Though property prices came back down to earth in 2017, real estate tech valuations shot into the stratosphere.
WeWork is now worth $20 billion. Compass is valued at $2.2 billion following a December funding round. Have you heard of Placester? Well, investors think it’s worth $202 million. The Jared Kushner-backed real estate crowdfunding startup Cadre now has a $800 million price tag.
Big valuations tend to make it easier to raise money, and so 2017 was also the year of blockbuster funding rounds. Underlying it all is a growing belief that the multi-trillion-dollar real estate market is overdue for innovation and that startups can profit tremendously.
“Commercial real estate is an asset class that has generated strong financial returns for investors,” Andreessen Horowitz’s Jeff Jordan wrote in a June blog post, explaining why the venture capital firm led Cadre’s $65 million Series C funding round. The startup, he hopes, will “bring access, transparency, and insight to an otherwise opaque industry.”
While The Real Deal would argue that WeWork, Compass and Common aren’t tech companies, venture capital firms seem to treat them as such, so we decided to include them in this annual ranking of 2017’s biggest real estate venture funding deals. The list is based on information from M&A database PitchBook and TRD research.
1) WeWork, $4.4 billion fundraising round
WeWork’s co-founder Miguel McKelvey didn’t hold back when a Bloomberg reporter asked him about the company’s $20 billion valuation in November. “You can say OK it’s your opinion I’m overvalued or undervalued. Like, who gives a shit? It doesn’t affect me and the business I’m trying to do,” he said at a CornellTech@Bloomberg event. “Valuation does not come into the equation. So why do we even need to be in that discussion? I don’t care.”
The reporter, Scarlet Fu, responded: “Well, you care also because that valuation means people like Masayoshi Son of SoftBank putting money into a company like WeWork and allowing you to pursue all these different offshoots.”
Indeed, the co-working company announced a $4.4 billion investment from the Japanese conglomerate and its SoftBank Vision Fund in August. Much of the money was earmarked for the firm’s expansion into East Asia. Since the deal, WeWork opened a gym, announced its first grade school, acquired the social networking company Meetup and the coding education platform Flatiron School and invested in the Wing, a women-only co-working club. And it doesn’t stop there: WeWork is quietly planning a push into retail.
And the Manhattan-based firm may not even be done fundraising yet. In November, CFO Ariel Tiger reportedly traveled to Israel to discuss a potential bond offering there.
2 & 3) Compass, $100M and $450M fundraising rounds
Not only does Compass hog spots No. 2 and 3 in our ranking, but the company’s funding rounds were merely a month apart. On Nov. 8, TRD reported that the residential brokerage startup raised $100 million in a Series E funding round including Fidelity Investments, IVP and Wellington Management. The valuation: $1.8 billion. At the time, Aaron Graf, CEO of lead-generation brokerage LG Fairmont joked that Compass was the “greatest fundraising machine in the history of America.”
Less than a month later, on Dec. 7, Compass announced a $450 million commitment from SoftBank, bringing its valuation to $2.2 billion. The firm is using the funding toward its nationwide expansion, and CEO Robert Reffkin has previously said Compass will have 20 percent market share in 20 major markets by 2020.
The great debate over whether Compass is overvalued — and over how much money a more or less traditional brokerage business can even expect to make in the 21st century — just got a lot more interesting.
4) Cadre, $65 million fundraising round
Cadre was in the news a lot in 2017, but not for funding big real estate deals. Jared Kushner, one of the startup’s co-founders, reportedly failed to disclose his stake in the company when he joined the White House.
The firm, led by Goldman Sachs and Blackstone Group alum Ryan Williams, got back to business in June, when it raised $65 million at a $800 million valuation. Cadre had previously raised $68 million from investors including Alibaba’s Jack Ma, former Vornado Realty Trust exec Michael Fascitelli and Island Capital Group’s Andrew Farkas. It also landed a $250 million credit line from George Soros’ Soros Fund Management, as TRD first reported in January.
Cadre is basically a real estate crowdfunding platform for rich people. Customers can buy into commercial properties via an online exchange. The firm has been cagey about how many, and which, deals it has funded.
5) Placester, $50 million fundraising round
A $50 million March funding round earns Placester the fifth spot, and the title of highest-ranking startup that isn’t based in New York. The Boston-based firm creates software tools for real estate agents. New Enterprise Associates, a previous investor, led the Series D round, which came with a $201.95 million valuation according to PitchBook.
The company’s online products let agents build their own websites and manage data. It also offers customer relationship management and lead generation tools. The firm’s previous investors also include Romulus Capital and TechStars.
See more 2017 year end reviews here
6) Common, $40 million fundraising round
Though $40 million sounds like a lot of money, it pales in comparison to the $4.4 billion that its competitor WeWork recently raised. On Tuesday, Common announced a Series C round led by Norwest Venture Partners. The deal came two months after Harriman Capital agreed to invest $15 million into the development of four co-living properties for Common in New York and Los Angeles.
Common, founded by Brad Hargreaves in 2015, operates 15 co-living locations in New York, the Bay Area, Chicago and Washington, D.C. In December 2016 it opened its largest location to-date at Adam America’s 69-unit building 595 Baltic Street in Boerum Hill. The LeFrak, Mack and Milstein families are also investors in the startup.
7) HomeLight, $40 million fundraising round
Say you’re selling a home. You probably need an agent to find a buyer. But how do you find a good agent? That, at least, is the question HomeLight is trying to answer. The startup runs an online platform that churns through data to figure out which agents perform best in specific markets.
Agents who find customers through the platform pay a referral fee. And some investors think that business model could be lucrative enough to justify a $180 million valuation. In August, HomeLight raised $40 million in a Series B round led by Menlo Ventures. The startup had previously raised $15.5 million from a list of investors including Zeev Ventures, SGVC, GV, Crosslink Capital, Bullpen Capital and Innovation Endeavors, TechCrunch reported.
8) Roofstock, $35 million fundraising round
If the U.S. homeownership fetish really is nearing its end, Roofstock is one of its (many) gravediggers. The Oakland-based company, founded in 2016, allows investors to buy single-family rental homes online and puts them in touch with property managers, among other services.
It charges sellers a 2.5 percent fee and buyers another 0.5 percent. In October, Roofstock raised $35 million in a Series C round led by Canvas Ventures, which also included Lightspeed Venture Partners, Bain Capital Ventures, Khosla Ventures, Nyca Partners, QED Investors and FJ Labs.
Around 20 percent of investors who use the platform are based in New York, the firm’s CEO Gary Beasley told TRD at the time. But they prefer to buy elsewhere. “It’s just hard to make the numbers pencil out in New York for a yield-oriented model,” he said.
Fun fact: Roofstock’s former director Maren Kasper joined the Department of Housing and Urban Development at the beginning of the year and became a key transition official, before jumping ship to Ginnie Mae.
9) Knock, $32.5 million fundraising round
Last year, Opendoor led TRD’s tech deal ranking with a $210 million fundraising round. This year, it was a competitor’s turn to make a (much smaller) splash.
In January, Knock raised $32.5 million Series A round led by RRE Ventures. Like Opendoor, Knock targets home sellers who want their money fast. The online brokerage platform promises to sell a home within six weeks for a 6 percent commission. If it fails to sell in that timeframe, the startup is required to buy the home for a previously agreed price.
Knock’s CEO Sean Black was part of Trulia’s founding team and headed the listing portal’s sales and operations team until 2010
10) Opcity, $28.77 million fundraising round
The Austin-based company’s business model is similar to HomeLight’s: It is an online marketplace that matches real estate agents with clients. In May, the company raised $28.77 million in a funding round that valued it at $98.77 million, according to PitchBook. Icon Ventures led the round. Georgian Partners, 8VC and LiveOak Venture Partners also chipped in, Forbes reported.
Co-founder Ben Rubenstein previously co-founded the digital marketing startup Yodle, which sold to Web.com for $342 million in 2016.