The gold rush in PropTech VC continues through August 2019. Is Co-working overheating the space?

by Dave McKenna, Editor

CRETech Research August Monthly Funding Report indicates that PropTech investment year-over-year through 2019 has more than doubled. According to their accounting, the total PropTech VC volume through August has hit $2.6 billion. At this point last year the YTD PropTech VC investment total stood at $1.2 billion, a $117 million increase. The 2019 VC volume in PropTech is up 4% since July, suggesting $104 million in August alone.

Source: CRETech Research

These numbers are startling, but may also be significantly overstated (or at least easily misunderstood). The single largest deal in August was $400 million raised by Knotel, a provider of co-work space. Creating co-working space is highly capital intensive and is mostly not tech related. However, deals which would be considered routine CRE capitalizations are routinely counted as PropTech investments in these reports, suggesting more value is flowing into tech than is in fact the case.

In related news, WeWork, the mother of all PropTech unicorns (and another big hard-asset real estate play), which lost $2.9 billion last year, is now targeting an IPO at about half its valuation of just a couple months ago. Lack luster IPOs from high flyers like Lyft and Uber is cooling interest and forcing a relook by the market on cash-burning machines like WeWork.

However, the prospect for PropTech ventures continues to be strong. The deal volume is up 38% according the CRETech report. The numbers indicate that not only the number, but the average value of the deals is escalating as well. According to the data in the CRETech report, the number of deals grew to 55 investments through August 2019 compared to 40 deals by same time last year. The average value of the deals grew from $30 million to $47.3 million over the same time frame.