Proptech is an important area for commercial real estate and for technology vendors. In an atmosphere of rising interest rates and economic and geopolitical uncertainty, things have been shaky. Investors, particularly VCs, have been pulling back strategically, telling startup founders starting in the Federal Reserve’s upward drive of interest rates to cut cash burn rates and not to assume more funding would be forthcoming. After undertaking a mid-year survey of both investors and startup founders for sentiment and comparing it to the results from a 2022 year-end survey, the company reported its investor confidence index was up to 6.1 out of 10 rather than the 5.4 from the last one, showing “cautious optimism.” A score of 5 is supposed to be neutral, anything above that some degree of optimistic, and below, pessimistic. As the report noted, “43% of investors expect to make more PropTech investments, up significantly from 26% at Year-End 2022,” and “39% of investors expect an uptick in deal flow, in line with Year-End 2022 and up from the all-time low of 19% at Mid-Year 2022.” CEOs answering for startups had a confidence index of 4.8 out of 10, up slightly from 4.4 at the end of 2022 and the all-time low of 4.2 in the middle of last year. Of them, “45% of startup founders believe that it will be harder to raise capital over the next 12 months, down from 57% six months ago, “60% of startups expressed increased likelihood of experiencing a liquidity event in the next 3 years — an increase from 54% recorded six months ago,” and “44% of startups expect the PropTech space to remain competitive over the next 12 months.” What any of this means is hard to say. The methodology explanation is neither transparent nor revealing. “This survey was designed in collaboration with the Real Estate Board of New York (REBNY) and the Royal Institution of Chartered Surveyors (RICS) based on industry leading standards for sentiment analysis,” the firm said. “We used a purposive sample of active investors and startups in real estate technology and post stratification to ensure quality data. The Confidence Index is based on responses to 4 sentiment questions about future market expectations.” The report didn’t offer numbers of respondents for either investors or start-up CEOs, undercutting the ability to estimate whether the responses have likely statistical relevance. Furthermore, to call a sample “purposive,” by a Merriam-Webster definition,” is to say that it was either “having or tending to fulfill a conscious purpose or design” or “serving or effecting a useful function though not as a result of planning or design.” Not quite what one might hope for from a survey that tries to present itself is statistically meaningful.


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Erik Sherman

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