Investors Say 2022 Will Be Year of M&A in Proptech

If 2021 was the year of showboating in proptech, 2022 will be the year of strategy.

Coming off a period defined by hyped public-market debuts through IPOs and SPAC mergers — many of which disappointed as equity markets soured — investors expect M&A activity to dominate the proptech landscape, according to a survey released this week by venture firm MetaProp.

That weakness in the public markets, coincidentally, served to boost “investor confidence” as it leaked into the private sphere, moderating valuations and previously “rushed” due-diligence processes, according to the survey. The metric, gauging investors’ desire to commit and belief that opportunities will present themselves, stood at an all-time high of 9.3 out of 10 at the end of 2021.

Actual performance probably had something to do with it. Roughly 85 percent of investors surveyed said the proptech startups they’d committed to were meeting or beating expectations for customer growth — an all-time high.

Roughly 71 percent of the survey’s participants said they are likely to put more money to work in proptech this year, investing in an average of eight startups. That’s up from 54 percent six months ago.

Investors expect the single-family rental and construction-tech spheres to see robust growth and particularly strong M&A deal flow in the coming months. Of all sectors, single-family rentals saw the greatest interest among the investors surveyed.

The group also showed pronounced interest in ESG and “Web3” technologies — those oriented around blockchain, decentralization and token-based economics.

Legacy real estate companies will probably be major players, too.

“I expect the real estate incumbents to become much more aggressive in their tech, innovation, VC, and startup M&A activity,” one survey respondent wrote. “Some will develop this into a major competitive advantage.”

Meanwhile, “startup founder confidence,” which gauges that cohort’s belief in its ability to secure talent and capital commitments, fell to 7.4 — down from 8.3 six months ago, and a low not seen since the onset of the pandemic in the first half of 2020.

“The shifting economic climate and operating in a maturing sector caused slight uncertainty in founders,” MetaProp said.

About 73 percent of startup founders said it will be harder, or at least as hard as it has been, to raise capital.

An overwhelming majority of the survey’s respondents — 96 percent — agreed that the pandemic accelerated proptech adoption.