REAL ESTATE TECHNOLOGY PERSPECTIVES THAT COUNT

Outdated CRMs for Leasing Teams

In recent years, tech-based products and services have flooded the commercial real estate market as the industry finally acknowledged the world’s inevitable shift to a digital future. However, as this transformation has unfolded, one critical real estate process has gone largely untouched: lead management and effective processes to improve the renter/leasing journey. Even in 2022, the CRM products that enable and guide the apartment leasing process across much of the industry remain outdated, resulting in a frustrating experience for operators and renters alike.

While both renters and leasing teams want to boost efficiency through increased tech adoption, legacy CRMs lack the connectivity and the seamlessness needed to maximize the benefits of each tool. Failing to streamline and integrate the different digital platforms that are exponentially supporting the modern leasing process has resulted in missed opportunities to improve operations and renter satisfaction. If this siloed implementation of leasing tech continues, property management companies and renters will inevitably miss out on the full ROI and will not reap the full reward of new tech tools.

The Problems with the Status Quo

The CRMs that many property managers use to drive the leasing process are property-centric property management softwares — meaning the data in these systems is collected and analyzed from the perspective of each individual building. A quick history lesson: the largest legacy players all began as accounting software. Over time they acquired, attempted to build, or tacked on customer-facing pieces to complete the journey. For owners and operators, this approach has a significant problem: By definition, a property-centric CRM is incapable of linking together multiple residential communities. For operators with several properties in a single market, this translates into significant inefficiencies. The same prospective renter likely has duplicative profiles that are assigned to two or more properties and leasing agents. This prospective renter would also have to perform certain tasks, such as background checks, multiple times. For property management companies, the inability to “cross-sell” properties and present units in their portfolio that the renter was unaware of is a massive loss. While this has always been an issue, it became particularly relevant over the past two years, when the traditional leasing process moved  almost entirely online.

To support the continued shift away from this legacy model and toward an improved approach to rental management, we were proud to recently make one of our largest investments to date, leading Funnel’s $36.5 million Series B round.  

Taking a ‘Renter-Centric’ Approach to Leasing

Funnel’s software helps operators manage their entire portfolio’s marketing, communications, and leasing in a single platform, creating efficiencies and improving processes through a unique “renter-centric” model. They have created an entirely new category: Renter Management Software. This innovative reimagining of the traditional approach to real estate CRMs supports a more convenient rental process for both prospects and operators. With renters at the center of the leasing process, multi-building portfolios can leverage Funnel’s technology to centralize and improve operations across dozens of properties, reducing costs by helping operators staff intelligently, and allowing them to track each prospective tenant’s interactions across the portfolio for a more holistic outlook.

Funnel is also rolling out a powerful fintech integration to empower renters to verify their financial status through their banks — removing the necessity for analog processes like collecting W-2s and pay stubs.

Prior to this Series B investment, RET led two funding rounds for Funnel in 2019 and 2020. Since our initial investment, with the help of several of our strategic partners, we have assisted in guiding the platform’s evolution and witnessed its dramatic growth into the CRM of choice for 5 of the NMHC Top 20 owners (including many of RET’s strategic investors). This evolution has been driven by product development conducted in collaboration with several of our strategic investors, ensuring that the final tool being used today has been validated and sculpted to directly address the needs of the market.

Connecting The Resident Journey

As Funnel offers the market’s first-ever renter-centric CRM, it also serves as the ideal hub for a robust tech stack aimed at engaging with residents throughout every stage of the leasing process. Funnel also intends to build out new resident tools, including onboarding, resident portal, and renewals.

The platform fits seamlessly into RET’s ecosystem, and Funnel is quickly establishing itself as the premier foundation for rent tech integration and resident experience. Touring a property? Funnel can support property navigation and unit accessibility via Engrain and SmartRent.  , Need to source a dog walker for your new neighborhood? Funnel can connect you with local service providers via Amenify. Ready to move out and lease a new apartment? Funnel again can play a critical role by connecting renters to sister properties within the portfolio, thus building brand loyalty by providing an excellent renter experience.

Funnel is unique in this ability to provide direct benefits to allconsumers in the rental lifecycle, from prospect through long-term tenant.

The Future for Leasing CRMs is Here

We firmly believe that Funnel represents the future of leasing technology for enterprise and mid-market operators, and it is that confidence that pushed us to lead another round of funding for Funnel and significantly increase our stake in the company. By doubling down on our investment in Funnel’s unique platform, we are strengthening our commitment to the renter-centric future of leasing, which will benefit leasing teams as well as renters for decades to come.

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A Roadblock for Property Managers

With the rise of rental technology, solutions have been developed to manage essentially every aspect of the market, from amenities to insurance to rental payments. However, even as many of these solutions have permeated the market, the process of requesting maintenance and liaising with external vendors remains overwhelmingly dependent on antiquated, inefficient systems and has proven to be a roadblock many property managers struggle to overcome. And while this is accurate with regard to multifamily operators, it is especially true for single-family rental (SFR) investors, who, according to recent census data, make up 72.5% of the market. Unlike multifamily operators whose residential units are centralized within a single building or garden-style community, SFR operators may have to maintain a hundred units across a sprawling metropolis. These distributed portfolios and the wide variety of layouts, appliances and components — such as flooring, paint and HVAC — make the task of SFR maintenance even more challenging.

Bringing Maintenance to the 21st Century

As the SFR asset class continues to attract massive amounts of capital, identifying technologies that make it easier for investors of all sizes to manage their properties is one of RET Ventures’ primary goals. We are always looking to expand our rent tech portfolio with new solutions capable of addressing long-standing inefficiencies in the market, which has led us to our most recent investment in Lula.

An intelligent property maintenance platform primarily serving SFR owners, Lula reduces time spent on maintenance by nearly 60% – integrating with prominent property management software systems to streamline the complete maintenance process. It allows for easy and seamless communication between tenants, property managers, and contractors, ensuring a job can be easily requested and monitored until it has been completed. Lula is a solution-centric platform, providing de-escalation services for requests that do not actually require an outside vendor to address - improving communication, reducing costs for property managers and increasing tenant satisfaction. If a request does require a maintenance coordinator to be dispatched, Lula has a large network of quality and fully-vetted contractors to complete the work.

We are extremely bullish on Lula’s platform and the broader implications of such a tool for single family investors and property managers. We constantly hear from our strategic investors about the need for a product to modernize antiquated real estate maintenance operations, and believe Lula – based on its unique technology and smooth user experience – is the most impactful solution on the market.

Lula’s Significant Potential

Our investment in Lula comes at a time where macroeconomic trends are driving capital flows into SFR and many institutional pools of capital are beginning to announce single-family rental funds. As the SFR asset class continues to grow, the platform’s ability to simplify the historically convoluted maintenance process will bring tremendous value to all stakeholders in the space.

We are confident that Lula has the potential to become a major solution across the real estate industry in the years to come, and we look forward to supporting them as they continue to grow their team, expand their platform, and roll out their innovative technology in new markets across the US.

The Antiquated CRE Transaction Process

U.S. commercial real estate is a $20-trillion asset class, yet – even as technology has enhanced other aspects of the sector — the transaction process for buying, selling, and financing commercial property has remained highly analogue. Most deal-related data is collected by third-party intermediaries in offline channels, with disconnected spreadsheets, emails, handshakes, and other manual processes continuing to dominate workflows.

Despite the real estate industry’s size and scope, it has never benefited from what many other large financial markets enjoy: a technology infrastructure that centralizes the disparate counterparties, workflows, and datasets at play in every deal.

A Comprehensive Capital Markets Platform

Historically, RET Ventures has focused heavily on the operational side of real estate technology, with numerous investments in smart buildings and property management tools focusing on maximizing the operating efficiency of properties and portfolios. As we grow, our strategic approach has expanded accordingly across the CRE value chain, with a keen eye toward how owners build and finance their portfolios. A significant priority is bringing greater efficiency and transparency to the processes surrounding acquisition, disposition, and financing of projects, properties and portfolios; to that end, we’re excited to announce our investment in Revere.

Revere presents a novel concept for the institutional CRE market, combining a verified professional network, listing marketplace, and deal execution venue into a true ‘one-stop-shop’ for market participants. Revere enables brokers, developers, owners, lenders and investors to expand their network; identify potential counterparties; and buy, sell, or finance an asset all in one place.

Revere aggregates and stores vast amounts of relevant information on the people, companies, and transactions that comprise the institutional CRE market, making this data easily accessible to platform subscribers. Furthermore, Revere is unique among real estate transaction marketplaces as a subscription-based platform that does not take commission from any deals facilitated on the network — this model was designed deliberately, motivated by Revere’s mission to bring greater efficiency and transparency to the existing market structure, with brokers very much included. Revere provides a valuable turnkey tool for brokers throughout the transaction lifecycle helping them ensure best execution for clients on the buy and sell side of any deal.

Revere’s Incredible Potential

As a seed stage company, Revere is younger than our typical investment. But we see incredible market opportunity in the prospect of aggregating the different components of the CRE market onto a single comprehensive, collaborative platform. Just as importantly, we have tremendous confidence in the company’s leadership team, which includes sophisticated CRE professionals and ex-Googlers who understand the inner workings of a CRE transaction and how technology can improve it.

The company has already gained significant traction from several prominent institutions — including our co-investors Related Companies, Holland Partner Group, The Feil Organization, Driftwood Capital, Davis Development and Essence Development — and it is poised for rapid growth in the near term.

The Future of Real Estate Capital Flows

A platform like Revere is long overdue, but more timely than ever. With macroeconomic trends and inflation driving investors to real estate, the asset class is one of the most attractive destinations for institutional capital. In this climate, Revere’s ability to bring together all aspects of the capital stack – investors, developers, debt and equity — will simplify the transaction process and allow users to build business partnerships with investors across the country.

Revere is a valuable addition to RET’s current portfolio of real estate technology investments, and we look forward to providing the company with resources and support as they expand their team and continue to refine their product in the years ahead.

In the latest installment of this series profiling RET portfolio companies and their executives, we talk to Mogens Smed, CEO of Falkbuilt.

What is the inefficiency in the real estate industry that makes Falkbuilt necessary?

Conventional construction is inherently inefficient. Think about long schedules waiting for different trades to come and go, giant waste bins onsite and tipping fees at the landfill. Half of all waste in North American landfills is from construction sites! And now, with supply chain issues and severe materials shortages, conventional construction is even more challenged. Why would you want to throw 30 percent of your hard-come-by materials in the garbage?

How do you solve that problem for the construction industry?

Falkbuilt’s offsite prefabrication solution, empowered by technology, solves these issues.

We manufacture digital components in a compact factory—super studs, digital horizontals and cladding—and ship them to jobsites all over the world for fast, clean installations. We virtually eliminate waste onsite, which makes working in occupied spaces much easier.

Our process, “Digital Component Construction,” shortens the construction schedule, is far more sustainable than conventional construction and vastly increases the efficiency of labor onsite, which is an added benefit in the worsening labor crunch.

We use fewer materials, have a warehouse full of inventory, provide quicker lead times, deliver incredible design response, acoustic performance, durability as well as speed of construction. And we’re cost competitive with conventional construction. Our total material, fabrication, overhead, freight and installation costs are less than half other prefab manufacturers. Further, the digital components we manufacture are designed for disassembly, so they are easily and quickly reconfigured when a client’s needs change.

We’re also the only prefab manufacturer that has a solution completely aligned with conventional construction. Our digital components and process emulate how trades work onsite. Skids of flat-packed components come off the truck in the order they’re needed onsite. It’s all very intuitive and instantly familiar to trades on the job site.

We use that same principle—working like you already do—in our technology platform, Echo, which exponentially empowers industry standard software in the cloud. Echo also frees offsite fabricators from the constraints of standardized solutions to provide customized solutions with much quicker lead times.

How does your technology differ from your competitors’?

Echo is the first end-to-end cloud computing communication tool in the construction industry. With Echo, designers and engineers use the same tools they’ve already invested in, like Autodesk’s Revit or Inventor (the platform is technology agnostic).

Echo collects and manages the project data throughout from early design development, to pre-construction, material order, fabrication, shipping and installation. Each stage of the project moves faster, saving hundreds—sometimes thousands—of hours and providing total clarity as to cost and schedule.

With Echo, for the first time, architecture and construction professionals can leverage prefab construction, save thousands of decision-making hours, gain pinpoint accuracy as well as the ability to customize any project, large or small.

No one else does this! Echo is the only AI cloud computing platform that fuses design, manufacturing and delivery and we are confident it will transform the massive, notoriously technology-hesitant, building construction industry.

There’s an old trope about real estate being slow to adopt technology? Do you think that is still an accurate characterization?

That has been true for a very long time, but that’s mostly because previous technologies did not respond to the industry in a way that supported their process, leaving them with tried and true “best practices” as their only alternative. In the last few years, we’re beginning to see that evolve. If you look at the market, billions and billions of dollars are being invested in technology innovations for the construction industry. Echo is poised to change the game.

What advice would you give to a young entrepreneur just starting out in rent tech or proptech?

Don’t waste any time worrying! Don’t worry about running out of money because you will! Besides, too much capital compromises the sense of urgency and moving at speed which is integral to building any business. Don’t worry about making mistakes because you will make many. Stay focused on your vision and accept there will be a multitude of challenges you have to overcome. As every entrepreneur knows in their bones, a challenge is an opportunity.

Churchill is credited with saying: “A pessimist sees the difficulty in every opportunity. An optimist sees the opportunity in every difficulty.” Successful entrepreneurs are realistic optimists! There is a mantra I subscribe to: “Any individual can make mistakes, but success only comes from a team of people!”

Our Falkbuilt/Echo experience is testimony to the value of a strong culture supported by a capable and committed team of people both at HQ and throughout our global distribution network.

What is one challenge about building a proptech company that you weren’t aware of five or ten years ago?

Covid-19! I can tell you growing a new company in the middle of a pandemic has been the hardest experience in my 50-plus year career working in both construction and technology.

What’s next for Falkbuilt?

We’re just ending our second fiscal year and we have 90+ Factory Direct Branches across North America, the Middle East and India. Falkbuilt and our Falkbuilt Branches have outperformed all expectations, thanks in large part to employing the incredible efficiency of our Echo technology across our operations.

In just a few years—and during a pandemic—Falkbuilt has grown from nine employees in an empty building to more than 400 “Falkers” in a fully implemented, very busy, 90,000-square-foot factory. We’re producing projects for clients around the world and across a range of vertical markets including commercial, retail and healthcare. We’ve just celebrated our 1000^th successful project. And we’re just getting started. Echo technology is the backbone for building a scalable business model for Falkbuilt, and our greatest vision is seeing the technology have a major impact on the entire construction and fabrication industry!

The Mighty “Mom-and-Pop” Landlord

While institutional landlords dominate most real estate conversations, individual owners and operators of either a single rental property or a small portfolio actually comprise a major portion of the market. In 2018, so-called ‘mom-and-pop’ landlords were responsible for 60% of all investor home purchases, and as of 2020, this class of landlords owned a collective 22.7 million units across 16.7 million properties — making up a majority of rental residences in the country.

Despite their size, this group of investors has historically been underserved by the technology resources that streamline operations for institutional owners.

A One-Stop Shop for Financial Operations

As the leading VC for multifamily and single-family real estate technology, servicing the entire range of residential property owners and operators has always been one of RET Ventures’ most prominent goals. With this in mind, we have kept a keen focus on technology that has the potential to improve operations across the industry at-large; as we have expanded our portfolio, this has led to investment in platforms such as TurboTenant and TurnoverBnB. We are now expanding our focus on mom-and-pop operators as we announce our latest investment in Azibo.

Acting as the financial hub for small-scale owners of rental property, Azibo offers landlords a one-stop shop where they can complete necessary financial transactions — such as free rent collection and bill payments — while also efficiently managing, organizing, and analyzing payment and expense data. The platform also enables full-service banking services through free checking and savings accounts with cashback and offers nationally licensed insurance, as well as lending solutions such as mortgages and short-term loans. By collecting a wide array of property-related financial data, Azibo is able to generate powerful analytics that provide landlords with data-driven insights relating to operations, potential renovations and more.

Through our partnership with Azibo, we hope to democratize the sort of full-stack financial services and analytics currently utilized by large-scale institutional owners to the mom-and-pop market. The application of RET’s detailed expertise with tools for the institutional multifamily and single family rental market — combined with Azibo’s sophisticated team and robust suite of fintech products and licenses — has established the foundation to improve financial management for all landlords.

The Future of Rental for Non-Institutional Owners

With this latest funding round, Azibo will be expanding its team, accelerating product innovation and expediting its rollout to the entire rental property ecosystem, from landlords and renters to property managers and vendors.

Azibo is a valuable addition to RET’s current portfolio of investments supporting small landlords, and we are eager to continue backing technologies that meet the needs of this important yet underserved group of owners.

We are excited to kick off 2022 with this new partnership, and we look forward to supporting Azibo’s immense potential to better the rental management process in the years to come.

RET Ventures Partner Christopher Yip recently spoke on the “Inclusion & Innovation: Changing the CRE landscape” webinar hosted by EisnerAmper. Chris joined panelists Jim Farris, CEO of Mosser Capital; Alex Lofton, co-founder and president of Landed; and Michelle Boyd, director of the Housing Lab (a program of the Terner Center for Housing and Innovation at UC Berkeley) in the final installment of EisnerAmper’s “DEI in Commercial Real Estate” series.

In the webinar, Chris shared his perspective on the importance of market-based solutions rising up to meet the challenge of housing affordability and how real estate investors are increasingly focused on measuring and improving the ESG impact of their portfolios.

Watch the full webinar on the EisnerAmper site.