INSUBCONTINENT EXCLUSIVE:
The multi-trillion dollar global real estate market is getting flipped on its head.Business model innovation, data accessibility and the
proliferation of mobile, SaaS and other cloud-native software have already given rise to a cohort of tech unicorns that sit amongst the
dollars are continuing to spill into real estate tech (or proptech) companies at a rapidly increasing rate
Just upwards of $16 billion in venture capital has flowed into real estate-related startups in 2019 alone, according to data from Crunchbase
and Pitchbook, with major fundraises happening across industrial, commercial, residential, and financial categories.If we follow the money,
disruption on a global scale
Given the countless subsectors where exciting new startups are popping up, we asked more than 20 leading real estate VCs who work at firms
that span early to growth stages to share where they see opportunity within the colossal real estate category
In part one of our survey, we hear from:Zach Aarons, MetaPropPete Flint, NFXRyan Freedman, Corigin VenturesConstance Freedman, Moderne
VenturesTyler Sosin, Menlo VenturesJeff Crowe, Norwest Venture PartnersMicah Kotch, URBAN-XMerritt Hummer, Bain Capital VenturesKia
Nejatian, Plug and PlayMJ Cootsona, Plug and PlayRobin Godenrath, Picus CapitalAnswers have been edited for length and clarity.Zach Aarons,
MetaPropWhat trends are you most excited in real estate tech from an investing perspective?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
Industrial real estate has performed very well over the last few years, and we see a push toward workforce housing, medical real estate, and
We are looking at investing in technologies that benefit processes within these non-traditional asset classes.How much time are you spending
on real estate tech right now? Is the market under-heated, over-heated, or just right?We spend 100% of our time on real estate tech
The market is definitely hot, but the addressable markets are enormous and adoption is still relatively low and accelerating
Innovations like steel, bricks, timber, glass and reinforced concrete are hardly new, and they are still the predominant building materials
There have been minor advances like cross-laminated timber; however, we are looking for fundamentally new materials to bring into the
building trades.Plus any other thoughts you want to share with TechCrunch readers.Proptech is the most fun sector in the world
No other sector shares the complexities and idiosyncrasies of technology that has to be applied to the built world
We are very lucky we get to do what we do.Pete Flint, NFXReal estate is the biggest asset class in the world by far, but the products
available and service proposition surrounding it are still in the early stages of tech adoption
I see at least three major areas of opportunity for startups in real estate tech.First is the real estate transaction process
Starting around 2005, companies like Trulia and Zillow, transformed the consumer research experience and home buyers increasingly began
But the transaction itself spanning brokerage, financing and closing remains largely analog, complicated and inefficient
Example companies in this area are Ribbon and Modus.Second is the rise of alternative (or professionalized) living arrangements
I see a big opportunity for startups with a strong technology component to provide solutions for the mismatch between the way consumers want
to live today and the aging housing supply that was built for a previous era with different needs and demographics
Companies like Lyric and Zeus are building alternative living solutions with a vertically-integrated short term rental strategy, while
co-living startups are providing long-term rentals with value-added services.Third is spend around the home
The large costs in time, effort, and money of designing, building, and maintaining a home provide an opportunity for tech-enabled solutions
in construction, home management, and home maintenance
For example, Setter is providing a better consumer experience for requesting home maintenance services while Constru is bringing AI and
machine vision to lower prices and reduce schedule overrun on construction sites
I see many more opportunities for startups like these in this space.While these are big opportunities, the challenge with investing in real
estate tech is to find startups with teams that not only have world-class product and software capabilities, but also world-class knowledge
of finance, real estate, and operations
And with the recent WeWork debacle, we have seen a renewed emphasis on the failings of low-margin businesses
I always like to make the comparison to fintech
Technically speaking, real estate is a larger asset class than financial services
Between 2013-2017, fintech had cumulative funding of $62.4B vs
Even though proptech has ramped up the last few years, we still have a long way to go prior to catching up
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
Construction accounts for ~$10T annual spend globally and employs ~7% of the global workforce
This summer we spent a ton of time digging into the space and have now made a handful of investments
traditional real estate capital markets firms.
