The venture capital firm Fifth Wall, an investor in construction and real estate-focused startups that is backed by some of the country’s largest real estate companies, is expanding into early-stage investing with the launch of a new accelerator program.
For the firm’s co-founder and co-managing partner, Brendan Wallace, the accelerator is an opportunity to reach out to companies when the firm’s input can make more of a difference.
Because the company’s backers include some of the nation’s largest real estate and construction firms, Fifth Wall has deep insights into which types of technologies will be most interesting to the industry and can play the role of kingmaker, according to Wallace.
“Because of our model, we don’t invest until there’s a large corporate partnership,” he said.
“We’re missing companies at an earlier stage, and we can get them in front of corporates while the clay is still wet,” Wallace told me (glossing over the incredible, and unintentional, pun).
Typically a Fifth Wall investment indicates that a company could double or triple in value, and that attracts follow-on venture investors, said Wallace.
For the first batch, Fifth Wall will look for companies with valuations of under $25 million and will be making investments of anywhere between $500,000 to $1 million.
The sticker price is a bit larger than a typical accelerator, but Wallace said that’s because the companies his firm is backing would be a bit more mature.
For companies that are generating revenue (and with valuations of somewhere between $5 million to $10 million) the value is in the connections and contacts that a Fifth Wall seal of approval would bring, says Wallace.
On its launch, the accelerator program will already be the largest early-stage investment vehicle (and potentially the only early-stage investment vehicle) focused on the built environment.
As for the types of companies that Fifth Wall would look to bring in to its accelerator, Wallace said aspiring applicants need look no further than companies that are already in the firm’s portfolio.
As a participant in the Fifth Wall accelerator, each of the companies will work with one of the firm’s investment professionals on strategy.
Because the program is virtual, work with Fifth Wall’s investment staff could consist of weekly calls and introductions to potential corporate partners at the highest levels, Wallace said. The goal would be to make sure that the technologies and services startups develop are those that have the most relevance for Fifth Wall’s giant corporate backers.
All of the work will culminate in a demo day for potential co-investors, Wallace said. And the roster of firms that have already come in to back Fifth Wall portfolio companies is impressive.
The firm counts Bessemer Venture Partners, NEA, Khosla Ventures and GV (formerly Google Ventures) among the venture capitalists that have joined it in rounds of funding.
As with its venture arm, the Fifth Wall accelerator program will take a unique approach to the deals it makes.
“The way we do most of our deals is a direct investment at a valuation and performance-based warrants that vest at certain milestones,” said Wallace. “That structure will get us to a 15 percent ownership stake.”
Companies in the accelerator should expect a similar, performance-based structure, which means that Fifth Wall only gets the rights to invest if it achieves certain goals for the companies it backs.
In the world of spray and pray accelerators, that’s a pretty unique structure for founders — and one far more friendly than what they’d see in other programs, I think.
Here are the details of the program straight from Fifth Wall.
Components of the Accelerator Program
Fifth Wall’s Accelerator Program is a 12-month program designed to help early-stage companies: (1) get introduced to real estate companies and potential customers, (2) leverage our team’s & our strategic LPs real estate expertise, and (3) position our Accelerator companies to raise a VC round within 6-12 months.
Months 0-6
- Dedicated Fifth Wall Team Member: After acceptance into the Accelerator Program, Fifth Wall will assign a dedicated resource to help support the growth of Accelerator companies. We will establish a cadence of weekly or bi-weekly calls and can also join the Board of Directors as an observer.
- Opening Fifth Wall’s Real Estate Network: The dedicated Fifth Wall team member will also work with the Accelerator company to gain access to our vast real estate network through personal introductions, phone calls, and events.
Months 6-12
- January 2018 “Super-Day” at Fifth Wall Office: Fifth Wall will host a “super day” at the Fifth Wall offices where it will invite our VC network, angel investors, strategic real estate LPs and real estate relationships for a pitch event in March 2018.
- Press Announcement: Fifth Wall will announce its first class of accelerator program companies in January 2018 with a significant press launch.
- Introductions to Fifth Wall’s VC Relationships: Fifth Wall will work with our Accelerator companies to provide introductions to our large network of generalist VC relationships and help position themselves to raise attractive financing rounds.
How to Apply
Fifth Wall is accepting applicants for its first accelerator class of seven companies. Companies will be admitted on, or before, September 30, 2017.
Please share your materials with accelerator@fifthwall.vc:
- Most recent company presentation and financial model as appropriate.
- Current cap table and most recent term sheet and financing documents.
- Please include a description of how and where Fifth Wall and our strategic LPs can accelerate the growth of your business. Please be as specific as possible and highlight the value of any partnerships, commercial agreements, data sharing, etc. with Fifth Wall’s strategic LPs.
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