Real estate is often the largest asset people own. But when it comes to venture investment, giant bets in the space often don’t work out.
The list of failures and underperformers from the frothy investment period a few years ago includes many exceptionally well-funded real estate plays. Examples include WeWork, ibuyers such as Opendoor and Offerpad, and construction industry disruptors like Veev and Katerra.
More recently, as investors put dry powder to work at the intersection of artificial intelligence and real estate, we’re seeing a less capital-intensive dynamic play out. Deals are getting done, but rarely at unicorn valuations.
So far this year, a little more than $200 million has gone to startups applying artificial intelligence to real estate-related sectors like property management and construction, per Crunchbase data. Investment is on pace to exceed last year but remains below prior highs, as charted below.
Funded startups from the past year are a varied lot, spanning sub-sectors including rental management, drone-delivered site inspections, and building energy efficiency.
The largest funding recipient of the past year, New York-based EliseAI, raised $75 million last summer for an automation platform for the housing and healthcare industries. Its AI-enabled property management tool handles tasks such as rental inquiries, tour scheduling, maintenance requests and other routine tasks.
More recently, Santa Monica, California-based Zeitview landed $60 million in a March financing to provide drone aerial inspections for use cases including construction and building management.
Montreal-based Dcbel was another strong fundraiser, securing $55 million this month to scale a system that connects a home’s energy devices to smart grids and energy markets.
We’re also seeing a sizable pipeline of smaller rounds. Among companies funded this year that straddle AI and real estate, the median round was about $4 million.
Deliberately smaller
Commonly, we see reductions in total funding and smaller average round sizes as a sign of pessimism around a sector. For real estate, however, there’s a case to be made that venture investors still like the space, just not many of the capital-intensive business models popular during the boom years.
“It frustrates us to see dollars improperly allocated to our sector,” said Gavin Myers, managing partner at Prudence, an early-stage venture firm largely focused on real estate and construction.
Yet while onetime unicorns in i-buying and other real estate-adjacent areas may have faltered, Myers said he’s enthusiastic about deal flow in other emerging areas, in particular tools that add much-needed efficiencies in areas such as construction, real estate sales and building management.
For the time being, he said, “there’s more demand for solutions than supply of good solutions.”
The firm’s most recent investment along these lines was a $4 million March seed round for Uniti AI, an AI-powered real estate leasing agent. It’s also active on the building side, including participating in a $13.5 million Series A investment last year for Planera, which develops software for sharing information between the office and field in construction projects.
In addition to seeing strong demand for AI tools, per Myers, another advantage is that founders are able to use AI in product development to get to market faster and more cheaply than previous generations of startups.
Exits
While the pace of large startup exits has picked up in recent weeks, real estate-related companies haven’t been among the participants.
That said, we did see a unicorn-scale IPO by one major player with ties to the space — home service contractor platform ServiceTitan — in late 2024. Although down from their highs, shares have held up pretty well, with the Glendale, California-based company recently valued around $8.5 billion.
Looking ahead, there’s certainly no shortage of massive real estate-related revenue streams for startups to tap into. In fact, with construction spending on the rise, rents hovering close to all-time highs, and home maintenance costs higher than ever, one could argue that opportunities have never been bigger.
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Illustration: Dom Guzman
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