Sunset 4445433 1920

The Future of Proptech - 4 Trends To Pay Attention To

9/22/2019 by Nav Athwal

Proptech (or Real Estate Tech) has emerged as one of the most exciting and fastest growing areas of technology over the last decade. From billions of venture capital dollars plowing into the industry and creating tens of billions of market value to the successful public offerings of some of the early entrants, Proptech is getting increased attention. And this is only the beginning.

As aptly noted by Pete Flint in his article - “Proptech - A Massive Opportunity We’re Seeing” this is not surprising. Flint recognizes, “real estate touches everything we do. It’s the economics of the physical space --- it literally shapes our lives by defining the environment in which we live and do business.” In other words, real estate is a massive market (valued at $228 trillion globally) that impacts the daily lives of billions of people, so it is no surprise that people are paying attention to it and that the various challenges of the built world are being solved through technology.

Although the last decade has been exciting for the Proptech space, it has only focused on the easy stuff including access to data and information. However, it has paved the way for a new wave of Proptech companies solving much harder problems within real estate and the built world as well as new trends within this industry. Below, we recognize 4 technology trends that are set to permanently change the real estate market.

Online Transactions

Although early entrants such as Zillow and Trulia made access to data and information much easier, these companies didn’t really impact how we buy, rent, finance or sell real estate. In fact, although over 93% of consumers start the search for their home or real estate property online, they still complete most, if not all of the process, offline. But this has already started to shift with the emergence of online transaction platforms.

Platforms like Opendoor, Knock and Offerpad are attempting to make the real estate agent/broker obsolete through a concept called “ibuying”. ibuyers are companies that purchase homes outright, directly from the owner. This saves the seller from having to pay an agent, list, stage or market the home. Essentially, selling a home becomes a 1-click process for the seller.

These “ibuyers” have been responsible for purchasing (and then selling) billions of dollars worth of single family homes saving consumers weeks or months in transaction time thereby providing a no or low headache solution to sell your home. The trend has gotten so hot that even established public companies such as Zillow (Instant Offers) and Redfin (Redfin Now) have entered the market. But ibuyers are only one part of this shift to online transactions which also includes online mortgages and tech driven property management.

With respect to the former, companies such as LendingHome, Better Mortgage, and Blend are bringing the entire process of getting a loan - from application to servicing - online. This has the promise of faster closings and cost savings to the borrower because technology, rather than humans, drives the process. In the case of Blend, it’s not just building the software but also licensing it to major banks that can then provide this same streamlined and elegant solution to their own customers.

And with respect to property management, enter Doorstead (disclaimer - I’m an investor) and Belong, two companies attempting to change the experience around renting your home. Unlike traditional property management models where a property owner takes on all of the risk of their property not being leased on time, and also has to manage the entire workflow offline, these companies essentially guarantee the rental fee and shift the workflow to an elegant online solution.

Proptech companies focused on shifting real estate transactions online are still nascent but the next decade will see an almost total shift from transacting offline to online. The impact to consumers, landlords and other stakeholders will be massive with billions of dollars worth of economic impact.

Proptech Specific Venture Capital

Although Venture Capital is not an innovation in itself, it is a critical resource for companies looking to innovate within large, existing industries such as real estate. Historically, most VC funds have been generalists investing in a variety of startups across various business models and verticals: Greylock, Kleiner Perkins, Sequoia and Accel to name a few. However, these generalist firms have started to dip (and in some cases have dived heard first) into Proptech because of its immense potential.

However, a more recent trend/shift is Proptech-specific VC’s that offer not only capital dedicated to spawning innovation within real estate but also the expertise and relationships to increase the chances of success. MetaProp, Fifthwall, Navitas, and Camber Creek are just a few of the funds that have launched specifically to focus on funding Proptech innovation. These VC funds have another advantage over generalist VC’s: their LP’s and/or investment partners often bring tremendous real estate experience and connections that can be quite beneficial to nascent Proptech startups looking to gain momentum and build a strong customer following.

Fifthwall, a Proptech fund that recently raised $503 million to invest in real estate tech, counts among its base of LP’s real estate behemoths such as CBRE, Lennar and Hines. And MetaProp’s largest LP is Cushman and Wakefield. It doesn’t take a rocket scientist to see why a partnership with one of these Proptech-specific funds would be alluring as a way to create immediate brand recognition and momentum for an unknown startup. It isn’t surprising then that these funds have won some of the more competitive deals within Proptech including WeWork, OpenDoor and Lyric.

And these funds are having a drastic impact on the Proptech funding market. In fact, in 2008, Proptech raised a measly $41 million across just seven deals. Fast forward to 2018 and companies in Proptech have raised close to $4 billion across approximately 100 deals according to CBInsights.


Construction and construction management is a multi-trillion dollar industry and yet one of the most archaic verticals within real estate. Startups focused on making construction projects flow more smoothly while increasing productivity, efficiency and transparency are thus particularly alluring. And VC’s agree given venture capital investment into U.S.-based construction technology startups surged by 324 percent to nearly $3.1 billion in 2018 as compared with just $731 million in 2017, according to Crunchbase data.

Historically, the construction industry has been slow to adopt new technology as existing stakeholders rely on disparate and fragmented systems and traditional (rather than smart) building methods. However, several well funded companies are taking this industry head on.

Katerra, which raised $865 million from Softbank in 2017 and is a self proclaimed one-stop shop for building design and construction, is the most well-funded startup in this vertical. However, others aren’t too far behind. Procore Technologies, another unicorn worth close to $3 billion, provides cloud-based construction management applications and has raised a combined $229 million from Bessemer Venture Partners and ICONIQ Capital.

Others are less well-funded but have massive potential nonetheless. These include Rhumbix (a mobile platform that helps builders go paperless in the field) and Social Construct (a modular construction company for multifamily properties). The former has raised money from Greylock partner Jerry Chen, who is keen on evaluating deals in the space, and the latter by S28 Capital (they also invested in PlanGrid and led District’s Seed Round).

These startups are also often targets for M&A as larger more established companies choose to buy rather than build. Autodesk recently acquired two vertically integrated SAAS companies including PlanGrid for $875 million (we’re lucky to have PlanGrid’s CTO as one of our investors here at District) and BuildingConnected for $275 million. Another construction management software company, Viewpoint, was acquired by Trimble, a publicly-traded software developer, in July 2018 for $1.2 billion.

This combination of heavy VC investing and lucrative M&A combined with the fact that tech penetration within construction is currently less than 10%, makes this vertical particularly fascinating and ripe for disruption.

Commercial Real Estate

Although Commercial real estate is a subset of the larger real estate market which includes residential (1-4 unit) properties, from a technology innovation standpoint, it takes on a life of its own.

Commercial real estate which includes apartments, retail centers, office buildings, hotels, industrial buildings etc. encompasses over $11 trillion of value in the U.S. alone and annually, transactions within commercial real estate in the US exceed $500 billion. And although the real estate sector as a whole has started to shift towards a technology future, Commercial Real Estate has been late to the game.

Part of the reason for this is the fact that commercial real estate transactions are more complex than their residential counterparts. A single commercial real estate property can include dozens of disparate tenants and these assets (especially in the case of retail) are more susceptible to becoming victims of technology companies such as Amazon. And as a result of this increased complexity, until recently commercial real estate has been dominated by legacy technology or worse, no technology.

But that is starting to shift. Whether it be capital markets, appraisals, lending, property management or brokerage, innovative technology companies are slowly displacing manual offline processes or legacy technologies with more nimble and efficient platforms catering specifically to CRE.

Take Bowery Valuation for example, an innovative new platform automating the commercial real estate appraisal process. This company has raised over $18 million dollars from Proptech specialists Camber Creek, Navitas Capital and Corigin Ventures (among others) as well as real estate behemoth Cushman and Wakefield.

Another innovative company within the space is Crexi, which has built a platform to digitize the workflow around buying and selling commercial real estate. The company manages over half a trillion dollars worth of property value through its platform and raised over $11 million last year to further scale its operations.

Commercial real estate is exciting to me personally because my prior company RealtyShares and my new company District are both focused on innovating within this space. District is specifically focused on automating commercial mortgage lending. We're building the modern commercial mortgage platform - the first integrated end-to-end technology platform (from sourcing to servicing) to serve commercial real estate loans below $30 million.

Other notable mentions within this category of Proptech include VTS - digital leasing and asset management, and Juniper Square - digital investment management. The former is now valued at over $1 billion and today manages more than 10 billion square feet of assets on its platform. Both companies have as customers some of the largest property owners in the country.

One common thread between the founding teams of companies taking on commercial real estate is that the founders often have some industry experience. Given the more complex nature of this type of real estate, this industry knowledge becomes quite valuable as the company looks to solve unique challenges and scale.

The future of Proptech is bright and I foresee continued interest from founders, incumbents and investors as we enter a new decade of technology innovation within real estate. The next decade will see unprecedented disruption and I believe some of the most valuable companies within Proptech are yet to come.

District is a balance sheet lender re-engineering the commercial real estate mortgage process. By developing innovative technology, District is able to increase the speed and accuracy of deploying capital while increasing transparency into the lending process. As a national firm, we specialize in short- to mid-term bridge debt on all product types with competitive rates and leverage.

District is a balance sheet lender re-engineering the commercial real estate mortgage process. By developing innovative technology, District is able to increase the speed and accuracy of deploying capital while increasing transparency into the lending process. As a national firm, we specialize in short- to mid-term bridge debt on all product types with competitive rates and leverage.

Follow Us

Image 11 18 19 at 14 01

Are we in a Goldilocks Phase of the Economic Expansion?

Absent a geopolitical shock, a surprise in the trade war, or a disorderly Brexit, I am expecting a Goldilocks economy for 2020, an economy with modest, non-inflationary growth, not too hot, not too cold, but just right.

Read the full story

11/18/2019 by Arash Sotoodehnia, PhD

Building 394961 1280

How Commercial Real Estate Lender’s view Collateral by Property Type

Commercial Real Estate can largely be broken out into four different product types: Multifamily, Retail, Office and Industrial. Within each of these product types there lies specializations, nuances and combinations that make up the commercial real estate sector.

Read the full story

11/5/2019 by Kevin Henderson

Freddie and Fannie

What to do with Fannie and Freddie?

In September, the Trump administration proposed a new plan to re-privatize Fannie Mae and Freddie Mac. Their proposed plan would reverse one of the first actions taken in order to address the great economic crisis of 2008. But any modification of the status-quo would certainly have enormous ramifications for lenders and borrowers alike. If everything is working so well, why not just leave things as they are?

Read the full story

10/21/2019 by Bill Lanting

Get Started

District is the modern commercial mortgage lender providing you with higher
leverage, low rates and fast closings. View our Loan Programs or get started here.