Last year, Softbank launched the Vision Fund, a nearly $100 billion venture capital fund with a mission to invest in technology entrepreneurs solving the world’s most focal challenges. While the founders’ investment hypothesis was to provide long-term capital across a wide array of sectors, the largest venture fund in history provides an overwhelming amount of capital to startups revolutionizing real estate. Over the past few months, the fund has invested $4.4 billion in WeWork to revolutionize how people work, $867 million in Katerra to transform how construction is managed, $450 million in our firm to modernize how people buy homes and $120 million in Lemonade to overhaul how home insurance is bought.
Real estate technology (or proptech) is quickly becoming its own category in startup world. New VC firms have raised hundreds of millions of dollars to invest solely in real estate tech. Top traditional VCs made huge bets on proptech companies. Some of the world’s largest landlords have built venture capital arms to get in on the action. Commercial brokerages have launched investment funds and incubators. In 2010, the total investment in real estate technology was estimated to be $33 million. In 2017, over $5 billion was raised.
So, why the focus on the real estate industry?
1. Market Fragmentation
Modern technology has a knack for consolidating and collapsing industries without a single leader: Uber for the saturated transportation industry, Priceline for the saturated travel industry, Amazon for the saturated retail industry plus many others. Legacy real estate brands in both residential and commercial brokerages traditionally have a hard time recruiting top tech talent directly to their firms and move slowly. There is currently no single tech-driven leader in any arm of real estate. Venture capitalists are aggressively seeking these winners.
2. Market Size
The size of a target market is pivotal for investors. Real estate provides them with access the largest asset class in the world. It makes up over 13% of the U.S. GDP and the housing market in the U.S. alone is valued at a cumulative $31.8 trillion. It touches where every person lives, works and plays. Until recently, technology in this space has been widely untouched. VCs and technologists lacked experience or relationships in the real estate community and workers were generally not technologically savvy. As technology continues to advance and consumers demand efficiencies and speed, world-class entrepreneurs are inevitably finding massive opportunities to enhance the physical world.
Last year, Softbank launched the Vision Fund, a nearly $100 billion venture capital fund with a mission to invest in technology entrepreneurs solving the world’s most focal challenges. While the founders’ investment hypothesis was to provide long-term capital across a wide array of sectors, the largest venture fund in history…