One of the questions I get to ask each guest I interview on my podcast is how much money they’ve raised from venture capitalists. It’s a popular question these days in real estate technology for pretty obvious reasons. It feels like every other day we’re all seeing a headline about a new startup that’s raised another round for tens of millions and more.
But with all the focus on how much real estate technology startups are raising, is there simply too much focus and discussion on the amounts being raised? If you follow the industry trends (and even if you don’t), it sometimes feels like we’re reading a new headline everyday about someone raising a $$ million equity round and the next day another company secures $$ million in debt.
There’s much more than just the headline of how much money is pouring into real estate technology.
I decided that instead of me just giving my thoughts on the topic (which I have many, but am totally unqualified to be dishing out), why not ask the founders and investors from around the real estate technology scene to give their insights.
The idea is this article will serve as a valuable resource for those looking to begin the daunting journey of transforming real estate, in their own way, and doing so with the help of venture capital.
I asked each person the same questions, with some variations depending on if they are a founder, investor, or an executive.
- Has your company raised any money? or Have you invested in real estate technology?
- How much have you raised/invested?
- What do you wish you would have known prior to raising money?
- What should real estate technology founder know prior to raising capital?
- What advice would you give to founders looking to raise money?
Here’s how they responded:
As an Executive
What’s one thing you wish you’d known prior to your company raising any outside capital?
How best to begin working with new investors that are also industry experts. We have several investors that are real estate technology and real estate experts that add an incredible amount of value to our decisions and strategy, but we did not always know how best to work with them. I’m confident that we could have saved time and gone faster with some proven ways of bringing them into our team.
What advice would you give to other executives of real estate technology companies who are considering raising capital to scale their business?
Many times in real estate, we look only within the industry. Look for similar models and problems that have been solved in other industries to see what can be learned and applied to your company. That will give you both new ideas for scaling operations and for how to discuss real estate technology with potential investors.
As an Investor
How much have you invested in real estate technology?
$120,000
What should real estate technology founders know before they begin raising capital?
Many investors have been burned by outsiders coming into real estate and real estate technology without fully understanding some of the complexities in our market. Meet them where they are, acknowledge their past experiences, and be transparent about your team’s expertise.
What’s one piece of advice you’d give to real estate technology founders who are considering raising capital to scale their business?
Just because someone will invest in your company does not mean you should let them. Every dollar (or $100K) is worth the same amount. However, there are costs and benefits that come along with every investor. A good investor is like a good running partner. When there’s a good fit, both sides feel comfortable and glad to be helping the other one reach his or her goals. It’s essential that you get along well with the investors and trust them.
As a Founder
How much have your raised to date?
$10,000,000
What’s one thing you wish you’d known before having raised any capital?
It takes between 200 and 250 conversations with potential investors on average to close your first large round.
Is there anything you would have done differently?
I would have had more conversations weekly. The cadence I’ve found and operate at now is much different than when I was first raised capital years ago.
What advice would you give to other real estate technology founders who are considering raising capital to scale their business?
Find a mentor or coach that have successfully raised money for their own company when it was at a similar stage as yours.
How much have you invested in real estate technology?
> $20,000,000
What should real estate technology founders know before they begin raising capital?
Founder should have command over all aspects of their business (this is true across industries). Specific to real estate, we like to see founders who are very operationally-minded, i.e. those that demonstrate an ability to scale organizations while controlling cost. To help determine this, we dig deep into the company’s unit economics and try to understand how costs change as the business scales.
What’s one piece of advice you’d give to real estate technology founders who are considering raising capital to scale their business?
Have a crisp understanding of your use of proceeds for any fundraise. Also, for real estate technology companies that have a lending component, be able to demonstrate a command of the current and future credit facilities that the company will use to scale the business.
How much have you invested in real estate technology?
$1,000,000+
What should real estate technology founders know before they begin raising capital?
Perfect your vision, understand the market you are targeting better than your investors and provide a clear and simple path to revenue and profitability
What’s one piece of advice you’d give to real estate technology founders who are considering raising capital to scale their business?
The investors you choose will be with you for the good, bad and ugly as you scale your
Business. Be wise in who you choose to bring alongside you in this journey.
How much have your raised to date?
$5,000,000
What’s one thing you wish you’d known before having raised any capital?
Raise capital in the bay area and NYC only.
Is there anything you would have done differently?
Raise capital in the bay area and NYC only.
What advice would you give to other real estate technology founders who are considering raising capital to scale their business?
Raise capital in the bay area and NYC only. Get an advisor on board who in the last 18 months has raised at least twice what you’re looking to raise.
How much have your raised to date?
Confidential.
What’s one thing you wish you’d known before having raised any capital?
I wish I better understood the different financing vehicles (e.g. safe, common shares, preferred shares, convertible notes).
Is there anything you would have done differently?
I would have raised more in my first round.
What advice would you give to other real estate technology founders who are considering raising capital to scale their business?
Raise from people who believe in you, will support you, and aren’t out to trick you with deal terms that are not fair for investors and operators/owners.
How much have your raised to date?
Confidential.
What’s one thing you wish you’d known before having raised any capital?
Start building relationships and connections early on. Introductions take way too long time and you need access to at least 100 relevant investors once you’re ready to raise, to build and not miss a momentum. “Relevant” investors mean a lot as well-being “ready” to raise. In the research I also always check what are the LPs in the fund, especially if it’s a real estate technology fund.
Is there anything you would have done differently?
Yes, I’d invest more time in research and a couple tools to identify active investors in my space as well as 2-3 intro paths to each of them.
What advice would you give to other real estate technology founders who are considering raising capital to scale their business?
There are only six dedicated to real estate technology active investors, spread between SF, NYC and LA, thus you have to look at generalist investors. Your real estate technology startup might have an angle such as a marketplace, SaaS, AI, VR, thus looking at such investors makes sense. To me an important criteria was an investor to be a former entrepreneur previously. I’d recommend applying to NAR Reach program if your business is tailored towards agents.
How much have your raised to date?
We’re bootstrapped!
What advice would you give to other real estate technology founders who are considering raising capital to scale their business?
I would encourage other real estate technology founders to focus, especially early on, on customer acquisition and retention first when scaling their business. As long as you work hard to create a strong foundation to your business, the capital will easily follow. Plus it will make for a much more compelling statement to investors when you prove your traction and have great customer testimonials.
How much have your raised to date?
$5,000,000+
What’s one thing you wish you’d known before having raised any capital?
As an entrepreneur in active fundraising mode, it is inevitable to become laser focused on the goal of raising the capital and closing the round. That said, it is imperative that founders thoughtfully vet prospective partners, their investment thesis and strategy, as well as value proposition before you spend a significant amount of time engaging with each other. Fundraising is a hugely time-consuming, demanding, and expensive task for not only the founders, but the whole team. Choose the paths you wish to explore wisely.
What advice would you give to other real estate technology founders who are considering raising capital to scale their business?
When considering a top down, or bottom up approach to developing your target investor list, I suggest reaching out to companies whom you admire, who are one or two steps ahead in terms of stage, and with whom you can have brutally honest conversations with. Their feedback on who are great investor prospects will be invaluable as you begin your outreach. Secondly — don’t raise more capital, or raise capital sooner than required. These are expensive dollars for early stage companies, so only pull that lever when it truly makes sense.
How much have your raised to date?
$15,000,000
What’s one thing you wish you’d known before having raised any capital?
You need to architect your fundraising strategy ahead of time. In our early days at Onerent, we probably rushed the process a bit. It’s useful to think about the timeline for raising and plan the actions you’ll take to build momentum. This means plotting meetings in a short period of time and, ahead of time, doing tons of research on your target partners and your 2nd connections with them.
Is there anything you would have done differently?
As you fundraise, you’ll want to keep adding and changing slides in a pitch deck. We did a lot of that in our first rounds. But, we see better results when you actually hold the first meeting without a deck at all. Have it ready to go to send right before or after, but make the first meeting a conversation instead. Remember, investors need to find good deals. So you want to use your first meeting to tell the story of why your business will make them tons of money. Then, be prepared with the answers to every single question they could ask.
What advice would you give to other real estate technology founders who are considering raising capital to scale their business?
Make sure you’re spending time in the right rooms with the right investors.
Do not send a cold email blast to a list of investors.
Focus on a single, short and simple story.
Don’t raise money when you’re desperate—investors will smell it.
Practice with advisors, family, and friends. Gather feedback and iterate.
Talk about the future by leading with solid evidence of the past.
How much have your raised to date?
$2,325,000
What’s one thing you wish you’d known before having raised any capital?
Don’t raise too early! We were fortunate to be able to bootstrap our company in the early years. This allowed us to achieve a strong amount of traction and product market fit before raising outside venture capital.
Is there anything you would have done differently?
Honestly, we would have followed the same fundraising path. Bootstrapping a startup early on teaches entrepreneurs smart habits. Learning cost control and operational discipline will be invaluable as you scale and deploy capital as efficiently as possible.
What advice would you give to other real estate technology founders who are considering raising capital to scale their business?
For real estate technology founders, particularly first-time founders, it is important to understand the goals of your fund raise and how you will deploy the capital. If you don’t have a detailed plan for the use of the proceeds from a funding round, keep bootstrapping.
How much have your raised to date?
$5,500,000
What’s one thing you wish you’d known before having raised any capital?
Prior to starting Avail, I worked for an investment bank where our team advised publicly traded companies on M&A transactions. In that world, things are very efficient. Valuations and the decision process are very straightforward. Raising capital to scale a startup is the complete opposite. A lot of decisions are made based on personal relationships and hunches. Things like geography matter too.
Is there anything you would have done differently?
I would have invested a lot more time and effort into building relationships with investors. When running a startup, it’s really easy to dedicate 100% effort to building the business and wait to start fostering investor relationships until the business is “working”. It’s a delicate balance, but it’s important to build VC relationships along the way.
What advice would you give to other real estate technology founders who are considering raising capital to scale their business?
A lot of founders mistakenly believe that raising capital is something that you have to do to build a big, successful company. While capital certainly can help, it’s not the only way, and too many founders put too much focus on raising capital.
Moving Forward
Given the broad range of experience, funding amounts, and industry focuses represented here, it should be obvious that not all advice will work for everyone. Your unique use case needs to be considered. The number of variables is endless when making decisions around your startups need for raising capital.
After reading this, if you’re still hungry for tips on raising money, NFX recently released a pretty cool video series titled 16 Non-Obvious Lessons on Pitching. I know if I were thinking of raising capital for my startup (believe me, that’s not remotely in the near future), I’d reach out to the contributors from this article before beginning down that path.
Now it’s time to share your thoughts. Feel free to at me on Twitter @NateSmoyer or leave a comment below what you think founders should be considered before they go out and pitch their business.