Los Angeles real estate technology (or proptech) venture capital fund Fifth Wall just announced it's launching its own SPAC, or special purpose acquisition company. Fifth Wall has been a prolific early-stage proptech investor since launching its first fund in 2016.
In case you haven't been filled in on SPACs yet
A SPAC is essentially a blank-check company that raises capital to identify and acquire private companies ready to go public. In this regard, you're not so much investing in a company, but rather in a management team that can identify, acquire, and bring to market a company.
SPACs allow companies to forecast future earnings, whereas the traditional IPO does not. Depending who you ask, this gives the companies a better chance of being "fully valued," while others would say it leads to "frothy" valuations.
Some other proptech SPACs
A recent proptech SPAC deal you may have followed was that of Opendoor (NASDAQ: OPEN), which Fifth Wall was actually an early investor in. That SPAC was led by Chamath Palihapitiya of Social Capital. Opendoor is an iBuyer, which uses technology to make an instant offer on a home for sale.
Tishman Speyer launched its own SPAC as well. In fact, it just announced Latch, a contactless lock and smart home company, as the first company it will be taking public. Palihapitiya was involved with this one as well.
Some background on Fifth Wall
Fifth Wall was founded by Brad Greiwe and Brendan Wallace in 2016, both real estate industry vets. Their first fund was started with commitments of $20 million and now, five year later, they have over $1 billion in assets under management.
Their funds have built up an impressive track record. Investments span across real estate, construction, and retail. Examples include:
What this means going forward
Fifth Wall has proven it can identify innovative early-stage proptech companies poised for growth. This fact, combined with a clear investor appetite for the SPAC market, means there will be more household-name proptech companies going forward. This is Fifth Wall's chance to prove it can be a full-stack, multi-stage venture fund that can take a company from seed stage to IPO.
The Millionacres bottom line
Although the proptech landscape has become quite fragmented in many verticals, the industry itself is becoming much more institutionalized and capitalized, with Fifth Wall as a prime example.
Proptech is about driving efficiencies in real estate. As a real estate investor, it's important to stay ahead of the curve. Seeing which companies have raised the capital to grow and scale is an important part of this.
That being said, don't confuse fundraising success with a good business and business model. You still have to do your due diligence.