The acceleration of digitization in the Latin American region boosted certain sectors that before the start of the current health emergency were unable to lay the foundations for their business, but with the contingency they managed to make surprising progress and one of them is real estate technology or better known as proptech.

During 2020 and 2021, the ecosystem proptech in the region it has been able to establish its roots and thus grow rapidly, proof of this was the birth of the first unicorns in the sector, the Brazilians Loft and QuintoAndar, to later welcome it to the select club of real estate technology startups with a value greater than 1,000 million dollars to the Colombian Habi.

According to a study by Juan Huicochea Mason, a researcher at the Massachusetts Institute of Technology (MIT), from 2019 to 2022 the number of platforms proptech in Latin America it went from 300 to 1,300, with Brazil in the lead regarding the presence of these startups, with about 900, followed by Mexico, which has 140.

For the researcher, there are factors that make solutions proptech have had an accelerated growth in the time of the pandemic, such as the demographic bonus, where millennials play an important role, the centralization of the Gross Domestic Product in large cities and increasingly urbanized environments.

“There are certain factors that have allowed the sector to grow a lot in the region…The technological lag, the growing demand for housing, demographic urbanization, sophistication of the ecosystem and growing investment confidence,” explained Hucochea Mason during the Tech meeting club organized by Proptech Latam.

Collateral damage

Technology startups globally do not have an easy time these days. Venture capital investors who have bet on their models are beginning to demand profitability, which, combined with a scenario of high inflation, less liquidity and even geopolitical issues, increases the pressure.

Companies like the Swedish fintech Klarna have started with massive staff cuts, an episode that is increasingly common in different countries; for example, in Mexico the cryptocurrency trading giant Bitso announced the cut of 80 positions, in Argentina the bad moment reached the firm Buenbit, which cut 50% of its staff.

This scenario comes after a charming 2021 for the sector proptech. According to Endeavor, it is estimated that the ecosystem in Latin America attracted more than 1,300 million dollars of venture capital, that is, a growth of more than five times compared to what was estimated in 2020.

Within the technology ecosystem, he forecasts that although 2022 may not decline in terms of investment, an environment of slowdown is already perceived. According to data from the Latin American Association of Venture Capital & Private Equity, during the first quarter of the year in the Latin American region the total amount of venture capital investment reached 5.5 billion dollars, that is, an increase of 88 % compared to the same period in 2021.

Although the annual increase was notorious, there was a slowdown in investment, compared to the previous quarter, with a 40% drop in the amount and 28% in the number of deals.

For Mauricio Tessi Weiss, who participated in the creation of Cemex Ventures (the cement company’s capital fund) and is now a partner in Zacua Ventures, there is nervousness in the financial markets, which could impact the recovery of the construction sector, which began to show signs of dynamism after the pandemic hit.

“Without a doubt there are many pressures that are coming from many angles…In the public markets companies are being hit, they are lowering their valuation and they are making a significant correction,” said Tessi Weiss.

For the partner of Zacua Ventures, specialized in investment in infrastructure, the only way that startups have proptech to face the nervousness of the market is by becoming more efficient.

“The only way that we see that it can move forward is to find some way to be more efficient, productive, to achieve objectives and the fulfillment of construction projects, with the increasingly growing scarcity of resources, prices and costs on the rise. The answer is clear: technology is what is going to allow us to meet those objectives”, highlighted Tessi Weiss.

For the MIT researcher, despite the international context, Latin America has the conditions to be able to attract risk capital with the touch of security that investors are currently looking for.

“Latin America as an alternative for growth will continue to be a great option, due to its potential since, for example, people are urbanizing, that is, we are opening a field that was not open… if we continue to develop technology and provide security investors, the investment is going to be greater than in other regions,” said Huicochea Mason, who predicted that this year venture capital investment will reach levels similar to those of 2021, that is, 1.3 billion dollars.

look out

For Rubern Frattini, founder of the accelerator proptech PIRELabs, one of the secrets to face uncertainty is that the platforms begin to see how to support traditional companies in their technology implementation process.

“We need to look more outwards… There are many real estate companies that are willing to enter (to digitization). For example, lately we have been talking with companies in the logistics park that are understanding that they need to incorporate technology into their processes” , detailed Frattini.

Likewise, the specialist indicated that, given the nervousness of the market, there are other funding options such as family offices that seek to invest in startups proptech of the Latin American region.

Strategic Alliances

But the traditional real estate sector does not want to be left out of the moment proptech and seeks to support startups through strategic alliances, either through investment or commercial agreements.

According to Domingo Valdés Díaz, Finance Director of Vinte housing, it is necessary to create synergies to support the ecosystem and also for firms to strengthen the final offer of products and services to the general public.

“We see that winning is more in the synergies, in the face of all the challenges that new companies face, with external and internal factors,” said the director of Vinte, who has made investments and has created alliances with firms to enhance its total model. housing marketing.

Currently, Vinte has alliances with the Yave platform, dedicated to granting digital mortgages, and with Homie, specialized in housing rentals; in addition to being an anchor investor in Casa Bravo, a firm that has a lease-with-purchase model.

Valdés Díaz indicated that an important aspect that Vinte considers before making an alliance with a startup is the participation of other investors, which generates confidence that the model that is betting on is viable. “The most important thing is to see that other investors enter these startups, it gives us a lot of confidence that we are not the only crazy ones who are investing,” he said.

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