- Real estate.
It's a trillion dollar industry
that is lying in plain sight.
And in the last year, the space has had 15 IPOs.
Over $32 billion has been invested in the space.
Today we're talking with Brendan Wallace, one of the founders
of one of the largest real estate venture firms
in the world.
- Fifth Wall today is the largest
and the most active investor in real estate technology.
Some people call that prop tech,
but we kind of broadly define it as like any technology
for the built world, for the physical environment.
- And it turns out that real estate
is 13% of the global economy.
How did Brendan make such great investments in this space?
And what is the future of real estate?
That's what we're going to find out today.
Let's get started.
One of the cool things about Fifth Wall
is their limited partners, the people who give them money
are actually some of the largest real estate firms
in the world.
And that was an explicit goal from the beginning.
- So about half of our $3 billion
comes not just from financial LPs,
but from owners and operators and developers of real estate.
So companies whose primary business is real estate.
And the reason that's important is that those LPs
are some of the largest end users, customers
and partners of the technologies we're investing in.
- Working closely with the right people led Fifth Wall
to realize home buying was actually pretty broken.
- Pretty much every aspect of buying a home,
which is this incredibly kind of anachronistic
almost archaic process
where this extremely important consumer decision
that many people make
that has a massive impact on their financial lives
is made with very little information,
and is made with all these antiquated
offline analog processes and technologies.
- Real estate tech is the perfect way
to view what is happening in society today.
It turns out there are lots of broken parts
that can and should be improved through great software.
- We kind of looked at it
as a constellation of different problems.
So one problem is obviously getting access
and discovering the new home.
Another problem is getting out of your old home.
Another problem is buying home insurance and title insurance
and notarizing the documents and securing a mortgage.
There's all these component peripheral financial products
that need to be purchased in conjunction with buying a home.
- And here's where Brendan and I
got to work together a little bit.
We're both investors in a very special startup
called Opendoor.
- Fifth Wall is a early investor in Opendoor,
which is an iBuyer, effectively a marketplace
for consumers to get liquidity on homes that they own
in order to unlock that equity
to acquire a new home or go on to something else.
- Today, that startup has gone public,
and is now worth over $4.2 billion.
I love this example because from day one,
the founder Eric Wu was focused on building something
that was clearly better, faster, cheaper
for everyone involved.
Fifth Wall has funded so many different startups
in this space.
So, when it comes to home buying,
they didn't stop with Opendoor.
- We invested in Hippo, which is digital home insurance.
So, property and casualty insurance
delivered digitally to the consumer.
Doma, which is digital title insurance.
So digitizing this very archaic,
somewhat esoteric financial product of title insurance
that every consumer has to secure
in order to get a mortgage, and then Blend,
which is digitizing the process of originating a loan
from a lender to a borrower.
So enabling the borrower to input information
about themselves and for the lender
to assess their credit worthiness more efficiently,
and kind of streamlining that whole process
of securing a mortgage, which most homes are purchased with.
- Initialized was an investor in Blend at early seed too,
and one of the coolest things about being an investor
is actually that,
being able to meet other like-minded people like Brendan.
It's kind of like bumping into someone
at the vintage vinyl section at your record store.
Oh, you're into Led Zeppelin too?
Real estate was naturally a thing
that Brendan and I both would be gravitated to.
It's just such a large market.
- If you just think about a building
and everything that functions inside a building,
very few parts of it are truly digitized.
So, most of the rest of our lives as consumers,
there are component technologies
that make anything we do more frictionless, faster,
easier, cheaper, but the process of leasing space,
using space, going to an office room,
getting access to a building, all of that is really done
through fairly archaic antiquated processes.
And so I actually think real estate tech as a category
is one of the most fertile
in terms of new opportunities for entrepreneurs.
We've probably seen that in the last few years
just because prop tech has exploded.
- So, we've been excited about real estate tech for a while,
but what does Brendan think is the next big thing
in property tech?
It turns out what we saw earlier from Opendoor and Blend
for residential is playing out now
on the commercial side too.
That's next.
- Taking a lot of the insights that we've seen
in and around residential real estate transactions,
so the companies I was just mentioning, the Opendoors,
Hippos, Domas, States Titles of the World,
and looking at what insights around making the process
of buying a home for the consumer faster, easier, cheaper
more frictionless through technology,
can be applied to commercial real estate transactions.
And that is something we have not yet seen,
meaning most of the innovation,
and this happens predictably in lots of parts of technology,
have happened on the consumer side of things,
but commercial real estate is enormous.
And the process of buying or selling a building,
ensuring a building, getting a mortgage on a building,
signing a lease, are all pretty painful processes.
And I think the solutions there,
the solutions set that will emerge
is both pure plate technologies.
So, softwares that just leverage everything we've learned
on the consumer side, but probably also tech-enabled
real estate service companies.
So there's still an element of service that's required
in transactions that are this large and this complicated,
but there are ways to layer in technology
through that stack, I think in really creative ways.
And I don't think we've seen the level of innovation
on the commercial side that we have on residential.
- That is such a great reminder for all of us.
You can walk into even huge markets like real estate.
And even if one part of it takes off,
there's still brand new opportunity
lying right around the corner.
- So obviously if you're interested in this,
follow our Twitter, we're @fifthwallvc.
- Don't forget.
They've got a great YouTube channel here too.
Link in the description right here.
Go check out Brendan's episode
and subscribe to his channel too.
That's it for this week. Thank you so much for watching.
And as always, we're here to introduce you
to smart founders, investors,
and ideas everywhere in the world.
If you like this
and this was the first time you saw this channel,
we just talk about startups here all the time.
So, I'd like you to click like, subscribe, and the bell icon
so that you don't miss new episodes every single week.
Leave a comment down below.
If you like to hear more from VCs and startups,
let me know what you want to see.
Thanks so much for watching, and I'll catch you next week.