Funding in the Smart Buildings sector is at an all-time high as over $13 billion was invested in 2021. This Research Note highlights our analysis of this unprecedented level of funding for smart building startups and established players. This past year has seen a 55% increase in investment values surpassing the previous annual record of $.8.5 billion in 2018.
In line with our half-year 2021 analysis, when we reported $5.1 billion in investment, proptech solutions with technology addressing the management and operational phase of the commercial building lifecycle attracted significant backing. The second half of the year gained momentum accounting for over 60% of the investments in the smart building sector.
In terms of the number of transactions, Memoori recorded 372 funding rounds, a decrease of around 7% from 2020, when 401 deals were identified. Although the number of deals decreased, we are seeing an increase in US dollar values across all types of funding - seed rounds, Series A to E funding, and growth capital all attracted higher levels of investment in the sector.
Predictions of a pandemic-triggered slowdown in funding for the smart buildings space have proved to be totally unfounded. This data supports our assertion that the COVID-19 crisis has in fact triggered an acceleration in investment in a number of key technology areas which address pandemic-focused solutions to enable the revised configuration of office space and the safe reopening of buildings.
While COVID-19 and the economic downturn is undoubtedly having a negative impact on many firms, demand has increased for technologies to mitigate the spread of coronavirus throughout commercial real estate. Solutions such as contactless access control and visitor management, indoor air quality sensors, social distancing compliance measures, indoor location-based systems, and occupancy analytics platforms are driving the digital transformation of commercial real estate out of necessity.
Funding for smart building startups (firms founded since 2012) accounted for around 81% of total funding rounds in 2021, an increase on 70% for new entrants in 2020. Our Startups Report series provides an overview of recent investments in the smart buildings space.
Memoori has tracked 302 funding rounds for startup companies, amounting to over $9.5 billion across the smart building sector in 2021.
Many of the investments supported innovations being developed by startups with greater speed and agility to market than established players, as they pivoted their offerings to address the "new normal" environment.
Another trend we have observed is the increased participation of corporate investors in funding technologies and applications for smart buildings either directly or through corporate venture capital units. Major incumbents from across the building lifecycle are leading and supporting funding rounds to a much greater extent than before as they face competitive pressure from a wave of smart building startups in the continuing race towards IoT and data-driven buildings. Recent strategic investors in the smart buildings space have included HVAC and building management firms, lighting companies, real estate service firms, energy management players and oil and gas majors.
Corporate investors accounted for around 30% of the backers in the smart buildings space in 2021. Strategic investments from corporate stakeholders in the built environment have contributed to a maturing smart buildings space. This funding is often accompanied by partnership agreements enabling investors to apply the technology in their own business and property portfolios, allowing the various participants to more easily assess the outcomes and benefits of particular solutions and business models.
Note that Memoori’s overall definition of investments in the smart buildings space includes venture capital funding, private equity, and strategic investments for both established players and startups in technologies for commercial and industrial real estate, smart homes, and building-related solutions for smart cities. Our definition focuses on the management and operational phase of the commercial and industrial building lifecycle and therefore EXCLUDES technology for the design, construction, purchase, financing, leasing, and sale of real estate.
The high levels of funding being pumped into the smart building space over the last four years indicate an increasing level of maturity and confidence in the sector. We believe this is set to accelerate the adoption of smart building technology, as businesses increasingly look to protect and enhance the experience of their customers, visitors, employees, and workplaces.
This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.