“The real estate industry is slow to adopt new technology”. How many times have you heard that statement? While there may be some truth to it from a relative perspective, there are so many exciting things happening in the world of real estate technology today.
I recently had a call with David Danesh, a real estate tech enthusiast and aspiring angel investor. I was blown away by his knowledge of the real estate tech landscape and specifically the venture capital firms fueling the explosive growth of real estate tech companies. Real estate tech adoption is driven partly by the quality of the new technology, and new technology is often a product of the funding available for tech start-ups. This is what makes these emerging real estate-focused VC firms so important.
I asked David if he would contribute a guest post, providing an overview of the real estate tech investing landscape. This post won’t cover any specific real estate tech firm, but rather the leaders in real estate tech funding world.
It’s an exciting time to be in the real estate business!
At a time when just about everything in our lives can be achieved at the swipe, tap, or click of a button, real estate remains anchored in tradition and human influence; the industry has simply struggled to keep up with the pace of technological advancement. Until now.
Over the past decade, companies like Airbnb, WeWork, CoStar, Zillow & Redfin have ushered in a new era of innovation in real estate, and paved the path for the rest. Now, several years later, real estate tech has become an exciting, established vertical for the VC world. I recommend CBInsights’s early real estate tech Market Map for a preview of some exciting new ventures.
Recent tech successes and failures have provided VCs and entrepreneurs with better insight on how to create value. The only major concern I’ve heard voiced by investors is that the emerging industry has attracted entrepreneurs looking to jump into a hot vertical rather than solve genuine problems. With that in mind, I believe we are only beginning to scratch the surface of how technology will impact the way we interact with the built world.
When will environmental site assessment, appraisal, title, and escrow companies integrate the right technologies to deal with their backlog of deals? When will real estate investment bankers spend less time with back office paperwork and more time on negotiations and structured finance? When, if ever, will investors have the data needed to treat real estate like the stock market?
The digital transformation of real estate is long overdue. Fortunately, the antiquated outlook that prizes soft credentials at the expense of innovation is beginning to fade.
Real Estate Tech Funding
In the last 5 years, Real Estate tech companies have raised nearly $6.4 billion in funding with records being broken in dollar amount and deal flow each year. Last year alone, private real estate tech startups raised over $2.6 billion across 235 deals, increasing funding by over 40%. And in through Q1 2017, real estate tech has raised over $770 million across 61 deals representing a 10% increase in funding.
The following report will highlight the 5 Key Players leading the Venture Capital World for Real Estate Tech as of Q3 2017.
Major Players in Real Estate VC
MetaProp: Accelerator, Fund and Advisor that strives to be the first stop for early-stage real estate tech startups seeking capital and guidance
- Founding Year: January 2015
- Founders: Aaron Block, Zach Aaron, & Clelia Peters
- Fund #2 Size: More than halfway done with raising $25 Million
- LP’s: Cushman & Wakefield, NYC EDC, Rebny, The News Funnel, Zillow Group, Warburg, Rics, DLA Piper, Eisneramper, Millennium Partners, Silicon Valley Bank, and Additional private investors
- Value Add: Deep relationships both in real estate and the press. Ability to invest early stage because of the insight they gain from their LP’s current needs and yearly accelerator program.
- Notable Investments: Bowery, Enertiv, Flip, HOM, onTarget, Ravti
- Accelerator: Yes, established in 2015. MetaProp also offers a Pre-Accelerator program at Columbia University.
Camber Creek (Berman Enterprises): Camber Creek is a standalone venture fund that has access to Berman Enterprises real estate portfolio in addition to other LPs totaling assets over 150 million square feet and over 120,000 apartments.
- Founding Year: 2009
- Founder: Casey Berman
- Fund Size: Have raised $20+ Million so far and looking to close at $30 Million.
- LP’s: Real estate owner/operator family offices.
- Value Add: Camber Creek’s LP’s consist of real estate owners who can beta test and implement technologies across their real estate portfolios. Camber Creek is no longer a Berman Enterprises Company or necessarily the VC arm of Berman Enterprises. Overall, Camber seeks to invest in startups that can have an immediate and direct impact on the thousands of units owned by Berman Enterprises and the LP’s of Camber Creek.
- Notable Investments: 42Floors, Canvas, Clear Edge, Optii, Parkifi, VTS, Latch. Many of Camber Creek’s initial investments have gone to participate in the MetaProp accelerator.
- Accelerator: No
Fifth Wall: LP driven fund with a top-down approach targeted at established tech start-ups.
- Founding Year: June 2016
- Founders: Brendan Wallace & Brad Greiwe
- Fund Size: $212 Million
- LP’s: Hines, CBRE, Equity Residential, Lowes, Lennar, Host Hotels, Prologis, Rialto, Macerich, Rudin Management. Also backed by a leading Ivy League university endowment, institutional family offices, and a number of executives at the leading real estate private equity firms in the world.
- Value Add: Top-Down approach. They work with their Anchor LPs to identify opportunities where Fifth Wall can play the ‘kingmaker’.
- This limits Fifth Wall to invest in technologies that can be immediately integrated by their LPs. Simply, their mandate limits they investments to a specific type of startup within real estate tech.
- Notable Investments: B8ta, Clutter, Notarize, ClassPass, VTS, Open Door, States Title. These investments do not align with their current investment mandate.
- Accelerator: Yes, established in 2017
- Accelerator allows Fifth Wall to target earlier stage startups that their fund may have previously passed over. Fifth Wall can now mold younger, Series A, startups to fit the needs of their LPs.
Moderne Ventures: VC Fund targeting innovation that goes beyond real estate technology.
- Founding Year: July 1st, 2015
- Founders: Constance Freedman
- Fund #1 Size: $33 Million
- LP’s: Over 400 corporations and executives within Moderne’s target industries who serve as investors, mentors and advisers to the fund and its portfolio companies
- Value Add: Interested in technologies that can expand into other industries and thus have a larger target market. The list includes: AI, Blockchain IOT, lead generation/cultivation, VR/AR, Insurance, Concierge, services, Personal Assistance, Personal Finance, Event Management, Art Tech, and Contractor Tech.
- Notable Investments: Abode, Agentology, Baroo, Cubicasa, Hello Alfred, Hello Tech, Hippo, Home Bot, Preclose. Founder of MV invested in Docusign – considered her most successful real estate tech investment to date.
- Accelerator: Yes, established in 2016
- Moderne Passport is a 7-9 Month immersion program focused on customer acquisition and growth. As a result, compared to traditional accelerators, MV is geared toward later stage companies.
Brick & Mortar Ventures: Leading Construction Tech Investor and ambitiously seeking investments for the future. For example, the fund is working closely with NASA and on ideas which include robots on Mars and 3D Habitats.
- Founding Year: Jan 1st, 2014
- Founder: Darren Bechtel
- Fund Size: Undisclosed. Whisper – $100 Million
- LP’s: Undisclosed
- Value Add: Considered the best construction and Commercial Real Estate tech investor in the valley. Founder, Darren Bechtel, has deep family ties to the construction industry. The team focuses on architecture, engineering, construction, and facilities management.
- Notable Investments: PlanGrid, Building Connected, Getable, Rhumbix, Build Zoom, Fieldwire
- Accelerator: No
Although there have been a plethora of real estate tech start-ups emerge over the past decade, the industry remains ripe for innovation. There is no better or easier time than today to take advantage of the opportunities across the real estate sector.
What’s your favorite real estate tech start-up?