Keep An Eye On RET Ventures
John Helm is a good friend of mine. If you have met him, you can understand why (with all due respect to John) you might not have heard of him. He is humble, low key, and modest. But don’t let that calm and understated exterior fool you. John is wicked smart, incredibly connected in the tech world, hugely accomplished and surrounded by very bright, exceptional people.
Few people are as wired in the multifamily tech world as John, and now that he has over $100m in his war chest and the Multifamily sector is one of the hottest in CREtech, John Helm and RET Ventures is absolutely someone I would keep an eye on. I caught up with my friend recently to learn more about his latest Fund and future plans.
Why just Multifamily for RET Ventures?
The industry represents a large investment opportunity with well over 40 million rental units in the US alone, which grows to more than 50 million when including Canada. However, the majority of RE tech venture funding to date has gone into direct-to-consumer residential and CRE, not MF. This is because the MF/SFR (Single Family Rental) “rent tech” is a unique real estate category with differentiated and complex operational needs. The rent tech space represents a challenging and misunderstood investment area for generalist VCs given its slow sales cycle and fragmented structure. Successful rent tech investing requires a deep understanding of these challenges, developed through first-hand experience building and leading companies that have sold solutions directly to MF operators. Our LP base is comprised exclusively of the largest MF/SFR operators in the industry, representing nearly one million rental units. This is the largest group of institutional MF operators of its kind and offers a significant growth opportunity for any company seeking to break into the industry. We believe our model and expertise is the right combination to jumpstart innovation and technology adoption in the space.
What are the types of investments you will be targeting and at what stage are you looking to invest?
Broadly speaking, our mandate includes all real estate tech, though we prefer to focus on “rent tech.” RET Ventures invests at the Seed and Series A stages with checks ranging from $500k to $5m. Finally, we prefer to lead rounds, particularly when RET Ventures’ LPs are able to influence the outcome.
In terms of investments to date, we just led a $5M Series A round for SmartRent that was announced on November 13th. SmartRent’s smart apartment automation solution enables property managers and renters to remotely monitor and control smart devices, such as locks, thermostats and light switches, property-wide. With the help of RET Ventures and our LPs, the company has projected that it will grow its installed base from a handful of small pilots to over 15,000 units by year end, with an additional 35,000 apartments committed for 2019.
What are some of the hot themes in the sector?
A segment that we are already investing in, through companies like SmartRent, and that we expect to bust wide open is the IoT or “smart apartment” space. Today, fewer than 50,000 apartments in the US are truly “smart” from the owner/operators and resident’s point of view. However, we think that most of the industry will be smart within 5-10 years and that provides incredible opportunity for us and the entire industry.
Additionally, AI and machine learning is a huge topic across many industries and ours is no different. We expect to see these technologies leveraged for CRM and resident communications as owners and operators look to improve the quality and efficiency of resident communications. Also, resident amenities are a big topic and trend in our industry as well as a potential investment opportunity for us. As amenities become more important and tech-focused, there will subsequently also be a need for the software to power them.
Where are we in the MF tech sector overall? Do you sense momentum in the cycle? Are sites starting to scale?
Overall, we are at an inflection point in the industry as the emergence of new technologies that have yet to be broadly deployed in the real estate industry have created a massive opportunity for innovation. While there is a relatively low technology risk associated with new entrants in the RE tech space, there is significant go-to-market risk. At RET Ventures, we mitigate this risk through our deep connections and operational experience in the rent tech space and we are uniquely positioned to identify practical, adoptable new RE technologies and to expedite their deployment into the multifamily industry.
At the end of the day, owners are always looking for tech investments that improve operations or help generate additional revenues and this is where we can add exceptional value. We already see IoT/smart apartment technologies scaling well and will be committed to identifying market leaders within both existing and new, emerging product categories.
What are some of the challenges that startups need to be mindful of that enter this space?
There are three primary pieces of advice that I would give to all startups as they enter this space:
- Sales cycles are very long, and can last 2-3 years, so rent tech and proptech companies should keep their burn rates low while they work through the pilot process. Even the brightest entrepreneurs are dismayed to find slow adoption in this space and it is critical that these companies plan for extended sales cycles if they are going to survive.
- Smart entrepreneurs don’t let initial sales success with a few early adopters fool them into thinking they are ready to scale. The industry is very large and most multifamily property owners will take a more measured pilot and then a staged rollout approach.
- The best real estate technology companies serving the rent tech space focus on tangible benefits from their product, either quantifiable opex savings or actual revenue boosts directly tied to the solution. If I had a nickel for every company that told me they decreased turnover and increased occupancy, I’d be a wealthy man!
What’s next for RET Ventures?
Now that we’ve completely finished fundraising, we’re ready to do deals! Expect our investment pace to increase and for RET Ventures to be more visible in the industry.