NEW YORK CITY—The Q4 2017 Global PropTech Confidence Index, presented by MetaProp NYC in partnership with the Real Estate Board of New York and RICS, charts an environment of increasing growth and participation, with survey participation up 175% from six months ago, and at the same displays the markers of an increasingly crowded field. Eighty-six percent of PropTech startups surveyed expect their space to be more competitive in 2018, compared to 2017, up from 76% in the second quarter of this year and 63% a year ago.

Along the same lines, 76% of investors are expecting to see more pitches from PropTech companies next year than they saw this year, up from 62% in Q2. And while 49% of investors expect to make more PropTech investments in the coming year, compared to just 12% that plan on making fewer such investments, signs point to them becoming more selective.

“I will be more cautious about whether any new investment opportunities are really game changers or just good ideas,” says an investor quoted in the report. A PropTech CEO expands on this viewpoint: “2017 saw the PropTech space come into its own as a space to be reckoned with and invested in. The space is suddenly overflowing with disruptive startups competing for attention.

“I believe that in 2018, we will continue to see a lot of growth in PropTech, but the wheat will begin to separate from the chaff with the best companies and solutions rising to the top, while some of the riffraff begins to fall away,” the CEO continues. “I also believe we will see investment in PropTech continue to grow, but investors begin to be a bit choosier about which companies are viable for the long haul.”

The survey shows that investors made fewer investment over the past year: an average of 2.7, compared to 4.7 between Q3 of 2016 and Q2 of this year. Accordingly, the survey found that 29% of PropTech CEOs expect that raising venture capital will be easier in '18 compared to '17. That's down from 41% in Q2.

In line with that increasing selectivity, 31% of investors are now investing at later stages of a PropTech company's growth: i.e. past series A, although 47% still invest at the pre-seed and seed level. Investor confidence in the sector remains high with an index of 8.2 out of 10, although that's down fractionally from 8.3 in Q2.

The report cites “later-stage startup funding, increased deal flow and a wealth of M&A activity” as factors in that confidence. It notes that with startup confidence at 7.2—also down slightly from 7.3 in Q2 of this year—“the gap between investor and startup confidence is the closest it has been since the report's inception in Q2 2016.”

This slight retreat in startup confidence, which stood at 5.6 when the report was launched and has climbed since then, represents “the first indication of startup confidence plateauing, which could be related to uncertainty of exit opportunities. High competition within the space and fundraising optimism have kept startup outlook positive.”

A survey comment from a startup appears to set the stage for the coming year: “We're in the third inning of a game that's likely heading into extra innings as the entire FinTech, RealTech, PropTech, etc. space is relatively nascent. Many are still figuring out sustainable business models, yet the entrenched, legacy players are so completely and irreversibly behind in terms of tech that the opportunity for the survivors continues to grow, and fortunately, that growth will be exponential. But make no mistake, this is warfare, and 2018 will very likely show increased competition as incumbents put up their defenses.”

Instant Insights /

PropTech in 2018: More Choices, Choosier Investors

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