The proptech VC firm Fifth Wall, based in Los Angeles, USA, has paid out a total of $164.3m (£116.6m) for three different companies in the sector in a matter of days, including one deal that UK property professionals should keep a close eye on.
The investment firm’s biggest outlay was $135m for Opendoor, although only $35m was equity investment from Fifth Wall, with the rest made up of $100m in debt from US housebuilder Lennar.
Fifth Wall also paid out $25m for Hippo, a home insurance start-up similar to Neos, which has received investment from Zoopla, as well as $4.25m for Enertiv, which uses data and analytics to improve the way in which commercial buildings are operated.
Opendoor allows US consumers to sell their home without listings or showings by buying their houses and owning them, before selling them on to buyers.
It makes money in two ways — by charging a fee to sellers and from any difference between what it buys the houses for and what it sells them for.
Opendoor has long been seen as the biggest proptech success story — so far publicly announcing $355m of equity capital raised and $100m of debt.
For UK property professionals, this deal is fascinating: the debt will be used to fund ‘part-exchange’ of homes for buyers of new-build properties.
British housebuilders have been very successful at targeting overseas buyers and first-time buyers (by way of Government subsidy like Help to Buy) — but so far haven’t found a lucrative strategy for winning the business of those families ‘trading up’.
While UK proptech Nested takes obvious influence from Opendoor, its model provides less certainty for a customer but also takes on substantially less risk itself by not guaranteeing to buy a home.
Instead, Nested promises to lend you a guaranteed amount if it fails to sell your home within three months and share in the upside when the sale does complete.
While British housebuilders could partner with Nested or a UK clone of Opendoor to open up a part-exchange option for home buyers to consider new-builds as a viable option, no such scheme currently exists this side of the Atlantic.
Of the two other deals, Hippo’s home insurance product bears a striking resemblance to the UK’s Neos — a Zoopla investee.
Both use sensors in the home to detect leaks and other risks that might cause someone to claim on their home insurance.
The hope is to catch issues early, reduce the cost and frequency of claims and therefore lower insurance premiums.
Fifth Wall, founded by former Goldman Sachs banker Brendan Wallace, surprised the proptech world in May last year by raising $212m and claiming to be the first fund backed by real estate money to invest in real estate related innovations (read Eye’s coverage here).
By contrast, Pi Labs in the UK and Metaprop in New York have struggled to raise — Pi Labs particularly unable to translate its mind share in the proptech world into successful investments.
Institutional investors, typically the larger funders of venture capital, often need evidence of a track record — a Midas touch, if you will.
The latest deals are a display of Wallace’s ability to persuade the most promising companies to accept his cash.