UPDATED, May 2, 10:55 a.m.: Venture capital firm Fifth Wall Ventures raised $212 million for what it claims is the first fund backed by real estate money that invests exclusively in property tech startups.
Real estate companies like CBRE, Prologis, Hines, Lennar, Host Hotels, Equity Residential and Macerich Properties invested around $110 million in the fund, co-founder Brendan Wallace told The Real Deal, with financial institutions providing the rest.
Los Angeles-based Fifth Wall, founded last year, has an unusual approach. According to Wallace, it starts out by talking to its real estate investors to figure out what kind of tech products they would be interested in using. Then the firm goes out and finds startups that offer such products, invests in them and introduces them to its new customers: the firms that invested in Fifth Wall’s funds.
In other words, the firm not only offers startups the money to grow, but also the demand for its product. Wallace believes this gives it a competitive edge vis-a-vis other VC firms when it comes to winning over startups. “The ability to influence outcomes for early-stage companies opens a lot of doors,” he said.
So far, Fifth Wall has invested around $70 million in half a dozen real estate tech startups, including portfolio management software company VTS, home selling platform Opendoor, title insurance startup States Title and storage provider Clutter. Wallace added that the firm is in talks to invest in three more startups.
Last Month The Wall Street Journal reported that Fifth Wall is negotiating to buy Jared Kushner’s stake in Wiredscore, which measures internet connectivity in buildings. Wallace declined to comment.
From an investor’s perspective, Fifth Wall basically offers real estate firms a more systematic way of investing in tech products they use, which some had already dabbled in. The Blackstone Group’s real estate division, for example, invested in the portfolio management software company VTS in 2015, providing growth capital and a major customer in one stroke.
Fifth Wall’s co-founders Wallace and Brad Greiwe both have real estate backgrounds. Wallace started his career as a real estate analyst at Goldman Sachs and worked for Blackstone’s real estate division before switching to tech investments. Greiwe co-founded Invitation Homes, Blackstone’s single family rental housing investment firm that went public earlier this year.
Correction: an earlier version of this post incorrectly referred to States Title as Space Title.