Some pandemic-era proptech startups took it on the chin this week, as well as one North American bluechip. Residential listing and data provider Localize decided to shut down its U.S. operations allegedly due to regulatory changes and interest rates “creating a deep crisis and uncertainty in the U.S. real estate market”. Interesting timing IMO as just yesterday the Fed signaled they’re going to initiate rate ‘easing’ this year. Perhaps it has more to do with Localize’s internal fighting between founders and a questionable strategy of taking market share from U.S. incumbents without a differentiated product.
Another pandemic-era darling, albeit on the commercial side, specializing in property management and data-driven insights for landlords, announced it would be cutting 20% of its workforce due to what seems to be a miscalculation of the permanence of the hybrid work model, and an overaggressive acquisition strategy, including the acquisition of Rise Buildings for $100 million and Lane Technologies for $200 million, both in 2021. Proptech VTS saw its valuation subsequently soar to $1.7B after a CBRE-led round in 2022. Presumably, that 2022 valuation has fallen substantially.
Then there’s RealPage, the property and rental management company founded in 1998 that was taken private in 2021 by major B2B software, private equity investor Thoma Bravo. On Friday, the U.S. Department of Justice (along with 8 states) filed a civil complaint against the property management, data, and payments giant, alleging anti-competitive practices. Specifically, they accused RealPage of aggregating ‘sensitive’ rental pricing information from its customers, and using the same to feed a pricing recommendation algorithm that set semi-uniform rental rates throughout the various markets in which it operates, thus eliminating competitive forces and redounding to the benefit of landlords over renters.
Though proptech deal activity and fundraising was clearly positive for the month of August (chart coming soon), this week’s news, especially with Localize and VTS, signals what we anticipate to be the beginning of a larger trend of retrenchment, exit, and/or consolidation in 2025.
