3 proptech VCs list the biggest opportunities and challenges in pairing real estate with technology

3 proptech VCs list the biggest opportunities and challenges in pairing real estate with technology

 259 total views,  1 views today

Proptech is quickly gaining ground on fintech in terms of hype and investment dollars. Investors and startups say that now is the time for the real estate industry to start adopting new technology, or “proptech,” that will make companies work more efficiently.

Proptech is a broad and sometimes vague term, but a good working definition is right there in the name: technology that’s related to the sale, rental, maintenance, and improvement of property.

That can include online real estate marketplaces and “iBuyers” like Zillow, Opendoor, Redfin, and Compass as well as some of the more behind-the-scenes tools that landlords and property managers can use to maintain and monetize their real estate. Some people might also include coworking companies like WeWork, short-term rentals like AirBnb and Sonder, the tech underpinning smart cities like Alphabet’s Sidewalk Labs, and sustainable construction techniques under the proptech umbrella.

There are equally wide-ranging views of how large the industry is. Proptech data company Unissu pegged total VC funding at $14.85 billion for 2018, while Re:Tech estimated a total of $18.6 billion.

Business Insider spoke to two proptech-focused VCs, Fifth Wall and MetaProp, and one generalist VC with experience in proptech, Trinity Ventures, about the opportunities and challenges in identifying proptech investments.

Brendan Wallace, co-founder and managing partner at Fifth Wall, talks self-storage and sustainability.

Fifth Wall, a Los Angeles-based proptech VC founded in 2016, announced a $503 million funding round on Wednesday. Fifth Wall is the largest proptech-specific investor, and the firm says it makes up 70% of all dedicated capital for proptech.

They have backed Opendoor, coworking startup Industrious, and have branched out beyond just proptech into scooter and bike rental startup Lime. Fifth Wall had more than 50 strategic partners in its latest funding round, including CBRE, Equity Residential, Marriott, Prologis and Macerich.

Business Insider spoke with Brendan Wallace, co-founder and managing partner at Fifth Wall, about the future of proptech.

Opportunities: self-storage as a service, sustainability

Wallace is closely watching the rise of companies that don’t actually own assets and focus instead on providing real estate-related services. The most high-profile example is WeWork, which doesn’t own most of its office space and sells office-management as a service.

“You can provide a higher level of service to customers who are demanding that higher level of service,” Wallace said.

Wallace highlighted Clutter, a self-storage company that Fifth Wall has invested in since 2017, as an example. Clutter gives door-to-door service for self-storage, and rents space instead of owning and maintaining their own warehouse.

“They’re a really interesting business that has almost turned self-storage into a service industry, as opposed to a real estate industry,” Wallace said.

Wallace also sees opportunity in sustainability. While green construction and sustainability are nothing new for the industry, Wallace points out that real estate nonetheless accounts for almost half of US energy consumption. Sustainability technology can appeal to more environmentally minded investors and tenants, and also help companies save on energy costs.

“You can start to drive really meaningful change around sustainability as an actual investment strategy that’s both economically really exciting for real estate owners in terms of the cost savings, and financially exciting for Fifth Wall from an investment perspective, ” Wallace said.

Challenges: ‘late-adopting’ industry, blockchain roadblocks

Real estate’s relationship with technology is just starting to change, according to Wallace. Many in the industry have only started to embrace new technology over the last five years.

“You might have incredibly disruptive technology, but you have to be cognizant of how challenging it is sometimes to sell in to large real estate incumbents,” he said. “And we obviously support that, but real estate has been a historically slow-moving, late-adopting industry.”

Wallace also thinks that blockchain, for all of its hype, has not yet meaningfully impacted real estate. Fifth Wall is optimistic that the technology will eventually develop, but real estate is behind the fintech curve.

John Lin, investor and principal at Trinity Ventures, is eyeing automation and AI

Trinity Ventures is one of the old-guard venture funds that has dipped its toe in the proptech pond, and is joined by heavyweights like Sequoia Capital, Andreessen Horowitz, and SoftBank. Trinity got its start in proptech back in 1998, before the name was even coined, with an investment in commercial real estate market LoopNet, later acquired by CoStar.

Business Insider spoke with John Lin, an investor and principal at Trinity Ventures, about upcoming trends in proptech.

Opportunities: adding AI, analytics

Lin sees a lot to gain in automation and AI, a trend that connects proptech to the rest of the tech world. Products are being developed in different sectors of the real estate world, and are targeted at everyone from home buyers to real estate agents to large institutional landlords and property managers. One company in Trinity’s portfolio, Side, develops tools to help real estate agents run their own businesses with minimal paperwork.

“Agents are constantly on-the-go and working from mobile devices, which is helping to drive demand for time-saving automation,” Lin said. “One example is using AI to read and input documents with natural language processing, or NLP.”

NLP is technology that allows machines to read and understand human language for specific tasks.

Lin sees analytic software like Zillow’s Zestimate as another place where real estate can use tech to gain an advantage.

“Other companies have combined massive volumes of data, such as MLS listings, with government, demographics, and financial data, to predict housing prices,” Lin said.

Challenges: paperwork is holding back digital transformation

Lin identified paperwork as one of the biggest roadblocks to more advanced data in real estate.

“One huge barrier to digital transformation is that there is so much manual paperwork,” said Lin. “Taking that paperwork digital has proven to be more difficult than expected,” Lin hopes that NLP and similar types of software can help make the digital transformation easier.


Read More


Please enter your comment!
Please enter your name here