Real Estate Startups Navigate a Changing Funding Landscape
Recent data indicates a decline in venture funding for U.S. real estate-related startups. However, not all areas are suffering. Several sectors remain popular with investors, driven by the current market conditions characterized by higher lending costs, declining affordability, and homeowners less willing to sell and relocate. This is a marked departure from the low-interest rate environment and active sales of the past.
Crunchbase data reveals four key areas where investment is still flowing: home equity financing, rental management solutions, eco-friendly building technologies, and tools to streamline construction processes. Here’s a look at which companies are securing funding in each category.
Home Equity and Alternative Financing
Homeowners who purchased property when prices and mortgage rates were lower are often staying put, and many have substantial home equity. This situation has spurred investment in startups offering homeowners ways to access this equity. There’s also increased funding for tools to simplify homebuying and selling in this more challenging financial climate.
Here’s a snapshot of companies that have secured funding in this area:
- Splitero: This San Diego-based startup focuses on home equity investments, allowing homeowners to receive cash in exchange for a share of their home’s future value and secured a $300 million strategic investment.
- Unlock: This company offers home equity agreements, providing cash in exchange for a portion of the home’s future value. They received a $30 million Series B round in September.
- EasyKnock: This company is a provider of sale-leaseback financing, offering homeowners another way to access their home equity. It raised $28 million in Series D funding in February.
Rental Management Solutions
With prospective homebuyers priced out of the market, the number of renters is growing. U.S. Census data shows roughly 43.5 million occupied rental units, about a third of all occupied homes. Along with the increase of renters, the median rental price across the U.S. has also increased.
Rental-focused startups are also experiencing increased funding rounds. Here are some examples:
- Bilt Rewards: This New York-based company offers a loyalty points program for renters, redeemable at local businesses. It secured $150 million in August, bringing its reported total funding to $563 million.
- Rentberry: This platform helps renters find properties and negotiate terms. It recently raised $90 million in a Series A round.
- EliseAI: This startup develops conversational AI for property management and picked up $75 million in an August Series D.
Eco-Conscious Homebuilding and Improvements
The real estate industry is estimated to contribute around 40% of global combustion-related emissions. This includes carbon emissions from construction, existing building operation, and maintenance. As such, startup investors are directing capital toward companies developing solutions like lower-carbon cement and energy-efficient heating and cooling systems.
Here’s what the funding landscape looks like for environment-conscious startups:
- Several companies are developing clean concrete. Sublime Systems and Fortera respectively secured rounds of $85 million and $75 million.
- Quilt: This Silicon Valley-based company produces electric heat pumps for room-by-room temperature control. It raised a $33 million Series A round.
- Sealed: This startup enables homeowners to carry out home weatherization and energy upgrades and closed a $30 million Series B.
Streamlining Construction
Most builders agree new construction is overly expensive and time-consuming. Surging building material costs, amplified by inflation, and complex regulations contribute to the problem. Consequently, there’s significant funding directed toward tools and platforms aimed at making the construction process easier and less costly.
Here’s a look at some of the companies:
- PermitFlow and GreenLite Technologies: These companies offer tools to expedite the construction permitting process. PermitFlow raised a $31 million Series A in February, while Greenlite secured $28.5 million in September.
- HighArc: This homebuilding automation platform developer, based in Durham, North Carolina, secured $53 million in Series B funding.
Adapting to the Market
Ultimately, startups must innovate to address real-world market conditions. The companies receiving funding in these key areas are focused on solving problems related to affordability, rising building costs, and the general slowdown of sales. These offerings, whether facilitating access to home equity without selling or assisting builders in simplifying construction while reducing their carbon footprint, are likely to remain in demand regardless of market cycles.
