The global economy is going through, what feels like, a natural disaster. In a recent CREtech Talk: Perspectives in a Time of Uncertainty webinar, four of the most active investors in real estate tech, including Merrit Hummer of Bain Capital Ventures, Travis Connors of Building Ventures, Daniel Fetner of Corigin Ventures, and Dave Eisenberg of Zigg Capital, shared their views on the impact of the recent pandemic on the real estate tech industry, venture capital strategies, and offered tips & suggestions to real estate tech startups to help them navigate these uncharted waters. The discussion was lead by Steve Weikal, Head of Industry Relations at MIT Center for Real Estate.
“This is unprecedented in modern economic history where the revenues have gone to zero from what could have been exceptional growth prior to that,” according to Dave Eisenberg
And while the greater real estate industry is in a tailspin, some panic has started to set in, according to Eisenberg. “I think it’s highly divergent based on how exposed you are to the shutdown but there has been a tremendous demand shock.”
The conversation touched on almost every aspect of the pandemic’s impact on real estate tech, including a major shift in venture capital and investment strategies.
“The degree of panic really depends on each company's unique circumstances,” according to Merritt Hummer.
While the panelists seemingly agreed on the state of the macro real estate tech market, startups in the sector that were planning on raising capital may have to shift their strategies, especially those new to the venture space.
According to Eisenberg, companies that we’re planning to fundraise are close to panic because valuations have shrunk precipitously, capital markets have shrunk precipitously and debt markets have tightened.
“There has been a slow down in new investment activity with a pivot on focusing on companies in the portfolio,” according to Hummer.
While some investors have retracted term sheets, of the lucky 214 startups that raised capital in Q1 of 2020, according to CREtech data, there maybe be a divergence in philosophy between seed and late-stage capital allocation.
According to Daniel Fetner “...at a high level, a lot of our companies that raised funds in the second half of last year, they’d already ear marked the first half of 2020 for building product, and so, they weren’t reliant on incoming revenue as part of their burn calculation.”
“I think growth stage companies have the advantage in this environment of just in being able to offer more data to support a story of the resiliency in a downturn,” according to Hummer.
However, for early-stage startups that had planned on raising capital, it may be even harder than ever.
‘It’s hard for investors to develop relationships over Zoom. If you haven’t spent time with a team in person before, it requires a lot of extra conviction to make a fully remote investment decision,” according to Eisenberg
While the commentary was largely reflecting great concern among these industry leading investors, real estate tech startups that can demonstrate clear ROI and cost reduction may be able to survive, and in some cases, thrive in today’s market was a fairly universal consensus among the panelists.
“There are capabilities in the technology that are far ahead of what has been adopted by the market. People may have seen that before as a nice to have that they weren’t willing to do, now recolonizing that they need to add more automation to have less human dependency,” according to Travis Connors.