Los Angeles fund Fifth Wall says it will channel some capital from its new property fund into Asian start-ups
- Fifth Wall says it will seek out Asian start-ups involved in artificial intelligence or robotics for smart buildings, as well as concepts that leverage blockchain technology
- Mainland developer China Vanke ranks as the only mainland company among the 50 backers of Fund II, a venture capital fund run by Fifth Wall that raised US$503 million
Fifth Wall Ventures, a Los Angeles-based venture capital firm, plans to invest part of the proceeds from its new US$503 million property technology fund on start-ups in Asia, reflecting the first time it has channelled capital beyond US shores.
The firm announced it had closed Fund II to new investors earlier this month after exceeding its initial funding target of US$400 million, drawing participation from 50 companies, including mainland developer China Vanke.
Brendan Wallace, co-founder and managing partner at Fifth Wall, said some of the capital raised will go towards start-ups in Asia with technologies involving artificial intelligence or robotics for smart buildings, as well as concepts that leverage blockchain technology for applications in real estate.
“In real estate, the opportunity set in Asia’s start-ups and tech ecosystem is less mature than the US. But given the scale and size of China and its real estate industry, I believe the proptech ecosystem will grow quickly,” said Wallace.
Proptech, or technologies used in the “built world” as Fifth Wall puts it, could involve anything from artificial intelligence, internet of things, data analytics, robotics and financial modelling software.
Wallace added that other promising investment themes included micro-mobility for smart cities, energy efficiency solutions, and technologies related to the construction industry.
Other Asian investors in the new fund include Singapore’s Keppel Corp and Japanese companies Kenedix and Mitsubishi Estate.
Fifth Wall did not disclose the size of investment by individual companies, but indicated they were between US$10 million to US$15 million.
“The real estate industry in Asia is undergoing the same technological sea change as the US experienced three years ago when Fifth Wall launched its first fund. Incumbent real estate owners, operators, and developers in Asia and China in particular are increasingly recognising that their adoption of strategic technologies can differentiate and enhance their businesses,” Wallace said.
Fifth Wall raised US$212 million in its first property technology that closed in May 2017.
The proceeds from that fund have since been fully invested in 27 start-ups based in the US.
Wallace said the fund had invested in Lime, a San Francisco company focused on providing shared electric scooters, bikes and transit vehicles. The company, which has a network of locations throughout the US and Europe, announced it will open its Asian headquarters in Singapore during the third quarter.
“As the real estate and technology industries increasingly converge, Fifth Wall has become central to that convergence, fostering a level of strategic collaboration that has never before characterised the real estate industry,” Wallace said.
As an example of what Wallace referred to as the “network effects” of the fund, Industrious, a start-up which won backing from Fifth Wall, has since partnered with several commercial US real estate landlords – who are also investors in the fund – to design, develop and operate co-working spaces, Wallace said.
In recent years, co-working space solutions have become a priority for many Hong Kong and Chinese commercial landlords. This is driven by changing tenant demands, whereby developers are increasingly catering to smaller tenants, Wallace said.
“Fifth wall is working closely with strategic partners like China Vanke on a number of technology initiatives. We are looking to structure pilot technology partnership [with our portfolio companies] in support of their business,” Wallace said.
China Vanke builds and operates offices and industrial parks, and currently manages more than 70 office projects across 20 cities with total area of about 7 million square metres under management, according to its 2018 annual report.