Real estate technology (RE Tech) companies are bridging the gap between technology driven services and real world assets. And their solutions are maturing fast. In 2017, RE Tech hit its stride, gaining more attention from venture capital funds. As a result, global RE Tech companies saw an influx of capital from VC firms in 2017, totaling nearly $13B. More than half of that went to US based real estate firms. This is a threefold increase over the amount raised in 2016.
The increase in investment went primarily to companies like WeWork, Compass, OfferPad, and AirbnB. These companies enhance traditional real estate businesses, rather than transform or disrupt them. Their services gained traction and achieved scale over the last few years by striking a balance between traditional real estate and technology. It's no surprise that companies receiving the most capital have taken this tactic. But, keep an eye out for new names making a splash in 2018 (see the lists below for names of potential up-and-coming disruptors).
While many RE Tech companies don’t fit the traditional mold for venture capital investors, they are expressing more and more interest. As noted in this article from Rey Mashayekhi, there is a sweet spot developing between risk averse real estate investors and venture capital investors. And, due to the size of the real estate market, venture capital is increasingly attracted to the opportunities. One founder stated that “every generalist VC now has RE Tech circled on their whiteboard.” With venture capital firms flush with capital, and the opportunities in RE Tech abundant, the trend is expected to continue in 2018.
For deeper reading, check out RE:Tech’s annual report on the investment trends in RE Tech. Or, for a great summary, read Rey Mashayekhi’s article in the Commercial Observer.
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