With an already established reputation and track record in the United States, Fifth Wall has launched a dedicated European fund which focuses on European PropTech. BNP Paribas Group, along with BNP Paribas Real Estate will be part of the Fifth Wall Real Estate Technology European Fund. This exciting opportunity means BNP Paribas Real Estate will have access to a range of technology and innovation solutions and will be able to develop its expertise in the field of innovation and sustainable real estate.
In an interview with Roelof Opperman, Managing Director, Fifth Wall, we spoke about what kind of opportunities collaborating with such a venture capital firm can provide and how working in this way is crucial for the evolution of the real estate sector.
Can you tell us a little bit about Fifth Wall and what its ambitions are?
We aim to work with our investors – currently 60 of the world’s largest owners and operators of real estate – to find the latest and greatest innovation. We help them assess, and hopefully, invest in these technologies and, where possible, often these technologies can be deployed as new solutions among our global consortium.
What type of companies do venture capitalists invest in?
The PropTech companies that we aim to invest in are fast growing, dynamic, and usually at an early stage of their development. This means they’re looking to us to take their product and to insert it into our distribution network to help scale.
We find these investment opportunities through a variety of ways including via our real estate investor base. When we know that a number of real estate firms that invest in us are facing the same problems, we look for companies offering a solution. We are also constantly conducting thematic work, whereby we review big trends and issues occurring in real estate and seek bold solutions. As the largest venture capital firm focused on PropTech, we are able to attract a lot of deals that come through our network and from other generalist venture capital firms, which means we often see attractive companies and are able to offer to them valuable support for their solutions.
How do you help and support your partners with their ambitions and goals?
Firstly, through understanding technology and innovation. I think the Covid-19 pandemic has brought to the forefront the fact that we are in a world that’s dynamically changing, and as that happens you can no longer view investment in technology and innovation as purely a one-time thing. Technology must be invested in on an ongoing basis, as part of an offensive Research & Development strategy.
Secondly, we view ourselves as a technology and innovation guide and filter. In a sea of technology, we try to guide our partners, and help them prioritise
What do you think the impact of Covid-19 will be on the real estate sector and its ability to transform/adapt?
We’ve spent a significant amount of time looking at other pandemics and comparable situations, and we believe that Covid-19 hasn’t radically changed anything, but instead has accelerated everything. Growing e-commerce penetration, for example, was already a trend present prior to the crisis and has since been catalysed.
Likewise, before the pandemic, people were using video conference technology and working from home one or two days a week, Covid-19 has advanced these practises. In general, you are likely to see that real estate trends that would have taken five to ten years to appear may now occur in the next nine months.
The key right now is to identify the signal from the noise, so what are the long-term trends that will be present and how will tech and innovation feed into them? In some ways, it presents an opportunity for investment. Take for example the cleaning of an office. Before the pandemic, companies may have been hesitant to invest in robotic cleaners due to the upfront cost of investment and longer payback period. However, now with human cleaners concerned with coming into the office and these spaces needing to be cleaned – in some cases every two hours – the payback period for this technology can be significantly shorter.
In a sea of technology, we try to guide our partners, and help them prioritise
How important is strategic investment for revolutionising the real estate sector?
Strategic investment is critical. The lack of progress in technology is a funding and collective action problem. By getting a consortium of large real estate players on board, the sector changes. We believe the best way to align interest is to invest, as it shows your commitment to a certain area.
Fifth Wall has a strong reputation in the US, how will you replicate this in Europe? Will your strategy/way of working be different?
We expect our model in Europe to be similar to our model that has been at work in the US. We were fortunate that from our last US-focused real estate tech fund, Fifth Wall Ventures II, we started working with large European players meaning we already have experience working with a European investor base.
I think our existing model, which is to find the latest innovations and invest in and pair them with our real estate investors, will work very well in Europe. The interesting thing about Europe is that whilst domestic markets are big, the challenge is migrating a solution across countries on the continent. In many cases, if these companies want to be globally dominant they need to get to the US, as it’s the biggest institutionalised real estate market in the world. Our hope is that Fifth Wall will support the most significant PropTechs in Europe, helping them to both grow within Europe and expand into the US. In a sense, I see our European fund as a gateway between the two continents and an important link in growing the PropTech ecosystem within Europe.
You’ve stated that the European tech industry is 2-3 years behind America, does that help you in Europe?
We can look at what we’ve learned from the past 2-3 years in the US and apply this knowledge to Europe. Though some PropTechs can be global platforms and work within a variety of different countries, many focus purely on their domestic regions. This means we are able to look at the US, and the trends that have worked as domestic solutions (many of which we have invested in), and through our analysis, anticipate which ones may cross the Atlantic to Europe. Additionally, we will build on the learnings we developed in underwriting the US companies behind the trends to help identify and back the right European counterparts.
What will BNP Paribas and BNP Paribas Real Estate get from working with Fifth Wall?
BNP Paribas is a great fit for us because we have the opportunity to work with different parts of the company, including the real estate arm. For example, there are a number of technologies that cross over from FinTech and PropTech, like mortgage origination software.
In terms of real estate, we will be assessing a number of technologies across the whole scope of the sector. As BNP Paribas Real Estate has such a large remit, the majority of the technologies that we review will likely be relevant for a part of the company. In this way, BNP Paribas Real Estate will have access to a wide variety of technologies and innovations, increasing the probability of these technologies generating value for the company.
Fifth Wall seeks to embark on the path to sustainability through the achievement of B Corporation certification and ESG investments. What does this entail?
In June 2020, Fifth Wall became one of the largest venture capital firms to be certified as a B Corporation or “B Corp”. As a B Corp, Fifth Wall is committed to meeting certain social and environmental performance standards. With this certification, our current and future portfolio companies, investors, and employees can feel certain that they've partnered with an organisation that prioritises value-driven innovation and environmental performance.
The statements contained in this interview are not an offer to sell or a solicitation of an offer to buy any securities. Any securities referred to in this interview have not been and will not be registered under the US Securities Act of 1933, as amended (the “Securities Act”), or with any securities regulatory authority of any state or other jurisdiction. Consequently, the securities may not be offered, sold, resold, transferred, delivered or distributed, directly or indirectly, into or within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction. No public offering of the securities is being made in the United States.