Now is the time to invest in technology, say venture capitalists
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Despite three and a half days of networking, happy hours and lively evenings, there was no last day unease at Inman Connect Las Vegas.
Seats were hard to come by in the Main Ballroom on Friday as a panel of proptech investors took the stage to discuss the state of venture capital after a prolonged period of intense interest from Wall Street, in a panel called,
“Are companies still prioritizing technology and innovation or is it back to basics?”
And moderator Paul Hurst, director of innovation at First American Financial, set the stage by asking the group about the macro environment or the big picture of investing.
“We are in a period of dislocation,” said Liza Benson of Modern Ventures. “As we all know, the public markets have plunged on the tech side and venture capitalists have accepted that we are at a point where valuations are falling, but entrepreneurs have not. There are a lot of things that are not happening.
Benson directs Moderne alongside Constance Freedmand. Their last fund closed, oversubscribed, at $200 million in August 2021. The firm has backed companies including ICON, Porch, Better Mortgage, Homesnap, and Easyknock.
Vik Chawla of Fifth Wall Ventures, a very active financier of real estate technology companies, echoed Benson’s take.
“The valuation correction was healthy overall,” Chawla said. And compared to 2021 fundraising activity, he added, “future investors will come back and scratch their heads.”
Fifth Wall may be among those digging into their scalp, given what his company’s co-founder Brad Greiwe told Inman Connect Las Vegas in 2021.
“The residential space is going to see more venture capital infusion than any category,” Greiwe said at the time. “The market is too big. Venture capitalists see the opportunity as too huge to ignore.
What a difference a year makes.
Chawla remains bullish on the investment, he said, and believes companies under their leadership see the current market as a time for “true innovation”.
“These companies are ready to embrace it,” he said.
For once on the other side of the interview, frequent Inman Connect moderator Clelia Peters, managing partner of Era Ventures, provided some much-needed clarification on the function of venture capital funds as blocks. construction for businesses.
“There are a few things to keep in mind here,” Peters said. “Venture capital funds are funds that people put money into, and then they can’t take that money out, if they’re LP (limited partnership) investors.”
“We’ve been through this boom period in venture capital fundraising. And we have more venture capital funds and those funds are better capitalized than they’ve ever been, and that capital will need to be deployed,” she said.
As a member of a real estate family, Peters admits she had some apprehension about the role of venture capital in the industry, at one point describing it as a “bad feeling”.
“But there’s a long history of outside capital coming into industries and driving growth in our country,” Peters said. “I actually think it’s a much more positive thing to have venture capital to drive growth through innovation. Net net, I am very much in favor of increasing venture capital investment in our industry.
Driving innovation is a big part of what venture capital can do for a business, according to Chawla, allowing entrepreneurs to really focus on the product.
“If you look at why some of these companies are making such great products, I would actually say it’s partly a function of venture capital,” he said. “I don’t see that changing.”
Any talk of a recession tends to force leaders in any industry to self-examine and seek to shore up all areas of the risky operation. Benson said now is a great time for companies to look at technology.
“Basically what our businesses should be trying to do is either increase efficiency, with fewer humans, or increase revenue,” she said. “In fact, I think we’re going to see our LPs adopting this technology even in these tougher times.”
Moderator Hurst closed the session by getting each VC on the spot to name a company they would “bet” on and assuring the audience, “That’s not investment advice.”
Although Benson did not name the company, his company bet on a manufacturer of EV (electric vehicle) charging stations for apartments and commercial properties.
Peters named Welcome Homes and also mentioned that his company is keen on disrupting housing finance.
Email Craig Rowe