Written by Nima Wedlake
Residential real estate has proven to be a strong driver of economic growth and individual wealth, representing more than 15% of our nation’s GDP. The combined value of housing in the United States reached a record-high $31.8 trillion in 2017, according to Zillow.
Yet until recently, venture capitalists rarely invested in the sector. In 2010, investment in real estate technology companies made up less than 1 percent of total venture capital (only about $30 million). By 2017, however, activity in the category skyrocketed — VCs invested more than $5.7 billion into real estate technology companies last year.
Why the sudden interest in real estate? In the wake of the housing crisis, many entrepreneurs recognized that software and data could materially improve an inefficient real estate market. Consumers have also demonstrated a desire to move many aspects of the home buying process online. As a result, we’ve seen a dramatic rise in the number of technology companies across nearly every aspect of real estate, from home listings, to lending, to property management and beyond.
We recently developed a market map to better understand the universe of companies in the residential real estate sector. We’ve shared the map above, which includes more than 140 companies across every aspect of the home buying and renting experience (available in PDF format here). A few recurring themes inform the approaches taken by companies on this map:
- Digitizing much of the transaction workflow leads to an improved consumer experience (see Blend, Opendoor, JetClosing).
- Data is being leveraged to better meets the needs of individual homebuyers and investors (see SoFi, HouseCanary, PeerIQ).
- The use of technology results in reduced costs for consumers and less capital flowing to intermediaries (see Figure, Lemonade, OpenListings).
- The combination of these themes (digitization, data, and cost reduction) is enabling new housing finance models (see Ribbon, Divvy & Point).
Below we’ve described the individual categories that are the building blocks for this market map. You’ll notice that several companies are included across multiple categories — that’s by design. Companies like Opendoor are reimagining the entire buying and selling process, wrapping the home search, financing and selling process into a single platform.