Our latest quarterly update for real estate technology highlighted the most recent activity in the sector. Now, with over half the year complete, we’re performing a mid-year status check on how exits in the space are shaping up.
Based on analysis on our real estate technology research platform, we see that exit activity in the first half of 2018 is slightly down from 2017.
2018 Mid-Year Real Estate Technology Exit Activity Lower Than 2017 But Higher Than 2016
Let’s take a closer look at the number of real estate technology exit events by year.
The above graphic shows 20 exits in the first half of 2018. For the past three years, Q3 and Q4 accounted for 57% of total exit events on average. If that trend holds, 2018 exits will finish the year slightly lower than 2017, but higher than 2016. We’ll see if the second half of the year changes this trend!
Last quarter we looked at real estate technology funding trends and uncovered that investors are placing bigger bets on fewer companies. This quarter we are performing a deeper examination on our real estate tech research platform to compare funding by category. Our analysis reveals two key takeaways:
The Commercial Search category leads the sector in Q2 funding
The Commercial Search category also leads the sector in all-time funding
We’ll explain these key takeaways with some graphics and discussions below.
The Commercial Search Category Leads Real Estate Technology In Q2 Funding
To start off, let’s review the amount of funding raised this quarter by each category within real estate technology.
The above graphic shows that the Commercial Search category leads the sector in Q2 funding with almost $1.1B. Its funding is 40% higher than that in the next category, Home Services at $0.8B.
Commercial Search companies comprise of tools that help consumers or businesses find commercial real estate for rent or sale. Examples include shared working spaces and real estate search engines. Some sample companies include Kr Space, RocketSpace, WeWork, and UrWork.
So we’ve observed how different real estate technology categories stack up in their Q2 funding. But how do these categories’ funding compare with each other historically? Let’s investigate that in the next section.
The Commercial Search Category Also Leads in All-Time Funding
The graph below shows the all-time funding for different real estate technology categories. The Q2 funding and growth rates of these categories are also highlighted.
The bar graph indicates that the Commercial Search category also leads the sector in total funding at $11B. This is 30% higher than the funding in the next category–Life, Home, P&C Insurance at $8.4B.
In addition, the line graph shows that the Home Services category saw the highest growth rate in Q2 at 19%.
The Commercial Search category leads real estate technology in not only Q2 funding but in all-time funding as well. It’ll be interesting to see if any other real estate technology categories catch up in the rest of 2018.
As we have previously shared, the Real Estate Technology (proptech) startup sector is seeing a lot of momentum. How have its funding trends evolved over time? On our Real Estate Technology research platform, we have analyzed the data through 2017 and can conclude that investments into the Real Estate Technology market have become fewer in frequency but larger in amount.
We have come to this conclusion from the following three takeaways:
Total funding amounts are seeing strong growth
Number of funding events is seeing a decline
Average funding per deal is increasing
We will illustrate these takeaways through a series of graphics.
Real Estate Technology Funding Amounts Seeing Strong Growth
Let’s start off by examining the annual real estate tech funding amounts, stacked by quarters.
This graph illustrates that real estate tech funding saw robust growth at the annual level. Specifically, the funding in 2017 was 162% of that in 2016. In addition, the CAGR in funding amounts from 2012 to 2017 is an impressive 63%.
We have seen that real estate tech funding is showing strong growth, but what about the number of deals?
Real Estate Technology Funding Events Declining
The following graph shows us the annual number of Real Estate Technology funding events, stacked by quarters.
The above graphic illustrates that the number of real estate tech funding events saw a healthy upward trend from 2011 to 2015 and declined thereafter. The CAGR in funding events from 2012 to 2017 is still positive at 16%, despite the number of funding events dropping by 76% in 2017 vs. 2016.
We have seen that real estate tech funding amounts are growing steadily but the number of funding events is seeing a decline. Let’s see if the trend in average deal size provides any further clues.
Average Real Estate Technology Funding Deal Size Increasing
The following graph shows the average funding per Real Estate Technology deal over different quarters from 2011 to 2017, as well as the trendline.
As we expected, this graphic indicates that the average Real Estate Technology funding per deal has experienced consistent growth over the past few years. The trendline shows that from Q3 2011 to Q4 2017, the average deal size has grown by approximately 350%. This stable upward trend in average deal size demonstrates that while the number of deals has dropped, the investments in Real Estate Technology have indeed become more substantial over time.
Conclusion: Real Estate Technology Investors Are Investing More in Fewer Deals
In summary, we have seen from the above graphics that real estate tech funding amounts experienced strong growth at the annual level, yet its deal count has seen a decline in recent years. Moreover, the average funding per deal has been increasing consistently over time. These takeaways lead us to conclude that the investors in Real Estate Technology are investing more money yet into fewer funding deals. It’ll be interesting to see if this trend continues in 2018.
What are your thoughts on this? Let us know in the comments section below.
The real estate technology (proptech) sector has seen a lot of funding and exit activity over the past few years. Yet what are the different components of proptech and how do they make up this startup ecosystem? On our real estate technology research platform, we have classified the companies in the sector into functional categories. This blog post aims to examine these categories and how they compare with one another through a series of graphics.
IoT Home Is the Largest Real Estate Technology Category
Let’s start off by looking at the Logo Map for the real estate technology sector. As of January 2018, we have classified 1,613 real estate technology startups into 12 categories which collectively raised $46 billion in funding. The Logo Map highlights the number of companies in each category and a random sampling of these companies.
We can see from the Logo Map above that IoT Home is the largest real estate technology category with 329 companies. This category is comprised of companies that provide Internet of Things (IoT) devices focused on the residential real estate segment. Some example companies in this category include Ayla Networks, Nest Labs, Dojo Labs, and Entia.
We have seen what the different categories in real estate technology are and how many companies are within each category. What about their funding and maturity in relation to one another? Let’s look at our Innovation Quadrant to find out.
Most of the Real Estate Technology Categories Are Pioneers
Our Innovation Quadrant for the real estate technology sector divides the categories within the sector into four different quadrants according to their average funding and average age. The Heavyweights are the categories with companies that have reached maturity with significant financing. The Established are those that have reached maturity with less financing. The Disruptors are less mature but with significant financing. The Pioneers are less mature and with earlier stages of financing.
We can see from our Innovation Quadrant above that most of the categories within real estate technology belong in the Pioneers quadrant. The Commercial Search category has raised more funding and thus made its way into the Disruptor quadrant. Construction Management and Facility Management are the most mature categories with less funding. Life, Home, P&C Insurance category is in the Heavyweights quadrant for having reached maturity with significant financing.
We’ve now seen how the real estate technology sector is categorized and the relative stages of innovation for those categories. How do these categories stack up against one another in a holistic view? Let’s look at the Total Funding and Company Count Graph.
Commercial Search Is the Best Funded Real Estate Technology Category
The graph below shows the total amount of venture funding and company count in each real estate technology category.
We can see from the graph above that while IoT Home has the most companies in the real estate technology sector with 329 companies, it’s the Commercial Search category that leads the sector in total funding with $8.5 billion. The Commercial Search category is comprised of companies that help consumers and businesses find commercial real estate for rent and sale. Some example companies in this category include WeWork, 42Floors, CoworkingON, and PivotDesk.
Conclusion: Most Real Estate Technology Categories Have Large Growth Potential
The graphics above indicate that most of the real estate technology categories are pioneers and show large potential for growth and development. In addition, the sector is bustling with a good number of IoT Home companies. Yet the real estate search companies, including Commercial Search, Short-Term Search, and Long-Term Search, are receiving the lion’s share of the venture funding in the market. It will be interesting to see if this trend continues in 2018.
What are your thoughts on this? Let us know in the comments section below.
The following graphs highlight recent trends in Real Estate Technology startup funding activity. The graphics include data through June 2017.
The above graph summarizes the total funding raised by Real Estate Tech startups for each year. 2014 has the most funding to date at just over $8B.
The above graph summarizes the total amount of funding raised by Real Estate Tech companies founded in a certain year. Companies founded in 2010 have raised the most funding at around $6B.
We are currently tracking 1550 Real Estate Tech companies in 12 categories across 62 countries, with a total of $44.6 Billion in funding. Click here to learn more about the full Real Estate Technology market report.
The following two graphs summarize the rounds of funding going into the Real Estate Technology space. Please note these graphics are made using data through June 2017.
The graph above shows the total amount of VC funding broken out by round. From 2006 to 2016, we saw a sharp increase in the overall sector funding, with the total amount peaking in 2015 and then declining thereafter. Early and late stage funding round events (Series A, B, and Late Stage) have accounted for a substantial amount of total funding.
The graph above shows the total count of funding events broken out by round. The general trend over the past few years has been a substantial number of funding events in the Seed stage and a fewer number in the Series A stage, with the funding events in the later stages quickly dropping off.
We are currently tracking 1534 Real Estate Technology companies in 12 categories across 62 countries, with a total of $43.3 Billion in funding. Click here to learn more about the full Real Estate Technology market report.