SVB Collapse a “Wake-Up” Call to Proptech Investors and Startups

Venture capital protech firm MetaProp’s Global PropTech Confidence Index for 2H 2022 indicated a modest decline with investor sentiment, while start-up sentiment slightly recovered. The report indicated that “muted investor confidence reflects continued macroeconomic uncertainty, pronounced with investors monitoring rate stabilization, recession indicators, and inflation levels as the pace of decline begins to moderate slightly.”

And with that, 71% of those surveyed for the index anticipated making more or the same number of proptech investments in 2023, down from the 88% reported in mid-year 2022. Meanwhile, 38% of those surveyed anticipated they would see more deal flow over the next 12 months (an increase from the 19% during mid-year 2022), while respondents indicated there would be more upcoming mergers and acquisitions.

Then came the Silicon Valley Bank failure.

“While the overall sentiment towards proptech remains unchanged following the Fed and FDIC’s action on Sunday evening, SVB’s failure has underscored an important wakeup call for investors and startups alike,” Maureen Waters, a MetaProp Partner told Connect CRE. “The uncertainty surrounding the banking sector demands a more diligent approach to treasury management.” In the meantime, she continued investors, in working with their portfolio companies, will be more likely to “build deposit and financial product relationships at larger financial institutions.”

Waters also explained that the Global Confidence Survey underscored trends that have been going on for a while. Specifically, the continued flight to quality and increasing incentives for equilibrium and consolidation in the marketplace. Adding the SVB collapse to the picture, there are concerns about longer-term liquidity, especially in the face of current economic volatility. “As we move forward, this sentiment is likely to become even more relevant to investors seeking short-term profitability,” Waters commented.

The SVB event combined with overall market correction, could mean distressed opportunities within the proptech sector, Waters said. But conditions are creating what she called a “challenging fundraising landscape for start-up CEOs.” Even without the failure of SVB, “most of the uneasy signals were directly related to the uncertain and corrective climate that prevailed across both public and private markets in 2022,” Waters said.

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