With the Fed’s continued interest rate hikes, the cost of borrowing for a home is rising as fast as the literal price of homes during the pandemic.
So, with the financial landscape dampening the prospects of once-scalding real estate markets, it stands to reason that real estate startups would be negatively impacted, too.
In fact, there is ample evidence that savvy investors have put an asterisk next to real estate and proptech as some of the best places to invest.
In the first quarter of this year, venture capital firms put a whopping $4 billion into proptech. Compared to the fourth quarter of 2021, that is a 41% increase and a 31% increase from the first quarter of last year.
That $4 billion amounts to the highest investment total in proptech in a single quarter ever.
With the war in Ukraine already underway and inflation looming large in the first quarter of this year, writing this off as a product of a different financial landscape is foolhardy.
This first quarter performance came on the heels of a 2021 that saw $32 billion in global proptech investment, a 3.23% increase from pre-COVID 2019 levels.
The reality is investments in real estate during a recession are routinely considered to be among the safest.
Of course, these VC firms aren’t simply investing in single-family properties to bolster their personal real estate portfolio.
And, where other industries more readily adopt innovations that reinvent the wheel, the real estate sector has been operating a certain way for a long time.
It’s not broken. After all, real estate contributed $2.7 trillion to the U.S. economy in 2018, good for 13% of the country’s GDP.
However, that’s not to say it can’t be improved.
And these are precisely the kind of investment opportunities that have garnered the most interest in proptech. The real estate world will get behind something that can make their lives easier.
Meanwhile, as angel investors, the thing we’re most interested in is potential exits scenarios.
Well, in the first quarter of this year, there were 57 mergers and acquisitions in the proptech space. This goes to show the potential that startups in this industry possess for their early investors.
So, while the common refrain “invest in real estate” is widely embraced by the financial world, the interpretation is broader than many realize.
At the end of the day, there’s ample opportunity in the startup landscape to capitalize on the relative safety of real estate without compromising the upside of angel investing.
You’ve just got to know which opportunities carry value.