Technology

Driving Real Estate Tech Forward

• by Aaron Ru
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Utilizing a Collaborative Approach to Venture Capital By Aaron Ru Over the past decade, there has been an explosion in the number of technology tools available to the real estate industry. Innovation has occurred in all facets of real estate, from new methods of construction to improvements in the leasing process all the way to better technology to manage the full resident and asset lifecycle. Products such as smart locks and 3D tours have improved the touring and leasing process dramatically, enabling prospective residents to view a property either digitally or in-person outside the confines of a leasing agent’s 9 to 5 schedule. Better access to big data and new methods of modular construction have unlocked more efficient asset acquisitions and construction. On the property management side, owners have benefited from maintenance technology platforms that help facilitate better resident communication on maintenance issues and provide better service on the actual maintenance work through leveraging technology such as computer vision to better scope problems. Yet, even with a significant amount of real estate technology development from both startups and incumbents, adoption within the industry has been slower than expected. While some of this is a general technology implementation phenomenon — it is never easy for entrepreneurs to create a product that can perfectly meet end user needs and penetrate the market — there are a number of ways in which it is particularly challenging to roll out technology in the real estate industry. The Challenges of Real Estate Technology As opposed to most industries where operations are based out of either one or several large corporate offices, a huge amount of real estate operations happen at distributed portfolios across a region or country. This slows down tech adoption in a few ways. Let us consider an apartment owner-operator based in Dallas whose construction, leasing, and property management are happening across the eastern seaboard. There might be significant inefficiencies involved in property operations in North Carolina and Georgia, but because corporate decision makers are 1,000+ miles away, gaining approval for a tech expenditure is a challenge. Meanwhile, if the corporate COO is approached directly by a tech vendor and immediately buys into the vision of the technology, onsite teams in another state may be reluctant to use the tech. Even for tech that is easy to deploy, there are inevitably learning and implementation curves, and onsite teams will sometimes roll their eyes at corporate decisions without considering the long-term efficiencies. Another issue is that real estate tech is more than just technology. Typical software products are easy to roll out; once the company has signed up for fintech or martech tools, users receive temporary passwords, and they are able to log in in a matter of minutes. Real estate tech is much more complicated. Because of the nature of real estate, many tech solutions are not pure software, but have a hardware element to them. For example, SmartRent and other smart locks require physical installation in each unit. Similarly, some construction tech tools — even software-heavy ones — require a technician’s presence onsite. Effectively, this means that building a great software product is just the first step. Companies also need to exhibit excellent execution when physically deploying products, which makes the process of scaling that much harder for those technologies. A New Approach to VC Facilitates Improved Innovation and Execution These challenges are not minor, but they are solvable, and we have found that in our investing as a venture capital firm, we are able to create an approach that helps address and mitigate many of these issues. The core of our approach is our close relationship with 50+ institutional real estate firms, which goes all the way back to our founding in 2017. Seven years ago, real estate technology was just beginning to come into its own, but there was a significant disconnect between the “disruptive technologies” Silicon Valley venture capital firms were trying to fund and how the real estate industry actually vetted and deployed technologies to drive value. To address this, RET Ventures was founded with a unique model — instead of being backed by endowments or family offices like most VCs, RET raised money from residential real estate (multifamily and single-family rental) owners and operators. This created an ecosystem of innovation that helps us ameliorate many of the issues that slow down technology deployment. In addition to investing capital into our funds, most of our strategic investors are active partners who help us vet technology startups before we back them financially. More importantly, they typically collaborate with the leadership of our portfolio companies and provide them with guidance to help them deliver a product optimized for the way real estate professionals do business. This has tremendous value to any startup. New companies — whether in real estate or beyond — often pivot repeatedly as they struggle to establish product-market fit. The ability to have leading real estate companies giving them guidance is a huge advantage. With our investment capital coming from leading multifamily and SFR companies, RET is focused largely on technology for those property segments, and that focus helps alleviate many of the rollout and execution issues. Like any VC, we work closely with our portfolio companies to help them scale their growth. But unlike many VCs, we have a thorough understanding of the industry in which our portfolio companies operate. With three dozen plus real estate tech investments, our team has helped numerous startups gain the operational expertise required to roll out combined hardware/software products and get buy-in from groups of tech users distributed across many properties. The Importance of a Collaborative Approach If the approach we have taken has been innovative in the world of VC, the idea behind it could not be more simple: The real estate industry has to work collaboratively to drive real estate tech forward. Real estate has a host of unique processes, quirks and hurdles, and even brilliant tech entrepreneurs will not be able to figure them all out