Opendoor and Lime-backer Fifth Wall just raised $500 million in new funding to invest in real estate tech
- Fifth Wall Ventures, a proptech-focused venture capital firm, said on Wednesday it has raised $503 million for its second fund.
- "Proptech" encompasses a diverse range of busineses that brings together real estate and tech and includes companies like Opendoor, AirBnb and WeWork.
- Fifth Wall, founded in 2016, now has total assets under management of $1 billion and says it represents almost 70% of all dedicated capital raised for the sector.
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Venture capital firm Fifth Wall Ventures said on Wednesday it has raised $503 million for its second fund focused on investments in real estate technology known as proptech.
Proptech encompasses a diverse range of businesses that marry real estate and tech, including so-called iBuyers like Zillow and Opendoor, short-term rentals like AirBnb and Sonder, the makers of smart cities that use sustainable construction and coworking companies like WeWork. It can be hard to define the borders of what proptech is, so there are differing estimates of the size of the market. A Unissu report found that $14.85 billion was invested into proptech in 2018.
Fifth Wall, founded in 2016, says that with total assets under management of more than $1 billion it is the biggest proptech-focused VC firm and now represents almost 70% of all dedicated capital raised for proptech. The latest round of funding was originally slated for $400 million but expanded in response to demand, Fifth Wall said.
The firm has invested in more than 25 startups, including Opendoor, scooter and bike startup Lime, homeowner insurance firm Hippo, and coworking startup Industrious. Brendan Wallace, Fifth Wall co-founder and managing partner, told Business Insider that portfolio companies had brought in more than $100 million in revenue from the firm's strategic partners.
Many of Fifth Wall's backers are established real estate, hospitality, and construction companies that work with the startups on technology, making it into a sort-of shared venture arm for each different firm and giving portfolio companies access to potential customers.
Fifth Wall calls this a consortium model and has a team of former consultants, many from McKinsey, who evaluate the needs of their strategic partners and help them integrate the startups' technology once Fifth Wall has invested.
Fifth Wall's more than 50 strategic partners include CBRE, Equity Residential, Marriott, Prologis and Macerich in the United States, as well as Gecina in France, British Land in the UK, Merlin in Spain and Mitsubishi Estate in Japan.
While Fifth Wall had already had representative partners from different real estate sectors, this fund shows them building up multiple partnerships in each sector and expanding their international reach to 11 countries. Fifth Wall is now considering opening an Asia office after receiving investments from Japan, China, Hong Kong, and Singapore, Wallace said.
Read more: 'Proptech' firms angle for riches in U.S. real estate market
Wallace previously worked in real estate at Blackstone and co-founded recruiting platform Identified,which was bought by HR software company Workday in 2014. Fifth Wall's other co-founder, Brad Greiwe, also co-founded the single-family rental giant Invitation Homes.
Wallace said that he and Greiwe were surprised by how quickly proptech startups emerged and how many companies were looking to invest in new technology.
"The number of companies that are being founded today, the rate of technology adoption by corporates, the number of corporates that three years ago didn't want to invest in innovation and technology that do today: that changed at a far faster pace than we were anticipating," Wallace said.