The Real Deal New York

Who’s holding the purse strings?

Meet the new brain trust bankrolling real estate’s latest startups
By Konrad Putzier and E.B. Solomont | August 01, 2018 12:00PM

While the venture capital world is swarming with players looking for the next hot company to invest in, it has long ignored real estate. But starting about a decade ago, specialty funds began launching to invest exclusively in the so-called proptech space. And now, more and more of these firms are popping up to place early bets on a still-burgeoning sector.

Here are some of the most prominent ones.

Navitas Capital
Launched: 2009
Total raised: $80 million
Founders: Jim Pettit, Travis Putnam

When Jim Pettit and Travis Putnam launched Navitas Capital in 2009, the fund was among the first to focus on the nascent proptech sector. In December, Navitas closed a $60 million fund — triple the size of its first fund, which it raised in 2011.

Investors in the most recent round include real estate heavyweights such as the investment firm Divco West Real Estate Services, along with JLL Spark and Saint-Gobain, a French manufacturer of construction materials. Equity Residential is Navitas’ fourth limited partner, or LP.

Navitas’ founders come from real estate and finance: Pettit was a principal at Bancroft Capital, a California-based REIT, and Putnam was an analyst at an investment banking firm. Today the Beverly Hills, Calif.-based firm focuses on real estate and construction tech, typically investing between $100,000 and $5 million in early-stage companies.

Though it has yet to cash out of any of its companies for a major payday, its portfolio companies have attracted serious follow-up financing, suggesting that it’s picking winners. PlanGrid, a construction software startup, has raised $65 million, while Matterport, a 3D imaging startup, has raised $66 million. Navitas has also backed Katerra, which in January closed a Series D $865 million fundraising round led by SoftBank.

Camber Creek
Launched: 2011
Total raised: $50 million
Founders: Casey Berman, Jake Fingert, Jeffrey Berman

The founders of Camber Creek also have real estate pedigrees — and those backgrounds have no doubt driven their proptech focus.

According to co-founder Jeffrey Berman, who sources the firm’s deals, Camber Creek likes companies that give a competitive edge to its LPs, which collectively operate and manage 150 million square feet of U.S. real estate. Historically, that’s meant investing in pre-seed, early- and later-stage companies. “We engage companies when they’ve already proven there’s a market for their software, product or service,” he said.

Berman’s co-founders include his cousin Casey Berman and Jake Fingert, a senior policy advisor in the Obama administration. (The Bermans are scions of Maryland-based Berman Holdings, which owns and operates more than 9 million square feet of real estate. Camber Creek is based in Washington, D.C., but Jeffrey is based in Manhattan.)

Last year, Camber Creek raised a $30 million second fund, following an inaugural $20 million fund.

To date, it has backed more than 20 companies, such as VTS, the leasing and asset management platform, and 42Floors, which was acquired by flexible office space provider Knotel last month. Camber Creek also led investments in Nestio, a residential listings startup, and Vornado spinoff WhyHotel, a service that operates pop-up hotels in luxury apartment buildings.

MetaProp
Launched: 2015
Total raised: $45 million
Founders: Zach Aarons, Clelia Peters, Aaron Block

After raising nearly $5 million from family and friends, New York City-based MetaProp dipped its toe into proptech by launching a startup accelerator — which often includes seed funding and mentorship — in 2015.

With its limited funds, MetaProp began writing $25,000 and $250,000 checks to pre-seed and early-stage companies.

That strategy shifted in June, when MetaProp closed a $40 million round backed by heavy hitters in real estate, including Scott Rechler’s RXR Realty, CBRE Group, Cushman & Wakefield, JLL Spark and PGIM, Prudential Financial’s investment arm.

Co-founders Zach Aarons, Clelia Peters (who’s also president of Warburg Realty) and Aaron Block brought on a fourth partner, Zak Schwarzman, last year to lead the firm’s venture capital arm.

To date, MetaProp’s portfolio has 30 companies, including Bowery, a tech-enabled appraisal firm, and Spruce, a title insurance startup that raised a $15.6 million Series B round in July. Peters — who graduated from Yale, has an MBA from Columbia and spent several years at Boston Consulting Group — said the goal is to put more capital into companies MetaProp likes. “We are really interested in opportunities at any point along the real estate value chain,” she said.

Moderne Ventures
Launched: 2015
Total raised: $33 million
Founder: Constance Freedman

Unlike other specialized funds with a real estate interest, Moderne Ventures is on the hunt for tech startups with broad application — in and out of the property sector. “The bigger the market, the bigger the returns,” said founder Constance Freedman. “Also, we like to help our partners really differentiate themselves.”

The Chicago-based fund, which focuses on early-stage companies, also tries to connect entrepreneurs to seasoned execs through its Moderne Network and Moderne Passport, an immersion program for startups.

Freedman, who put herself through college by working in real estate, started in venture capital after graduating from Harvard Business School.

In 2008, she launched Second Century Ventures, the $20 million VC arm of the National Association of Realtors. At SCV, she backed DocuSign, an electronic software company that raised $629 million when it went public in April.

Moderne’s fund has backed companies like Hello Alfred, the New York-based chore wizard, and Agentology, a lead platform for real estate agents.

Fifth Wall Ventures
Launched: 2017
Total raised/Raising: $812 Million
Founders: Brad Greiwe and Brendan Wallace

When Fifth Wall Ventures raised $212 million for its first fund last year, it became the single largest specialized real estate tech venture investor on the scene.

But the Los Angeles-based company — which was founded by an alumnus of Blackstone Group and a co-founder of Blackstone’s Invitation Homes — isn’t done raising money yet. The company is working on a $200 million retail venture fund and a $400 million real estate fund, according to regulatory filings.

The company’s investors include CBRE, Prologis, Hines, Lennar Corp.,Host Hotels & Resorts, Equity Residential and Macerich. Unlike many others in the space, Fifth Wall also arranges partnerships between its startups and its investors. According to several sources, this means it often gets better investment terms than its rivals because entrepreneurs may accept a slightly lower valuation in exchange for relationships with the firm’s backers.

In February, Fifth Wall co-led an $80 million Series C round for co-working company Industrious. Its other investments include blockchain technology startup Harbor, online notary company Notarize and the home-selling platform Opendoor.

JLL Spark
Launched: 2018
Total raised: $100 million
CEOs: Mihir Shah and Yishai Lerner

Launched in June, JLL Spark is one of the newest real estate venture funds on the scene. It is also the only major fund managed by a commercial brokerage.

The global firm tapped Mihir Shah and Yishai Lerner — who co-founded app development company Mob.ly and later sold it to Groupon — to head the project. The fund focuses on Series A and seed investments in “technology startups with products that can help JLL investor and occupier clients, or that can be used by JLL businesses to better deliver their services.”

So far, the fund has flown mostly below the radar, investing through MetaProp and Navitas. But late last month it backed proptech startup Skyline AI — which uses artificial intelligence to gain an investment edge in commercial real estate — as part of an $18 million Series A round.

RXR PropTech Fund
Launched: 2018
Raising: $50M
Founder: Scott Rechler

While several major New York City landlords invest their own money in tech startups, RXR Realty’s Scott Rechler is launching his own fund.

Rechler said it made sense to launch a separate fund — to avoid any conflicts that might arise with his firm’s financial backers. For example, if he invested in a startup that offered a new technology for managing building lighting and then tapped it for all RXR’s properties, RXR could make out big on the back of its bankrollers.

“It just wouldn’t feel right,” he said.

Instead, RXR officially launched a specialized fund in June with plans to raise $50 million by the end of the year. It’s primarily targeting its existing partners, and investors will be able to co-invest up to $100 million alongside the fund in deals.

The fund is also working closely with MetaProp. Not only is it the largest investor in MetaProp’s $40 million fund, but MetaProp is also acting as an adviser to RXR on its investments.

According to Rechler, being a major landlord and talking to other real estate players on a regular basis gives RXR a leg up when it comes to sniffing out potentially successful startups. “We have the visibility as to what the demand for a product is,” he said.