Elevating PropTech Pitches: Insights and Strategies For 2024

Last year was rough for PropTech startups. Venture capital for the once-booming sector dried up, leaving many startups in dire straits. The PropTech sector raised $11.4 billion in VC funding in 2023, down 42% from 2022 and well below the $32 billion raised in 2021, per the Center for Real Estate Technology & Innovation. 

Investors are more cautious than in years past. As funding has slowed, some PropTech firms have been forced to close, lay off staff, or recapitalize debt to extend their runways. Pitchbook data reveals that more than 3,000 private venture-back U.S. companies closed in 2023.

"Venture capital has become a lot more scarce, even for companies with relatively strong business models rather than a track record of execution," said William Sankey, CEO of Northspyre, a cloud-based software engineering PropTech company. 

With investors waiting to see what the Federal Reserve does this year, a more cautious capitalism has prevailed. In 2024, investors will be more disciplined in funding, so PropTech startups must craft even better pitches and clear paths to profitability to raise money. The rules for developing a solid investor pitch remain mostly the same, but the stakes are higher.

What every pitch needs

• Identify the problem(s) your startup will solve. The issue must be important, urgent, and widespread, and the solution must be unique, scalable, and innovative. Founders should also demonstrate how their solutions fit the current real estate ecosystem and create exceptional customer value.

• Quantify the potential market size and opportunity for your solution. Use reliable data sources to estimate the total addressable market, the serviceable available market, and the obtainable market. Highlight the trends, drivers, and challenges in the real estate industry and how your startup’s solution will capitalize on them.

• Provide evidence of the product-market fit, such as testimonials, case studies, and metrics. Emphasize how your solution is unique from competitors and how you’re measuring performance. Explain the business model and monetization strategy, and outline your target segments, channels, partners, and sales cycle. Indicate current and projected financials, including revenue, expenses, cash flow, and valuation.

• Introduce your team and vision. It should highlight the founders' and critical employees' relevant experience, skills, and achievements. It should convey your values and mission and how they align with your PropTech solution and the real estate industry. Pitches can also mention critical advisors, mentors, and supporters who can vouch for you.

• Make the ask. Specify how much money you’re raising, what stage you’re at, and what valuation you aim for. Explain how you plan to use the funds for hiring, marketing, expansion, or product development. Indicate milestones, goals, and expected return on investment.

Finding the right investor

What VC should you pitch? It depends. Before pitching investors, it’s imperative to do deep research. Research the ideal investor’s focus, criteria, preferences, and portfolio. Find a VC with experience and interest in PropTech, someone who intuitively understands the challenges and risks in the real estate market and aligns with your vision and values. Platforms like Crunchbase, AngelList, and PitchBook are good sources to find relevant VCs and learn about their previous investments. Founders can also tap their networks, mentors, other founders, or advisors for referrals and introductions to the right investors.

Look for similar startups to yours and verify which investors have backed them. Founders should also remember that a relationship with a VC is a long-term partnership. Finding a VC that aligns with your vision and growth plan is critical. Getting your pitch deck in front of investors can be challenging, but several ways exist. One is to attend pitch competitions and startup events. Another way is to reach out to investors directly. This can be done via online platforms like AngelList or old-fashioned cold emails.

Pitch decks should be highly customized for investors and tailored to their needs and interests. For example, if you’re pitching a VC, you’ll likely want to focus on the startup’s growth potential. But the focus should be profitability if you’re pitching an angel investor.

The basic elements of a good pitch deck include:

• Keep it simple. Investors are bombarded with information every day and can have short attention spans. Simplify your pitch deck as much as possible and keep the focus concise.
• Focus on the problem. Don’t go too deep into the details about your product. Investors are primarily interested in the issue and why people would be willing to pay for your solution.
• Tell a story. The pitch should tell a captivating story that will excite investors about your startup. Use clear language and strong visuals to enhance your narrative, which will stick with investors long after the pitch.

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“Ultimately, nobody invests because of a pitch deck,” said Francesco Perticarari, a former engineer and founder of Silicon Roundabout Ventures, a UK-based deep tech fund. “But you invest because you believe what the company or the fund will become or will deliver, and therefore, you need to believe the story.”

Some VCs say they spend less than a minute looking at a pitch deck for a first pitch and up to ten minutes for a second pitch. Because of this, it’s strongly advised to have different decks ready for various stages of the pitching process. The first pitch could include a few short slides and the thesis; the second could be a more in-depth pitch deck of up to 30 slides.

It’s also wise to have different decks for different investors. Different investors will be looking for different things based on their profiles, so ideally, decks should be customized and tailored for each one. Some investors may be just attracted to the potential for returns. In contrast, others may be more attracted to the impact your company could make, like if your solution is geared toward solving a real estate problem related to climate change, like building decarbonization.

Startup founders should also regularly change and tweak their pitch decks based on the feedback they receive. If somebody doesn’t want to invest, at least try to get a well-thought-out “no” and some advice to improve your pitch for the next time you reach out to an investor.

Weathering the storm

PropTech pitches to investors will need to be even better in 2024. Last year began with stronger investment momentum, but 2024 has seen a more subdued approach from VCs. The Center for Real Estate Technology & Innovation’s research suggests a shift toward quality over quantity, with VCs scrutinizing deals more closely and focusing on long-term sustainability over rapid growth.

“Though there are signs allowing cautious optimism as the U.S. Federal Reserve has hinted that interest rate cuts will happen in 2024, in terms of VC investment, we can anticipate a market dynamic that will remain subdued,” said Arnaud Bouzinac, Growth Principal at JLL Spark. “Investors will remain very selective about where they put their money, and startups will have to manage their operations on a very tight budget and keep their cash burn to the minimum. Those unable to do so will continue to suffer or even disappear.” 

Competition for funding is intense, so founders must highlight their unique value propositions and explain why their startups are better positioned for success than others. More rejections from investors may be expected this year, so founders will need to use them as learning opportunities. The current market may not be the best, but resilient startups will “survive ‘till ‘25” and position themselves to weather the storm.

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