Credit: Brendan Wallace is a Co-founder and Managing Partner at Fifth Wall. Brendan was Co-founder & CEO of Identified, a data & analytics company focused on workforce optimization that raised $33 million of venture capital and was acquired by Workday (WDAY) in 2014. Brendan co-founded Cabify, the largest ridesharing service in Latin America. Brendan has been an active angel investor and manages one of the largest syndicates on AngelList, having led over 60 angel investments including Bonobos, Dollar Shave Club, Earnest, Philz Coffee and Zenefits.
Brad Greiwe is Co-Founder & Managing Partner at Fifth Wall. Brad is a Co-founder and Managing Partner at Fifth Wall. Brad is a Co-founder of Invitation Homes (NYSE: INVH), a multi-billion dollar owner and operator of single family rental properties backed by The Blackstone Group. He served as CTO and developed a proprietary technology stack to support the valuation, acquisition, rehabilitation, leasing, and professional management of 50,000+ homes in 13 major markets across the U.S. and helped Invitation Homes become the most dominant technology-forward brand in the single family rental category.
How did get your start in the venture capital community?
When thinking about how to build a new model of venture capital, we saw a lot of undifferentiated, generalist VCs fighting for dealflow and often “winning on price” in an increasingly competitive VC market. These generalist VCs lacked the deep industry expertise and relationships to truly add value to their portfolio companies in particular industries. Real estate technology, as one of the largest subsectors of the tech industry, was perhaps the most obvious example of this: generalist VCs couldn’t really help early stage real estate technology companies grow and scale. Entrepreneurs didn’t just need capital they needed strategic partners that could truly help them scale. And yet we couldn’t identify a single real estate technology focused VC fund, despite the fact that real estate technology has produced many of the largest private companies of the last decade like WeWork and Airbnb.
That’s when we decided to build a different kind of VC fund premised on deep specialization in one sector, what we define as “Built World Technology” covering real estate, hospitality, retail and construction tech. And we decided to raise half of our $212M first fund from the single largest owners of real estate who could act as “Kingmakers” for the early stage companies we’re investing in.
What’s a day in your life as a VC like?
Our days at Fifth Wall are a bit different than days at a generalist VC. Most generalist VC spend their time sourcing deals and fighting to get into the best deals, often times simply by paying the highest price. The best funds in the Valley like Sequoia, Benchmark, etc. do not have trouble accessing elite deal flow. However, the vast majority of generalist VCs are largely undifferentiated to entrepreneurs and as such they have been reduced to a simple playbook: paying the most money and the highest valuation to win deals.
By contrast, at Fifth Wall we have the benefit of having the largest owners of real estate as LPs and having a major real estate LP across every major subsection of the industry: CBRE (brokerage), Prologis (industrial real estate), Lennar (homebuilding), Equity Residential (apartments), Hines (office), Macerich (retail), Host Hotels & Resorts (hospitality). Fifth Wall’s LPs are the ‘must have’ customers and partners for real estate technology companies; their adoption of a particular technology can be game-changing and foreshadow adoption by the entire real estate market. As such, our time at Fifth Wall is spent understanding the technology needs and priorities of these strategic Anchor LPs in our fund. Often times our Anchor LPs will inform us that they plan on adopting or partnering with a particular startup. As a result, Fifth Wall really doesn’t have to spend a lot of time on deal sourcing as top deal flow is typically referred to us or entrepreneurs will seek us out.
How many companies have you invested in and what is your overall investment?
Fifth Wall has invested in 8 companies in its first year, representing about $80M of capital in its first year. Our deal flow is typically referred to us by our Anchor LPs, VCs, from brand awareness in the market or entrepreneurs will seek us out. Entrepreneurs appreciate the unique strategic value-add Fifth Wall can bring and we’re usually invited into rounds and don’t compete on price. The proof now is really in the performance of the fund and our track record as we’ve not only invested in most of the market-leading companies in our sector like VTS, Opendoor, and Clutter, but we’ve also been able to structure partnerships with our strategic real estate LPs that have rapidly accelerated their business.
What stage do you focus on and how much capital do you look to deploy for each portfolio addition?
Our value proposition to real estate technology companies is unique, we do not focus on a specific stage. Our focus is instead predicated on where Fifth Wall has: (1) a unique point of view on a company through our relationships with our strategic real estate LPs, (2) a unique ability to influence the outcome for an real estate technology company. In addition, often times our strategic LPs will co-invest alongside Fifth Wall in SPVs so we’ve invested as little as $500K in earlier stage companies and as much as $35M into more mature, later stage companies.
What matters to you most when evaluating a company as a potential fit for your firm and how does that relate to the ambitious companies that you have worked with in the past?
At Fifth Wall, we’re looking for companies that have the potential to reimagine some aspect of the Built World through technological innovation. Real estate is the US’s largest asset class representing 14% of the US economy – the largest single industry component of US GDP – yet, real estate remains one of the lowest spenders on IT and is clearly one of the least technologized industries. As such, Fifth Wall is looking for companies with ambitious founders looking to solve the major pain-points for landlords, property managers, tenants and consumers.
What advice do you offer to a first-time founder?
Our advice is specific to entrepreneurs in the real estate technology industry. It’s important to take the time to build relationships with your major, institutional customers early in the innovation process. Given the increased institutionalized and concentration of real estate ownership in a small number of major corporate landlords, it is really critical that early stage real estate technology companies look to acutely understand the pain points of these landlords. This is what Fifth Wall does vis-a-vis our investments: we serve as the connective tissue between new technologies and the major real estate incumbents that are potential customers.
What is the one common denominator that stands out to you across all great investments your firm has made during its history?
The success of Fifth Wall’s portfolio companies has in large part been driven the strategic partnerships Fifth Wall has structured between out strategic real estate LPs and the companies in which we invest. Sometimes these partnerships are as simple as a major enterprise contract being struck with an LP. Other times, these partnerships can be far more complex and multi-faceted like the broad strategic partnership Fifth Wall orchestrated between Opendoor and Lennar. That said, our greatest successes have been born from these partnerships, and connecting our real estate LPs with our portfolio companies to help accelerate growth has been our clearest differentiator.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
