Venture capital funding in the occupancy analytics market reached record-breaking highs in 2021, signifying a vibrant and active market environment, according to our latest research. Workplace technology, in particular, made up a substantial portion of overall transactions in the smart buildings space in 2021 and 2022, indicating a thriving workplace technology market, one that has been significantly accelerated by the evolving needs of commercial building owners, managers, and tenants in a post-pandemic world.
“Occupancy analytics stands as one of the nine segments within the smart buildings space attracting high levels of investor interest and funding since 2021,” the study explains. “Corporate venture capital continues to play an important role in funding innovations in the smart building space. The major incumbents providing building technologies and real estate services in commercial and industrial facilities are facing competitive pressure from a wave of smart building startups, in the continuing race towards IoT and data-driven buildings.”
In our latest research phase, covering January 2021 to December 2022, 93 funding rounds from venture capital, private equity, or corporate investors were recorded. Another ten investments were documented in the first four months of 2023. In total, these funding rounds in the last two years have a disclosed value of $1.8 billion, demonstrating investor understanding of workplace trends and a clear appetite to be part of the market’s growth.
The highest venture capital and private equity funding round by value between 2021 to 2022 was in Causeway Technologies, who received a $193 million private equity investment from Five Arrows Principal Investments, the European corporate private equity arm of Rothschild & Co., in June 2021. This is followed by a $150 million private equity investment in OfficeSpace by Vista Equity Partners, and a $125 million Series D funding round by Density after investments from Kleiner Perkins, Altimeter Capital, 01 Advisors, and others.
Several key trends were identified in our analysis of these investment activities. Since 2017, 230 transactions with a disclosed value of over $3 billion were tracked. Our new report shows the first boost in growth of venture and private equity funding for occupancy analytics from 17 deals in 2017 with a mean round value of $4.4 million, up to 30 deals in 2018 with an average value of $8.4 million.
The next two years provided slower growth in 2019, with a 25% increase in the number of rounds but just a 6% rise in the mean value of funding rounds, followed by a 20% increase in the number of rounds and 13% rise in value as the pandemic began to take effect.
“Funding and investments in occupancy analytics startups accelerated around the world due to the Covid-19 pandemic, as technology to manage the workplace became a necessity rather than a “nice-to-have” feature to mitigate the spread of coronavirus throughout commercial real estate,” the new study states, and demonstrates that with a spike in 2021. While the number of funding rounds only increased by 12% between 2020 and 2021, the total value of those deals rose by an incredible 123% in response to the pandemic.
The workplace software market, in particular, has stood out within the wider funding landscape. While remote work trends have reduced occupancy in the workplace, the reality of a hybrid solution for most organizations means they need to understand the patterns and behaviour of occupants more than ever. In addition to the human-centric benefits of the past, effective occupancy analytics now also determines overall space requirement, with direct impacts on real estate costs and, therefore, business’ bottom lines.
“Software as a Service (SaaS) businesses, particularly workplace management platforms, are increasingly becoming the focal point for private equity (PE) and venture capital (VC) funds, given their recurring revenues and scalable business models with the potential to grow very fast,” our comprehensive study explained. “The funding and investments in occupancy analytics startups globally were accelerated due to the COVID-19 pandemic as the demand for technology to manage the workplace escalated.”
Whilst not maintaining the highs of 2021, venture capital and private equity in 2022 has shown signs of improvement on 2020 and longer-term trends. Full year 2022 showed a 26% drop in the number of funding rounds compared to 2020, but a 43% increase on the total value of investments, 2020 vs 2022. Neither 2020 and 2022 can compare with 2021 spiked figures, but the fruits of 2021 investments will emerge in the overall market growth figures of the coming years, as growth blossoms in this exciting young market.
“The global occupancy analytics market in commercial office space is anticipated to grow from $3.25 billion in 2022 to $7.07 billion by 2028, a CAGR of 13.8%. The competitive landscape remains diverse and potentially confusing for the buyer, with numerous vendors offering point solutions and platforms. Notably, 58% of the occupancy analytics companies identified were founded in the last decade, indicating low entry barriers and the disruptive influence of software, analytics, and IoT in smart buildings.”
This Occupancy Analytics report is the first instalment of a two-part series covering Workplace Technology. Part 2, covering Workplace Experience Apps, Tenant Engagement Platforms and Mobile Access Control, is to be published later in Q2 2023. Both these reports, and many more, are included in Memoori’s 2023 Premium Subscription Service.