A huge surge in venture capital funding for real estate technology means digital innovation is on its way and begs the question, what kind of projects are being funded?
Venture capital funding for real estate technology ballooned from $1.8 billion in 2015 to $12.6 billion in 2017. According to the annual report from RE:Tech, a publisher for research on emerging trends in real estate and tech, the majority of the astounding 700 percent hike occurred in the fourth quarter of 2017. That’s when corporations started partnering with real estate tech developers to leverage customer data for future gains.
This massive spike in funding means digital innovation is going to continue to rattle the real estate industry. The question on everyone’s mind: How?
Tech companies that pull in the most venture capital funding (for example The Yard got $15 million, and Spain’s Spotahome got $200 million) tend to focus on expanding the sharing economy. They streamline sites and apps for home sharing and co-working spaces that offer alternatives to traditional offices or hotels. As sites like WeWork ($4.4 billion), Airbnb’s Niido ($200 million) and Common ($40 million) become more popular, other entrepreneurs look to innovate, so a funding explosion was likely to happen.
Significant amounts of funding also went to apps and sites that deal with home selling, buying and real estate brokerages, including websites like Compass ($550 million) and LendingHome ($57 million). New web properties have improved on details and features. They allow potential buyers to go through virtual viewings and get a clear idea of what types of properties they’re really interested in. Ideally, this tech could cut down time spent on viewings, lead to quicker closings and free up enough time for real estate agents to take on more clients.
Some of the companies that were funded develop products that allow for direct online home buying and selling, including Propy ($15 million), Knock ($33 million) and the UK’s Nested ($59 million). They’ve raised questions and concerns about the role of the real estate agent in these digital days. Is it a dying profession?
I don’t think so. Sure, these direct real estate sales services connect buyers and sellers while still keeping the agent somewhat in the deal. At the moment, though, it doesn’t look like real estate agents will be phased out completely, though watch out for OfferPad ($230 million) or India’s PropTiger ($55 million), which allow for a complete break with the way real estate has been bought or sold for generations.
RE:Tech’s report confirms that tech development in real estate is happening at a rapid pace with the support of enormous venture capital funding. Regardless of digital innovation home buyers and sellers still need someone they can trust to support them. While today, the personal connection a buyer or seller has with his or her real estate team is difficult to duplicate, that might change when the next generation of technology (which includes robots) matures.