Real estate technology firms attracting private equity saw another year of record deal flow in 2019. There was a 105% increase in equity and debt raised over 2018, and there were 78 raises of more than $20 Million.
For the most part, venture capital focuses on startups, while Private Equity focuses on companies who already have about $20 Million in revenue (or are targeting that run rate in the near future). The firms with lots of activity in the space are Brick and Mortar Ventures, Providence Equity, Camber Creek, Fifth Wall, JLL Spark, Moderne Ventures, Vista Equity Partners, RET Ventures, Vector Capital, and Second Century Ventures. GCA shared this data at CEO Connect in NYC last week.
For the most part, the banking relationships are focused on acquisitions. Inside Real Estate, Constellation, MoxiWorks, Vista, Fidelity, and Elm Street are the most active acquirers of existing technology companies today.
Elm Street has been quietly going about its business. They started out with Listingbook in 2016 and have rolled up a handful of select companies since. The company is led by Prem Luthra, who has a string of success dating back to his role as an executive at realtor.com, Cyberhomes, Real Estate Digital, etc. Elm Street has developed a new broker, team, and agent solution called Elevate that has seen remarkable growth in an area of the market that few seem focused on. While others are out hunting elephants, Elevate is signing up small and midsized brokers on a consistent basis.
It is not unusual for the terms of private equity deals to be kept under wraps. The press release that WAV Group PR issued for Elm Street announcing the banking relationship with Aquiline Capital did not include the numbers. We can only assume that it was big, and we absolutely know that Elm Street is using the money to quench their thirst for more acquisitions. Aquiline Capital Partners, founded in 2005, is a private equity firm based in New York and London investing in businesses across the financial services sector in banking and credit, insurance, investment management, and financial technology and services. Enterprise software like Elm Street’s suite of services is in alignment with their investment strategy, but real estate technology seems to be a new vertical for them. Good news is that they partnered with the right people at Elm Street.
Remember Providence Equity who purchased Boston Logic, Propertybase, Backagent, and BoldLeads? Since that rollup, we have heard nothing but crickets. I have not seen them at trade shows, have not seen any marketing, have not seen any news. I imagine that everything is just fine over there, but the silence is deafening.
With the stock market at record highs, wealth managers are fearful of a quick drop. This moves money into private equity which has more certainty and predictable returns. I anticipate that there will be a lot of PE activity in 2020. 451 Research suggests that the VC outlook and M&A Outlook is 88% or 96% positive on continued growth in this sector.
Disclaimer: WAV Group partners have capital placed in some of the PE firms mentioned herein. Victor Lund is a regular advisor to the capital markets. Elm Street is a public relations client.