The number of proptech startups seeking to bring high-tech to the commercial real estate industry has increased three-fold to 8,000 in the last decade, according to JLL data.
The spike in the number of players has also caused some shrinking of the field. Proptech M&A has totaled more than $18 billion in 2021 through the end of August and is on track to surpass the $21.9 billion of M&A transacted in 2020.
Funds continue to flow toward more established industry leaders and those whose products have proven useful through the pandemic period, JLL said.
“Our industry is right on the cusp of impactful change driven by widespread technology adoption,” Raj Singh, Managing Partner of JLL Spark, the global venture fund of JLL Technologies, said in a release.
Roughly half of the $97 billion total raised by proptech startups in the last decade was raised by U.S. companies, most of them located in New York, Chicago, Los Angeles and the San Francisco Bay area.
“Our industry is right on the cusp of impactful change driven by widespread technology adoption.”
SmartRent, the smart home automation platform, went public in August in a $2.2 billion merger with Fifth Wall’s first SPAC.
The Scottsdale-based company received $450 million in cash as part of the deal, which it will use to expand domestically and internationally, and potentially become a strategic acquirer to bolster in-house product development, founder and CEO Lucas Haldeman said.
“The addressable market is every rental unit and every single-family rental home in the U.S., and then around the world,” he said.
Haldeman expects there to be a convergence of the multifamily and single-family rental markets as the U.S. housing market boom continues. Multifamily operators want to get in on the single-family rental craze, and vice versa.
“I know a lot of them that are studying it and thinking about it,” the executive said.
CRE for all
The barrier to entry for commercial real estate investment seems to get a little lower every quarter.
Rhove, a new real estate fractional investment application, launched, and will soon allow users to put small sums of dollars and cryptocurrency to work in individual commercial properties with the touch of a smartphone screen.
“The commercial real estate market was really built to keep people out, not bring people in,” co-founder and CEO Calvin Cooper said.
Cooper wants eventually to facilitate crypto native end-to-end transactions, where all steps of the process are denominated in Bitcoin and other cryptos.
“We’re innovators,” Cooper said. “We’re also just people who live in a community and we want to own a piece of it, so we’re approaching it from a whole different perspective.”
Separately, Oakland-based Roofstock, a single-family rental investor platform, plans to launch a fractionalization service later this year to capture the surge in retail demand for single-family rental product. Investors will be able to put as little as $5,000 to work.
Roofstock, notably, just acquired the property management tech platform Great Jones to streamline asset management for the increasing number of retail investors buying, selling and managing single-family rentals remotely.
“The idea is we can bring a lot of the same capabilities, analytics and tools that has typically been the purview of just large institutions and make it available to individual retail investors,” CEO Gary Beasley said.
San Francisco-based HomeLight, a company that aims to streamline homebuying by allowing prospective buyers to make cash offers, raised $100 million in a Series D raise that valued the company at $1.6 billion
Earlier this year the company was reported to be nearing an IPO, but COO Sumant Sridharan said a public debut is not on the near-term horizon.
“That’s a decision that, if and when the timing is right, we’ll make it,” Sridharan said.
The company plans to use the Series D capital to scale its suite of financial products that facilitate contingency-free transactions.
“The last 10 years of real estate technology have been focused around listing aggregation,” Sridharan said. “We think the next 10 years are going to be about fundamentally changing the mechanics of the real estate transaction.”
STAT OF THE MONTH
Total proptech M&A so far in 2021.
Keep it coming
San Francisco-based startup Divvy Homes scored another $200 million in equity financing at a valuation of $2 billion — more than quadrupling its previous valuation.
The Series D raise came just a few months after its $110 million Series C round.
Divvy Homes, which aims to help renters become homeowners, plans to expand its footprint to 20 markets from 16 by the end of the year, possibly adding presence in the Carolinas and Detroit, CEO Adena Hefets said. The company’s target market is $100,000 to $350,000 homes in secondary and tertiary markets.
Divvy Homes buys the property on behalf of the prospective buyer, who signs a lease with Divvy, making periodic contributions toward a downpayment. Hefets said Divvy is more akin to a synthetic mortgage product than a typical “predatory” rent-to-own offering.
“The intention behind founding Divvy was really to create another way for folks who couldn’t get a mortgage to still be able to finance a home purchase,” she said.
• Two members of the cloud-based leasing and portfolio management platform VTS’ C-suite — chief technology offier Niall Smart and chief operating officer Patrick Kehoe — will leave the company by the end of September. The executives are stepping down for personal reasons, CEO Nick Romito said.
• Bungalow, the shared-living rental platform, raised $75 million in a Series C round, with plans to invest in secondary markets in the Sun Belt.
• The construction tech startup ICON, which prints 3D homes, secured $207 million in Series B funding.
• Another construction-tech platform, Agora, whose platform enables contractors to order and track building materials, raised $33 million in a Series B round.
• Reali, a startup aiming to streamline second-time home buying, rounded up $250 million in a Series B raise. The company wants to scale operations in California before expanding nationally.
• Knock, a leasing platform for landlords and property managers, raised $5 million in seed funding, with plans to grow their headcount.
• TurnoverBNB, a platform that helps vacation rental operators source and manage cleaning services, raised $4.5 million in a Series A round.
• RentCheck, a startup facilitating tenant-led apartment inspections, raised a combined $3.6 million in pres-seed and seed funding. A Series A raise is “definitely on the horizon,” co-founder Lydia Winkler said.