MetaProp’s take on the venture market mid and post crisis

The New York-based property tech VC has published a short paper outlining its view of the most likely winners and losers from the crisis.

In MetaProp’s own words

It has always been our mission to improve the built environment and the quality of lives of all that use it. Now more than ever, we are committed to doing our part. We are determined to help the industry not only survive but thrive, through Covid and beyond.

Unlike some industries that are struggling under Covid’s pressures, the impact to proptech has been limited to several categories and individual companies, but net-net the real estate industry’s need for technology is increasing and proptech is perfectly positioned as a catalyst for industry-wide maturation.

Stakeholder uncertainty

Real estate’s key stakeholders are asking urgent and unprecedented questions as they prepare themselves and their organisations to navigate Covid.

Proptech’s advantage

In general, proptech companies either enable or benefit from an enhanced level of visibility, control, efficiency, flexibility, and/or customer experience compared to the status quo. A macro crisis can often crystalise and accelerate innovative activity. For example, much of the groundwork for the boom in fintech, which is often held out as the closest parallel for proptech, can be traced to the shakeup of the financial services industry in the wake of the global financial crisis. Proptech has a robust ecosystem of solution providers that can address the difficult situations presented by Covid.

Transformation

MetaProp’s investor base represents more than 15bn sq ft of owned and managed real estate. In addition, we run the industry’s largest global proptech startup portfolio. Our world straddles broad cross-sections of both the global institutional real estate community and the startup ecosystem. This vantage point has offered a privileged perspective on current events, and their impacts on and implications for both the traditional real estate and proptech communities.

Below is our frontline view of the three categories of proptech transformation in the marketplace:

Already in motion, now accelerating | Rapid increase in the industry’s desire for a broad range of solutions that were already gaining traction in the marketplace to varying degrees over the past several years.

These include asset-level technologies like space planning and occupancy monitoring solutions and touchless access and asset control, tenant-facing solutions on themes like affordability for homeowners and renters, community and communications, wellness, and operations-oriented technologies like professional tools that enable real estate professionals to work remotely and or more efficiently and effectively, data and business intelligence solutions to help real estate leaders make better, faster decisions in an uncertain environment, and or tooling that plays to the further institutionalisation of real estate that is likely to occur as a result of Covid.

Previously in motion, now under pressure | Several categories within proptech now face headwinds that range from moderate to severe.

Companies whose business models centre on lease arbitrage (co-working, co-living, alternative accommodations), who take high levels of principal risk (iBuyers) and those who are tethered in real-time to the shifting sentiments of the capital markets (many direct lenders) are being constrained in the current economic conditions. While companies that are more ‘prop’ than tech but raised capital at software multiples are receiving stricter scrutiny in today’s market climate. And companies whose businesses rely directly or indirectly on activity in hard-hit end industry segments (hospitality and travel, retail) face headwinds as these sectors have effectively ground to a halt and face an unclear timeline towards recovery.

Limited prior activity, now activated | Covid has sparked interest in technology categories that had previously not been in widespread demand by the real estate community.

These include solutions that address timely occupier safety concerns such as thermal scanning and workplace-specific contact tracing, which have moved from niche cases to the front of mind, and automated operations solutions, such as robotic cleaning and facilities management and virtual property tours, which have significantly enhanced ROI cases in the current environment.

Moving forward

As has become a constant refrain in recent weeks, some of the most successful companies are founded in recessionary environments. And the urgency to bring creative new solutions to the market has only increased in the current climate. It is important to take a longer-term view and avoid the temptation to over-correct. Early adopters will not only sustain, but increase their investment in innovation in this environment as they have already begun to realise real ROI from their commitment.