Real Estate : Masteos, Immocitiz... The crisis intensifies for French proptech startups

Real Estate Startups Confronted with Market Downturn

Born from the merger of "property" and "technology," the proptech sector has experienced a meteoric rise over the last decade. Its business model focuses on modernizing real estate through digital innovation.

Promising to revitalize a sector in dire need of it, these startups have garnered attention in France and globally with spectacular fundraising feats, like OpenDoor in the United States, which raised 1 billion euros in four years by the late 2010s.

However, with the recent hike in interest rates, the volume of real estate sales has contracted, plunging the entire industry into a precarious situation. Proptechs, despite their rapid ascent, are not spared.

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Masteos Hit Hard by Sales Decline

Masteos, offering turnkey real estate investment solutions, is among the affected companies. A few months ago, following EDF's investment in its capital, the rising star of French proptech was valued at 150 million euros. By the end of 2023, it announced a cessation of payments and requested to be placed under judicial reorganization. Behind this are significant declines in revenue and cash flow problems.

This situation illustrates the fragile balance on which innovative young companies rest, now facing a harsher economic reality than expected. The sharp market turnaround even raises questions about the sustainability of the substantial fundraising model of some startups in "Venture Capital". A model that involves "burning cash until the next funding round," according to startup founder Thierry Vignal in Maddyness magazine. This limits the financial flexibility to adapt in tough times. "In hindsight, I think it's a model relatively unsuited to a real estate startup," he said.

Immocitiz: A New Alarming Signal

The case of Immocitiz, another bespoke investment player, further highlights the sector's underlying fragility. According to information unearthed by Les Echos, the company was placed into judicial liquidation last fall. The real estate group Consultim had become its majority shareholder just a year prior.

This blow to Immocitiz, considered just a few months ago as another promising proptech, reveals the vulnerability of real estate startups to unfavorable market conditions and increased financial constraints. Its liquidation, occurring so soon after major investment, appears to be a stern warning for the entire sector, underscoring the need for cautious management and strategic planning in an ever-evolving economic environment.