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Why real estate startups are hot right now, according to a top VC – Fortune

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Good morning. Finance writer Anne Sraders here, filling in for Jessica. 

Flow, the new residential real estate startup from infamous WeWork founder Adam Neumann, ruffled feathers this week after Andreessen Horowitz announced on Monday that it had funded it—shoveling $350 million into Flow, per The New York Times. The most eye-catching part of the announcement was, of course, the founder, Neumann. His previous startup WeWork bungled its first attempt at an IPO, cost investors billions of dollars, and ultimately ejected Neumann in Hollywood-worthy fashion

But like WeWork, the new startup is tethered to real estate—a seemingly increasingly hot area for venture capitalists. Over the years startups have popped up looking to solve or build on disparate corners of the real estate market, whether by offering community-focused residential spaces (like Neumann’s Flow apparently intends to, with a concept some are comparing to dorm rooms for adults—as well as, potentially, crypto?) or pitching fractional real estate investing. 

But the reason why some VCs are funneling cash into the sector isn’t simply because home prices have soared in recent years. Brian O’Malley, partner at Forerunner Ventures, told me this week that instead, they’re trying to address a deeper dissatisfaction (and dysfunctions) among consumers and investors. 

As investors, “we’re trying to be less focused on timing the market and what might look great in the next six months, and to be more focused on, ‘What systematic change do people want to have happen over the next decade or two?’” O’Malley says. “The relationship people have with their housing isn’t exactly what they maybe want anymore.” 

Forerunner has invested in a couple real estate-tied startups, most recently Arrived, a company that enables everyday investors to purchase shares in single-family rental properties and receive dividends in return. Forerunner led the company’s $25 million Series A round in May (in total, the startup has raised roughly $71 million, per PitchBook data). Other backers of Arrived include Jeff Bezos’s investment company Bezos Expeditions; PSL Ventures; and Spencer Rascoff, the cofounder and former CEO of Zillow. On theme, Forerunner also invested in Homebound, a tech-enabled homebuilding platform, back in 2018. 

According to O’Malley, real estate is, if not the largest, “one of the largest personal expenditures that [people] have, and there’s not been a lot of technology applied to change the way the business works. What’s exciting about that is that you’re looking at, you know, ultimately trillions of dollars of spend and an opportunity for change.” That’s “what’s got us excited,” he says. 

O’Malley suggests that unlike other industries, real estate has not seen big productivity gains over recent decades. “Building things is not getting cheaper, regulation is getting more complicated, the actual financing component is still, you know, a bit of a small ecosystem of the people that were always able to finance these properties,” he notes. “The way that you buy houses, the way that you rent properties—it hasn’t really changed with other categories,” like transportation (think Uber) or restaurants (think Toast), he added. 

There are clearly “different approaches to the general concept,” notes O’Malley; just look at startups like Neumann’s Flow or Arrived, aimed at tackling very different problems. And even with other competitors that focus on fractional ownership within real estate, like Fractional and LEX (the latter of which raised $15 million in January), O’Malley argues it could be more of a “rising tide” to lift all boats, as the startups take different approaches to the market. 

Of course, fractional investing in real estate isn’t new. “The pitch is not that this is a get rich quick, put all your money in this and see what happens,” O’Malley suggests of startups like Arrived. “It’s like, ‘Hey, this is an important part of a balanced portfolio,’ and some level of exposure, especially the kinds of exposure we’re getting [with Arrived], which…is not highly leveraged and is dividend-focused, is healthy for everyday investors.” 

What first comes to my mind is the host of big risks out there—not least a possible upcoming recession, rising interest rates, still-constrained housing supply, and a cooling residential market. Meanwhile some have raised concerns about the model of taking home properties (which people might buy to live in) off the inventory-constrained market when buying up single-family homes for such startups—the worry being that buying property to rent for investors could make homes more unaffordable for everybody else. (In defense of Arrived, O’Malley notes that “unlike other players in the market, Arrived isn’t bringing institutional money to compete with local buyers.”)   

But VCs like O’Malley believe there’s a lot of change right now in how people are living and working, and “with those challenges comes opportunity.” “The category is still nascent,” he says. 

We’ll have to see if these startups, like the properties they’re focused on, are built to last. 

Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
Submit a deal for the Term Sheet newsletter here.

Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

DriveNets, a Ra’anana, Israel-based cloud-native networking solutions provider, raised $262 million in Series C funding. D2 Investments led the round and was joined by investors including Bessemer Venture Partners, Pitango, D1 Capital, Atreides Management, and Harel Insurance Investments & Financial Services.

Orna Therapeutics, a Cambridge, Mass.-based RNA therapies biotechnology company, raised $221 million in Series B funding. Merck, MPM Capital, BioImpact Capital, and others invested in the round.

HiBob, a New York and Tel Aviv-based HR platform, raised $150 million in Series D funding. General Atlantic led the round and was joined by Bessemer Venture Partners and others.

VidMob, a New York-based advertising platform for brands, raised $110 million in Series D funding led by Shamrock Capital

Bevi, a Boston-based smart water cooler developer and provider, raised $70 million in Series D funding from Cowen Sustainable Investments

Super, a London-based payments platform, raised £22.5 million ($26.5 million) in funding. Accel led the round and was joined by investors including Union Square Ventures, LocalGlobe, and other angels.

Agora, a New York and Tel Aviv-based SaaS company for real estate firms, raised $20 million in Series A funding. Insight Partners led the round and was joined by Aleph.

GrayMatter Robotics, a Gardena, Calif.-based robotics company, raised $20 million in Series A funding. Bow Capital led the round and was joined by investors including B Capital Group, Calibrate Ventures, OCA Ventures, Pathbreaker Ventures, Stage Venture Partners, 3M Ventures, and Swift Ventures

Tessera, formerly Fractional, a New York-based NFT trading platform, raised $20 million in Series A funding. Paradigm led the round and was joined by investors including Focus Labs, Uniswap Labs Ventures, E Girl Capital, Yunt Capital, and other angels. 

BRAVO SIERRA, a New York-based male personal care company, raised $17 million in Series B funding. The Merchant Club led the round and was joined by investors including Capstar Ventures, Redo Ventures, AF Ventures, and Mousse Partners

Trial Library, a San Francisco-based oncology clinical trials company, raised $5 million in seed funding. Lux Capital partner Deena Shakir led the round and was joined by investors including NEXT VENTŪRES managing partner Julian Eison, Unseen Capital, and other angels. 

Microverse, a San Francisco-based online school for remote software developers, raised $4 million in Series A extension funding. Northzone, General Catalyst, All Iron Ventures, True Equity, and other angels invested in the round.

Quaddro, a São Paulo-based management solutions platform for small businesses and entrepreneurs, raised $3.2 million in seed funding. Valor Capital Group fund led the round and was joined by investors including Grão, Bridge Latam, NXTP and other angels. 

Insomnia Labs, a New York-based Web3 advertising and technology company, raised $1.5 million in funding. Polygon, Animoca Brands, Eden Ventures, HBJ Investments, and Concept Art House invested in the round. 

PRIVATE EQUITY

ARC Health, backed by Thurston Group, acquired Southeast Psych, a Charlotte-based mental health provider. Financial terms were not disclosed.

McCarthy Capital acquired a minority stake in WellnessLiving, an Ontario-based business management software company. Financial terms were not disclosed.

EXITS

Francisco Partners agreed to acquire Litmos, a San Ramon, Calif.-based corporate training solution provider, from SAP. Financial terms were not disclosed. 

OTHER

CI&T agreed to acquire Transpire Technology, a Melbourne-based technology consultancy. Financial terms were not disclosed.  

Pattern acquired Current, a Lehi, Utah-based influencer marketing platform. Financial terms were not disclosed. 

Sage agreed to acquire Lockstep, a Seattle-based accounting automation platform for workflows between companies. Financial terms were not disclosed.

WilliamsMarston acquired Paradigm Advisory Group, an Atlanta-based boutique advisory firm. Financial terms were not disclosed.  

IPOS 

PAG, a Hong Kong-based private equity firm, is considering delaying its $2 billion initial public offering in Hong Kong to 2023 due to market volatility, according to Bloomberg. The company is backed by Blackstone

FUNDS + FUNDS OF FUNDS

Shima Capital, a San Francisco-based venture capital firm, raised $200 million for their first fund focused on early-stage blockchain startups. 

PEOPLE

Red Cell Partners, a Tyson, Va.-based incubation firm, hired Roger W. Ferguson, Jr. as chief investment officer, chairman of the investment committee, partner, and a member of the board of directors.Formerly, he was with TIAA.

Sumeru Equity Partners, a San Mateo, Calif.-based private equity firm, promoted Pejman Pourmousa to operating partner, Sofija Ostojic and Nick Sheehan to vice presidents, and  Raymond Shen and Blake Shott to senior associates.

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This Week's Top Stories: Canadian Real Estate Braces For Impact As Bay Street Warns of A Hard Landing – Better Dwelling

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This Week’s Top Stories: Canadian Real Estate Braces For Impact As Bay Street Warns of A Hard Landing  Better Dwelling



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Hong Kong Billionaire’s K. Wah Wins Shanghai Real Estate Bid, Sees “Excellent” Opportunity – Forbes

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Hong Kong billionaire Lui Che-woo has been making successful investments in Shanghai real estate since the 1980s, such as K. Wah Center set along the city’s swank Huai Hai Road. A new project coming amid the country’s economically painful zero-Covid policies took a big step forward on Friday when his flagship K. Wah International Holdings said it had won a joint tender bid for HK$4.18 billion, or $532 million, to develop land on the city’s western side.

K. Wah, though a subsidiary, will hold 60% of a joint venture in partnership with two state-owned companies to develop residential and commercial property in an area planned for artificial intelligence and healthcare-related businesses, the announcement said.

K. Wah said the project “represents an excellent investment opportunity for the group to be engaged in a transit-oriented development to expand its presence in the Shanghai property market, replenish the group’s land bank and is in line with the group’s business development strategy and planning.”

The announcement comes after China’s overall GDP growth fell to 0.4% in the second quarter from a year earlier. In Shanghai, where millions experienced lockdowns of varying duration in the April-June period, GDP shrank by 5.7%. China’s relations with the United States and Europe have been strained by Beijing’s close ties with Russia and recent military exercises near Taiwan.

Mainland-born Lui, worth $12.1 billion on the Forbes Real-Time Billionaires list today, moved to Hong Kong at age four. Possessing only an elementary school education, he helped his grandmother run a retail outfit that sold food staples in Hong Kong as a teenager. In the late 1940s he re-exported army surplus, and by 1950 was buying construction equipment from Japan and selling it to Southeast Asia. In 1964 his was the first private company to obtain quarrying rights in Hong Kong, thanks to a record bid.

After that, Lui started building undistinguished residential housing there. Lui was also an early investor in China, buying into a quarry in Shenzhen in 1980 and later acquiring a land bank in Guangzhou. K. Wah Center opened in Shanghai in April 2005; beside real estate, part of his fortune also comes from the Macau casino operator Galaxy Entertainment Group.

Another long-term Hong Kong success story in Shanghai property development, Shui On Land, led by billionaire Vincent Lo, noted in a filing last month China’s short-term business outlook faces uncertainties. “The Chinese economy faces considerable headwinds amid a highly uncertain geopolitical environment, tense U.S.-China relations, and tightening monetary policy in the advanced economies,” it said. “The property sector debt issue will take time to resolve. Still, the government has the policy means and experience to handle the developers’ debt restructuring process and address the suspended project issue.”

And yet Shui On, whose Shanghai projects include city’s iconic Xintiandi nightlife and shopping area, was nevertheless upbeat about the longer-term investment prospects there. “Although the immediate outlook is less than favorable, the impending market correction should enable us to acquire assets in prime locations at attractive prices during what could be a golden era for new investment,” it said.

See related posts:

World Will Have Nearly 40% More Millionaires By 2026: Credit Suisse

The 10 Richest Chinese Billionaires

Taxes, Inequality and Unemployment Will Weigh On China After Party Congress

U.S. Business Optimism About China Drops To Record Low

Pandemic’s Impact On China’s Economy Only Short Term, U.S. Ambassador Says

@rflannerychina

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Real estate markets slow in most nearby communities – Calgary Herald

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Reviews and recommendations are unbiased and products are independently selected. Postmedia may earn an affiliate commission from purchases made through links on this page.

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Slowing demand and rising supply in outlying communities like Airdrie have set in along with cooler temperatures of late summer, recent data shows.

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Calgary Real Estate Board statistics from last month show sales falling year over year in most communities while supply is rising.

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“In all those markets, we’ve seen improvements in inventory,” says Ann-Marie Lurie, chief economist with CREB.
“Still these markets remain quite tight, but we are seeing some price adjustments and that’s because they came up so high during the pandemic.”

Airdrie is the largest and most in-demand market with the highest sales last month, 169 transactions, down almost eight per cent year over year. Still, the community saw inventory rise more than 10 per cent with now more than 1.69 months of supply, an increase of nearly 20 per cent from last year.

Other communities have also seen sales fall and supply rise. These include Cochrane, which had 75 sales, down about 17 per cent from August last year. Its supply is now more than two months, up about 26 per cent year over year.
Okotoks had 53 sales in August, down about 19 per cent year over year while supply grew to more than 1.8 months.

Despite falling demand and growing supply, prices still grew year over year in these communities. The benchmark price in Airdrie increased almost 19 per cent to $493,500. In Cochrane, the benchmark price grew by more than 16 per cent to $517,400 while the benchmark reached $549,300 in Okotoks, also an increase of more than 16 per cent.

Chestermere saw the biggest drop in sales year over year at more than 48 per cent.

Only High River experienced a slight increase in activity with sales last month up 2.5 per cent versus the same span last year.

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