Editor’s Note: Christine Magee is an analyst for CrunchBase.
Investments in real estate tech are on the upswing in the wake of some billion dollar exits this year.
Following Zillow’s acquisition of Trulia for $3.5 billion in July and News Corp’s $950 million purchase of Realtor.com-parent Move Inc. in September, venture investors are more eager than ever to get in on the market, putting up nearly $300 million in over 30 venture deals for real estate tech startups in the past quarter.
This is more than double the investment total previously captured in a single quarter, capping off a year of uncharacteristically heavy investment in the space.
Large rounds for China’s Fangdd, India’s CommonFloor, and Urban Compass out of New York – all consumer-facing real estate listing platforms – make up a significant portion of the total, but the high number of rounds suggests that investors are now seeing merit in other aspects of the space.
Real estate investment crowdfunding platform Fundrise, popup retail space rental service Storefront, and private workspace startup Breather all secured venture funding in the past few months to tackle a variety of less obvious pain points.
“Real estate is a super attractive industry to be building tech in,” says RRE Ventures‘ Steve Schlafman, “it drives a huge part of the economy, and it’s generally antiquated.”
Whereas in the past few years startups were focused around providing home buyers and renters better access to property listings, “now you’re seeing entrepreneurs that actually have domain expertise in real estate starting to build businesses to solve problems that they had when they were working in the industry,” Schlafman says.
RRE has backed startups like Floored, a 3D visualization platform that allows potential home buyers, among others, to explore virtual spaces online.
Real estate listing and search sites like Zillow, Trulia, and Redfin may have gotten the most funding and attention in the space, but these solutions just scratch the surface of tech’s potential to impact real estate.
“If you peel back to see what powers these third party sites like Zillow, Trulia, Realtor.com, it’s old school, antiquated systems – spreadsheets, shared drives, faxing listings over to the broker,” says Caren Maio, founder of New York-based Nestio.
Nestio provides a data management platform for real estate professionals, so that when a landlord marks a unit as rented, the broker knows about it in real time and can feed accurate information to third party sites. Consumers can be confident that listings they’re seeing on Zillow or Realtor.com are correct, while landlords reduce vacancy rates and close deals faster.
The higher investment numbers reflect a new demand for tech-driven solutions in the market, as real estate owners and brokers are incorporating tech on a more widespread level.
“Real estate three years ago was like the red-headed stepsister for tech startups — it has that undertone of an old-school, stodgy-type market,” says Maio.
But this is changing quickly. “There has been a shift within the real estate community that will continue, as an older generation of owners is supplemented by a younger generation that is more tech friendly,” says BoxGroup’s David Tisch, who has backed Nestio along with real estate startups Hightower, Storefront, and 42Floors.
And the reliance on technology will only increase if the fears about the bubble escalate and the economy weathers additional stress. “Efficiencies are much more necessary when the bubble pops than when things are flying high,” Quotidian Ventures founder Pedro Torres-Picón points out.
“One thing that’s interesting about real estate owners and brokers,” says angel investor Joanne Wilson, “is that they’re always up for something new if it’s going to help them make more money — it’s a sales business. It’s like after using an ATM machine, you’re never going to stand in line at the bank again — you want more tools because it’s amazing for business.”
Photo via Flickr user Phillip Taylor.