The Dawn of PropTech 3.0

Matt Knight
Jun 19 · 7 min read

PropTech is growing into adolescence.

It’s been a great run. We’ve had some laughs and we’ve had some drama.

I like to think we’ve learned a few things.

And now, sitting at home in the time of COVID-19 with the economy all wacky, it‘s time to reflect.


If you consider the 80s and 90s to be the first wave of property technology, we can call that PropTech 1.0. CoStar (‘87), Argus (‘85), Yardi (‘82), RealPage (‘98), even Excel (‘85). All of these software platforms were created in the 80s/90s and grew to dominance in the commercial real estate industry. Construction saw AutoDesk (‘82), Trimble (‘78), and Bentley (’84) in similar timeframes.

Then, as technology evolved, Millennials entered the workforce, and venture capital firms started forming around investing only in PropTech firms, we entered PropTech 2.0.

I’m going to call COVID-19 and the Spring/Summer of 2020 the end of that epoch.

I do so because I know that several firms are going to close their doors in the coming months (some already have). Several GPs are going to fail to raise their next fund. And the survivors will have to adjust to a new working order in commercial real estate where budgets and appetite for emerging technology has evolved.

So, let’s look backwards and then forward.


PropTech 1.0“Existence”

I’ll call PropTech 1.0 (1985–2000-ish) “Existence.” We had to start somewhere and the simple existence of software specifically built for the CRE industry is a great beginning. I don’t want to overlook what those early pioneers did to start digitizing the CRE and construction industries. REIS, Trepp, and a handful of other companies probably deserve a shout out here as well.

I’m going to call the mortgage crisis of 2008 and the ensuing downturn the official end of that era because most of the current cohort of tech companies and funds started right after that downturn.


PropTech 2.0 — “Awareness”

Beginning in the late 2000s and early 2010s, investors and founders started making a little more noise in the CRE industry. I still remember watching the early blog posts of 42Floors where they would play speed chess between meetings and catching up with Michael at Compstak as he just got out of 500 Startups.

**Note: One massively important factor here is that every youngster in the CRE game in the 2000s and 2010s graduated from school and showed up at work with a computer on their desk. They were expected to use software and technology for research, analysis, reporting, and most of their tasks. That was not true previously.**

This is around the time when Camber Creek started their first investments and fund. Brad and Brendan of Fifth Wall started becoming consistent angels in real estate tech. MetaProp started using the term “PropTech” and got their marketing machine rolling over New York (and beyond). Pierce and then Michael started organizing large events at CRETech for nerds like me to congregate and Steve did the same thing with multifamily tech events. (CRETech NY had more than 2,000 attendees last year!)

I think you have to give a meaningful amount of the credit in the last decade to Fifth Wall and what they have done for the largest companies in our industry. Jesse at Borealis/Building Ventures has been doing it in construction for almost 20 years, but Brad and Brendan applied it to the asset manager and developer world and were able to amass an enormous amount of deployable capital into PropTech. Most of the venture community, as well as the top of the CRE community, has heard of Fifth Wall and knows what they do. That’s no small accomplishment.

Taking that logic a step further, John at RETV has the thesis that multifamily technology (“Rent Tech”) alone is enough to provide market-leading returns in a venture context. And he was able to convince a significant number of the NMHC Top 50 that they should be a part of that.

JLL, Simon, RXR, Prologis, and Brookfield thought they needed to have funds of their own.

Colliers, Shadow, MetaProp, Moderne, Plug and Play, Upward Labs, and DreamIt all started incubators or accelerators focused on PropTech.

CRETech, Propmodo, Unissu, MetaProp, Fifth Wall, and even little old me have newsletters that help you stay abreast of the everything that is happening in the PropTech space weekly.

And if you ascribe to the “any-press-is-good-press” theory, WeWork was almost certainly a net positive for our space. (They are not a tech company, but most people don’t know any better.) I know we will need to do some damage control to our reputation because of the IPO fallout, but name someone you know who hasn’t heard of WeWork . . .

So whether it’s events, newsletters, funds, accelerators, incubators, acquisitions, failed IPOs, or a slew of other media, you can access the PropTech world whenever and nearly however you want to.

In a sense, the last decade was about PropTech organizing, promoting, and educating the market.

No more claims of ignorance. If you want to know about PropTech, you can. Hence my label of “Awareness.”

As for what’s next . . .


PropTech 3.0 — “Maturation”

As we look forward to what the world looks like Post-COVID, I’m extremely optimistic about where the PropTech industry is headed.

Ironically, most of the Sand Hill Rd crew is waiting for a handful of huge exits in PropTech before they actually dedicate a person (much less an entire pool/SPV of capital) to the industry despite the size of the asset class. With VTS, ProCore, AirBnB, and even Industrious (not a tech company, but the public won’t know that) poised for IPOs in the next 24 months, they are about to get the market validation they have been waiting for. More on that below.

Most of the PropTech-specific funds were able to deploy capital and start (or finish) sophomore funds. But that will change.

Here is what I expect to see in the fund space —

  • Thinning and consolidation. Expect to see fewer PropTech-only funds, but expect them to be bigger and/or stratified. Think about a “core” fund and then niche funds like Fifth Wall did with Retail and ESG/Sustainability. What will happen is a lot of the first-time funds will not hit the return thresholds they need to in order to continue operating in the VC space. That’s just a mathematical certainly given the uneven distribution of returns in VC (and all financial markets). So, some will close or sell their assets or combine. The ones that do generate top-quartile returns will be there to grow and absorb the assets of others.
  • Silicon Valley jumps in. I know Connie at Andreessen and Evan at Khosla have been doing deals for a while. And GV has experimented in the space. Trinity seems to be interested and Homebrew and Founders Fund also dabble. Sway and Tribe are also going to be players here. Plenty of the generalist firms have been poking around it. But I expect one or two of the traditional venture capital firms are going to start dedicating a pool of capital exclusively to PropTech. Expect them to be the dominant lead investor in PropTech in the 2020s. They have the track record and underwriting/support resources to do so whenever they decide to actually focus on it. Expect them to take cues from their FinTech practices and break the niche out between B2B (my space) and B2C (residential). I have a hunch about who it will be.
  • Corporates move back to LPs only. Expect these large real estate funds to give you the old “back to our core competency” bit and simply become passive investors (LPs) with specialists who manage funds. It happens every cycle. It will happen now that we are entering a recession. Real estate firms will focus on real estate and venture firms will invest capital in PropTech startups on their behalf.
  • Growth of Growth. Expect to see more growth equity funds play in this space. We’ve had a dozen or more early stage funds play in the PropTech space for a while now. Very few can effectively write checks at the B stage and later. That will change as more institutional capital (endowments, pensions, SWFs, etc) pay more attention to this space . . . and they are.

Here is what I expect in the Tech space:

  • IPOsAirBnB is the big one. They are a true marketplace and “real” tech. If the public market likes them, it’s a huge win for the industry. Same with ProCore. They just pulled their S1 and raised at a $5B valuation. When they go public, the construction tech industry becomes less reliant on M&A (which is a big deal). VTS, Industrious, maybe Latch, maybe SmartRent are all candidates as well (although I’m less optimistic about the last two). AirBnB and ProCore might be enough . . .
  • Data — Expect to see some big data exits as well. Doesn’t really matter if they are IPOs or just big acquisitions. People care about what happens inside and around commercial buildings and look for companies like Placer AI, Cherre, and maybe Reonomy to have nice exits based solely on high-quality and actionable property-level data.
  • MF Tech — Google and Amazon both want to get into the apartment renter’s wallet BADLY. So far, they have done a poor job. Expect them each to make a large acquisition of a company that has great access to the every day life of apartment renters in the US (see Latch and SmartRent above). Facebook might also dip their toe in this water but it’s up in the air with the vague mandate of their new fund.

That’s a handful of predications based off my network and experience. I’ll share more as they materialize.


So, here we stand at the precipice. One chapter ends and another begins.

And those of us who are in for the long ride are in for a treat in this next evolution of property technology.

I, for one, am incredibly grateful to the Steve Winn, John Walker, and Anant Yardis of the world. I could not know what I know and invest where I do without them laying the groundwork they did for our industry for years.

I’m cheering for Brian Chesky, Tooey Courtemanche, and Nick Romito.

I’m hoping I can be helpful to the Fifth Wall and Building Ventures and all the torch-bearers who are investing every day in the future of our properties.

We are in for an exciting (if challenging) next phase in the history of property technology.

I say bring it on.


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