Figure 41 shows the probability of a success of a company as shaped by the age of that company. To be sure that we were not skewing the results, we measured both the median and the average probability of success. Here, a successful exit is considered either an IPO or some form of M&A deal. As we can see from Figure 45, young companies tend to be successful in the PropTech industry, as their average probability of success remains greater than 50% for the first four years. However, for those companies five to nine years of age, the probability of success is higher. These are companies that will have a proven track record of managing operations, research and development, product delivery, and, importantly, fundraising. These companies also tend to be larger and have additional assets (hard, liquid, personnel, and, most importantly, unique proven uses of technologies) that make them attractive for acquisitions. The record then becomes more checkered in the 10-to-17-year range, although the trajectory of success is still upward, with a robust mixture of predicted exits being mostly comprised of M&A deals and IPOs, although the likelihood of an IPO does tend to increase over time.
Figure 42 shows a list of the top active companies in the PropTech ecosystem from the 2023 to 2024 fiscal year, organized by their opportunity score and predicted exit type. As we can see, there are many companies with high opportunity scores (those over 80, for instance) that have an M&A as their predicted exit type. This includes innovative companies, like Crassone, Dimedia, and Huspy. By comparison, there are considerably fewer companies that made deals in the past fiscal year that are predicted to achieve status through an initial public offering (IPO). However, beyond the promise of Black Knight, which we have already highlighted elsewhere in this year’s Barometer, we find there are several innovative companies that are likely to achieve an IPO status. However, Accenta represents one company with a very high opportunity score, which has a good likelihood of achieving IPO status, with promising numbers.
Among these companies of distinct promise, the aforementioned top four are balanced with two managing category companies, one building and one living. Crassone is a Japanese provider of home building infrastructure services intended to deliver estimations for demolition work, along with exterior housing construction work. Thus, Crassone is developing critical technologies that can forever transform the necessary process of urban renewal. Similarly, Accenta is contributing critical technologies to urban renewal. However, their emphasis is on the decarbonization process, combining artificial intelligence and machine learning to examine the inter-seasonal storage of thermal energy, with the aim of fitting buildings with a low-carbon boiler system to meet their thermal needs. Notably, Accenta raised EUR 108 million in a venture round led by EREN Group and Credit Mutuel Impact in September of 2023, with the aim of strengthening Accenta’s position in France and expanding to other locations across Europe.
In the managing category, Huspy and Dimedia focus predominantly on two different aspects of technological solutions: platforms and software. Huspy, to begin with, is a developer of an online mortgage service platform that is intended to ease the home-buying and selling process. The company’s platform simplifies the mortgage process, removing friction, and increases the availability of cost-effective solutions to one of the greatest hurdles to home ownership: finding and securing a mortgage. And they do all this through a web platform and paired mobile app that eliminates the need for paperwork. More broadly Dimedia has been providing software development and systems management solutions across the industry, while still focusing on their core product, which is a CRM software specially developed to meet the needs of real estate agents and agencies. Agencies can more easily manage the properties they have to offer and create customer relations across the Southern Slav states of Croatia, Serbia, Bosnia, Hercegovina, and Montenegro. Further, Njuskalo, the largest Croatian digital marketplace acquired Dimedia early in the 2023 fiscal year, as a further sign of the prospects of Dimedia’s technological contributions to the real estate property management space, especially as Njuskalo claims some 80% of the total number of business customers in the real estate sector in the sub-region. Thus, it’s important to remember that certain technologies and innovations that might be considered taken for granted in the North Atlantic and Northern Europe might provide avenues for ripe investment opportunities when applied to new regions and markets.
Figure 43 represents the number of companies in a given tier of Opportunity Score for the 2023 to 2024 fiscal year. What we observed is that the number of companies in each tier tends to increase with the opportunity score, suggesting there are a large number of PropTech companies that are ripe for future M&A deals. However, among those companies with the top opportunity score, we have just eight companies, including the aforementioned Accenta, Crassone, Dimedia, and Huspy. Beyond these four, the companies with the top opportunity score are Hybr, Inspection Go (iGo) and Modulex Modular Buildings. Among these next three companies, another two are managing category companies, while one is a building category company. To begin with, Hybr is an operator of a rental platform that seeks to provide solutions to the student housing sector, by connecting student renters directly with the landlords. The company raised GPB 3.24 million in seed funding from Blackwood Ventures and Adjuvo in November 2023 to expand its impact in a shorter time frame, supporting millions of students across the United Kingdom, in their effort to find the right housing, enabling them to achieve more with their studies.
While Hybr focuses on the rental market, iGo focuses on easing friction in the process of home buying. iGo is a home inspection software company that enhances the workflow of businesses and independent home inspectors. The software platform has a proven track record of providing agents with free repair estimates, while increasing agent referrals and market shares for inspectors, which is important since the home inspection stage of a property purchase is still often conducted with a flurry of paper and hand scribbled notes about what a thorough inspector may find, quickly organized into a readable format for the buy, and guided by the agent. The process has typically been confusing for everyone involved in the past, and iGo is part of the solution.
The final company with a top opportunity score for the 2023 to 2024 fiscal year is Modulex Modular Buildings, a provider of steel modular buildings utilizing 3d volumetric cold rolled steel technology. Their business is also carbon net-zero certified, further enabled by AI and IoT technological solutions to provide the U.K., U.S., and E.U. with housing and infrastructural needs swiftly, although they have also serviced projects in India as well. As a global pioneer in the Building category and construction technology, more specifically, Modulex Modular Buildings is an indicator of several observable trends: 1) being the development of new materials using technological solutions to advance R&D; 2) being the enabling of technological solutions through the application of cutting edge computing technologies (including AI, Blockchain, and IoT), and 3) striving to edge ever-closer to a carbon net-zero future. We highlight these trends further in the next case study.
Figure 44 shows the distribution of deals during the 2023 to 2024 fiscal year in the Building category. As we can see, there is an enormous concentration of deal capital in the People’s Republic of China, rising far above the rest, with nearly ten billion raised (or $9.75 billion USD to be precise). Coming in second, the United States only raised $1.11 billion USD in the Building category, while the third and fourth place countries, Sweden and Israel, raised $323.52 million and $175.97 million USD respectively. In a second tier, Canada, Germany, Japan and the United Kingdom all raised between $50 and $100 million USD. Finally, in a third tier of leaders, Australia, Finland, Austria, France, Netherlands, South Korea, Indonesia, Peru, Singapore, and Switzerland all raised between $10 and $50 million USD. Among the most notable trends are the simple fact that the United Kingdom is relatively far down the list, and certain long-term global leaders, such as Spain, are not present in the Top 20. Consequently, it is clear that Building category companies still have space to grow in these markets. Although we might argue that the placement of the United Kingdom is a result of the relative financialization of the PropTech market, in the case of some other leaders, such as France and Spain, the relative need for new real estate and residential buildings is so significant, that the present indicators are signs of room for growth. Other signs of growth suggest that Building category companies, including those headquartered in Europe, may be able to make more progress riding the waves of developing economies where construction is a much more significant player in the overall market, in part because rapid urbanization is a key demographic feature of those countries. Indonesia and Peru would be examples of these markets.
Figure 45 shows the top PropTech deals in the Building category from the 2023-2024 fiscal year. As we can see, the top teals are by Chinese, Swedish, American, and Israeli companies, while two German companies, an Austrian company, a Finnish company, and a Canadian company round out the Top 20. Although the big players are Buyout/LBO deals in the PRC and China, VC deals in the United States are more significant among the top deals. Much like the rest of the PropTech industry, the concentration of the greatest number of top companies here is clearly still in the United States, but the fact that the PRC has the largest deals on the list shows the promise of scaling in a much larger market by measure of population. American companies with major deals in the Building category included Meriton ($250 million), SunTec Concrete ($165 million), Mighty Buildings ($52 million), ITG Communications ($45 million), Curri ($42 million), Briq ($38 million), PermitFlow ($31 million), and TraceAir ($25 million). Within this list, these companies engage with the production and patenting of a vast array of technologies.
For instance, is a leader in the field of HVAC manufacturing and systems, while SunTech Concrete is a leader in the concrete industry. These companies develop and test new technologies every year, but they may not attract the glitz and glamor of fad or meme-motivated investment strategies. That said, there are certainly companies that are more well known for their contemporary appeal, such as Mighty Buildings, a constructor of beautiful, sustainable homes utilizing modern designs and technologically enhanced processes that reduce time, labor costs, and waste for a project. Building off the needs for the ever growing industry, companies like Curri are developing logistics platforms to grow sales, cut risk and enhance CX with software advances. Other companies, like Briq and ITG Communications focus more on industry and providing, with ITG Communications focusing on the construction of cable and associated communications facilities as it caters to the B2B sector, while Briq also caters to the B2B sector, but focuses on providing financial automation of operations to small businesses and contractors for projects. Similarly, PermitFlow is primarily a B2B operation, although the technological innovations it provides are incredibly important, as PermitFlow simplifies the process of preparation, submission, and tracking of permits.
Scandinavian construction companies have long been leaders in the development of robotics and materials technologies, as have Germany companies, so it is not a surprise to major leaders from these countries. Israeli companies, especially in Tel Aviv, have been emergent in the tech sector, and this year’s data may prove a sign of this. However, the indicators of the health of the industry could be more fragile to geopolitical conditions than several other markets. Construction and building companies in Israel have come under international scrutiny, and it is unclear if investors will be willing to continue to establish a footing in the region should the degree of existing conflict continue or deepen.
Figure 46 illustrates the Top 20 deals in the Building category of the PropTech industry excluding those companies that are headquartered in the United States. Given the extreme size of the Chinese market, one might expect a significant portion of the American slots to be taken up by Chinese companies. Indeed, when we exclude the eight American companies from the list, we do add three more Chinese companies, being Tianjin Construction Group, InterHouse (China) and CNPC Powder respectively. However, this is also where we see companies from the Netherlands, being Monumental (Machinery), Indonesia, being Gravel, and Peru, being Eecobuildtec making more of an impact. Notably, these companies are solving specific problems of their markets, while providing solutions that are truly global in nature and could improve workflows in markets elsewhere. Gravel, for instance, has developed a construction workforce platform that makes it simple to find qualified and trustworthy construction workers, by democratizing access to blue collar workers across boundaries, as well as providing auxiliary residential repair and maintenance services. Further, Gravel has begun to offer materials sourcing online through their platform, allowing for further easing of labor shortfalls during the building process. On the materials and services side, Ecobuildtec (recently renamed “Ecobuildnext”) is providing inexpensive and quickly assembled housing, through providing modular systems, and civil work design flows that service specific industrial sectors, particularly mining. However, their core technologies may be used to abate the housing crisis more broadly, and the company is keenly aware of this possibility as they seek to expand their market. Regardless, technology and innovation remain the key to expanding the PropTech market in the Building category. Thus, it is not a surprise to note that the vast majority of the market deals are completed early/late stage VC, Accelerator/Incubator, and Seed Round deals.
Figure 47 shows the total number of deals in the Building category of the PropTech market for the 2023 – 2024 fiscal year as broken down by their deal type. Of these, almost 21% (20.81% precisely) were Later Stage VC deals, while 17.26% were Accelerator Incubator deals, 16.41% were Seed Round deals, and 13.54% were Early Stage VC deals. Clearly acceleration, innovation, incubation, and drive to support the growth of new technologies still make up the greatest number of deals in the market, showing relative promise for the future. IPOs, however, remain rare, as less than 1% of all deals this year in the Building category were IPO deals (.6768% to be precise), additionally, M&A deals (6.6%) and Buyout/LBO deals (3%) show that this form of successful consolidation has still been much more likely than an IPO deal. The evidence suggests that while this category is ripe for investment, the likelihood of a successful exit is much more likely to still be in the form of an LBO/Buyout or M&A deal than an IPO.
There are a vast array of tools that have been adopted by the real estate agents over the past several years. These can include everything from adopting Canva for advertising purposes to Docusign, to email marketing software and social media. However, market intelligence dashboards, featuring the ability to process large selections of data quickly, have only become more available more recently. These are essentially business intelligence tools used to visualize data. They can create a better understanding of the market audience, competitors in the market, and key features of the market geography as core aspects of their analysis. In the Real Estate sector major advances in market intelligence platforms have recently been pioneered by RealPage and Slate.AI. Market intelligence dashboards have become relatively common when one engages in the search for long-term residential properties, such as houses and condos (or “co-ops” as they are termed in some cities, such as New York). However, there is little information widely available about the impact of these technological advances on the short term rental market.
The short term rental market is typically defined by units that are rented between one and seven days, or slightly longer, with the supply side of this market either being property managers (including for hotels) or independent hosts (such as those who might rent their properties on AirBnB or similar services). On the demand side, individuals seeking these properties are typically individuals who are in either an urban, suburban, or rural setting for a short period of time and typically travel a significant distance to arrive at that setting. They may be traveling with family, or for work. They may be families seeking to attend the drop off of their students at dorms, or public events and ceremonies, such as graduations, weddings, and funerals. They are typically engaged in either work or leisure, or a combination of the two during their stay. With such a diverse array of individuals who may be renting short term stays, it has been nearly impossible in the past for property managers to attempt to analyze this market without any tools.
Further, independent hosts often participate in the short-term market for a combination of financial reasons (seeking extra income), or social and cultural motivations (such as those offering “authentic cultural stays”), whereas property managers (PMs) are more like intermediary operators or companies that are simply seeking to maximize profits and returns. Overall, the short-term market is thus so diverse that it has a high turnover rate for PMs, along with a relatively low barrier to entry, but a relatively high barrier for survival and success. The low barrier to entry means that the market is very fragmented, supply can become quite volatile, and competition can shift from nonexistence to intense in very short periods of time. Occupancy levels are also much more difficult to track in this market, due to the large number of informal property managers that exist and the explosion of the AirBnB market.
In this case study, 2,000 AirBnB listings in Madrid were analyzed over 18 months. Property managers were counted in the study if they adopted the market intelligence dashboard software at least once during the survey period. One of the key features of adopting the technology straight away, of course, was an increase in the relative transparency of the market for property managers. The analysis shows how market intelligence data impacts occupancy levels, daily pricing, and revenues. Since pricing algorithms are not designed to produce a bias in favor of an individual property manager, the argument is that those PMs who use them will have a better knowledge of the overall trends of the market.
Figure 48 shows the occupancy, revenues, and price after the adoption of a market intelligence dashboard by a property manager. Surprisingly, market intelligence dashboards saw a relatively low adoption rate, given the potential value that they offer for property managers. Just 16% of AirBnB listings had property managers that made use of a market intelligence dashboard. The results for these property managers were quite dynamic, however. They reduced inoccupancy. Occupancy rates dramatically increased, by a total of 13.3%, after the adoption of the market intelligence dashboard. The 13.3% increase in occupancy rates drove revenues up in a similar fashion, totalling a very substantial 11.6% increase in revenues. Finally, although it might be intuitive that such software would seek to optimize prices upwards, there was a 15.8% drop in the daily average prices of these properties. Thus, property managers that add the use of a market intelligence dashboard secure a competitive edge. They leverage the data to outperform their peers, while less tech-savvy PMs are likely to find themselves increasingly struggling and even potentially exit the market because of the lower return performance of their invested properties. While we should note that the results of this case study should not be extrapolated onto the long-term stay/rental or purchase market, it does follow that certain markets will behave in a different fashion. Additionally, it’s important to note the price decline associated with the adoption of market intelligence dashboards in this case. If the data were to show a price increase, there is at least a chance that such a platform could run afoul of existing laws that are designed to criminalize price fixing, as the American Department of Justice has recently contended in a newsworthy lawsuit against RealPage. However, in this case, because the data shows that the increased revenues for short term rentals are coming from a decline in prices and an increase in occupancy rates, investors can rest assured that the evidence suggests a completely different conclusion: the adoption of technology is contributing to greater equilibrium in the market.
