In 2024, VCs Focus on “Quality Over Quantity”: CRETI
In total, real estate tech entrepreneurs have received $15.1 billion in funding for their ideas on how to improve the industry, according to CRETI’s 2024 Proptech Venture Capital Analysis.
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Venture capitalists wrote the largest number of checks to proptech companies in October this year, according to the Center for Real Estate Technology and Innovation (CRETI). In total, real estate tech entrepreneurs have received $15.1 billion in funding for their ideas on how to improve the industry, according to CRETI’s 2024 Proptech Venture Capital Analysis.
The organization’s findings set the stage for a conversation that has been heard in class, on webinars and typed in e-mails countless times during the post-pandemic housing market: money needs to mature.
“Investors increasingly favor companies with strong financials and clear ROI narratives,” the report said. “Gone are the days of growth in every way. Instead, the focus has shifted to sustainable solutions, with a clear ROI. This change is not just a response to economic conditions; it represents the maturation of an industry that has developed steadily over the past decade.”
In short, a good idea won’t get you ahead, at least not without some income to show for it. But that doesn’t mean that a promising small company can’t get its financial backing. What the industry is now calling the “Seed-Crowding Stage” has turned out to be, according to one VC executive, “funding at revenue levels between $500,000 and $1.5 million.”
Anyone who has paid close attention to the real estate market over the past decade or so understands that there is no solid root holding the market in place of innovation. In response, capital has poured into construction technology to the tune of $4.5 billion, CRETI reports, making it the most funded branch of proptech.
When it comes to specific products that are getting attention, that money will be “… technologies like 3D modeling, AI-enabled project management, and improved supply chain and logistics. which deal with the inefficiencies of the sector,” said CRETI.
Companies that have built tools to improve the home buying experience for consumers are more likely to get a share of the more than $3 billion that has flowed into residential proptech, a report found. This niche may find room to grow in the post-NAR real estate world as agents struggle to find ways to get paid directly and sellers become less likely to pay a buyer’s agent.
As if the concerns of the buyer representation agreement were not enough to challenge the power of the agent-buyer, the winds of change in the industry are often growing stronger, and are beginning to blow in new directions.
Clear Cooperation – the rule that the listing must be made public within 24 hours of signing the agreement – is hot, as is NAR’s goal. Many brokerages are coming out of membership and, therefore, may be looking for new ways of community and industry support, something that tech entrepreneurs can find ways to exploit.
Artificial intelligence solutions and data empowerment are at the top of the funding list, according to CRETI, and the multifamily sector has been quick to put that money to work.
Software providers in property management and apartment marketing are moving rapidly in 2024 to integrate AI into lead generation, applicant quality, maintenance processes and credit and expense integrity.
“The increase in AI-focused funding underscores investors’ confidence in their cross-sectoral plans and long-term growth potential, positioning this sector as a cornerstone of the proptech ecosystem,” CRETI said.
One notable AI-driven investment is that of Camber Creek in SERHANT. Technology. A popular industry fund has invested a total of $45 million in a portfolio of job brokerage software focused on the power of AI marketing and business workflow solution, S.MPLE.
The next 12 months should see much of the same, with a focus on quality investments.
“Contracts reached by 15 percent compared to 2023, but the average deal size increased by 12 percent, indicating a shift to fewer but higher investments,” said CRETI.
Although seed and start-up capital is hard to come by, it all benefits the industry, which has matured rapidly over the past five years. Software developers are looking at past lead generation gimmicks and reinventing existing solutions to provide new ways to improve internal efficiency and focus on making search, fraud and lending better for the consumer.
Email Craig Rowe