Where real estate tech is evolving

November 17, 2017

More investors are pouring money into developing the behind-the-scenes tech that powers the real estate industry, and it's important for brokers and agents alike to understand where that money is going, and why.

The amount of venture capital that's now being invested in real estate-specific tech is significant, having grown sharply since 2012, and much of that money is devoted to tech firms based on the coasts, according to new data from PitchBook. This stimulus results in billions of dollars in funding being distributed to tech-based platforms and disrupters in the real estate industry, including several that have earned hundreds of millions in VC funding on their own, simply because more investors now see the value the industry provides.

Where does that money go?
Often, VCs seem to be most interested in getting into the real estate games themselves, with sales platforms and online brokerages garnering $1 billion each. Others with significant funding are real estate investment platforms and mortgage lenders. But beyond that, these firms seem to understand the value in helping real estate professionals and brokerages with marketing. For example, the software company Placester is currently valued at $202 million.

With these issues in mind, it's important to note that many investment experts believe the trend of more money pouring into the real estate tech space will only continue in the near future. That, in turn, should drive where tech is most likely to emerge and impact agents' strategies.

"When I was initially fundraising, institutional investors would comment on the 'cute little niche' we were focused on," Constance Freedman, founder of real estate tech investment firm Moderne Ventures, told the site. "I would always point out that yes, a niche indeed, but a multi-trillion dollar niche! Investors are starting to open up to this as well."

A slow shift
Even with all the money now coming into the sector, the vast majority of the business in the real estate industry is running through traditional real estate firms, which is to say it's one sector of the economy that tech firms have largely been unable to disrupt yet, according to the Miami Herald. But at this point, most investors see their best opportunities to advance tech use in the field by enmeshing it with the physical, in-person nature of the long-standing real estate sales process.

Certainly, those who have been in real estate for some time understand that some consumers can have plenty of questions about how to proceed and worries about buying or selling as closely as smoothly as expected. Agents can deal with those issues as they come, but if tech options come along to eliminate those hurdles before they arise in the first place, the technology can help both agents and clients get through a sale or purchase with even greater ease.

Not every area of investment for real estate tech is going to directly affect an agent's day-to-day work, but keeping apprised of the broader trends in the industry can help professionals move to embrace the future as much as possible.