Multiple firms in the proptech space have found the value of partnerships with incumbent real estate companies. The relationships include corporations acting as fund LPs, co-investments and helping with product and service trials.
Fifth Wall has developed industry connections from the beginning and counts such companies as Cushman & Wakefield, CBRE and the Lincoln Property Company as partners.
Vik Chawla, a partner at Fifth Wall, says that working with these organizations helps get their portfolio companies’ feet in the door at these large market players.
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“I’m that much more certain the business will do well if I’m bringing the customers to the table myself,” Chawla says. “The vast majority of our strategic partnerships has the value for [corporations] manifested in the form of being customers of the companies in which we invest.”
For example, one partnership with home-building giant Lennar has resulted in several scaling projects with such Fifth Wall-backed start-ups as Opendoor, Blend and States Title.
“If at the time of my investment, I can add several million to double-digit millions of incremental revenue by consummating a partnership between a large corporate and a start-up, I’ve only improved the investment outlook that much more,” Chawla says.
He adds that these types of set-ups end up lowering the risks of some investments because even if the start-ups receive no financial backing from the large corporations, they benefit by having a stamp of approval from one.
“You couldn’t sell into those huge [companies], no other would adopt your product, if you didn’t have a key logo backing your business,” Chawla says.
Corporates benefit as well
Aaron Block, a co-founder and managing partner at MetaProp NYC, says that his firm looks to work with these companies as well in many of the same ways.
Block adds that these partnerships are important for the corporations, too. It gives these companies, that may not regularly have the time to mine the start-up scene, an opportunity to “peek around the corner” at what may be coming down the pipeline.
He adds that co-investing with these legacy companies not only helps the start-ups receiving the funding, but also allows the legacy companies to get their capital into the latest innovation and put some attractive opportunities on their balance sheet.
Gregory Dewerpe, founder of A/O Proptech, says that corporate involvement is also a focus of the firm, but in a slightly different way.
“We use a lot of our time to help the large incumbents innovate as well,” Dewerpe says. “We believe a lot in the power of the ecosystem. Proptech is not just about investing in new technology, but also making sure the industry grows.”
Dewerpe says that he finds the US model of partnerships with specific corporations less favorable because without perfect goal and strategy alignment, advancement can be slow and difficult.
Instead, he says that his firm’s strategy is more about working with corporations and start-ups on thought leadership about the industry and more generalized innovation.
“What’s important is to do everything we can to help the industry as a whole,” Dewerpe says.