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Big money investors have already reshaped the real estate landscape in recent years, but at least one venture capitalist thinks that trend is only going to accelerate as more firms with deep pockets warm up to the industry.
Patricia Nakache
Investors poured $135 billion into startups overall in 2018, a surge up from between $70 and $80 billion in the prior several years, said Patricia Nakache, a general partner at investment firm Trinity Ventures. She spoke Friday at Inman Connect Las Vegas.
However, the number of actual deals held relatively steady — meaning that funding round sizes are generally getting bigger. She expects that trend to play out in the real estate technology space as well.
Nakache pointed to companies such as WeWork (now part of the larger We Company) as well as Opendoor as driving an interest among investors for real estate startups. Softbank‘s activity in the sector has also piqued rival venture capitalists’ interest, she said. Softbank is a huge Japan-based firm that has invested in both of the above companies as well as in Compass.
The affect appears to be snowballing; last week, venture capital company Fifth Wall Ventures announced it successfully raised $500 million for a new fund.
It’s not just investors with mountains of capital who are flocking to the real estate sector, Nakache said. Traditional investors who have previously eschewed it are now interested too.
Real estate companies themselves are also playing a role.
“The capital that’s coming into the space is not just traditional venture dollars,” Nakache said. “It’s coming from industry players themselves.”
Investors are focused on several different areas, one of which is the “battle over the future of brokerage,” she said. Companies are looking for WeWork-esque startups that have strong brands and focus on commercial rental space.
Companies such as WhyHotel, which orchestrates “pop up” hotels in new multifamily developments, are helping to drive a similar investor interest in companies that are experimenting in the residential space.
How exactly the real estate and prop tech investment landscape plays out in the coming years remains to be seen, but at least right now the appetite for new companies doesn’t appear to be sated.
“I think there’s going to continue to be evolution,” Nakache concluded.
