Understanding the market, business models and investment opportunities in real estate tech.

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The Real Estate Technology Landscape
October 2019
Understanding the market, business models and investment opportunities in real estate tech
Thomvest Ventures Research

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I. Why should we care about the real estate sector?

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Real estate is the largest asset class in the U.S. — the current value of the U.S. housing
stock exceeds $33 trillion, and more than 6 million transactions occur annually
There has been a historical lack of investment in technology in the real estate sector —
creating opportunities for new software-enabled businesses
Transactions are inefficient, expensive and involve multiple parties — thus creating an
opportunity for new buying models
Real estate is one the few industries where brokers have not been dis-intermediated —
commissions exceed $80 billion annually
1
2
3
4
Things to like about real estate

4. 4
Sizing the residential real estate market in the U.S. — our largest asset class
6 million
Annual residential real estate
transactions in the U.S.4
$1.4T
Aggregate value of annual U.S.
home sales5
$33T
Aggregate value of existing
housing stock in the U.S.2
122 million
Occupied housing units across
the U.S.1
$1.6T
Annual mortgage originations
(purchase & refinance)6
1.2 million
New residential construction
starts per year3
1. As of 2017; Source: American Housing Survey
2. As of 2018; Source: Zillow Research
3. As of 2018; Source: U.S. Census Bureau
4. As of 2018; Includes both existing and newly constructed home sales; Source: NAR & U.S. Census Bureau
5. As of 2018; Source: National Association of Realtors
6. As of 2018; Source: Mortgage Bankers Association

5. Intermediaries lead to slow & expensive transactions
Realtor Mortgage
Broker
Mortgage
Lender
Title &
Insurance
Appraisal &
Inspection
InvestorsConsumer
Today’s buying process takes 90+ days and intermediaries capture 6%-12% of home value
30+ days to close a transaction10-30 days to secure a loan30-90 days to find a homeTime
Annual Market
Size ($B)
$80B $15B $35B $10B $25B $20B
Market
Participants
1M agents 300K brokers
100 major lenders
20K total
4 major title cos
2 GSEs
10 major investors
Cost 6% transaction 1% transaction 2% transaction 0.5% transaction 1.5% transaction
Source: National Association of Realtors, Mortgage Banking Association, Zillow Research, and Thomvest Research 5

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Why is now the right time to enter the space? A few macro tailwinds…
Consumers prefer digital experiences
Rapid generational acceptance and use of digital devices
Percent of Buyers Using Internet
in Home Search Process
(Source: National Association of Realtors)
2010 2016
67%
15%
% of Originations by Non-Bank
or Small Lenders
(Source: Inside Mortgage Finance)
1 Banks no longer dominate in mortgage
Originations have shifted to smaller, non-bank lenders
2
‘06 ‘10 ‘12 ‘14 ‘16 ‘18‘08
37%
95%

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Why is now the right time to enter the space? A few macro tailwinds…
Property & buyer data has been digitized
Startups can access & analyze rich real estate data
Case-Shiller HouseCanary
20,000
200
Number of data points used
for market forecast
(Source: Forbes)
Case-Shiller National
Home Price Index
(Source: S&P CoreLogic)
3 Rising prices require new financing models
Home affordability inhibits growth in first-time buyers
4
‘08 ‘10 ‘12 ‘14 ‘16 ‘18
138
212

8. 8
These macro trends create opportunities for startups
There are tremendous opportunities
for new entrants in real estate
Prefer digital experiences
Rise of non-banks
Data drives efficiency
Affordability crisis

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II. Defining the technology landscape

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We’ve seen a proliferation of technology companies across every aspect of real estate Click here for high-res version

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We’ve seen a proliferation of technology companies across every aspect of real estate Click here for high-res version

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Real estate technology companies have evolved to “own” more aspects of the transaction process
ValueCaptured
Complexity of Offering
COMPANIES
DESCRIPTION
STAGES OWNED
Companies manage the end-to-end
transaction process, from property search
to financing, closing and ongoing
management.
These companies take a more “asset
heavy” approach to the market than their
predecessors by taking on some purchase
or leasing risk.
As the name implies, these companies
seek to manage every stage of the
transaction.
COMPANIES
DESCRIPTION
Solve specific problems, usually for a
single party in the transaction flow.
STAGES OWNED
Single stage, such as payments
COMPANIES
DESCRIPTION
Sites aggregate real estate listings.
Visitors who indicate interest in a specific
property are passed on to agents.
STAGES OWNED
Typically the upfront search process
COMPANIES
DESCRIPTION
Companies building digital-first
experiences that streamline many of the
workflows associated with brokerage,
financing a home or property
management.
STAGES OWNED
Begin at search, but also take a
percentage of transaction revenue
The Point Solution Era
The Lead Gen Era
The Tech-Enabled Era
The Full Stack Era
The Four Phases of Real Estate Technology

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Multiple transformative business models are seeing success in the real estate sector
SaaS-Enabled
Marketplaces
Networked
SaaS
Pure
Marketplaces
Asset-Light,
Tech-Enabled
Examples: BuildingConnected,
Eden, PeerStreet, Zumper
Examples: Blend, CompStak,
Procore, SnapDocs, VTS
Examples: Airbnb, LiquidSpace,
Porch, RadPad, Roofr
Examples: Compass, LoanSnap,
Mynd, Hippo
Demand
Demand Supply
Supply
SupplyMarketplace
SaaS
Product
Marketplace SupplyDemand SupplyMarketplace
SaaS Product
Enables Transactions
Demand
Tech-Enabled
Service Provider
The real estate sector requires collaboration amongst multiple stakeholders,
which enables network-driven business models

14. Venture activity in the category has increased dramatically…
U.S. Real Estate Technology VC Investment by Year
(in Billions, USD)
Source: Pitchbook; as of 9/30/2019
$1B
$2B
$3B
$4B
$5B
$6B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD 2019
$5.54B
$3.95B
$5.39B
$2.25B
$4.22B
$1.65B
$485M$509M
$251M
$56M$66M$83M
20 21 23 41 65 98 165 182 211 223 262 191
Deal Count
Through first 9
months of 2019
14

15. 15
And round sizes are trending upward
VC Investment Distribution by Financing Amount
(% of Total Capital Raised)
Source: Pitchbook; as of 6/30/2019
20%
40%
60%
80%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
67%
49%
81%
49%
81%
60%
41%
46%
8%
14%
3%
17%
3%
9%
29%
29%
12%
12%
5%
10%
6%
7%
19%
6%
12%
13%
25%
10%
23%
11%
25%
52%
24%
42%
100%100%100%
$0 - $25M >$25M - $50M >$50M - $100M $100M+
$1.8M $1.2M $900K $1.0M $1.1M $1.0M $1.2M $1.5M $1.2M $1.6M $2.3M $4.4M
Median Deal Size
WeWork & Airbnb
raised $3B and $1B in
2017, respectively

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17 companies have raised between $100M and $250M in cumulative financing
Cumulative Financing of U.S. Real Estate Technology Companies
(in Millions, USD)
Source: Pitchbook, as of 6/30/2019; Note: this analysis is inclusive of debt capital raised
$100M
$200M
$300M
$400M
$250M
$229M
$217M
$180M
$161M$160M
$150M$145M$142M$137M$133M$131M
$106M$104M$104M$103M$100M

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18 companies have raised more than $250M in cumulative financing
Cumulative Financing of U.S. Real Estate Technology Companies
(in Millions, USD)
Source: Pitchbook, as of 6/30/2019; Note: this analysis is inclusive of debt capital raised
$2B
$4B
$6B
$8B
$10B
$8.39B
$4.4B$4.35B
$2.42B
$1.14B$1.11B$1.09B
$837M
$573M$433M$410M$335M$326M$314M$307M$306M$305M$270M

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Median valuations for real estate tech companies are also on the rise
Source: Pitchbook, as of 6/30/2019
Median Post-Money Valuation by Company Stage
(in Millions, USD)
$10M
$20M
$30M
$40M
'14 '15 '16 '17 '18 '19
$12M
$11M
$10M
$8M
$7M
$5M
'14 '15 '16 '17 '18 '19
$30M$30M
$19M
$18M$18M
$19M
$75M
$150M
$225M
$300M
'14 '15 '16 '17 '18 '19
$126M
$113M
$69M
$89M
$48M
$58M
'14 '15 '16 '17 '18 '19
$280M
$227M
$200M
$215M
$179M
$57M
Seed Series A Series B Series C

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Venture deals in the category are trending later stage
Source: Pitchbook, as of 6/30/2019
20%
40%
60%
80%
100%
2012 2013 2014 2015 2016 2017 2018 H1 2019
19%
8%9%10%8%8%
4%3%
23%
14%
6%
17%
11%8%
7%6%
21%
34%
30%
22%
27%
27%
27%31%
37%
44%
55%50%55%57%62%60%
Seed Series A Series B Series C or later
VC Investment Distribution by Stage
(% of Deals)
84 136 212 217 243 267 292 125
Deal Count

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There are several active real estate technology investors
Source: Pitchbook, as of 6/30/2019
Firm HQ Stage AUM Notable Real Estate Technology Investments
Investments in
Last 24 Months *
Metaprop New York Seed $40M BetterView, Bowery Valuation, Morty, Reside, Spruce, WhyHotel 17
Y Combinator Mountain View Seed $770M
AlphaFlow, Disclosure.io, Openland, RealtyBits, REZI, Riley,
SmartAlto, Starcity,
17
Fifth Wall Ventures Los Angeles Early-Mid $377M
Blend, Convene, Eden, Enertiv, Industrious, Lyric, Notarize,
Opendoor, VTS, WiredScore
11
Moderne Ventures Chicago Early $42M
Agentology, Envoy, GeoCV, Homebot, HomeSnap, LeaseLock,
Preclose
10
Revolution Washington DC Late $1.9B Convene, Habito, HomeSnap, IdealSpot, Quilt, WhyHotel 8
Khosla Ventures Menlo Park Early-Mid $3.1B Bungalow, Cape Analytics, Opendoor, Roofstock, WanderJaunt 6
Founders Fund San Francisco Early-Mid $3.2B Bungalow, Cadre, Compound, Home61, Notarize 6
Andreessen Horowitz Menlo Park Early-Mid $7.1B Airbnb, Cadre, Divvy, FlyHomes, Opendoor, PeerStreet, Point 6
Greylock Partners Menlo Park Early-Mid $5.6B Blend, REZI, Ribbon, Sonder 5
Ribbit Capital Palo Alto Early-Mid $710M Figure, Goodlord, Habito, Juniper Square, LendingHome 5
* Only includes investments in real estate technology companies

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III. Where do we see compelling opportunities?

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In which categories will the next unicorns be formed?
“House of Debt”
Alternatives
Certainty
as a Service
Space
Arbitrage
Better with
Software
Companies improving the
home buying & selling
experience
Companies developing
novel housing finance
models
Companies utilizing
space in novel ways to
meet changing demand
Companies leveraging
technology to improve
the transaction process

23. Certainty as a
Service
Companies improving the
home buying & selling
experience
- The buying process takes 90+ days
- Intermediaries capture 6%-12% of home value
- There average consumer takes 4.3 months to buy and 2.8 months to sell a home
- The average transaction cost is $20K
Pain Point — The buying and selling experience is expensive, time consuming & stressful
Why Now?
The majority of homes purchased are
found online
Availability of data to accurately price
homes
Percent of home buyers that found
their property online
Source: GeoPhy and MSCISource: National Association of Realtors
- Abstract the complexity associated
with real estate transactions by acting
as a single platform for buying or
selling
- These platforms revolve around a few
core concepts: search, inspection
pricing, financing & closing, which
make up the ecosystem of certainty as
a service
‘06 ‘10 ‘12 ‘14 ‘16 ‘18‘08
11%
‘04
50%
Traditional Appraisal GeoPhy AVM
6%
13%
Median absolute percentage error
(MdAPE) of home valuation
50% Lower Error

24. Founded: 2013
Employees: 1,000
Total Funding: $2.8B
Last Financing: Series E2, 3/19
Receive an instant offer to sell your home
Opendoor offers an online home-selling service that aims to
streamline the sales process down to a few days by presenting
home sellers with an instant, all-cash offer for their property.
Certainty as a
Service
Companies of Note
Potential Challenges
- These models have not been tested in a negative housing environment; for instance, if home-buying demand
falters due to higher interest rates and stock-market volatility, the trend toward instant offers from institutional
homebuyers could face a serious test
Founded: 2017
Employees: 48
Total Funding: $229M
Last Financing: Series A, 10/18
All-cash offers to ensure successful transactions
Ribbon enables home buyers to bid with cash backing, earn
discounts, guarantee a move-in date and secure financing before
or after the closing.
Founded: 2015
Employees: 129
Total Funding: $158M
Last Financing: Series B, 8/19
Brokerage combined with all-cash offers
The company operates a brokerage that offers home buyers the
ability to advance payment in cash to a seller, increasing the
likelihood of successfully closing a transaction.
Companies improving the
home buying & selling
experience

25. “House of Debt”
Alternatives
Companies developing novel
housing finance models
- Availability of credit has tightened: the average FICO score for conventional loans in July 2018 was 751,
more than 100 points higher than average scores from 2004 to 2006
- Following the housing crisis, the home ownership rate fell to 62% in 2015, down from 69% in 2005
- The home ownership rate is particularly low among millennials — only one-third of Americans under
35 own a home
Pain Point — Current housing finance models don’t meet the needs of many homebuyers
Why Now?
Record home prices prevent many
potentials buyers from transacting
For existing homeowners, wealth is
concentrated in their home value
Source: Housing Finance Policy CenterSource: ATTOM Data Solutions
72%
28%
Over 60% LTV
$3.1T
Below 60% LTV
$7.9T
- 58% of U.S. adults say they would
have trouble finding a home they
could afford in their city or county.
- An average wage earner would not
qualify to buy a median-priced home
in 368 of 440 counties analyzed *
- Authors Atif Mian and Amir Sufi argue
that the financial system must move
away from its reliance on inflexible
debt contracts
* Based on a 3% down payment and a maximum debt-to-income ratio of 28%
Housing wealth by loan-to-value ratio

26. “House of Debt”
Alternatives
Companies developing novel
housing finance models
Companies of Note
Potential Challenges
- These new financing models require significant consumer education, which may impact adoption
- There is a less robust universe of institutional investors for novel financing products, especially in a negative
housing environment
Founded: 2005
Employees: 151
Total Funding: $90M
Last Financing: Series B, 7/18
Sell a fraction of your home
Unison opens the door for more people to buy and own the home
they want with less debt through its HomeBuyer and HomeOwner
programs.
Founded: 2017
Employees: 40
Total Funding: $37M
Last Financing: Series A, 10/18
Lease-to-own home buying platform
Provider of a home ownership platform intended to allow renters to
build equity credits as they rent, enabling clients to close the
housing affordability gap.
Founded: 2018
Employees: 13
Total Funding: $12M
Last Financing: Seed, 7/19
A debt-free home buying solution
Instead of taking on a mortgage and debt, homeowners and
aspiring buyers can partner with Haus to buy what they can afford.
With this co-investing model, payments are 30% lower on average.
Founded: 2017
Employees: 53
Total Funding: $18M
Last Financing: Series A1, 1/19
Smart loans designed with borrowers in mind*
The company's mortgage services help consumers in buying or
refinancing a house by analyzing financial situations in seconds and
providing simple, tailored financing options.
* Note: LoanSnap is a Thomvest portfolio company

27. Space
Arbitrage
Companies utilizing space in
novel ways to meet changing
consumer demand
- Limited housing alternatives often tie individuals to a location and a job, which limits geographic
mobility — adults in the U.S. are moving at an annual rate (10%) that is at its lowest since the US
Census Bureau began collecting the data in 1946
- Cap rates are decreasing amidst rising asset prices, driving landlords to identify opportunities to
increase revenue per square foot
Pain Point — Consumer preferences have changed, and traditional rentals are insufficient
Why Now?
Consumers spend more time renting
prior to purchasing a home
Consumers are facing a growing rent
burden
Source: Pew ResearchSource: Zillow 2015 Home Buyers Survey
1975 2015
6.0
2.6
- In 2015, nearly 43 million American
households lived in rental units, an
increase of 9.3 million since 2004
- Since 2001, gross rent has increased
3% a year, on average, while income
has declined by an average of 0.1%
annually
- The rise of home-sharing models
enabled property owners to better
utilize their asset and provide renters
with more flexible living options
- This is true of both short-term stays
and long-term living arrangements
Median years renting prior to home
ownership

28. Companies of Note
Potential Challenges
- Many startups in this category take on master lease risk; while this limits their exposure relative to total property
value, there are still some concerns around the “inventory” requirements for scaling these businesses
- There are untested questions around long-term sustainability of companies in this space — is there existential
risk if market conditions change rapidly?
Flexible term co-living units in large complexes
The company rent out rooms in furnished and shared apartments
on flexible lease terms for a members-only community without any
broker fee.
Founded: 2016
Employees: 99
Total Funding: $29M
Last Financing: Series B, 3/19
Residential units converted to corporate housing
Furnished homes for business travelers in urban areas. The
company leases properties from homeowners, and makes them
available to corporate accounts.
Founded: 2015
Employees: 154
Total Funding: $65M
Last Financing: Series C, 12/17
Carefully curated living communities
Designer of community homes intended to provide an optimized
layout, fully-furnished private rooms, shared living spaces and
included utilities.
Founded: 2011
Employees: 406
Total Funding: $66M
Last Financing: Series A, 3/19
Space
Arbitrage
Companies utilizing space in
novel ways to meet changing
consumer demand

29. - Several companies have emerged that
manage one or more aspects of the
transaction process, including: data
collection, appraisal, inspection, title,
escrow, insurance, & notary
Better with
Software
Traditional real estate
offerings utilizing technology
for product & distribution
improvements over
incumbents
- Despite many technology advancements, closing costs still represent a meaningful share of total
transaction expenses in residential real estate
- Much of that cost directly enriches incumbents; for instance, title insurers only pay around 3 or 4
percent of their premium dollars on claims, compared to upwards of 80 percent across other
insurance products
Pain Point — Legacy vendors waste home buyers valuable time and money
Why Now?
Consumers have expressed a willingness
to use digital mortgage tools
Source: Boston Consulting Group
2012 2017
$8,082
$5,137
The cost of producing loans has
increased, impacting profitability
Source: Mortgage Bankers Association
- 79% of homeowners say they would
consider completing the entire loan
application process online
- 81% of borrowers prefer online loan
solutions, and 87% believe that those
online solutions are faster than
traditional processes
Per-loan production expense amongst
U.S. mortgage originators

30. Better with
Software
Traditional real estate
offerings utilizing technology
for product & distribution
improvements over
incumbents
Companies of Note
Potential Challenges
- In many cases, incumbents have lock-in to the agency channel which has historically been the primary source
of referrals for services like title, escrow, insurance, etc.
- State-by-state (or even county-by-county) regulatory hurdles may impede growth
Founded: 2015
Employees: 226
Total Funding: $40M
Last Financing: Series B, 10/18
Shared platform for managing closings
Qualia develops cloud-based real estate transaction management
software designed to simplify the real estate closing process.
Founded: 2016
Employees: 85
Total Funding: $19M
Last Financing: Series A1, 7/18
A digital-native title company
Spruce integrates with lenders to provide title insurance and
escrow services that radically simplify and enhance the closing
process for borrowers.
Founded: 2017
Employees: 13
Total Funding: $4M
Last Financing: Seed, 5/18
A better way to complete disclosures*
Glide has developed a simple and streamlined process for
completing seller disclosures online and preparing a home listing
for sale.
Founded: 2012
Employees: 406
Total Funding: $314M
Last Financing: Series E, 6/19
Enabling banks to offer digital mortgage tools*
Blend has developed a digital lending platform enabling financial
institutions to process loans faster, increase productivity and
deliver exceptional customer experiences.
* Note: Glide and Blend are Thomvest portfolio companies

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Real estate is inherently cyclical — most technology companies have not been
through a negative housing cycle
Real estate is a capitally intensive asset class — scaling businesses requires lots
of venture capital (see WeWork)
Real estate is operationally intensive asset class — yet to be seen if software
can drive meaningful efficiencies & automated labor-intensive processes
The transaction process is inherently complex relative to other asset classes —
not all purchases can be brought online due to asset heterogeneity
1
2
3
4
What are some of the risks associated with investing in real estate technology?

32. Thank You!
About Thomvest Ventures
Thomvest is a cross-stage venture capital with offices in
San Francisco and Toronto. Our firm has invested more than
$500M since its founding, and we primarily focus on
opportunities in the fields of real estate technology,
financial technology, cybersecurity and cloud
infrastructure. The capital we invest is our own, enabling us
to be more creative, flexible and patient with our
entrepreneurial partners.
For more information, visit our website or contact the
report’s author, Nima Wedlake.
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