Real Estate Startup Investors Are Still Bullish About These 4 Themes

Earlier this week, we wrote about the sharp decline in venture funding to U.S. real estate-related startups. But while overall numbers are down, there are still areas popular with investors.

Using Crunchbase data, we identified four spaces where this is the case: Home equity financing, rental management, eco-friendly building and tools for streamlining construction.

Notably, these are all themes that play into the current real estate market climate, characterized by higher lending costs, lower affordability and fewer homeowners opting to sell and move. It’s a sharp contrast to funding trends from a few years ago, an era of low rates and active sales.

Without further ado, here’s a look at who’s getting funded in each of our categories.

Home equity and alternative financing

Homeowners who bought when prices and mortgage rates were lower are largely staying put. Many are also sitting on substantial sums of home equity.

This situation has given rise to a spree of startup investment activity around offerings for homeowners looking to withdraw some cash from their properties. In addition, we’re seeing funding around other tools to simplify homebuying and selling in a challenging financing environment.

Using Crunchbase data, we put together a list of six such companies funded this year.

The biggest round by a long shot came this month for Splitero, a startup focused on home equity investments, which provide homeowners with cash in exchange for a share of their home’s future value. The San Diego company landed a $300 million strategic investment from funds managed by Antarctica Capital.

In a similar vein, we saw a $30 million September Series B for Unlock, which offers a home equity agreement through which homeowners get cash in exchange for a share of their home’s future value.

Another large investment went to EasyKnock, a provider of sale-leaseback financing, an option for homeowners who want to extract equity from their homes. It picked up $28 million in Series D funding in February.

Rental management

With would-be homebuyers increasingly priced out of the market, more are becoming renters. Currently, the U.S. has around 43.5 million occupied rental units, per Census data, which is roughly a third of all homes with occupants.

Tenants are paying more than ever too. Today, the median price for a rental on Zillow is $2,050. Prices in many of the largest markets surged between 2021 and 2023, and they haven’t really come down.

While this is not the most desirable situation for renters, it seems more favorable for rental-focused startups, many of which have raised good-sized rounds this year. Using Crunchbase data, we put together a list of eight.

The biggest funding recipient is Bilt Rewards, developer of an app offering loyalty points that renters can redeem at local businesses. The New York-based company raised $150 million in August, bringing total funding to date to $563 million.

Rentberry, a platform for finding rentals and negotiating terms, landed a $90 million Series A in September. And EliseAI, a startup developing conversational AI for property management, picked up another big round, securing $75 million in an August Series D.

Eco-conscious homebuilding and improvements

It’s an oft-cited statistic that the real estate industry is responsible for around 40% of global combustion-related emissions. This includes the carbon footprint of construction, as well as operation and maintenance of existing buildings.

Clearly, there’s room to do better. This has motivated startup investors to pour capital into a host of companies in areas like lower-carbon cement and more energy-efficient home heating and cooling. Below, we put together a list of nine such companies funded this year.

Four of the companies on our list are working on clean concrete, an area that has attracted considerable investor interest in the past few years. The two biggest funding recipients this year are startups Sublime Systems and Fortera, which picked up rounds of $85 million and $75 million, respectively.

On the energy-efficient home side, meanwhile, Silicon Valley-based Quilt, which makes electric heat pumps that offer room-by-room temperature control, raised a $33 million Series A round. And Sealed, a startup focused on making it easier to carry out home weatherization and energy upgrades, closed a $30 million Series B.

Streamlining construction

Most builders would agree: New construction these days is too expensive and time-consuming.

Inflation is a big culprit. Per the National Association of Home Builders, the cost of building materials has surged 38% since the pandemic. In addition, the group estimates that on average regulations now account for nearly 25% of the cost of a single-family home.

To wit, we’re seeing some robust funding activity around tools and platforms aimed at streamlining the planning, permitting and construction processes. To illustrate, we put together a list of eight companies in this space funded this year.

Two companies — PermitFlow and GreenLite Technologies — secured fresh funding for business models aimed at making it faster and easier to obtain construction permits and manage the permitting process. PermitFlow landed a $31 million Series A in February, while Greenlite picked up $28.5 million in a September financing.

One of the largest rounds, meanwhile, went to HighArc, developer of a homebuilding automation platform. The Durham, North Carolina-based pulled in $53 million in Series B funding this year.

Can’t solve every problem

At the end of the day, startups have to innovate for real-world market conditions, which today are characterized by lower affordability for residential property, higher building costs and slower sales.

The current pipeline includes a number of companies addressing pain points in these areas, including paths for homeowners to extract equity without selling and tools for builders to simplify construction and reduce carbon footprints. Hopefully for startups, these will be offerings that continue to attract demand regardless of how the market cycles.