REAL ESTATE TECHNOLOGY PERSPECTIVES THAT COUNT

As a venture capital firm focused heavily on tech solutions for single-family and multifamily rental property, we keep a close eye on the flow of capital to the real estate tech space as part of our day-to-day operations. Sensing something of a market vacuum for this sort of data, we recently decided to increase the rigor with which we track this investment activity, with the goal of both enhancing our own familiarity with these trends and presenting them to the broader market.

A few weeks ago, we presented the first of what we expect will be many quarterly reports on rent tech trends at this year’s virtual NMHC OpTech conference. Considering the event was held virtually due to COVID-19, it is not surprising that the contents of the report demonstrate how investment activity has been affected by the pandemic.

We hope you’ll review the entire report, which is embedded below, but some of the most salient takeaways include:

1. Reassuring Resilience for Early-Stage Deals. The pandemic hit the country hard in the final weeks of the first quarter, and it was not surprising to see that that led to a deal slowdown in Q2. In fact, with just 23 early-stage deals, the “rent tech” space had by far its slowest quarter since we began tracking it in 2018. But things bounced back nicely in Q3, once investors had time to take stock of the pandemic and assess their new reality. This resilience is due in large part to the ways in which many real estate-related technologies are “pandemic-friendly” and facilitate social distancing and working from home.
2. Funding for “next-gen property managers” has seen a decline. This category refers to companies that sub-let apartments within multifamily properties, typically renting them out for short stays, and includes startups like Vacasa and Sonder. With the larger hospitality industry’s struggles in 2020, it was no surprise to see this segment struggle as well. In fact, with investment volume declining by about 50% in Q1-Q3 (as compared with the same three-quarter period in 2019), it saw one of the most significant slowdowns across the proptech arena. It should be noted that while activity has slowed, it has not stopped altogether, as some companies which leverage a unique approach to collaborating with their multifamily partners have actually thrived over the course of the year. Our portfolio company Kasa, which raised a $30-million Series B funding round in Q3, is a prime example.
3. The number of early-stage companies getting funded is declining. Even as funding activity bounced back in Q3, the overall trend is hard to miss. Since peaking in Q1 2019, the number of early-stage funding rounds has been heading south. While this may initially seem to point to the market losing interest in these tech companies, that’s actually not the case — the dollar value of real estate tech investment and VCs’ own fundraises remain strong. However, as the cohort of these companies matures, a greater portion of that capital is concentrated toward later-stage funding rounds, and the number of early-stage companies raising capital has taken a dip. With tech adoption increasing across the industry, we at RET remain bullish on the prospects for early-stage technologies, and we will continue to work with our strategic investors to fill the gap and fund the most compelling rent tech startups.

For more insights into proptech and rent tech trends from the year, you can view our full research report.

For many of us, 2020 has been by far the most unusual year in our lifetimes. Even so, innovation and the adoption of technology have continued unabated, and in some cases have accelerated. A prime example of this is the growth of rent tech. In fact, the rapidly evolving world in which we live has helped many real estate-related technologies thrive, as social distancing has increased the importance of tools that support real estate operators and renters and the new socially distanced, work-from-home reality.

After the whole world seemingly came to a chaotic halt in March, the RET team, like many others, took the opportunity to take stock and reflect on our strategic priorities. We assessed the situation — both for our fund and for our portfolio companies — before getting to work developing strategies that would bring success to our growing ecosystem of real estate operators and entrepreneurs in this “new normal.”

As the summer rolled on, we found ourselves as busy as ever, and we backed several exciting companies in the rent tech space during the last few months. These included:

— Engrain, a unique company that creates building mapping technology and visualization software, with a focus on multifamily properties. Engrain builds a 3D map layer for properties to act as a “Google Maps for real estate.” With an open API, they will pursue integrations with other technologies, enabling self-guided touring, accounting systems, facilities management tools, and other asset and property management-related solutions to benefit from wayfinding and location-based data analysis. RET led the $3.7-million funding round in Engrain.

— Kasa, an innovative hospitality company that partners with owner-operators of multifamily and hotel properties to offer business and leisure travelers short-term accommodations. While there are other companies in this space, Kasa is unique in its approach to collaborating with multifamily operators and has invested heavily in its technology stack, which enables it to be more nimble in its operations and provide greater value to its industry partners. Even as the broader hospitality industry has struggled, Kasa has sustained strong occupancy and unit growth through 2020, meaningfully growing market share. RET was proud to participate in both Kasa’s $20 million Series A (which closed less than a year ago) and its $30 million Series B.

— PassiveLogic, a next-gen autonomous building management system (BMS) that leverages an AI-driven digital model infrastructure to reduce BMS installation time by up to 90% and ongoing energy spend by 30%. The technology can improve the insight institutional landlords have into the operational performance of their portfolio, and also provides open interoperability for other software and hardware, making it a welcome next-generation smart building solution for the industry. RET invested in the company’s $16-million Series A raise.

— Falkbuilt, which manufactures offsite fabricated interior construction components and develops software to bring efficiencies to architecture, design and construction. Falkbuilt’s founding team has a wealth of experience in construction, and the company has a robust distribution network of 70 independently owned branches, helping it rapidly grow its domestic and international client base. We were very excited to lead Falkbuilt’s $20 million CAD Series A round.

We also made a still-unannounced investment in the IoT space with a company developing a novel application for microphone-based AI with exciting applications for the real estate sector. We look forward to sharing this with you all soon.

We’re also vetting a number of other compelling real estate tech companies, and will have more news to announce soon!

If you’ve followed RET Ventures since we first launched Fund I back in November 2018, you know that the firm has seen countless wins and successes over the 16-month period. Just in the last year alone, we invested more than $60M in 11 rent tech leaders that work closely with some of the largest single- and multifamily owners and operators in the U.S. Commercial Observer recently posted a nice article on the history of the fund and our early traction that you can read here. It’s been an incredible journey to watch RET’s unique model provide deep, strategic relationships with entrepreneurs, LPs, and mainstream investors to help develop some of the most innovative real estate technologies in the industry.

Today, GlobeSt.’s Real Estate Forum released its annual “Commercial Real Estate Tech Influencers” and decided to include John and the firm as one of the honorees. If you’re not familiar, this list is known for highlighting the top tech, real estate, and investment firms making major contributions to the robust rent tech and proptech innovation ecosystem that is fueling real estate’s long-awaited digital transformation. To be included among so many pioneers, trendsetters, and forward-thinking entrepreneurs is both an honor and a validating moment for the RET Ventures team, the LPs that believed in us, and our business model.

We’re just getting started and we hope you’re as excited as we are for what the future holds for the firm. Thank you for your continued support and keep an eye out for more exciting announcements from RET Ventures in 2020.

Last year, I penned a blog post titled, ‘Why We’re Excited About Rent Tech’ shortly after we announced our first fund — the category delivered on its promise and then some in 2019. In fact, proptech investment hit $14 billion by mid-year 2019, more than all of 2018 combined. All of this activity is luring major generalist VC firms towards proptech which is a major development as they’ll provide not only large pools of capital but also experience scaling global businesses to emerging proptech and rent tech businesses. The real estate technology ecosystem is maturing nicely and we expect big things in 2020.

Specifically, there are three trends that have us excited for the rent tech space in 2020:

Smart Apartment Tech Extends Beyond Apartments

The operations and cost savings that mature smart apartment technology provides is now enabling owners to deploy portfolio-wide as opposed to unit-by-unit. With proven IRRs and implementation becoming easier and more affordable, smart apartments are now mainstream across rental properties. It’s more common than ever for an apartment complex to provide smart features to their residents — such as smart thermostats, locks and lighting. Utilizing smart technology for asset protection is also becoming mainstream, with leak sensors virtually eliminating major water damage incidents.

Two of our portfolio companies — SmartRent and GiGstreem — are major players poised to facilitate this trend. SmartRent is a leading smart home platform company that is seeing very strong industry adoption, for multifamily property managers and renters that enables greater visibility and control over apartment assets. Some of SmartRent’s offerings include smart locks, thermostats, light switches, leak sensors, building access and parking control that improve resident experience, while also allowing property owners to take better care of their assets.

GiGstreem specializes in providing high speed internet service to multifamily properties. By working with GiGstreem, property owners can offer reliable internet upon move-in, thus eliminating the need for residents to select and set up individual cable and wireless packages. In addition to offering residents high-end amenities such as this, GiGstreem’s building-wide Wi-Fi solutions ensure that all other smart apartment technology, such as SmartRent’s solutions or individuals’ smart home devices, run reliably 24/7.

The ‘Hotelification’ of Rental Properties

We’re seeing multifamily and single-family owners make significant investments in high-end amenities. This “hotelification” of rental properties is a major opportunity as it allows organizations to create new revenue streams by adding services like dog walking and apartment cleanings that greatly enhance resident experience. Over the past year, Hotelification has introduced new product categories to multifamily and single-family rental property owners.

Many multifamily and single-family residences are using Amenify’s ‘resident experience platform’ to broaden their amenities offerings. With Amenify, residents easily book high-end amenities with third-party providers; over time this will include offerings such as cleaning, hiring personal trainers, pet services, events, or concierge support, with their mobile phones. This enables property managers to effortlessly offer residents top-tier services and create new revenue streams while offloading much of the work that would traditionally be required to offer such amenities, like vetting services, setting up local partnerships, or hiring additional staff.

There are also a burgeoning group of high-growth companies, such as moved, that handle all aspects of the moving process, from providing boxes and other packing materials, to hiring movers and managing residents’ schedules. Moving is one of the top life events that people stress out about so many rental property owners are using moved as a compelling incentive to simplify their transition to one of their buildings.

Multifamily and single-family organizations are also making a more concerted effort to respond to short-term rental companies like Airbnb and VRBO by taking a page out of their own playbooks. A growing number of rental properties directly oversee and offer units to business visitors, tourists or tenants’ friends and family to take advantage of otherwise under-utilized units to create new revenue streams and amenities — but only if they can ensure existing tenants are not negatively impacted. It’s important for rental owners considering this strategy to work with like-minded partners and closely monitor regulations around short-term rentals and partner with municipalities whenever possible to ensure compliance with local laws.

Self-Touring Paves the Path Towards Self-Leasing

The multifamily industry is abuzz with empowering people to view prospective apartments without a leasing agent. Numerous companies have emerged with solutions from lockboxes, to iPads, to fully integrated access control systems that allow prospective residents to enter and tour the property at their leisure. We see this as just the first step towards a larger opportunity we see happening in 2020: self-leasing.

Multifamily and single-family organizations are building end-to-end leasing experiences that will allow a prospective resident to tour and execute a lease on their own time and whenever convenient for them. We are seeing an increasing amount of our LPs seek to utilize several technologies to assist them in this initiative including CheckpointID for identify verification, SmartRent to manage activities like building/unit access, and Nestio or Funnel for the CRM tools to manage all leasing activities and determining when and how a leasing agent should interact with a potential resident. This is a win-win scenario as people are free to tour, and potentially lease, apartments on their own schedules while rental owners and operators are able to better utilize leasing staff to engage prospects that need extra attention or on higher-value “concierge” activities.

As we head into the New Year, our team is incredibly grateful to continue working closely with an incredible group of entrepreneurs and multifamily and single-family organizations to support the burgeoning rent tech market. We’re confident that the proptech surge shows no signs of slowing down in 2020 and beyond.

While most VCs focus on capital and operating experience, RET Ventures also brings a unique benefit though its close working relationship with our LPs. RET Ventures has made this an important focus of our fund, carefully selecting our investors, and fostering tight relationships with each one. We are particularly proud of the group of top-tier multi-family organizations that we’ve brought together to help us identify and support emerging rent tech category leaders. We believe that these relationships will help us deliver value to our portfolio companies far beyond capital. We also believe that a fund’s LPs are good indicators of the health and quality of the fund. As such, we are honored to include five major multifamily real estate investment trusts (REITs), Aimco, Boardwalk, Essex, MidAmerica, and UDR, as well as leading private owners Starwood Capital Group, Cortland, and GID among our initial group of LPs.

Our partnership with these well-respected organizations, along with our proven experience as both investors and entrepreneurs, presents significant benefits for RET Ventures portfolio companies. Our LPs collectively own or manage nearly one million rental units and make up the largest single group of institutional multifamily owners in North America. Combining our LP ecosystem with RET Venture’s unique experience generates value for all parties in the following ways:

Navigating Industry Sales Cycles

The real estate industry has proven to be a difficult market for technology companies to break into. Its complexity and unique cost considerations lead to a large inherent lag between startup founding and revenue creation. This is due to the industry’s long sales cycles due to the often-high operational complexity of tech adoption to owners and operators. Even the brightest entrepreneurs with the strongest ideas are dismayed to find slow adoption in the space.

Thanks to my experience scaling up and successfully exiting two rent tech startups with investors that include several of our current LPs, I have unique insight into navigating these challenges. Our fund can leverage our staff’s collective experience to give entrepreneurs concrete advice, which they can use to help keep burn as low as possible while navigating through these complex sales cycles.

On the LP relationship side, our Fund also can help expedite owner / operator decisions. The strong relationships we’ve forged within the industry allow us to present tech providers to their potential customers with a level of trust that’s far beyond the industry norm.

Keeping the Industry’s Pulse

RET Venture’s LPs represent the cutting edge of the multifamily industry. Our LPs’ portfolios are large, modern, and sophisticated. Because our LPs have such breadth of coverage throughout North America, it is easy to predict the market’s needs from theirs. RET can in turn point out opportunities for growth to our portfolio companies, whether they be expansion into new markets, additional product features, or new pricing schemas. Having an investment from RET ensures more rapid feedback and iteration than would otherwise be possible.

Access to Major Multifamily Organizations

As I mentioned above, the real estate industry has notoriously high tech adoption costs for property owners and managers. While this is due to a long list of industry quirks, reasons include the large number of emerging and unvetted providers in the space, natural skepticism towards new in-home tech from residents, operational and staff adoption friction, building retrofit cost and the resident’s limited propensity to engage with their landlord. Given these risks, it is natural that multifamily owners and operators are cautious when engaging with emerging rent tech providers.
Our expertise allows us to walk side-by-side with technology companies, helping them avoid these pitfalls, and our LPs trust us to identify the emerging companies that have taken action to mitigate these risks. The result is a mutually beneficial relationship, where better rent tech startups are brought to the table sooner, creating revenues for the startup and value for our LPs more quickly than would otherwise be possible.

Thanks to our proven track record of delivering value to all parties, I am proud to say that RET Ventures has built a reputation of trust among both entrepreneurs and multifamily owners and operators. This reputation helps maximize the value of an RET investment for entrepreneurs, by going beyond provided capital.

Industry Expertise and Knowledge

Our LPs represent a wealth of industry knowledge, experience, and expertise. RET’s close relationship with its limited partners allows the Fund to leverage our LPs’ experience to guide entrepreneurs or technology companies that may have valuable tools, but not be so intimately acquainted with the multifamily industry. Gaining feedback from some of the largest multifamily players in the world is invaluable in tailoring a product, sales strategy, or marketing campaign for the broader market and pulling ahead of competitors.

We are honored that so many leading multifamily organizations believe in our vision and are committed to helping us transform on the rent tech market. Throughout the coming months, we will provide readers with an in-depth look at each of our LPs individually and discuss how technology is benefitting their operations and helping them differentiate from their competitors.

RET Ventures Value-Add

While most VCs focus on capital and operating experience, RET Ventures also brings a unique benefit though its close working relationship with our LPs. RET Ventures has made this an important focus of our fund, carefully selecting our investors, and fostering tight relationships with each one. We are particularly proud of the group of top-tier multi-family organizations that we’ve brought together to help us identify and support emerging rent tech category leaders. We believe that these relationships will help us deliver value to our portfolio companies far beyond capital. We also believe that a fund’s LPs are good indicators of the health and quality of the fund. As such, we are honored to include five major multifamily real estate investment trusts (REITs), Aimco, Boardwalk, Essex, MidAmerica, and UDR, as well as leading private owners Starwood Capital Group, Cortland, and GID among our initial group of LPs.

Our partnership with these well-respected organizations, along with our proven experience as both investors and entrepreneurs, presents significant benefits for RET Ventures portfolio companies. Our LPs collectively own or manage nearly one million rental units and make up the largest single group of institutional multifamily owners in North America. Combining our LP ecosystem with RET Venture’s unique experience generates value for all parties in the following ways:

Navigating Industry Sales Cycles

The real estate industry has proven to be a difficult market for technology companies to break into. Its complexity and unique cost considerations lead to a large inherent lag between startup founding and revenue creation. This is due to the industry’s long sales cycles due to the often-high operational complexity of tech adoption to owners and operators. Even the brightest entrepreneurs with the strongest ideas are dismayed to find slow adoption in the space.

Thanks to my experience scaling up and successfully exiting two rent tech startups with investors that include several of our current LPs, I have unique insight into navigating these challenges. Our fund can leverage our staff’s collective experience to give entrepreneurs concrete advice, which they can use to help keep burn as low as possible while navigating through these complex sales cycles.

On the LP relationship side, our Fund also can help expedite owner / operator decisions. The strong relationships we’ve forged within the industry allow us to present tech providers to their potential customers with a level of trust that’s far beyond the industry norm.

Keeping the Industry’s Pulse

RET Venture’s LPs represent the cutting edge of the multifamily industry. Our LPs’ portfolios are large, modern, and sophisticated. Because our LPs have such breadth of coverage throughout North America, it is easy to predict the market’s needs from theirs. RET can in turn point out opportunities for growth to our portfolio companies, whether they be expansion into new markets, additional product features, or new pricing schemas. Having an investment from RET ensures more rapid feedback and iteration than would otherwise be possible.

Access to Major Multifamily Organizations

As I mentioned above, the real estate industry has notoriously high tech adoption costs for property owners and managers. While this is due to a long list of industry quirks, reasons include the large number of emerging and unvetted providers in the space, natural skepticism towards new in-home tech from residents, operational and staff adoption friction, building retrofit cost and the resident’s limited propensity to engage with their landlord. Given these risks, it is natural that multifamily owners and operators are cautious when engaging with emerging rent tech providers.
Our expertise allows us to walk side-by-side with technology companies, helping them avoid these pitfalls, and our LPs trust us to identify the emerging companies that have taken action to mitigate these risks. The result is a mutually beneficial relationship, where better rent tech startups are brought to the table sooner, creating revenues for the startup and value for our LPs more quickly than would otherwise be possible.

Thanks to our proven track record of delivering value to all parties, I am proud to say that RET Ventures has built a reputation of trust among both entrepreneurs and multifamily owners and operators. This reputation helps maximize the value of an RET investment for entrepreneurs, by going beyond provided capital.

Industry Expertise and Knowledge

Our LPs represent a wealth of industry knowledge, experience, and expertise. RET’s close relationship with its limited partners allows the Fund to leverage our LPs’ experience to guide entrepreneurs or technology companies that may have valuable tools, but not be so intimately acquainted with the multifamily industry. Gaining feedback from some of the largest multifamily players in the world is invaluable in tailoring a product, sales strategy, or marketing campaign for the broader market and pulling ahead of competitors.

We are honored that so many leading multifamily organizations believe in our vision and are committed to helping us transform on the rent tech market. Throughout the coming months, we will provide readers with an in-depth look at each of our LPs individually and discuss how technology is benefitting their operations and helping them differentiate from their competitors.

Building on the momentum RET Ventures gathered at the end of last year, we decided to update our website and brand to more accurately reflect our values, mission, and network.To ensure an accurate portrayal of the fund (and to keep us honest) we gathered feedback from our LPs and portfolio companies throughout our rebranding process. We are now very excited to officially launch our new website and brand.Unlike many other funds, we know that our value as investors goes far beyond our capital and expertise. To highlight our unusual value prop, we included several important features in our new website that we’re excited about:

Interactive Limited Partner Map

Our home page hosts an interactive map of North America, offering a detailed look at our LP holdings by state. Texas currently leads with more than 140,000 units owned by our LPs.

Portfolio Company Job Board

This is just another way for us to support our entrepreneurs. Tapping our network to identify key talent is the least we can do to fuel our portfolio companies’ growth. Browse exciting job openings in rent tech here.

Limited Partner Spotlight

In addition to the interactive map, we’ve given our LPs their own page where we highlight the companies and individuals giving RET Ventures unparalleled access and industry expertise.

Investments

Our investments page offers a quick snapshot into the entrepreneurs, technologies, and companies RET Ventures backs. Click on their logos to learn more about these rent tech leaders and their mission.

Contact

One of the website’s most important features is our contact page where founders, owner-operators, industry experts, and more can reach out to us directly.We invite you to take a look at our new website and share your feedback either in the comments below, or directly via our contact page.