Venture investing into the real estate space took a major upswing in 2017, with $12.6 billion invested, tripling the $4.2 billion from 2016. That was due to mega deals, including the $4.4 billion raised by WeWork from SoftBank, as well as a $550 million investment in Compass, the majority of which also came from SoftBank.
The space is so hot right now that there are multiple venture firms that are solely focused on real estate that just raised two: in June, JLL Spark raised a $100 million fund to invest in real estate technology, followed by Fifth Wall Ventures, which raised $100.8 million for its second fund, according to a filing with the Securities and Exchange Commission. The firm is targeting a total of $400 million for the fund.
The true sign of a maturing space, though, is when companies start to go public, and we've already seen that start to happen with what some would call "real estate 2.0" companies, those that have come into existence in the last 10 to 15 years, such as Zillow and Redfin.
Real estate technology, however, has had a bit of a spotty history on the stock market. In the last 20 years there have been three high profile companies that went public, only to have their listings removed when they were repurchased. That includes Move.com, which went public in 1999, only to then be purchased by iPlace for $150 million in August 2001, and LoopNet, which went public in 2006 before being bought by CoStar for $860 million in 2011.
The most recent exampel was Trulia, which went public in 2012, before being bought by Zillow for a whopping $3.5 billion in 2014.
Interestingly, in two of those cases, the acquirer was another publicly traded real estate tech company. So it's not that these companies can't succeed on the public market, but more that only a handful have been able to.
Here's the real estate tech companies that are still on the publicly traded markets are faring right now:
Who could be next?
So which companies could be the next ones to go public?
The most obvious answer to that question is Airbnb, which has been one of the most anticipated IPOs for years. The company, which has raised $4.4 billion, is valued at $31 billion. According to Pitchbook, if it were to IPO now, it would be the second largest of the last decade, assuming Uber doesn't go public first.
The other obvious candidate for a public market debut is WeWork, which has raised even more money than Airbnb, with $8.6 billion, but with a smaller valuation of $20 billion.
There are two more real estate tech companies that could go public, though they are not quite as high profile as Airbnb and WeWork. The first is Compass, which has raised $808 million, including a $450 million round in December that valued it at $1.8 billion. The second is Opendoor, which has raised $645 million, most recently a $325 million round in June, giving it a $2 billion valuation.
(Image source: triplemint.com)
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Redfin is the industry's first online brokerage for residential real estate. We believe that technology and a consumer-centered business model mean that we can get better results for our customers, at a completely different price.
How it Works: Buying a Home
Customers search for homes on our website, arrange home tours with Redfin and, when they've found a home they like, get started on an offer via our website. For each transaction, the same Redfin real estate agent handles the negotiations, contingencies and paperwork. The average customer saves more than $10,000 in commissions.
How it Works: Selling a Home
Customers use our website to tell us they'd like to sell a home, and then begin working with their Redfin team to get the home ready to sell and set the price. Once an offer comes in, Redfin negotiates on behalf of the customer and makes sure all the paperwork is taken care of. The average customer saves more than $10,000 in commissions.
Our Business Model
Our service is half on the Internet, half personal. Redfin's technology combines listings with objective data, including maps, property outlines, third-party appraisals and tax records. We base our service on data-driven best practices for buying and selling a home. Our business model focuses our personnel on customer service. We employ agents directly, and we compensate agents based on customer satisfaction. We believe this approach is not only more efficient, but leads to better service.
Our core value is consumer-driven innovation. We were the first to launch a map-driven search application in 2004, and the first to offer an online home-buying service in 2006. By January of 2008, we had refunded more than $10 million in commissions to home-buyers. According to MLS records, we were also able to negotiate a lower price for our customers than other brokerages could. We offer a 100% satisfaction guarantee.
Redfin earns fees from buyers or sellers that we represent in a real estate transaction. In Seattle, we have begun an experimental program to provide a mortgage service, charging a flat fee to act as a mortgage broker. These are the only ways today that we generate revenue.
Our History
The company is led by technology entrepreneurs from Plumtree Software and Applied Discovery, and backed by Madrona Venture Group, the original investor in Amazon.com. Other investors include Draper Fisher Jurvetson, Vulcan Capital, BEV Capital and The Hillman Company. We offer local service in Seattle, San Francisco, San Jose, Los Angeles, Orange County, San Diego, Boston and Washington, DC; we are expanding nationwide over the next two years, moving next to Chicago.
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"After spending years at big name brokerages, I wanted something fresh. This company spearheads change and makes the industry perform better. I’m proud to be part of the team."
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We negotiate better together.
Broker records show that Redfin agents and their customers negotiate a better price when buying a home.
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