Ok, so I just made a very bold claim in the title, and I want to provide some contextual definitions for my claim:

1. B2B in the context of real estate **refers to any business that could be selling services to a real estate agent/broker, property manager, builder, home service provider, real estate investor, or another stakeholder whether they are a small/medium size business or a larger business.
2. Proptech refers to any technology company that provides services to the real estate industry or consumers of real estate. This category is pretty broad in actuality since it can cover building construction, assisting in brokering real estate transactions, providing home services and property management, and offering financial and lending services.
3. Venture backable startups are any business which operates in a total addressable market of something greater than $10 billion with the potential to capture at least $1 billion of revenue in market share.

Based on the above definitions, I still claim that most proptech companies are not venture backable based on TAM, customer segments, and approaches to distribution.

The Biggest Problems with Proptech Service Companies are Market Size and SMB Behavior

Here are some high level statistics for United States:

• There are 1.5M+ real estate agents and brokers
• There are 206,000 loan originators
• There are 740,000+ builders
• There are millions of 1-2 man operations in the home services space
• In all the above statistics, the average age is around 45-55

While these industries typically have a number of businesses, competition is high and there is a strong skew for 90% of transactions done in each space to be performed by the top 10% of individuals and businesses.

As a result, the size of each market practically is only a fraction of what it actually is, which means that in order to build a huge business, the price point of the product needs to be incredibly high, but unfortunately much higher than what the willingness to pay usually looks like for a traditional business in one of these spaces, unless you are somehow able to achieve critical mass on distribution.

Most Non-Tech Businesses that Proptech Startups Sell to are Incredibly Cheap

If you are selling to a mortgage brokerage, real estate brokerage, construction company, title insurance business, etc., these businesses operate on incredibly thin margins every year. Even if you provide a revenue generation mechanism such as lead generation, investing into a new technology platform usually involves risk.

There are three core problems selling into this space:

1. Revenue forecasting is typically seasonal. Revenue cycles in these industries are typically concentrated around sales and inventory which is made available typically during the spring or summer season, which means that there is a finite window for deals to be completed every year.
2. These markets are highly subject to changes in interest rates. If interest rates go up, so will cost of supplies, and this will negatively impact the ability of newer generations to buy homes.
3. Most of these customers will not understand your technology, so they expect near-instant gratification.