In this issue: GBIF's first exit, portfolio company progress updates, and our commentary on the rapidly-changing VC funding landscape.
Fund Update
GBIF’s First Exit! Honest Buildings merges with Procore
GBIF is excited to announce that Honest Buildings has merged with Procore, the leading software platform for construction management. This merger will allow Procore to create the construction industry's first full-stack platform to manage projects from start to finish.
We first invested in Honest Buildings in February 2017, and it has been a great experience to be a part of the company's growth story. GBIF warmly congratulates Riggs Kubiak, CEO and co-founder of Honest Buildings, and the entire Honest Buildings team on their drive and vision in getting to this point. We look forward to the continued success of Honest Buildings' tech under the Procore umbrella, and we are proud to welcome Procore to the GBIF portfolio.
Portfolio Company News
Neha Palmer joins ElectrIQ Power's Board of Directors
Neha Palmer, the Head of Energy Strategy, Global Infrastructure, at Google Inc., has joined as an independent director for ElectrIQ Power. Neha brings with her 20 years of experience in the energy sector and a focus on renewable energy. Neha currently leads the team that procures energy and electric infrastructure for Google's global portfolio of data centers. GBIF welcomes Neha to the ElectrIQ Power board and we look forward to working with her to grow the company.
Five Guys Chooses Goby to Automate Accounts Payable and Create Operational Savings
Five Guys, the burgers and fries restaurant franchise group, has chosen Goby’s invoice automation software to streamline, automate, and optimize their utility bill workflows for nearly 500 Five Guys locations across North America.
”We chose Goby's cloud-based technology suite for its sophisticated utility bill management process, which will replace the time-consuming manual tasks our accounts payable team members previously dealt with,” said Larry Hart, V.P. Finance and Accounting at Five Guys.
Goby’s software is a particular advantage when applied to utility bill data, which is notoriously more complex than other bills. It provides complete data capture with an extremely high degree of data integrity and a systematic analysis of performance.
CarbonCure Achieves Policy Win at US Conference of Mayors
Josh Stanbro, City of Honolulu Chief Resilience Officer; Kirk Caldwell, Mayor of Honolulu; Robert Niven, CEO CarbonCure at US Conference of Mayors in Hawaii
Cities and their governments have a tremendous opportunity to make an impact on climate action and reduce emissions via policy incentives that favour lower-carbon construction materials.
A motion that urges all cities to prioritize the use of CO₂-mineralized concrete in future city projects that require concrete was passed unanimously by the United States Conference of Mayors, which covers more than 1400 cities.
Kaarta Partners with Velodyne to Power its New Mobile Mapping Platform
Velodyne Lidar, Inc. announced Kaarta has included Velodyne’s smart, powerful lidar technology in Kaarta’s new Stencil 2-32 ground surface mapping solution. Equipped with Velodyne lidar, Stencil 2-32 accurately scans ground-level surfaces, mapping items such as curbs, manholes, signs, poles, and other features at a fraction of the cost of traditional mobile mapping systems. The Stencil platform helps enable city planning for infrastructure improvements as well as parking and traffic management.
Amatis Featured at IBEW Toronto Vendor Event
Carlos Calvo, IBEW Local 353 Facility Manager
The IBEW (International Brotherhood of Electric Workers) recently hosted a vendor event in Toronto to demonstrate new technologies, including Amatis' wireless lighting controls. Amatis' tech will be installed in the Toronto IBEW training center where over 11,000 members will be able to test the technology and start to specify it in their projects.
Five PropTech Predictions from DealPath CEO Mike Sroka
Mike Sroka looks to the future of PropTech and software innovations for Real Estate Management. Read his analysis of the rapidly-changing world of real estate software services and his predictions for the near future of the real estate world.
Network News
Grosvenor donates to the BOLT Charitable Foundation
GBIF's lead investor, the Grosvenor Group, has announced a generous donation to the BOLT Charitable Foundation. BOLT stands for Building Opportunities for Life Today. It aims to inspire a new generation of tradespeople and to provide access to education, training, and employment to under-resourced youth living in low-income communities, who wish to pursue a career in construction. Grosvenor's contribution will support six scholarships in the construction trades.
BOLT, which was founded by Leo Del Zotto of Tridel, was introduced to Grosvenor by GBIF. We're delighted to recognize Grosvenor's contribution to a worthy local community cause in our LP network.
Commentary
Follow the Money: Accelerating Fundraising, Financings, and Exits in PropTech
The PropTech sector is coming of age. The first half of 2019 has witnessed a step function change in capital flowing into our space, driven by strong demand from real estate owners to procure and deploy new technologies to improve their ROI.
“For years, real estate technology startups watched from the fringes as big banks and venture capital firms lavished attention on financial technology firms. Now, ‘PropTech’ has joined the party. Startups are raising more cash than ever while landlords are adopting a range of new software and hardware that is changing the way they do business.”
—Peter Grant & Konrad Putzier, Wall Street Journal, July 2, 2019
VC Fundraising Activity
An increasing amount of capital is flowing into dedicated PropTech funds, and their fund sizes are growing by orders of magnitude. This will allow funds to write bigger cheques to the growing cohort of larger PropTech startups that need later-stage VC rounds (C, D, E etc.), and make bigger bets on their most promising portfolio companies while maintaining healthy portfolio diversification. In combination, these factors will allow improved portfolio construction and better risk-weighted returns.
This is a positive development for all of us toiling in the PropTech trenches, and for Greensoil, it provides more co-investment dollars for existing and future portfolio companies. These fund closings further establish PropTech as a key vertical within VC, akin to FinTech 2 to 3 years ago. This opens up a broader universe of potential LPs for PropTech VCs, whose capital raising has been dominated up until now by strategic players in the real estate sector.
Here is a sampling of recent PropTech VC fundraising announcements:
Fifth Wall closed its second fund at $500M in July, more than double its first fund, which raised $212M in 2017.
Camber Creek announced the launch of its third fund with a $120M target size, quadruple the size of Camber Creek Fund II which was closed just last year in 2018.
Metaprop has announced the launch of their 3rd VC fund with a $100M target size, more than double the size of Metaprop Ventures II.
Corporate VCs are also getting into the act: JLL Spark was capitalized with $100M by parent JLL in 2018 and Nine Four Ventures, a unit of Laramar Group, started investing in 2018 and has made four investments to date.
Navitas Capital raised its latest fund in 2017, the $60M Fund II which was almost double the size of its first fund.
PropTech Company Financing
Financing volumes for PropTech companies set a torrid pace during the first half of 2019, up 60% compared to the same period last year in the US (see Chart 1).¹ The average equity deal size rose to over $20M in Q2.
Globally, the figures are also up over 2018, but not to the same degree. According to Unissu,² financing volumes reached $8.1B for the first half of 2019, up about 10% on an annualized basis vs. 2018. More noticeable in the global data is the increase in deal size, which rose to $31.4M for 1H 2019, almost double the size for all of 2018. This is the result of more capital going to later-stage deals, a great indicator of the PropTech sector maturing.
PropTech M&A Activity
Dollar volumes and number of transactions are also on the rise in the PropTech M&A market. Chart 2³ shows that 2018 in particular was up substantially with over $25B of transactions completed, more than triple the next highest year (2015).
M&A is coming from three areas: Real estate companies buying PropTech, PropTech companies buying other PropTech companies, and PE-led rollups (e.g. Lightbox).
Consolidation is expected to increase going forward in each of these categories as niche tech vendors become part of larger platforms and PropTech vendors reach sufficient scale to move the needle for potential acquirers. GreenSoil portfolio company Honest Buildings is a good example of this trend, merging with Procore to become part of a comprehensive software platform and application ecosystem for construction, encompassing subcontractors, general contractors, owners, all the way up to investors and lenders.
References:
Conferences
RealComm: June 13–14, 2019
George Fortin (PSP Investments), Anvesh Rai, and Jamie James at RealComm
In June, the GBIF team attended the RealComm conference in Nashville, Tennessee. Jamie James participated on a panel at the CIO Roundtable titled "PROPTECH Primer–A Starter Conversation on the State of the Industry." During the discussion, Jamie presented GBIF portfolio companies Kaarta, iLLUMA-Drive, and Cybeats. He was joined by representatives from MetaProp and Brookfield.
GBIF Principal Anvesh Rai was a judge on Launchpad Showcase alongside representatives from Prologis Ventures, Blackstone, Brookfield, MetaProp, Building Ventures, Plug and Play, and Pegasus Capital Advisors.
Proptech Toronto: June 25, 2019
In June, the GBIF Team attended Proptech Toronto, sponsored by Deloitte and OREA.
Anvesh Rai participated on a panel titled “Perspective from Venture Capital” along with representatives from Venturon/ National Homes, Alate Partners, and Plaza Ventures.
Upcoming Conferences: Find us there!
Real REIT: September 5, 2019
North America Smart Energy Week: September 23–26, 2019
CREtech New York: October 16–17, 2019
MIPIM PropTech NYC: November 12–13, 2019
What we’re reading
The Hotel Hackers are Hiding in the Remote Control Curtains –Bloomberg
"Back doors to your personal data can be found in everything from smart fish tanks to Wi-Fi pineapples."
Driverless Cars Arrive in New York City –New York Times
"Six autonomous cars will shuttle passengers around the Brooklyn Navy Yard for free."
Momentum builds for automation in construction –WSJ
"Investors including Goldman Sachs are pouring money into construction startups, betting that the industry is on the verge of sweeping changes."
Amazon’s most ambitious research project is a convenience store –Bloomberg
"Jeff Bezos and his company have spent seven years and hundreds of millions of dollars getting rid of cashiers. Will it pay off?"
The hidden costs of automated thinking –The New Yorker
"Overreliance on artificial intelligence may put us in intellectual debt. In some cases, we rely for decades on knowledge that's not fully known."
Toronto Leads Construction in North America
In commercial real estate consultancy Rider Levett Bucknall's (RLB) latest Crane Index report, Toronto had the most cranes in operation in Q2 2019 at 120, more than double the number of the runners-up (Seattle and Los Angeles, tied at 49 each).
