Powered by technology such as cloud computing, machine learning, and big data, property management and transaction tools enable property owners and real estate companies to handle larger portfolios of homes and improve user experience during transactions or while managing residential properties.
Despite the sheer size of the US residential property market, it has been one of the last sectors to implement technology.
While many of the top-funded property startups have focused on connecting buyers and tenants with sellers and landlords, tremendous opportunities still exist for innovation in other areas, given that renting and buying/selling properties involves a series of manual tasks. Moreover, the current Covid-19 pandemic has resulted in the widespread use of technology across different segments in the property sector.
Virtual viewing becomes the norm:
Matterport saw 3D camera sales grow by 600% in April 2020.
Virtual appraisals gain traction:
In March 2020, Clear Capital launched its OwnerInsight online appraisal tool for homeowners to securely send information and images of properties.
In April 2020, Reggora released a similar tool called Virtual Inspection.
Online notarization is picking up:
A remote online notarization (RON) platform, Notarize , claims its business grew by more than 500% between March 2020 and September 2020.
The majority of startups have focused on developing rental management solutions and agent tools (buying/selling and renting). Many of the rental management tools are built for individual landlords due to the incumbents’ strong foothold in the enterprise segment. Meanwhile, the agent tools help real estate agents obtain referrals, respond to leads, generate leads, and search for properties collaboratively with clients.
Most startups on the list were founded between 2011 and 2018, with around half of them established over the past five years (2015-2018). Many of these newer startups are categorized under rental management and title and escrow.
All startups on the list are divided almost equally between the early stage and growth stage. Each category has its own leaders. Notably, all startups in the title and escrow category are growth companies.
Among our disruptors, the residential proptech segment comprises a few public players such as Zillow Group, Appfolio, and Compass, while also featuring a number of smaller, privately funded companies. In terms of private funding, the top two categories are home improvement and transaction closing tools. Each segment is characterized by the existence of a few players with substantial funding as of August 2021, such as Thumbtack (USD 698.2 million), Houzz (USD 613.6 million) and Notarize (USD 213.3 million).
Although the rental management segment features the most number of startups, these companies have raised relatively less funding, with Mynd being the highest-funded company at USD 117.6 million as of August 2021. This is possibly due to the existence of large property management software incumbents in the space. Many rental management startups have focused on providing their services to individual landlords that manage smaller residential property portfolios. An increasing number of newer startups have also focused on offering full-service property management rather than providing only a part of the service (e.g., rent collection only).
Aside from rental management, many startups have also emerged to equip the property sector with tools for agents that enable them to market homes (lead generation, agent matching, etc.). Public companies Zillow Group and Compass are the dominant players in this segment, while HomeLight and Side are the top private players in the space with more than USD 260 million in funding each as of August 2021.
Zillow Group has a portfolio of real-estate technology brands, including online marketplaces (Zillow and Trulia), a direct buying platform (Zillow Offers), a home lending platform (Zillow Home Loans), as well as other property management and transaction platforms such as Zillow Rental Manager (a rental management service), Premier Agent (an advertising and lead generation services), dotloop (a transaction management service), and Zillow Closing Services (a provider of title and closing services).
The company revenue is divided into three main segments:
1) Home: Revenue from direct buying and selling of properties (73.8% of total revenue for FY2021)
2) Internet, media, and technology (IMT): Revenue from rental management, advertising, transaction management, business software solutions, construction marketplaces, and others (23.2% of total revenue for FY2021)
3) Mortgage: Revenue from mortgage advertising, mortgage originations, sales of mortgages, and mortgage software solutions (3.0% of total revenue for FY2021)
Key customers and partnerships
In August 2022, Zillow Group partnered with Opendoor to bundle product offerings, allowing users of Zillow to access Opendoor Offers (Opendoor’s iBuyer solution) and use it as a standalone product or alongside Zillow’s other offerings such as financing, closing, and agent selection solutions.
Funding and financials
The company generated total revenues of over USD 8.1 billion for FY 2021, which grew 144.0% YoY. The significant revenue growth is attributable to an over 2.5x YoY increase in home sales compared to FY 2020. Furthermore, the total visits increased 6.3% YoY to 10.2 billion in FY 2021. The adjusted EBITDA margin shrank 76.7% YoY to 2.4% in FY 2021 from 10.3% in FY 2020.
Buying and Selling Tools for Agents:
Transaction closing tools:
Incumbents in the property management space (rental management and home improvement tools) comprise real estate investment companies, property management companies, digital home improvement companies (Amazon Home Services, IKEA Systems, and ANGI Homeservices), and high-end property management software companies such as Yardi Systems and RealPage. Many property management companies, especially industry leaders, tend to use these two software solutions.
Meanwhile, in the real estate transaction space, the incumbents are real estate brokerages, title and escrow companies, and home appraisal providers. Brokerages appear to focus more on equipping their agents with marketing tools and streamlining business operations with transaction management tools. The top title and escrow companies, Fidelity National Financial and First American Financial, seem to focus mostly on expanding their digital closing capabilities. Data and analytics provider CoreLogic has been a leading player in the property valuation field for around two decades.
Many incumbents have collaborated (i.e., integration with third-party systems) with startups to provide digital offerings, as it allows them to adjust to changing market demand quickly. One of the top five real estate brokerage companies, RE/MAX, has integrated its system with a digital signature management tool, DocuSign; and real estate investment trust (REIT) AvalonBay has collaborated with the artificial intelligence (AI)-powered leasing assistant MeetElise.
Acquisitions are another popular method for entering the space as they allow incumbents to capture market share quickly. For example, RealPage has made mergers and acquisitions (M&A) part of its growth strategy, with recent activities including the acquisitions of Buildium, SimpleBills, and Modern Message.
Some real estate brokerage companies have developed their own proprietary technologies to gain a competitive edge and prevent data sharing with third parties. For instance, Keller Williams has launched an agent-to-agent referral tool, Referral, while Coldwell Banker has developed a similar tool, Exclusive Look.
No investor data is available