Real-Estate

Public Proptech Company Revenues Up 71% As M&A Surges

The publicly traded proptech sector is growing larger, more active and more crowded. It’s also generating a lot more cash than it used to.

Public proptech firms pulled in an estimated $13.5 billion in revenue in the second quarter, according to a report released this week by the investment bank Keefe Bruyette & Woods. That’s up 71 percent from the period last year, when shutdowns halted much of the U.S. economy, but also up 61 percent over the same period in 2019.

A larger roster of companies helped generate the gains. Twenty additional proptech firms went public over the last year through IPOs and SPAC mergers, including Blend Labs’ $360 million IPO in July and Procore’s $635 million IPO in May.

The sphere should continue to grow due to the “strong appetite” for proptech in the SPAC market, KBW said. Nine proptech and real estate services-focused SPACs — with combined buying power of more than $8 billion — are seeking acquisition targets, and another 12 have “notable ties” to proptech and real estate, according to the report.

M&A activity is expected to accelerate as leaders emerge from the large, chaotic field of small proptech players, KBW said. This year, there have already been 155 deals globally through August — a record pace — up roughly 80 percent compared to comparable periods in 2020 and 2019.

The second quarter saw 56 mergers or acquisitions targeting proptech companies, the second-highest total on record, trailing only the first quarter of this year, when 59 deals were recorded.

Venture funding continues to flood the space, with roughly $7.9 billion put to work this year, as of early September. There was a marked slowdown in venture financing during 2020 due to the pandemic, but the 2021 year-to-date total outpaces 2019 financing, the current record, by 27 percent.

“The rebound in proptech venture capital investment activity in 2021 has been broad based by stage/size, but led by a surge in mid- and late-stage deal activity,” KBW said.

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