Where are VC's Investing in Proptech?
Updated: Dec 3, 2019
According to Crunchbase and Pitchbook, almost $16 billion in venture capital has flowed into real estate-related startups in 2019 alone. So where are these investments going? Tech Crunch interviewed some of the top VCs out there and this is what they had to say (edited for clarity and length):
Brandan Wallace - Fifth Wall:It’s not surprising that technology for the real estate industry would become one of the largest and most attractive categories of venture capital. Real estate is the single largest industry in the U.S., yet historically has been one of the lowest spenders on IT. The industry was (and to a great extent still is) known as being a late adopter of technology solutions. I would characterize the last five years as being an ‘Age of Enlightenment’ for major real estate owners, operators, and developers: CIOs were hired for the first time, large IT budgets have been allocated and are growing, and almost every major real estate owner now recognizes that adoption of new technology is existentially critical to their future strategy. Generalist VCs have been pouring capital into real estate technology companies, especially in the last few years. However, not all of those investments have performed well, and there’s usually one simple reason for that: distribution is absolutely everything for real estate technology startups. Getting large real estate corporates to adopt a new technology is often deterministic. In addition, generalist VC firms typically lack the deep real estate relationships and domain expertise to drive distribution and adoption of emerging technologies.
Zach Aarons - Metaprop:We like to track trends that play out in the broader real estate markets. Due to low interest rates and cap rate compression, real estate investors are now looking for yield through investments in non-traditional asset types. Industrial real estate has performed very well over the last few years, and we see a push toward workforce housing, medical real estate, and senior housing. We are looking at investing in technologies that benefit processes within these non-traditional asset classes
Ryan Freedman - Corigin Ventures:From an investment perspective, we’re spending a lot of time in construction tech right now. From a macro standpoint, we feel there is a supply-demand mismatch with respect to the size of the market and the amount of funding in the space. Construction accounts for ~$10T annual spend globally and employs ~7% of the global workforce. In addition, it’s one of the most antiquated industries in the world. We’re big believers of founder-market-fit, and this category in particular requires category expertise to navigate a very old-school industry.