Proptech VC Fifth Wall Closes $866M Fund

Real estate industry technology VC Fifth Wall announced the final close of its Real Estate Technology Fund III. The total brought in of $866 million, combined with the $147 million European Real Estate Technology Fund that closed in February, makes just over $1 billion.

For comparison, Fifth Walls’ second technology fund closed in 2019 with $503 million in commitments. The firm also has portfolios in climate technology and retail.

As the Wall Street Journal notes, this is an uncertain and difficult time for commercial real estate, which means they have less money for technology and, so, there are challenges for proptech.

The bet for investors in such a fund at the moment is two-fold. One is an expectation that things macroeconomic conditions will change for the better in the near future. The other is that, when money gets tighter, the target customers are looking for ways to reduce cash burn, improve margins, and operate more efficiently. In theory, software businesses that

The new fund is the first from Fifth Wall that combines both early-stage and late-stage investment in two different parts: Fifth Wall Early Stage Ventures, L.P. (seed to Series-B) and Fifth Wall Fund III, L.P. (Series-C and beyond).

“Fifth Wall’s Fund III received commitments from existing and new investors across the globe, including Annaly Capital Management, Inc., Arbor Realty Trust, Inc., bpifrance through the Digital Funds of Funds, CBRE, CFG Bank and its wholly owned subsidiary Capital Funding, LLC, Cushman & Wakefield, employees of Northwood Investors, LLC, Equity Residential, Essent, Granite Properties, Hines, Invitation Homes, JBG SMITH Properties, Keppel Corporation, Koch Real Estate Investments, Lineage Ventures, Meritage Homes, The Moinian Group, Move, Physicians Realty Trust and PulteGroup, among others,” the firm wrote in its press release, adding that construction management vendor Procore, which was a portfolio company of a previous fund, also invested.

Fifth Wall said that when it started in 2016, “PropTech was an emerging category of venture with $4 billion of capital activity.” But the history of what would be called PropTech is older.

Proptech company Rentr has an interesting timeline of the category, going back to PC software in the [probably later] 1990s. Back then, it was probably written by value-added resellers of computers who also wrote programs for vertical industry markets.

But things have changed and software development these days is big and expensive business, not something a couple of people knock out in someone’s den. That’s a big reason why the investments are so large these days.