Investors are definitely warming up to the opportunities in proptech — technology applied to real estate. The numbers are still out on 2018 but over $12 billion was invested in real estate technology in 2017. Some early funds have been investing in the space for years already.
One such fund is Camber Creek. What makes Camber Creek so interesting is that its investors own, operate and manage over 150 million square feet of real estate in the U.S. Sure, this perspective helps in due diligence feedback, as the firm can solicit investment feedback from its LPs. But it also gives Camber Creek a competitive advantage because its investors also become paid users of its portfolio companies.
Jeffrey Berman, a general partner at Camber Creek, joins us on the podcast to discuss the genesis of the venture firm, as well as its investment methodology. My favorite part of interviewing investors is digging in to their portfolio companies — we do that as well.
Why invest in proptech?
Camber Creek invests in technology that’s purpose-built for the real estate industry. That means, really anything that can be accretive of value to the built world. If you think about your life — everything plays out in real estate. Things that don’t seem to be germane to real estate, like your internet connection or your mobile phone — these all play out in space. We invest in technologies that are creating behavioral shifts in how people use their space more efficiently or profitably.
In 2008 and 2009, the real estate industry was at an inflection point. Not a lot of deals were happening during the financial crisis. The idea that legacy properties would be competing against brand new towers made a lot of real estate people think about creating defensive moats around their properties.
We think technology could be the solution. Back then, if you had said proptech, people would have asked, “You mean a fax machine? Your laptop?” Now, it actually means something to people. It’s really only been in the last 18 to 24 months that the sector has exploded. That’s because so many real estate development firms are starting to understand that technology is no longer a nice to have but a need to have.
Where are you investing in real estate technology?
Our investments reveal themes that we believe will play out in large scale over the next number of years. One of our portfolio companies is Bowery, a tech-enabled appraisal firm. I could imagine readers saying, “Oh man, appraisals? So boring.” It is but it’s also something everyone in the real estate space has to go through.
If you think about it, the modality around appraisals hasn’t changed in decades. Someone shows up at a property, walks around with a pad of paper and maybe an iPhone, taking pictures and notes. But the appraisal process still costs thousands of dollars and takes weeks to produce.
Bowery’s founders realized there had to be a better way. It uses a natural language algorithm to cut down the time it takes to do an appraisal from two weeks to a few days — basically, 60 to 75 percent faster than a traditional appraisal using technology. They’ve grown fairly quickly since we invested in the firm’s seed round.
The macro theme we’re investing in is that technology will change the way real estate transactions are done.
Another company we invested in is TaskEasy, which leveled the playing field for small landscaping companies. When we looked at this company, it had software that gave enterprises large scale services on demand. When the company was founded, there were only four or five landscaping companies that could handle accounts at the national level. TaskEasy democratized that process so that small mom and pops could bid automatically on these much larger contracts.