Big Tech Is in Big-Layoff Mode, but Proptech Might Not Be and Here’s Why

No one is saying that proptech hasn’t been feeling some pain. Even as of October, both investors and startup founders had a drop in confidence in the sector. According to a count by the Center for Real Estate Technology & Innovation (CRETI), while proptech companies raised $19.8 billion in total globally from venture capital firms in 2022, that was down 38% from 2021’s nearly $32 billion and represented the second lowest investment year since 2018.

“The narrative in the proptech industry continues to change along with the macro real estate environment,” the organization explained.  “Real estate organizations have adopted a more defensive position as entrepreneur-founders and investors navigate through a cautiously conservative landscape.  Market volatility continues to persist due to monetary policy, rising interest rates, and recessionary fears.”

Zigg Capital founding partner Dave Eisenberg recently predicted that “2023 will be about proptech companies surviving, thriving or diving in the downturn,” which pretty much covers all the possibilities. He expected “a handful of very savvy transactions that will pierce through the liquidity desert and prove to be transformative a few years from now.”

And yet, this isn’t the type of doom and gloom that you see in one form from the largest tech companies. The site Layoffs.fyi, run by a startup founder who has tracked tech layoffs since the start of the pandemic, tallied 159,684 employees laid off from 1040 tech firms in 2022 and another 68,502 from 229 companies in 2023.

Which, let’s remember, is still only a month old.

The difference, though, is understandable. Many of the large number of layoffs have come from big tech companies, a number of which have dropped 10,000 or more employees each, and some of the biggest layoffs have come from some of the companies like Google and Microsoft that had enough money to navigate through a recession without layoffs and still be in strong shape after. But there are also some that haven’t, as Business Insider pointed out, including Apple, HubSpot, and chip makers Nvidia, Broadcom, and AMD.

One of the reasons for big layoffs is to send a signal to investors that management will preserve earnings in the face of layoffs to keep stock prices elevated. Another reason is that executives took big jumps in tech use that started during the pandemic as proof enough they could expand their companies for huge increases in revenues and earnings when logic might have suggested that the effect would be temporary.

Proptech companies are facing some fundamental problems of turmoil in real estate. Some sectors, like office, are getting hit hard. Home construction has been in significant decline, so a proptech companies dependent on rising home sales will be facing distinct trouble. But software that can help CRE companies work more efficiently and boost profits might do much better. Proptech didn’t have a chance to explode in size and hire large numbers of workers in wishful anticipation of growth.