NEW YORK — Investment dollars are flocking to real estate technology, and there are a few things companies can do to attract a piece of that pie.
That’s according to Chris Gough, managing director at investment banking firm GCA Savvian Advisors, who spoke at CEO Connect at the Inman Connect conference today. He represented dotloop when it was acquired by Zillow Group as well as ZipRealty when it was acquired by Realogy.
There have been six years in a row of consistent outperformance and growth in the real estate tech sector and some funds have been increasing their real estate tech exposure (examples are RRE Ventures and Thrive Capital), according to Gough.
“In 2016, we expect there will still be access to capital markets for $10 million to $2 billion deals,” Gough said.
“There are a lot of well-funded international portals and businesses that I could easily see looking into the U.S. market for stability,” he added.
He noted that 80 percent of the dollars that went into real estate tech in 2015 were either seed or Series A funding rounds.
IPO activity has slowed down in 2015 relative to 2014 in this space because companies like Airbnb and DocuSign have gotten financing that allowed them to remain private, Gough said.
“Most of the dollars in this space are going toward innovation enabling technologies” to help agents improve productivity and transaction volume, he said.
“The important thing to attract private equity is to provide a platform business and not just be a single-service provider,” he added.
Money is also going toward disruptive lending platforms and companies that keep the agent at the center of the transaction, according to Gough.
For real estate businesses, this means four things, Gough said:
- Shift your focus from growth to a scalable business model.
- Build a capital buffer for your company.
- Try to build beyond being a “one-trick pony.” Don’t focus just on real estate, but on real estate and mortgage or real estate and insurance or real estate and something else — that’s what’s going to get buyers interested.
- At least entertain the conversation of M&A (mergers and acquisitions) because you want to explore all avenues available to you.
When asked by Inman publisher Brad Inman whether there were some companies “on fire” to look out for, Gough stressed he wasn’t offering investment advice, but did highlight three companies:
Predictive analytics company SmartZip and customer relationship management (CRM) firms BoomTown and Commissions Inc. The latter is a “sleeper” focusing on higher productivity teams, Gough said.
Editor’s note: This article has been corrected to fix Gough’s title and to note that he expects there will still be access to capital markets for $10 million to $2 billion deals this year, not $2-$10 billion deals as stated in a previous version of this article.
