Proptech—computer technology aiming to increase efficiency and opportunities in commercial real estate—was primed to surge this year.
VC firm MetaProp was set for the rush. Today it announced the closing of its third real estate tech seed fund that, at $100 million, was oversubscribed. The MetaProp Ventures III, L.P. followed its $40 million second fund that closed in 2018.
According to the company, investors for the latest fund come from North America, Europe, the Middle East, Asia, and Latin America and own and manage 20 billion square feet of real estate. The group includes previous investors PGIM, Mitsui Fudosan, CBRE, Bridge Investment Group, Cushman & Wakefield, and JLL Spark. Among new investors are Ivanhoe Cambridge, Intact Ventures, Messer, and Ferguson in North America; DAMAC from UAE; Development Bank of Japan and Sumitomo Mitsui Trust Bank in Japan; Swire Properties of Hong Kong; Jakarta Setiabudi Internasional from Indonesia; South Korea’s Eugene Corporation; and Ananda Development in Thailand.
“We’ve done our first handful of deals [for this fund] already,” Aaron Block, co-founder and managing partner, tells GlobeSt.com. The strategy for each fund “is an extension of the predecessor fund.”
“We’ve done [almost] 140 investments just in proptech,” Block says. “What we have invested on is teams using tech to attack or improve unexploited opportunities in the real estate space.”
An important part of MetaProp’s strategy is to look at every function or task that happens in the lifecycle of a real estate asset. About a third of the company’s investments are in construction. Other investments are in areas like mortgages, insurance, and “other types that intersect with the built world,” Block says.
The reason for so many investments is that, in venture capital, nothing is guaranteed. The rule of thumb is that a third of the investments a fund makes will go bust, a third will make the invested money back, and a third do well.
“Each portfolio, you’ll get one, two, three, maybe four breakout profits,” says Block, whose firm does early-stage investment only. “That’s a foreign concept of many folks who spend their time in the later stages of investment.”
“We invested in a company called Avail out of our first form.” It had software to perform a suite of activities—finding tenants, examining credit histories, signing leases, and collecting rents—that a landlord must do. Move Inc, which operates Realtor.com, bought Avail at the close of 2020. That was a win.
Then there was someone out of a big consulting group that MetaProp backed. Coming from Europe, he knew of a financing approach like a reverse mortgage but leaving people debt-free.
“It’s not an industry with the best reputation,” Block says. The founder worked with others to develop the business plan, except they eventually concluded that the idea, although it worked in Europe, wouldn’t in the U.S.
“Sometimes it works out like with Avail and sometimes like our friend in consulting it doesn’t get there,” explains Block.
That’s why there’s always the next fund to think of, so a few more winners can make the investment pay for everyone.