North America has long been the leader of the proptech universe. While the U.S. has a greater number of proptech companies and a higher dollar volume, the entrepreneurial bug is spreading across Europe’s real estate industry, creating a new generation of real estate professionals and innovative companies.
Over the past decade, the European proptech market has witnessed a significant rise in venture capital investments. A total of $1.98 billion was invested across 243 deals in 2019, which is a significant increase from the $28.15 million invested across 9 deals in 2009.
The trend continued in 2019, which has seen major deals in proptech. In April, Tophat, a London-based manufacturer of modular homes, received $98.59 million ($USD) from the Goldman Sachs Group, marking the largest European protech equity investment in 2019, to date.. In July, DoveVivo, a Milan-based co-living startup, raised $80.84 million lead by Tikehau Capital. In June, McMakler, a Berlin-based property brokering startup, raised a $55.1 million Series C. Earlier in November, Luko, a Paris-based home insurance startup, announced that it raised a $22 million Series A.
The Future of the European Proptech Market
Increased flow of capital in European startups is only one of the signals of the rising proptech wave in Europe. There are several other trends suggesting that Europe’s proptech scene is growing. As CREtech research, we identified the trends that will drive growth in the European real estate technology market in the next few years.
North America has historically dominated the venture capital industry, however Europe’s share of venture and growth capital has increased recently. 2018 was a record year for venture capital fundraising in Europe, with over $22 billion flowing into venture capital funds. Historical data from European Investment Fund (EIF) shows further evidence of the tremendous growth in venture capital investment and fundraising in Europe: venture capital investment in startups has grown fourfold to $29.6 (€23) billion between 2013 and 2018.
Yet, venture capital still remains an underdeveloped market in Europe. It’s ratio of venture capital investment in startups to GDP is relatively lower than that of the US, so much so that venture capital investment in Europe will have to grow four or five times its current level before matching the US. It’s safe to say that this gap presents an incredible growth potential for the continent, and several European countries are already striving to accelerate that growth.
The UK currently remains the top place for European venture capital despite Brexit, receiving 37% of all the venture capital investment in Europe. It also represents, combined with the US, close to half of all venture capital investments in Europe. Given the UK's long-standing reputation as the financial center of Europe and its ability to show longer track records for investor returns, the UK is likely to attract more capital than other European countries in the coming years.
This doesn’t mean that venture capital market is stagnating in other parts of Europe. In fact, it’s quite the opposite. There are several venture capital funds that propel the growth of the Europen proptech sector, and collectively they have participated in 52 deals worth a combined $431 (€335) million last year. These funds are located in different countries across Europe, including Luxembourg, Spain, France and Germany. It’s also worth noting that Germany is another rising star in the European venture capital market, with more checks written and more funds built every year. As more exits take place and provide strong returns, we expect the venture capital growth to continue and spread to most countries in Europe.
Europe’s startup scene has long existed in the shadow of the US and Silicon Valley, which for years has gone unchallenged as the world’s leading startup hub. Yet, the balance is starting to shift, with new and exciting tech hubs emerging all across the US, Asia and especially Europe.
Today, there are roughly 3,220 proptech startups in Europe, according to Pitchbook. Within Europe, the UK leads the innovation front with 805 proptech startups, where most of these startups are concentrated in central London. It is also common for startups from other countries and cities to go to London to raise capital, as it increases the likelihood of connecting with more funds and closing larger rounds.
In addition to the UK, France, Germany and Spain also drive proptech innovation in Europe, with 547,342 and 304 startups, respectively. Netherlands, Sweden, Switzerland and Finland are also worth mentioning; While these countries are home to relatively fewer startups, they are quickly joining the global proptech market, as each has currently over 100 companies dedicated to proptech. We expect the number of European proptech startups to significantly increase in the next few years, as the innovation culture takes a stronger hold in this continent and attracts more investor and innovator interest.
Overall, as deal and funding amounts continue to trend upward, along with the growing community of entrepreneurs, startups and investors, we expect the European proptech to continue to grow in 2020 and beyond.