The PropTech investors' dilemma – What are the key success factors that secure survival?

Abstract

Purpose

The real estate industry is known as a late adopter when it comes to changes and innovations. While the industry is slowly evolving, parts of the sector are increasingly being conquered by property-related start-ups, known as “PropTechs”. These companies offer solutions and cutting-edge technologies to increase efficiencies and solve industry-wide problems. However, little is known about these companies' survival. This paper analyses the survival rate of PropTech firms and the determinants.

Design/methodology/approach

Based on a sample of 1,052 firms, factors that influence the firms' survival rate are analysed using the Cox Proportional Hazards Model, which is expanded with non-linear splines to capture turning points in the survival.

Findings

The authors find that in addition to the size, financing condition plays the most critical role in the success of Prop-Tech firms, including the number of financing rounds and maximum number of investors over lifetime. Moreover, the relationships are non-linear. Founding years and technology focus can also statistically influence the success rate. Companies founded before 2008 focussing on Sustainability Technology, Data and Business Analytics, Real Estate-related FinTech and Visualisation show the highest success rates.

Practical implications

The results are critical for investors interested in PropTechs to understand the success of their investments better. The importance of financing conditions shows that both investors and PropTechs may benefit from better financing processes that provide funds in a timelier manner.

Originality/value

The authors exploit a new and comprehensive data set that includes over 6,000 PropTechs globally. The authors' study fills in the literature gap on the determinants of the survival rate of PropTechs.

Citation

Kassner, A.J., Cajias, M. and Zhu, B. (2023), "The PropTech investors' dilemma – What are the key success factors that secure survival?", Journal of Property Investment & Finance, Vol. 41 No. 1, pp. 76-91. https://doi.org/10.1108/JPIF-01-2022-0007