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Early Stage Real Estate Tech Investment Thesis (Sept 2016)

Here is an example of a personal investment thesis that I created to share with venture capital firms. In this example, I provide my personal perspective on the real estate tech sector. For details on how I build this thesis check out my blog (https://goo.gl/CU4Qid).

Note: Some of the confidential information has been redacted for privacy.

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Early Stage Real Estate Tech Investment Thesis (Sept 2016)

  1. 1. Earnest Sweat | 2016 Prospective Venture Capitalist name@gmail.com 555-555-5555 Exploring the Real Estate Tech Industry Investment Thesis & Opportunities
  2. 2. REAL ESTATE TECH The Big Idea Placing property data on the internet has created a real estate market that is much more transparent & accessible. This process has shifted the way consumers, developers & property asset managers view operations. These trends coupled with rise in crowdfunding platforms creates a uniqueopportunity for Real Estate Tech solutions to meet the needs for digital natives. Emergence of big data demands shift in real estate professionals’ roles. The information divide between the industry & consumers has blurred. This has begun to cause real estate professionals to rethink how to remain relevant in this more transparent real estate market. Technology presents advantages & access for real estate investing. Professionals are limited in analysis due to Excel & other dated platforms. Data analysis tools can provide investment advantages, while investing platforms connect developers with new sources of capital. Consumers prefer finding real estate & space using tech instead of talking to brokers. As millennials take a greater role in the residential & commercial markets, their preferences will be more vital. More than 50% of search for homes on mobile & amongst that group, 26% end up buying a home. Source: Center for California Real Estate; FinLeap; US News. Earnest Sweat | 2016
  3. 3. REAL ESTATE TECH This Thesis is Predicated on 6 Assertions • Investing in the real estate asset class is more accessible through the emergence of crowdfunding. • More consumers use technology much more to make transactions & important purchases (i.e. purchasing home, finding rental). • Banking services use archaic & slow underwriting processes that cause transactions to delay or not close at all; Peer to Peer marketplaces use tech to make loans simple & fast, reducing lead times needed by banks. • Data on real estate & apartments are gathered more than ever & the capabilities of data analytics that are applied in other industries would make the real estate industry a lot more efficient. • Consumers are more accustomed to researching and conducting transactions online & on mobile devices. • Real estate has previously been an illiquid asset but thanks to digital marketplaces there is an opportunity to freely trade this trillion-dollar asset class. Therefore, there is a tremendous investment opportunity in early-stage startups addressing needs of new real estate consumers— providing access, customized & secure products. Earnest Sweat | 2016
  4. 4. REAL ESTATE TECH Data on Internet has led to more informed Consumers & Operators Startups like Realtor.com, Trulia, & Zillow placed historically inclusive data to the general public. This has resulted in more informed consumers in residential markets & realtors/brokers leveraging tech to differentiate themselves. Source: Properties Online. Earnest Sweat | 2016
  5. 5. REAL ESTATE TECH Thesis Definition This thesis defines real estate tech as intersections of analytics, marketplaces & business tools that provide either consumers access to transactions or real estate operators with products to run more efficient property portfolios. Technologies that abide by this definition may be crowdfunding platforms or property marketplaces,data analytics tools, shared economy marketplaces, & efficiency tools that address the fast paced needs of the consumers,developers, realtors, & portfolio managers. For instance, ReScour has built a data platform & decision engine that utilizes proprietary market analysis based on massive data aggregation to identify real estate investment opportunities. Earnest Sweat | 2016
  6. 6. 1. Transaction are traditionally slowed by a lack of information, which prevents buyers from conducting analyses or the lack of organizationwith needs for closing documents. REAL ESTATE TECH Need for enterprise tools that address industry’s inefficiencies 2. Real estate companies are not operating in an effective manner at the portfolio because they are not aware of the insights that macro data would provide. The business of real estate is less about managing physical assets & more about empowering teams of executives, investors, accountants, property & project managers, & third-party service firms to make complex, unified decisions. Effective real estate technology enterprise platforms will leverage access to data & solve the pain points of practitioners, including workflow, speed of transactions & transparency. The traditional maze of approvals, documents, messages & reports should become a logical set of inputs & outputs that can be remapped in a logical method with analytics & transaction tools. Property managers are looking for tools that help them optimize the revenue & cost levers, including energy management & flex space. The two pain points (on the right) present a the tremendous opportunities within real estate technology. Cause of Pain Points Earnest Sweat | 2016
  7. 7. REAL ESTATE TECH Technology provides more access for participating in asset class Source: Massolution; Forbes; Despite 49% of the world’s wealth being held in property, only 12.9% of the world has access to real estate investment. With the JOBS Act, crowdfunding provides more investors. Investors can benefit from marketplaces, which connect individual & institutional investors with property developers. The platforms solutions open a further source of financial capital for real estate developers (approx. $2.5B), & a new investment class for many investors— improving cost transparency & connecting new markets. Platforms need to specialize in specific markets/asset types where their developer partners can provide quality deals for the new segment of investors, who are looking to invest $5K or more. Earnest Sweat | 2016
  8. 8. REAL ESTATE TECH Value Proposition The value proposition of this thesis can be defined by access & actionable analytics, wherein data offers guidance on customized products, acquisition of customers, & security verification. As an example, Entertiv provides hardware & software tools that specialize in the collection, visualization & analysis of real- time energy data in commercial, multi-family & industrial buildings. While Offrbox offers a platform that empowers buyers & sellers of residential investment properties to search, make offers, & close transactions in a succinct manner. Lastly, WhoseYourLandlord is bringing quality to the rental experience by enabling renters to find their next home & to review their landlords & housing complexes. Earnest Sweat | 2016
  9. 9. 1. Realtors are still involved in 86% of all home sales in U.S. but they have not adopted much tech & are not providing the best service to a more informed digital consumer. REAL ESTATE TECH Investment Conclusion 2. Traditional property owners lack the internal expertise to create tools that leverage data & speed up transactions; market needs tools that suggest optimal deals & manages transaction process. I believe that the success of real estate startups will be a function of their analytic capabilities, as opposed to online information from traditional property owners in the residential, commercial or industrial markets. The proliferationof real estate information on the internet has created consumer demand and has resulted in an emergence of real estate tech startups. Yet the big data analytics strategies to create tools that enable property operators to make complex decisions & consumer facing access tools remain integral, & a function of an impressive founder’s execution. These factors should be evaluated thoroughly during due-diligence for early-stage real estate tech startups. These two conditions (on the right) present a tremendous opportunity in real estate technology. Key Market Conditions Earnest Sweat | 2016
  10. 10. REscour, Entertiv, Offrbox, & WhoseYourLandlord Startups of Interest
  11. 11. Significant Achievements & Opportunities: Using proprietary market analysis based on massive data aggregation, REscour helps identify investment opportunities. Based on a customer’s portfolio & market preferences, the program creates custom, tailored recommendations in real time. Commercial real estate sales in the U.S. is a $15 trillion industry with over $800B per year in transactions but it has experienced little innovation. It is a black box that is very opaque & hard to get the info for transactions. REAL ESTATE TECH REscour Investment Conclusion: This information is sufficient to prompt informal due-diligence. Overview: A data platform & decision engine that utilizes proprietary market analysis based on massive data aggregation to identify commercial RE investment opportunities. http://www.rescour.com Total Financing: Has raised $2.8M over 2 rounds. The investing group includes TechSquare Labs, Spider Capital, & Chamath Palihapitiya. Traction: REscour has developed a proprietary data pipeline that retrieves, classifies and geo-locates millions of data points from structured and unstructured data sources. Founder: Jake Edens (CEO, Co-Founder, xxxxx@rescour.com). Experienced COO of other startups, Georgia BBA, Georgia Tech MBA. Can make personal intro to CEO Source: Crunchbase; Company Website. Earnest Sweat | 2016
  12. 12. Significant Achievements & Opportunities: Sells a sensor-based system stationed in a building's breaker box that can tell how much energy each room is consuming in real time, so owners can cut those costs. Commercial buildings in the U.S. waste 30% of the energy they consume, according to the U.S. Department of Energy. The company has helped clients save up to 40%, with 12% on average, & paybacks typically under two years. REAL ESTATE TECH Entertiv Overview: Enertiv is a leading energy data and analytics company specializing in the collection, visualization and analysis of real-time energy data. http://www.enertiv.com Total Financing: Have raised $1.94M over 2 rounds. The latest round was $1.15M Seed round in September 2014. Investors include Vaidya Capital Partners, Techstars & R/GA Ventures. Traction: Have built hardware & software solutions that address: building energy management, occupant engagement, tenant sub-metering & billing, & measurement & verification. As of August 2014 the company had approx. $1M in revenue. Founder: Connell McGill (CEO, Co-Founder, info@enertiv.com). Project Manager at New England Consulting Group, Babson BA in Entrepreneurship. Source: Crunchbase; Crain’s; Company Website. Investment Conclusion: This information is sufficient to prompt informal due-diligence. Earnest Sweat | 2016
  13. 13. Significant Achievements & Opportunities: Offrbox has obtained SLA’s with numerous conferences, association influencers, funds & strategic partnerships including the Real Estate Investment Association & Silver Bay. The total value of U.S. residential homes equals $28T. There are 105M homes in the U.S. & 5M are sold each year. There is a lack of transparency & access during the home transaction process. REAL ESTATE TECH OffrBox Overview: Platform empowers buyers & sellers of residential investment properties to search, make offers, and close transactions in a few clicks. https://offrbox.com/ Total Financing: Have raised $500K in seed capital (July 2016) from two angel investors. Traction: Since the beta launch in July 2016, the platform has over 1,400 properties in 43 states with a market value of $50 million featured. Over 2K users have browsed the site & over 4K are subscribed to the startup's email list. Founder: Eric Andrew (CEO, Co-Founder, xxxxxx@offrbox.com). Real Estate Professional, Auction.com, Goldman Sachs, & Columbia BA. Source: Crunchbase; Company Website. Investment Conclusion: This information is sufficient to prompt informal due-diligence. Can make personal intro to CEO Earnest Sweat | 2016
  14. 14. Significant Achievements & Opportunities: The startup has won multiple pitch competitions. The team has completed the Dreamit Ventures & Comcast Ventures accelerator programs. $440B was spent on rent in 2014 & majority of renters (52%) are under the age of 30. WhoseYourLandLord is positioning itself as the go to rental platform for millennials. REAL ESTATE TECH WhoseYourLandlord Overview: Bringing quality to the rental experience by enabling renters to find their next home & to review their landlords & housing complexes. Also enables landlords to provide & use renter references. https://www.wylandlord.com Total Financing: WhoseYourLandlord has bootstrapped to this point. The team is currently raising $500K in seed funding. Traction: Since launching the startup in January 2014, the startup has displayed 27% MOM growth in users—equaling approximately 120K. The team has also developed partnerships with TransUnion & Allstate. Founder: Ofo Ezeugwu (CEO, Co-Founder, xxx@wylandlord.com). Inspirational Speaker & Temple BBA in Entrepreneurship. Source: Crunchbase; Company Materials. Company Website. Investment Conclusion: This information is sufficient to prompt informal due-diligence. Can make personal intro to CEO Earnest Sweat | 2016
  15. 15. Trust Stamp & Abra Non-Real Estate Startups
  16. 16. Significant Achievements & Opportunities: Uses over 200 public records and social data to provide reliable ID verification in under one minute for financial advisors or real estate agents meeting new prospects or clients. Trust Stamp is a Global Entrepreneur Partner of IBM from whom it has received $120K of in-kind funding as well as a Microsoft supported Biz spark Plus startup. The cyber security market is estimated to grow to $170B by 2020, at a CAGR of 9.8%. REAL ESTATE TECH Trust Stamp Overview: Guards against identity theft & friendly-fraud by providing a secure digital token & objective trustworthiness score using patented algorithms & AI resources. http://www.truststamp.us/ Total Financing: Have raised $1.3M in total over 3 rounds. The latest was a $1.1M Seed, September 2016, led by Second Century Ventures. Traction: Currently offered for U.S. Marketplace use as a web application. Anticipates international, iPhone & Android app scheduled for early 2017. Founder: Gareth Genner (COO, Co-Founder, xxx@gmail.com). Serial Entrepreneur, Educator & University of London JD. Source: Crunchbase; TechCrunch, Company Materials, Markets & Markets; Company Website. Investment Conclusion: This information is sufficient to prompt informal due-diligence. Can make personal intro to CEOEarnest Sweat | 2016
  17. 17. Significant Achievements & Opportunities: Users can fund their Abra wallets (through the app) immediately with their bank accounts, & send money completely free by just entering a phone number. The startup plans to use the Series A raise to expand to 20 countries by 2017. Mobile P2P payments will grow to $174B by 2019 & 30% of P2P volume will be paid via mobile, up from 1% in 2015. REAL ESTATE TECH Abra Investment Conclusion: This information is sufficient to prompt informal due-diligence. Overview: Abra is the world’s first digital cash, peer to peer money transfer network. Abra Tellers represent a global, shared network of consumers helping each other easily deposit & withdraw cash. https://www.goabra.com/ Total Financing: Have raised $14M in total over 3 rounds. The latest was a $12M Series A, September 2015, led by Arbor Ventures. Investors include Blockchain Capital, RRE Ventures & First Round Capital. Traction: Offered in the Philippines and expanded into U.S. in late 2016. The company generates revenue by charging a .25% fee to a user whenever they transact with an Abra Teller. Have tellers signed up in 80 countries. Founder: Bill Barhydt (CEO, Founder, info@goabra.com). Serial Entrepreneur, Startup Investor, Goldman Sachs. New York Institute of Finance. Source: Crunchbase; TechCrunch; Company Website; Business Insiders. Earnest Sweat | 2016
  18. 18. REAL ESTATE TECH Conclusion The future of Real Estate Tech is at an exciting point. I hope our paths intersect to build and fund startups that change the way individuals live, transact, & invest in properties for the next 30 years. LinkedIn For more context on my academic and professional experience, please check out my profile here. Medium I have written about my Real Estate Tech investment thesis & provided advice for founders. Check out #ReadingEarnest here. Twitter I have microblogged & shared articles on events impacting the Fintech sector. To stay informed please follow me here. Earnest Sweat | 2016