NEW YORK–With nearly $6 billion invested this year from both venture capital funds and industry insiders, investment in Proptech is just beginning said panelists at the MIPIM PropTech NYC event.
“We just got started; it’s still very much a virgin market. Valuations are going higher, and we are waiting for a lot more development to occur. Real estate is the largest asset value in the world and has much room to grow,” said Samuli Siren, managing partner at Redstone Digital GmbH, a consulting services venture capital firm specializing in seed investments.
Opportunities in PropTech include innovation in data and insights to help underwrite asset classifications in the multi-family residential space, the flexible commercial office marketplace, a WeWork for retail model, solutions that simplify leasing and contract management platforms and robotic automation in industrial warehousing, according to Sean Muellers, managing director of Blackstone, the largest real estate portfolio holder in the world.
“As we think about the best way to match our internal challenges with what the market can offer we have a tendency to chose companies that have learned a bit more about their product or process and are series A or beyond,” said Muellers
An essential part of the calculus for Blackstone is to find companies with the wherewithal to scale, he added.
JLL Spark, another strategic investor which announced plans to pour $100 million in the PropTech sector earlier this year, remains focused on identifying early-stage startups.
“We recently invested in HqO, in the tenant experience space. In a few years, everyone is going to have an app that connects them to local merchants and we were able to get in early,” said David Gerster, vice president of Data at JLL Spark Global Ventures Fund.
Gerster said valuation in the industry remains “a bit of a mixed bag” due to the nascency and diversity of markets and applications coming out of the sector.
While some wonder if a risk valuation mismatch may exist, based on slowing business-to-business cycles; as more pain points emerge so will marketplace solutions, experts said.
“If you are in a downturn, it’s not a good idea to do things in slow and antiquated ways and this paves the way for disruptive opportunity,” said Gerster who highlighted that JLL Spark’s investments in Dealpath and Honest Buildings, which are both startups focused on replacing the old excel spreadsheet way of doing things with more transparent and efficient solutions.