Softbank To Create New Built World VC Fund

Michael Marks has declined a dozen invitations to make keynote speeches at conferences. His three-year-old company, the construction startup Katerra has earned a recent spike in attention, reports Wired.

“Construction technology has gotten kinda buzzy,” Marks said. The source of some of this buzz may have to do with Katerra landing $867 million in venture funding led by the SoftBank Vision Fund in January. It surpassed Marks’s plan to raise around $500 million, but SoftBank got involved, and the figures grew.

Rivals are both intrigued and afraid of the SoftBank Vision Fund, reputed for its investments in razor-edge technology. Now it’s placing a bet on a relatively stagnant industry when it comes to tech, real estate. The $93 billion fund’s punching power has the capacity to pick winners and losers in any market it enters, and this effect is manifesting quickly in real estate.

Sheer size is the main appeal of the real estate sector as an investment. A massive fund like SoftBank needs appropriately scaled opportunities, given that the fund’s minimum investment is $100 million. Real estate offers the big numbers it takes to interest the fund with a global asset value of $228 trillion.

Beyond that, there is fragmentation in the real estate industry. Realogy, the biggest US-based residential brokerage and real estate services company owns a dozen different brands and commands a one-digit market percentage. on top of that, the big players have been slow to pick up new technologies.

“Traditional real estate players are fundamental value investors looking for current yield. They just think about the world so differently,” says Ryan Scott Abbe, head of real estate investment banking at ‎JMP Securities. “They’re scratching their heads at all of these technology solutions.”

Technology allowing for greater market efficiency, complicating life for investors who simply wanted to buy low, sell high, and call it a day. Investors, brokers, financiers, and related players all are relying on tech to become more strategic, thus increasing competition.

“It’s probably the last great bastion of the global economy that has not seen that type of disruption,” said Richard Sarkis, CEO of Reonomy, a commercial-real-estate data platform in which SoftBank invested prior to the creation of the Vision Fund.

This innovation opportunity has attracted venture capitalists of all kinds, with startups focused on real-estate tech (proptech) surging to $9.8 billion in 487 deals in 2017, an increase from just $546 million in 133 deals in 2013, reports CB Insights.

Softbank is still able to move more swiftly and powerfully than most. CEO Masayoshi Son, who takes a long view (think 300-years down the road) is known for driving entrepreneurs to raise far more capital than they intended, and push the limits of their investments.