SPACs Will Bring A Multi-Billion Dollar Boost To The Proptech Market
In 2020, Verdantix tracked that investment in proptech firms fell to $4 billion across six segments, from a high of $6 billion in 2019 (see Verdantix Proptech Funds Invest $4 Billion Across The Smart Building Sector In 2020). While deal activity slowed last year, many in the sector anticipate that 2021 will be a bumper year for proptech investment. A significant reason behind this is that 2020 saw an influx of cash into proptech focused special purpose acquisition companies (SPACs), otherwise known as blank cheque companies. SPACs are specifically created to take privately held companies public by merger or acquisition. SPAC launches have come from various big players, including commercial real estate firms, institutional investors, and venture capital firms.
Real estate services firms CBRE and Tishman Speyer both launched $350 million and $300 million SPACs respectively in the second half of 2020, with the aim of acquiring fast-growing proptech firms. Institutional investors Joseph Beck and Thomas Hennessy set up a $173million SPAC called the PropTech Acquisition Corporation and announced a $523 million merger with proptech firm Porch Group in December 2020. In the wake of this deal, the duo is planning to launch a second $175 million SPAC. 2021 has already seen a wave a SPAC proptech activity, in January, the SPAC, Crown PropTech Acquisition, filed for a $200 million IPO on NASDAQ, and venture capital firm, Fifth Wall, announced ambitions to raise $100 million for a proptech focused SPAC.
This trend will result in a growing number of proptech vendors going public in 2021. For example, in January 2021, proptech firm Latch, a maker of smart locks and building-management software, announced plans to use the Tishman Speyer SPAC to go public, which will value the firm at $1.56 billion. This follows Opendoor, an online real estate company, which merged with the SPAC Social Capital Hedosophia II in December 2020, valuing the firm at $18 billion before its IPO on NASDAQ.
Incumbent building technology vendors must keep a careful eye on the rise of proptech SPACs. In the near-term, the growth of deep-pocketed SPACs will increase the competition for attractive acquisition targets and likely push deal premiums up. In addition, proptech firms that go through an IPO will quickly grow their resources and increase their competitive threat. To better understand the disruptive propositions coming to market that aim to challenge traditional market players, sign up for our webinar: Disruptive Proptech Solutions Coming To The Smart Building Market.