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Are Strategic VC Investors Still Considered An Asset?
Defining the future of real estate
Franco Faraudo
March 08, 2024
Propmodo Daily
By Franco Faraudo · Mar. 8, 2024
Greetings!
When does strategic investment become a bad strategy? Most PropTech venture capital firms proudly showcase their high-profile investors, but a recently established firm has chosen to keep quiet about the source of their strategic funding. Today, we will look at why a VC wouldn’t want to advertise its LPs and what that means for the future of PropTech companies looking to scale.
Also, don’t miss our Real Talk interview with WireScore founder Arie Barendrecht. He discusses evolving tenant expectations, introducing their SmartScore for smart buildings, the shift in landlord responsibility for tech infrastructure, and his company’s aspirations to become a truly global standard across asset types beyond just offices and multifamily.
After years of uncertainty, a new hybrid work model is emerging. Offices have a fresh purpose as hubs of collaboration. Success in this new era depends on data-driven insights. Discover how to analyze building data for improved operations, higher revenue, and smarter upgrades in our latest Propmodo Research E-Book in collaboration with Cohesion.
Now, let's dig in!
Are Strategic VC Investors Still Considered an Asset?
A PropTech focused venture capital firm named Prudence just announced that it has raised $80 million for its next fund. This announcement isn’t huge news in the real estate space; at $80 million, this fund would be somewhat small in the grand scheme of the venture investment world, and Prudence is a newer, somewhat lesser-known PropTech investor.
But there is one difference between Prudence and all of the other strategic PropTech venture investors that have come before it. Prudence doesn’t list any information about the companies that have invested with them. They even went as far as to declining to name the investors they have partnered with, instead relying on a vague statement: “We have a really great investor base that’s made up of a combination of institutions, family offices, high-net-worth individuals, and I think, importantly in the sector we play in, strategic capital as well. We were happy to have the support of a lot of our existing investors and then a handful of new investors to sign up for this one as well.”
So, if Prudence has such a great investor base full of strategic capital, why would they not want to sing it from the rooftops? All of the other VCs in the space, like Fifth Wall, MetaProp, RET Ventures, Camber Creek, Moderne Ventures, and Alpaca, plaster their strategic partners all over their websites. The reason seems obvious: what PropTech company wouldn’t want a large potential client as an investor, even if it has to go through a fund manager?
My suspicion is that Prudence’s silence about their investors is a strategic choice. As nice as it might seem to have a large property company as an investor, I have heard from many founders that it can actually be quite limiting. If a company gets known as “CBRE’s investment” or “Greystar’s platform” then other property companies might not want to use them. This is also why I think we are not hearing about as many direct investments from property companies into startups.
Strategic capital can be a great way to bring industry expertise into a technology company. It can also be a good way to gain customers and, hopefully, brand champions. But as much as it might help get sales off the ground, it could end up limiting the size of the total addressable market. Real estate is a very defensive industry and sometimes companies would rather forego trying a new solution rather than supporting a competitor. While strategic investments from established players will likely continue flowing into real estate technology companies, these funding sources may become less prominently publicized.
Insider Insights
🕵️ Additional investigation: North Carolina’s Attorney General has started an official investigation into RealPage and “whether this company’s operations violate the law and raise rental costs for residents.”
🏰 Euro trip: The EU’s central bank has decided to keep its interest rates steady, citing wage growth as a growing concern for inflationary pressure.
Real Talk
Overheard
Asking rents make all the headlines, but they're only for new leases-- so they don't reflect what the average current renter actually pays. For that, we look to the in-place rents, i.e. the rent roll.
Like the CPI's shelter measure of "contract rents," in-place rents lag asking… twitter.com/i/web/status/1…
— Jay Parsons (@jayparsons)
3:10 PM • Mar 7, 2024
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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.
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