Real Estate Startups Navigate a Shifting Investment Landscape
Recent data suggests that while overall venture funding for U.S. real estate-related startups has cooled down, certain segments are still appealing to investors. This analysis, based on Crunchbase data, identifies four key areas that continue to draw investment: home equity financing, rental management, eco-friendly building practices, and tools designed to streamline construction. These trends reflect the current real estate market, characterized by higher borrowing costs, reduced affordability, and a decline in homeowner mobility. This marks a significant shift from the low-interest rate environment and robust sales of just a few years ago.
Let’s explore the startups receiving funding in each of these categories.
Home Equity and Alternative Financing
With many homeowners remaining in their homes due to high prices and interest rates, and with substantial home equity accrued, startups are capitalizing on the demand for accessing this equity. Investment is flowing into initiatives that offer homeowners various options for extracting cash from their properties. Additionally, tools aimed at simplifying the homebuying and selling process amid challenging financial conditions are also attracting capital. Here are six companies that have secured funding this year:
- Splitero: This San Diego-based startup, which focuses on home equity investments, received a significant $300 million strategic investment from Antarctica Capital. Home equity investments provide homeowners with cash in return for a portion of their home’s future value.
- Unlock: The company offers home equity agreements, and received a $30 million Series B investment in September.
- EasyKnock: This provider of sale-leaseback financing secured a $28 million Series D round in February. Through this option, homeowners can access equity from their homes while remaining in them.
Rental Management’s Rise
The rental market is experiencing growth as potential homebuyers are priced out of the market. Census data indicates roughly 43.5 million occupied rental units in the U.S., which is about one-third of all occupied homes. At the same time, rental prices are increasing; according to Zillow, the median rental price is currently $2,050. The surge in prices between 2021 and 2023 has not yet subsided in many major markets. This situation seems to favor startups focused on rental services, as a number have successfully closed sizable funding rounds this year.
Here are eight companies that have received funding in this sector:
- Bilt Rewards: Based in New York, this company developed an app allowing renters to earn loyalty points that they can redeem at local businesses. The company secured $150 million in August, bringing its total funding to $563 million.
- Rentberry: A platform designed for finding rentals and negotiating lease terms, Rentberry received $90 million in a Series A funding round in September.
- EliseAI: This startup, which is developing conversational AI for property management, secured a $75 million Series D round in August.
Eco-Conscious Homebuilding and Improvements
The real estate industry accounts for approximately 40% of global combustion-related emissions, including emissions from construction, operations, and maintenance. This has led to increased investment in companies developing solutions such as low-carbon cement and energy-efficient heating and cooling systems. Here is a selection of nine companies funded this year in this arena:
- Clean Concrete: Four of the companies on the list are focused on clean concrete technology. Sublime Systems and Fortera, were the largest recipients, securing $85 million and $75 million respectively.
- Quilt: This Silicon Valley-based company, which produces electric heat pumps for room-by-room temperature control, raised $33 million in a Series A round.
- Sealed: A startup focused on making home weatherization and energy upgrades easier, closed a $30 million Series B round.
Streamlining Construction
The construction sector faces challenges, including high costs and lengthy project timelines. Inflation has significantly increased the costs of building materials, with a 38% surge since the pandemic, according to the National Association of Home Builders. Regulations also contribute to rising costs, accounting for nearly 25% of the cost of a single-family home. Accordingly, investments are flowing into tools and platforms aimed at streamlining planning, permitting, and the construction process. Here are eight companies in this area that received funding this year:
- PermitFlow: This company, focused on making it easier to obtain construction permits, secured a $31 million Series A round in February.
- GreenLite Technologies: Also aiming to streamline the permitting process, Greenlite secured $28.5 million in a September financing round.
- HighArc: The developer of a homebuilding automation platform, HighArc, in Durham, North Carolina, secured $53 million in Series B funding.
Adapting to the Current Market
Ultimately, startups must respond to real-world market conditions. The current circumstances, marked by reduced housing affordability, increasing construction costs, and slower sales, are driving innovation. The companies securing funding are addressing pain points within these areas by developing products that offer homeowners options for extracting equity without selling, and by providing builders with tools to streamline construction and decrease their carbon footprints. The success of these offerings may hinge on their ability to continue attracting demand regardless of market fluctuations.
