Future City: Venture capital doubles down
Venture capital firms poured an unprecedented $4 billion of equity funding into the proptech sector in the first quarter, doubling down on their bets even as rising interest rates and the resulting market turmoil dragged on tech names.
The quarterly total, an all-time high, represented a gain of more than 30 percent compared to the 2021 first-quarter sum — and last year turned out to be a record year for proptech fundraising.
Investors have held on to their belief in the sector’s long-term adoption and growth despite moderating private market valuations and newly public names’ dramatic sell-off in recent months, the investment bank Keefe, Bruyette & Woods said in a report. Proptech stocks sharply underperformed in the first quarter, declining an average 20 percent.
There is a silver lining to the recent downside: The broad “reset” in company valuations has created favorable conditions for much-needed consolidation in a sector that now counts several thousand startups within its ranks, KBW said. Recent M&A deals have included private companies looking to scale, public companies looking to expand their offerings, and “technology-enhancing deals by traditional real estate incumbents,” it said.
Most investors expect M&A to accelerate over the next 12 months.
Bruises and cuts
Rising interest rates have been especially hard on mortgage lenders, who are contending with much lower applications and refinancings as well as a rising number of cash buyers.
So far this year there have been layoffs at South Carolina-based Movement Mortgage and a few controversially handled rounds of them at New York-headquartered Better.com.
Now, Blend Labs, a San Francisco-based digital mortgage lender, is letting go 200, or about 10 percent of its staff, to cut $34.5 million from its annual payroll, according to a regulatory filing.
Affected Blend employees will receive at least 18 weeks of pay and continued health insurance and other benefits, which will cost the company around $6.7 million, co-founder and CEO Nima Ghamsari said.
Fannie Mae analysts expect lenders to refinance $889 billion in 2022 and $558 billion in 2023 — a sharp drop for the $2.8 trillion they processed in 2020.
Room by room
Modular construction has been around for decades, but using digital technology to streamline prefabricated interior build-outs is uncharted territory.
Falkbuilt, a construction-tech company that claims to be the first and only to do it, raised C$35 million in a funding round led by RET Ventures and Stephens Capital Partners, bringing its total funding to about C$65 million.
CEO Mogens Smed says the company’s offering is cheaper than any extant modular solution, and its interiors are more precisely designed and easier to install.
Founded in 2019 and headquartered in Calgary, Falkbuilt has some 400 employees and conducts business across the world. It has built out regional distribution centers in New Jersey, a virus testing station at a Bermuda airport, a research station in Antarctica, and 10,000 square feet for Morgan Stanley in Mumbai.
The company will use the new funds to shore up inventory that has become increasingly costly and difficult to source as a result of supply chain disruption, Smed said.
rnrnPublic proptech companies generated $20 billion of revenue in Q4 — a 112 percent increase year over year.rnrn
Measurabl, a San Diego-based firm that helps real estate companies manage, benchmark and report so-called ESG — environmental, social and governance — data, bought Boston-based Hatch Data for an undisclosed sum.
Hatch Data, a “smart building” platform that aggregates information from meters, building systems and IoT sensors, will bring real-time, property-level analysis to Measurabl’s dashboard.
The commercial real estate industry is responsible for nearly 40 percent of global greenhouse gas emissions and is under pressure to reduce its impact as the world looks to transition to a net-zero carbon economy. The U.S. Department of Energy estimates commercial and government buildings use 35 percent of the country’s electricity and generate 826 million metric tons of carbon emissions annually.
There are new emissions benchmarks and regulations seemingly every day, Aaron Barranco, Measurabl’s senior vice president of “customer success,” said during a presentation in New York in April.
“There should be a virtuous flow of data from the meter to the market,” he said. “There should be one place where you can access that data and report it out — not only to these benchmarks, but to investors as well.”
• PassiveLogic, a startup that claims to have created the first fully autonomous building systems platform, scored $15 million from Brookfield.
• RentRedi, a property management software provider for landlords, raised $12 million in a Series A round.
• WeWork partnered with real estate software concern Yardi to help companies design and manage their flexible work programs.
• Lara Cumberland, Meta’s head of M&A integration, left the company to take up the role of chief operating officer at the proptech unicorn Pacaso.
• Splitero, a firm that allows homeowners to trade equity in their home for a lump sum of cash, raised $5.8 million in seed funding.
• Requity Homes, a Toronto-based startup that offers a rent-to-own program for homeowners, raised C$1.2 million in pre-seed funding.
• Rental management software startup Alfred launched in Charlotte, marking its expansion into North Carolina.