Investors from 500 Startups, Liquid 2 Ventures, Andreessen Horowitz and Zeev Ventures weight in
Right now, investors are taking a harder look at the real estate tech space than ever before.
According to GCA Global's Real Estate Technology Sector report, Q2 of 2018 saw the highest number of deals in the past two years, with 85 fundings totaling $1 billion. That represents a 45 percent increase in funding, and a 42 percent increase in deals.
That is also a 37 percent increase in deals on a quarterly basis, though it's also a 41 decrease in funding from $1.7 billion in Q1.
The funding this year includes Opendoor, which raised $135 million in Q1, then followed it up with an additional $325 million in Q2. There was also $150 million raised by direct home buyer and seller OfferPad, $50 million raised by mortgage point-of-sale software provider Cloudvirga and $40 million raised by Spanish rental portal SpotAHome.
In just two quarters so far, there has already been $2.7 billion invested into the real estate space, by GCA's numbers. Compare that to the $3.2 billion invested in all of 2017 and this year is on track to far outpace it.
So what's fueling this uptick in funding to companies in the real estate space? There's nobody better to ask than the investors themselves, so we reached out to them to find out what excites them about the space right and what makes them want to put money into it.
Here's how they responded.
Eitan Bek, co-founder & Managing Partner at TLV Partners, as well as Boardmember at Skyline AI
“The real estate investment market is huge. However many of the integral processes that make up the day-to-day of CRE investors and operators are performed manually. While artificial intelligence (AI) has already transformed a number of industries, the commercial real estate market is still lagging behind. AI is the future of real estate analysis and underwriting and is poised to fundamentally change the way assets are acquired. We have just completed an investment in Skyline AI that is poised to transform this market. Utilizing big-data and AI techniques, the company has created one of the most comprehensive real estate databases in the world, comprising of over 100 data sources and enriched by using various machine learning methods, including NLP and unsupervised learning, all in an effort to more precisely analyze and assess real estate assets. In addition, Skyline AI can perform the majority of the diligence that a regular property investment firm would do with just the click of a button.”
Alex Rampell, General Partner at Andreessen Horowitz and investor in FlyHome
"In the future — and increasingly the present! — we will buy and sell our homes from a company, due to the laws of comparative and technical advantage. It doesn’t mean that agents will go away, but the experience will be a full stack one. A negotiator will negotiate. A financing expert will help finance. Data collection, advertising, and pricing will be algorithmic — all things better suited for experts than a jack of all trades. And so on and so forth — the real estate agent’s tasks will be unbundled and then rebundled under the framework of a company that applies each task against the rule of comparative advantage. People laughed at Henry Ford for pushing an assembly line versus craftsmanship, but it turned out that Ford automobiles were vastly more reliable. Ford today has 200,000 employees, and you can imagine the disarray if each of them built and sold their own cars based on individual experience."
Linus Liang, Principal at Signia Venture Partners and investor in Reali
"Home listings were first posted online less than 15 years ago. Companies like Redfin and Zillow saw the opening and pounced. Now cities are digitizing not just property data, but statistics like crime, education, and public services leading to the emergence of new billion dollar opportunities. But the fire hose of data is overwhelming. Enter algorithms.
Using algorithms, we can leverage the mountains of data and for example, drill down to micro details that predict how much a house should cost and even how valuable it will be in 10 years from now. This systematic approach allows buyers and sellers to have a more productive journey and ultimately achieve their respective real estate goals.
The advent of Artificial Intelligence in the real estate space is only beginning. Within the next two decades, 47% of current jobs (i.e., insurance underwriters and loan officers) will be automated, according to an Oxford University study. But a real estate deal will always require some level of intimacy. In other words, personal, human relationships still matter."
Hans Morris, managing partner of Nyca Partners and investor in Skyline AI
“Digitization of markets, incorporation of new data sets, factor-based investing, and creation of low cost investment vehicles have transformed the asset management industry over the past two decades, yet the institutional real estate investment market remains highly manual, expensive, and opaque to many investors. This is clearly ripe for change, and Skyline.ai is simply the best team we’ve met. They’ve already accomplished a great deal in a short amount of time, but we think a very large, global market is before them, ripe for deconstruction.”
Oren Zeev, Founding Partner at Zeev Ventures and investor in Reali
"The process of selling or buying a house today is as inefficient and backward as it was 30 years ago. The players and their way of doing business has largely remained intact. In the next decade we are likely to see a complete transformation as new players leverage modern technologies to disrupt the market and provide a better experience that consumers, especially Millennials, are increasingly expecting."
Sheel Mohnot, Partner at 500 Startups and investor in Hubba, ZipMatch, 42floors and HomeLight
"We love investing in real estate. The largest portion of most people's net worths are tied up in real estate, meaning that is a particularly impactful sector to people and shaving a small percentage on a transaction at scale can have large impacts. Aside from that, it has been tremendously lucrative; five of the 10 most recent unicorns are real estate companies: Opendoor, Compass, Wework, Airbnb and Ucommune.
Michael Ma, General Partner at Liquid 2 Ventures and investor in Reali
"Our investment in Reali comes at a time when customers are demanding more real estate tech services and transparency than ever before. With an AI-powered app experience and in-house experts, Reali is modernizing the entire real estate transaction process and saving consumers millions of dollars in agent commissions. It’s a model we believe will forever change the industry."
Daniel Bahar, Principal at iAngels and investor in Skyline AI
“Real estate is the biggest asset class globally and has been slow to adopt new technologies. In the last few years we have seen new technological companies emerge leveraging on the utilization of big data and AI in asset management, brokerage (Compass), listing (Opendoor, Zillow), credit and also pure data providers. Very few are willing to put their money where their mouth is and utilize big data analysis and prediction models to make their investment decision. We liked Skyline as we believe they are doing something distruptive, very scalable and can make a real change in the way people invest in real estate."
Zak Schwarzman, a Partner at PropTech venture capital firm MetaProp and investor in Eave and Rentalution
"For a firm like MetaProp, there has really never been a better time to be investing in early stage PropTech. There has been an explosion in company formation in the sector and the traditional real estate and investment communities are clearly paying attention to an unprecedented degree. With 90+ early stage PropTech investments under our collective belt we understand the sector's great untapped potential, its unique challenges and the importance a trusted, collaborative partner who can bring the startup, real estate and investment communities together to build companies that will shape the future of the real estate industry.
MetaProp recently closed its $40 million Fund II, with the backing of a blue chip real estate investor group that offers PropTech startups a pilot- and test-ready “sandbox” that spans more than 15 billion square feet across every asset type and global market. Fund II's early investments into companies like Workframe, Blueprint Power, Locate.ai, WhyHotel, etc. represent a broad cross-section of the PropTech market. To our eyes, every step of the real estate value chain is up for grabs right now and we are inspired by the diversity, sophistication and ambition that we see in the next generation of PropTech startups."
Peter Rabley, Venture Partner at Omidyar Network and investor in Spruce
"There is a real lack of innovation in today’s real estate industry, creating great opportunity for startups like Spruce and investors like Omidyar Network. Through our Property Rights initiative, we invest globally in technologies that we think are highly disruptive and fundamentally improve the way property rights are identified, issued, publicized, and protected. In markets such as the United States, we look for entrepreneurs who are tackling the antiquated, somewhat opaque processes that make the home buying experience overly complex, time consuming costly, and overwhelming for all involved. And that’s precisely what the team at Spruce is doing. They’ve created a first-of-its-kind digital platform that makes securing title insurance clearer, faster, and more enjoyable. After launching in 2017, Spruce’s growth to nearly 50 states by the end of 2018 underscores the demand, and we’re excited to be a part of this positive path forward for the real estate market."
(Image source: bocanewspaper.com)
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500 Startups is an early-stage seed fund and incubator program located in Mountain View, CA. They invest primarily in consumer & SMB internet startups, and related web infrastructure services. Their initial investment size is typically $25K-$250K.
Selected areas of interest include financial services & e-commerce, search/social/mobile platforms, personal & business productivity, education & language, family & healthcare and web infrastructure.
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Andreessen Horowitz is a $2.5 billion venture capital firm that was launched on July 6, 2009. Marc Andreessen, Ben Horowitz, John O’Farrell, Scott Weiss, Jeff Jordan, and Peter Levine are the general partners of the firm.
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iAngels is an equity crowdfunding platform that gives accredited investors the opportunity to become angels in their own right by investing in technology startups alongside top tier angel investors in Israel.