It’s no secret that the last year has presented immense economic challenges, as regulators have sought to tame soaring inflation by harnessing a market that has been firing on all cylinders for years. The early effects of these measures may have been most acute in the tech market, as giants like Google and Meta have announced multiple rounds of major layoffs, and a once-white hot era for tech and venture capital has cooled significantly.

That was the backdrop at RETCon — a proptech-focused conference held in Brooklyn between April 2-4. On the event’s final day, RET Ventures Principal Aaron Ru took the stage to address a standing room crowd and deliver his take on how our firm, and the VC arena at large, is working to navigate these obstacles.

Acknowledging the overall slowdown in funding that dates back to last year, he pointed out that while capital is continuing to flow to early-stage companies seeking Seed and Series A funding, more mature companies are struggling to secure larger rounds — looking instead to insiders who can finance bridge rounds until the broader economic climate improves.

Meanwhile, though many early-stage companies continue to raise, they are also facing steeper challenges and more critical vetting of their long-term paths to profitability. Many areas of proptech, particularly those based on supporting the transaction process, have been adversely impacted by the slowdown in activity across the broader commercial real estate market, and no longer hold the immediate appeal they possessed in an era of low interest rates and high liquidity. 

Where many venture firms are now turning their attention, however, is to proptech solutions that may not be on the fast track to unicorn status, but that are capable of generating immediate return-on-investment for operators looking for both an immediate edge that will help them weather the current economic storm, as well as contribute to better margins in the long term.

“You have to have a business model that works day one,” said Ru. “There’s no free money to be had anymore.”

This environment, while not without its challenges, works particularly well for RET’s unique business model, which allows portfolio companies to take advantage of the firm’s network of Strategic Investors — comprising nine of the top 20 NMHC Owners and Operators, which together own and manage over two million multifamily and single-family rental units across the U.S. and Canada. While many start-ups often struggle to find an initial believer willing to pilot and distribute their product, RET-backed platforms are plugged into a highly trusted and capable network of operators that can vet, pilot and deploy their solutions across their broader portfolios. 

While the days of free-spending SPACs and fast-tracked unicorns may be over for now, RET’s approach to venture capital allows it to not just identify and foster solutions that can thrive in any economic environment, but to also nurture critical relationships that help establish a  pathway toward developing and solidifying the long-term presence of these solutions across the market.

“That’s probably the best lesson from all of this market choppiness,” said Ru. “These market relationships are not just a year or two. You have to find partners that continue to back you and that you can work with for a half decade or a decade.”