies, to improve the efficiency and the vital safety features of equipment. The combination of these technologies allows intelligent construction equipment to collect, store, analyze, and process information, while also executing appropriate actions and engaging in rapid decision-making facilitated by the operator.
Zoomlion Intelligent Aerial Work was acquired by Roadrover – which is primarily a provider of automotive electronic solutions, including in navigation and audio systems, smart seating systems and more – through a $1.32 Billion USD (CNY 9.42 Billion) LBO on February 23, 2024. Although the reasoning for the deal may appear opaque at first glance, a closer read reveals that Roadrover is in turn predominantly owned by the plural majority shareholder, Zoomlion Heavy Industry Science, the original parent company of Zoomlion Intelligent Aerial Work. Additionally, since Zoomlion Intelligent Aerial Work was previously held by several outside investors, the deal represents a significant assessment by the parent company that it’s PropTech investment is indeed bearing enough fruit – quite literally, in the case of annual revenues – that they believe these revenues can be large enough to service the debt taken by Roadrover through the buyout package. In other words, they represent an assessment by the parent company, Zoomlion Heavy Industry Science, that their intelligent building equipment can transform portfolios, in addition to the marketplace.
Similarly, Cainiao and comparable companies have been fundamentally transforming the way we live and work through their integration of smart hardware technologies (for delivering packages), artificial intelligence (for assessment of packaging processes), and software that enable differentiated digital capabilities within our network, including a widely used logistics application (Cainiao App). Yet, Living category companies only tend to occupy the middle of the pack. While we are seeing a massive and consistent concentration of capital in the managing category, it is important to note that the distribution of capital has been spreading across the globe for the past several decades of growth for the PropTech industry.
Figure 17 shows the distribution of capital by Investors who are active in the PropTech industry by investor origins location for the past two decades. Previously, we mapped the distribution of PropTech companies in the world and found very distinct trends. The largest number of companies in our 2021 and 2022 data were clearly located in the United States, although India, the UK, and Germany were a second tier of top players. In 2023, we shifted the focus to look at the global distribution of PropTech investments and observed that China was the only second tier player, with Germany, the UK, and Spain forming a third. This year, we are taking a long-term vision. As you can see, the total capital invested by investors active in the PropTech industry remains concentrated in the United States, with $304.77 billion USD invested by US -based investors from 2005 and the end of the 2023-2024 fiscal year. China emerges in the second tier as a stand alone, yet again, with $52.90 billion USD invested, while the UK, Germany, and Spain form a third, with $23.86, $13.86, and $13.38 billion USD invested, respectively. Yet, some interesting trends emerge when we compare this distribution to the funds raised by PropTech companies in the past two decades.
Figure 18 shows the distribution of funds raised by PropTech companies between the 2005-2006 FY and the end of FY 2023-2024. Most notably, while the top end of the distribution has not changed in terms of the rank of countries. The amount of capital invested in the PropTech companies in the United States, the United Kingdom, and Germany is lower than the amounts of investments originating from those countries. By the time we approach Spain, Australia, and Brazil, however, the investments are virtually the same. In the case of India, there’s slightly greater investment in ProPTech companies than the investments originating from India in the PropTech space. When we have such differences, we can suggest that this is because, in essence, the United States also functions as an “investment originator” country for the global PropTech marketplace, whereas India is, relatively speaking, an “investor receiving country.” This does not mean that there are not substantial PropTech investments originating from investors in India. However, it does suggest that the large distribution of PropTech companies in India-long term, as suggested by the data of the past PropTech barometers, makes India a ripe market for receiving investments.
Figure 19 shows the capital invested by deal type, over the course of the past 20 years. As we can see, most of the capital has been accumulated through just a few types of deals, with M&A deals, Later Stage VC deals, and Buyout/Leveraged Buyout (LBO) deals leading the pack. A second tier is made up of Public to Private and Early-Stage VC deals, while a third tier is made up of Acquisitions Financing and IPO deals. The enormous amount of financing devoted to Mergers and Acquisitions is a sign of the market consolidation we have discussed in previous editions of the PropTech Barometer. Yet, the Later Stage VC deals are also of note. A Later Stage VC deal is a sign that a company is relatively mature, and still is worthy of substantial start-up investment. From a financial perspective, this distribution is showing a trend of increased maturity of PropTech companies. They are viewed as long-term viable leaders, with a reliable product and established market niche. For instance, a great example of a Later Stage VC deal completed in 2021 was by Cloud Kitchens.
Cloud Kitchens provides software to make it feasible for restaurants to open delivery-only locations, which expands their market reach, and then also makes said distribution incredibly cost-effective for food providers. Thus, Cloud Kitchens is utilizing revolutionary software to help transform the way we eat at home. Consequently, Microsoft, Ankush Gera, and Chimera Capital joined forces in November 2021 and invested $850 million USD of venture funding in exchange for a combination of promised repayments for debt and equity shares in the company. The funds were used to fuel the expansion of Cloud Kitchens across the United States, Latin America, the United Kingdom, and the Middle East. Although Cloud Kitchens has faced difficulties stemming from the post-pandemic decline in delivery demand, the overall model of ghost kitchens – locations nearby areas of high-delivery demand, which don’t have a storefront, and are entirely focused on delivery, coupled with a substantial digital presence – is becoming increasingly a phenomenon that helps meet the need of office spaces or residents in said high-traffic areas.
Despite the major impact that Later Stage VC deals have on the market, it is also notable that there is a substantial portion of the PropTech capital, to the tune of $34.79 billion USD, which has been put into Early-Stage VC deals in the past two decades. These Early-Stage deals, of course, are what has fueled much of the technological innovation, especially across the United States, Europe and Asia. In the following chapter, we begin to break down more insights of the PropTech industry by regions.
