The Only Thing Holding Back Real Estate Tech is Talent

Despite the veritable explosion the real estate tech landscape has experienced over the past 10 years, that growth must be accompanied by the talent needed to handle these new companies’ operations. As is often the case with emerging technologies, there is a gap between the latest technological advancements and those who express the most interest in taking an active role in their implementation. This gap has historically been generational, although issues such as the male-dominated nature of the industry, the general volatility of startups and the skill sets required to navigate this tech have also posed challenges to the industry’s ability to attract talent.

Capital is Not the Issue
One factor that is decidedly not holding back progress in proptech is capital. Investment in 2021 alone was $32 billion, with over $50 billion in venture capital being placed in new startups between 2019 and 2020. However, the availability of funding is only one part of the equation. The most cutting-edge software, such as what is needed to create and maneuver a digital twin model, or program automated tools, is relatively new and requires a significant amount of training. While universities today offer highly specialized degrees in this field, they have only begun doing so recently, severely limiting the number of individuals who are qualified to fill these technology positions. This is exacerbated when considering geography; New York, Boston and San Francisco represent significant tech hubs, meaning that qualified graduates are often faced with relocating in order to participate in the proptech scene.

Tech startups must also overcome the hurdle of attracting candidates who are qualified, interested and located within proximity. This challenge is nothing new to startups, as they have also been facing similar challenges when appealing to investors. In recent years, investors have been gravitating toward more established real estate tech companies over startups, likely drawing upon the role these firms played in bringing the CRE industry through the height of the pandemic. In the first half of 2021 in particular, pre-seed and seed funding rounds received roughly 8% of venture capital funding, which has generally been the case since 2000, according to a recent JLL report. Conversely, between 2006 and 2008, Series C funding jumped from approximately 10% to 70%, a figure which has been maintained to this day, barring occasional dips.

Longevity and Demographics
As it pertains to appealing to talent, today’s proptech startups must be able to show longevity and resilience. The number of these startups has risen 300% from 2,000 to nearly 8,000 since 2011, and many have questioned whether this growth is sustainable. While many — myself included — believe that mass consolidation is around the corner and necessary, the fact remains that startups have a failure rate of around 90%, per the Small Business Administration. Knowing this, it can be difficult for new members of the workforce to place their faith in all but the most promising or established tech companies.

The demographics of both the real estate and tech industries also pose barriers. Because real estate tech is positioned at the intersection of both, the real estate tech industry is similarly one-sided today. In fact, only between 5% and 20% of real estate tech founders are women, per a 2019 Forbes article. Further, nonprofit Transparent Collective found that only 1% of venture capital startup founders are Black, meaning that of the 10,400 companies that received funding in 2019, fewer than 400 are Black-founded. This lack of representation can make the prospect of entering the field particularly daunting for members of minority communities.

A Promising Outlook
Fortunately, there may be solutions on the. horizon. Because the real estate tech industry has thrived over the past two years and has seen tremendous surges in investment, the stage is set for the industry to make a significant leap forward in terms of which companies are able to remain viable for longer, especially once consolidation begins to occur on a wide scale. Additionally, the corporate landscape is far different now from it was even as recently as 2019, with the adoption of work-from-anywhere and hybrid models fueled by the same technology spurred by many of these real estate tech companies. This greater flexibility extends to both the manner that employees conduct business as well as who the employees are themselves. As an example, it is no longer as necessary for interested candidates to be in proximity to their employer’s physical location in order to join the workforce. Finally, the increased reliance on tech solutions in today’s CRE landscape means that more real estate tech companies will likely be able to compete with even the more established firms, leading to a healthy competition that will encourage more candidates to consider a career in property technology.

Overall, the real estate tech industry has faced unique challenges in acquiring talent that stem from the unique and evolving nature of the real estate tech industry itself. However, recent years have been particularly transformative for the industry due to the pandemic’s effect on the corporate landscape, leading to increased funding, greater necessity and an overall heightened reliance on technology in facilitating how business is conducted. With all of these factors combined, real estate tech is positioned to attract significantly more talent in the coming months and years and bring greater diversity to a blooming industry.