Tag: proptech

• Canada’s proptech landscape

  

  The morning I attended the release of Venturon’s 2024 Sustainable Proptech Report. What’s great is that it includes a list of all the (known) companies that are active in this space in Canada. It also summarizes venture funding by region. Interesting to see Alberta punching above its weight and coming in second behind Ontario. It has roughly half the population of Quebec.

  

  As part of the event, the following companies also gave short presentations:

  • Panergy — they make a prefabricated insulated wall system
  • Darabase — they are creating an advertising ecosystem around augmented reality; one that will allow building owners to monetize in a new digital world
  • Axe Buildings — they make simple, prefabricated homes; they are optimizing for speed and price, not quality
  • QEA Tech — they use drones with thermal cameras to tell you where your building envelope is leaking and wasting energy

  I don’t know anything about these companies other than what I heard this morning, but all are working on important problems. Darabase is perhaps the most future oriented in that it appears to rely on AR / spatial computing becoming a thing. I believe this will happen, and so I found it particularly interesting.

  The 2024 report is available online, here.

  2024.10.08

• Thoughts on Opendoor Exclusives

  My most recent post about Opendoor, the so-called iBuying company, is about how it wants to become the “transaction layer for homes.” What that means is they would like to start facilitating third-party transactions between buyers and sellers, and move away (either partially or completely) from actually owning homes for a period of time.

  The company is still trying to sell homes that it purchased in Q2-2022, which, as we all know, was a very different kind of housing market. So by doing this, Opendoor would be both reducing the market risk that it takes on and making its business model less capital intensive.

  Knowing this, I actually think that “iBuyer” is the wrong moniker for their business. As I see it, the long-term objective is not to just be an iBuyer of homes. The objective is to ultimately facilitate transactions in a capital efficient kind of way. The point of iBuying is/was to seed their two-sided marketplace with sellers.

  As we have discussed before, two-sided marketplaces usually always have a chicken-and-egg problem. No sellers equals no buyers, and vice versa. So you have to figure out a clever way to attract one side. Of course, now that Opendoor has sellers, the company can start to aggregate the demand side (i.e. buyers). And that is exactly what it is doing with Opendoor Exclusives.

  Exclusives works like this:

  • The inventory consists of “off-market” homes that have yet to be listed on MLS
  • The homes are discounted about 2-4%
  • They are available for 14 days
  • You can’t negotiate the price — it’s first come, first served
  • If your appraisal comes in lower, Opendoor will price match
  • And finally, Opendoor will not pay any buyer commissions (which is reflected in the above discount)

  As I understand it, if the home doesn’t sell, it then gets listed on MLS and all of the normal terms and practices would apply. But before that happens, the key objective is to facilitate a quick transaction in one of two ways.

  The first way is for the seller to request an offer from Opendoor’s network of buyers. In this scenario, Opendoor never needs to own the home or perform any improvements (which is usually what it does when it iBuys). It is an intermediary earning some sort of take.

  The second way is for Opendoor to do its usual thing and make an instant offer to buy the home. But here’s the thing. With enough buyers on its platform and by creating a sense of urgency (hey, here’s a lower price!), presumably the idea is that it may never need to close on a number of these homes. It just needs to find another buyer within 14 days.

  If it works, this could be an interesting business.

  2023.03.22

• Opendoor wants to be a transaction layer for homes

  We have spoken a lot over the years about Opendoor. And for a period of time, iBuying seemed like a very good idea. Zillow go into it. Redfin got into it. Everybody was iBuying. But then this year everybody started losing money, mostly due to algorithms that could not contend with falling prices.

  It turns out that being a market maker for homes can be a tough business because there is a lag between when you buy the home and when you hope to sell it. And so right now, few people want to be an iBuyer. Zillow no longer does it. Redfin no longer does it. And Opendoor’s stock is, at the time of writing this post, down 87.19% YTD.

  It is pretty easy to be pessimistic on this space, and that pessimism may be warranted. Though it may not be. My thinking has always been as follows. The process of buying and selling a home will eventually move online. The industry is ripe for change and there is no debating that. The real question is: how the hell do you do it? Everybody, including me in my late 20s, has tried.

  Two-sided marketplaces are tricky, because you always run into a chicken-and-egg problem. If you don’t have buyers, no seller is going to bother with your real estate marketplace. And if you don’t have sellers (i.e. homes), no buyer is going to bother with your real estate marketplace. So generally speaking, the way to build a marketplace is to start with one side, somehow get them on and using the platform, and then open it up to the other side.

  And this is exactly what iBuying hopes to do. Today it is largely a tool for sellers. It is a tool that says, “I will give you instant liquidity for your home so you don’t have to worry or care about who might actually buy it.” This is, of course, convenient for sellers, which is why people have been using it; but it is capital intensive and, as we have seen this year, it transfers some risk to the iBuyer.

  In the world of Opendoor, they call this a first-party (1P) transaction. It is them buying directly from sellers. But the larger vision is for Opendoor to become more of a transaction layer and instead just facilitate third-party (3P) transactions. This is currently being done through Opendoor Exclusives and the objective here is to match buyers and sellers directly, so that Opendoor can avoid taking on the risk of actually owning homes for a period of time.

  Will this work? I don’t really know. But I do think it is exciting and I do think it is the way to think about what Opendoor is ultimately trying to do with their business.

  Reminder: I am long $OPEN

  2022.11.23

• DDG Partners + GS Invest = Azur

  Last week I wrote about a project in New York by DDG Partners called 100 Franklin. If you missed it, go here.

  I didn’t, however, say much about the developer. Though at the time I was wondering why their website was no longer up.

  DDG Partners is a firm that I have written about several times over the years. They are a firm that I have always admired because of 1) their commitment to design and 2) their vertically-integrated approach to development. They do things like design, construction, and asset management all in-house.

  So I was interested to learn that back in May they announced a merger with French real estate firm, GS Invest. Prior to the union, GS had a portfolio of more than 3 million square feet across Europe. The new investment and development company is called Azur.

  Also interesting is the fact that Azur has started making proptech investments. Their first investment is in a company called Whiterock AI.

  For more about Azur, click here.

  2021.07.26

• “As-is” residential real estate marketplace raises $80 million

  Sundae, which is a residential real estate marketplace that connects distressed sellers and/or dated properties with potential investors, has just raised $80 million in Series C funding. Since its founding in 2018, the company has raised a total of $135 million.

  The marketplace is largely targeted at investors looking to buy, renovate, and then flip off-market homes. The company has also said that it is looking to protect distressed and/or uninformed sellers from opportunistic buyers.

  The way it works is that Sundae lists the home and then aggregates demand from qualified local investors. These investors then bid against each other, in an auction, to buy the home. Presumably this is a good thing for homeowners.

  Once a bid has been accepted, Sundae will then advance $10k to the seller to help with moving and other expenses. Supposedly the company delivers, on average, about 10 offers within the first few days of a listing.

  Sundae appears to have a narrower focus compared to other real estate startups like Opendoor. This is a marketplace for “as-is” homes and a solution to “predatory wholesalers” who buy off-market and then quickly assign the paper.

  But perhaps this is just the start of more change in the real estate industry.

  2021.07.21

• Using Clubhouse to talk about real estate and proptech

  Okay, Clubhouse is pretty awesome. I participated in my first discussion room — thanks to my friend Evgeny, who has been a vocal supporter of the platform — and I have now seen the light. The topic was real estate and PropTech. And we hope to do it again.

  It feels a bit like Twitter to me, but obviously with audio and with greater controls and visibility in terms of who can participate inside of a discussion room.

  It also makes perfect sense to me that Twitter is piloting their own version of Clubhouse called Spaces. That feels like a natural extension and something that needs to happen. Perhaps some of the moderation features will also make their way into the rest of Twitter.

  As many of you already know, what makes Clubhouse unique is that the communication is free-flowing and impromptu. You are able to see what topics people are talking about and then jump in and out of those audio rooms, as well as invite people to join a discussion that you may be having.

  All of this makes the communication feel like you’re at a party or in an open office. Over there you can see/hear that someone is talking about the “Pensky file.” If that’s interesting and/or relevant to you, you have the option of jumping into that conversation.

  I wouldn’t be surprised to see some of these features and behaviors translated over into workplace collaboration tools. I think it would be helpful to see what other discussions are taking place within a team or company.

  Maybe if we made things a little more free flowing, we wouldn’t need so many damn Zoom meetings.

  2021.02.09

• The 25 top-funded proptech startups in Canada

  Proptech Collective has just published their inaugural 2021 Proptech in Canada report. Here are a couple of screen grabs that you all might find interesting:

  

  

  

  What these images should tell you is that the Canadian proptech landscape is fairly Toronto-centric, but that it’s also very much in its nascent stages. We’re just getting started here.

  I would encourage you to download a full copy of the report. It’s very well done.

  2021.02.08

• Systemizing Airbnb

  Wired recently published a long read called, “I stumbled across a huge Airbnb scam that’s taking over London.” Apparently the people who do these sorts of things on the platform (things that are both illegal and questionable) call it “systemizing.” This is the process of trying to create scale. Secure lots of units. Create a bunch of fake/duplicate accounts. And try and maximize revenue.

  This obviously runs counter to Airbnb’s mission of “authentic places”, “community”, and “local hosts.” But as Benedict Evans points out in his latest newsletter, “where there is money and people, there will be scams.” And Airbnb is obviously doing everything it can to quash this kind of activity, especially as it prepares for a possible IPO this year. The company has a policy of zero tolerance.

  Fraud and government regulation are likely to be the two biggest kinks to work out as the company gets ready for public consumption. I am sure an equilibrium will be found; it’s just going to take some time and a few lawyers. It goes to show you just how challenging startups can be when you combine digital (tech) and physical (real estate).

  2020.02.17

• Patch Homes announces $5mm Series A round to grow fractional home equity platform

  There are a number of home equity startups in the marketplace today.

  A few years ago I wrote about an alternative product to HELOCs or home equity loans, called Point. And earlier this year, I wrote about a startup, called Landed, that is helping “essential professionals,” such as teachers, with their down payments. They’ll contribute up to 10% of the value of a home in exchange for a share in any future gains, or losses.

  Today, another startup in the space — Patch Homes — announced a $5mm Series A round. From what I can tell, it appears to be similar to Point in that it involves the fractional sale of home equity. Though, to be clear, the model is distinct from the fractional homeownership that is popular in many high demand vacation destinations. Here’s a bit more on how the product works (source):

  The Patch model enables homeowners to “tap into” their home equity by selling 20–40% to Patch’s affiliate, Patch Capital, which shares in both the upside and downside. The homeowner remains in control of her or his home for the life of the relationship and exits via a sale or refinances in 7–10 years.

  While this product is not for all homeowners, it provides a new and important financing option. The Fed estimates that home equity ownership in the US is $15 Trillion. It makes no sense that the only financing options are additional debt or a complete sale of the property. Patch gives homeowners the option to de-lever their personal balance sheet or otherwise raise cash. Clients have used Patch proceeds for numerous reasons, the most popular of which are to pay off debt, increase liquid savings and finance home improvements.

  I am not surprised to see this gaining momentum. The biggest benefit is that it gives you partial liquidity (i.e. cash up to $250,000), without having to sell your property or take on additional debt service payments. It’s equity, not debt. Fred Wilson, an investor in the company, calls it fractionalizing home equity.

  2019.09.12

• The scale and scope of urban tech

  “Cities have become the basic platforms for global innovation and economic growth, supplanting the corporation as the fundamental organizing unit of the contemporary economy.” -Richard Florida

  Richard Florida and Patrick Adler of the Martin Prosperity Institute here in Toronto have been doing some research on what they are calling “urban tech.” They define it as encompassing the following industry sectors: co-living and co-working; mobility; delivery; smart cities; construction tech; and real estate tech.

  Here are the largest urban tech startups based on the amount of VC investment they have received:

  

  Below is how the space breaks down by sector. Mobility / ride hailing is the behemoth, receiving 61% of all VC investment. Food delivery is next. And “proptech” is at the bottom.

  

  Finally, here are the top “urban tech” cities. Beijing is right up there with San Francisco.

  

  For more information on the study, click here.

  Tables: CityLab

  2019.05.31