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Despite three-and-a-half days of networking, glad-handing happy hours and thumping after-hours, there was no last-day malaise at Inman Connect Las Vegas.
Seats were hard to come by in the main ballroom on Friday as a panel of proptech investors took to the stage to discuss the state of venture capital after a sustained period of heavy interest from Wall Street, in a panel called,
“Are Companies Still Prioritizing Tech and Innovation or Is It Back to Basics?”
And moderator Paul Hurst, chief innovation officer at First American Financial, set that stage by asking the group about the macro-environment, or investing’s big picture.
“We’re in a period of dislocation,” Moderne Ventures’ Liza Benson said. “The public markets have tanked on the tech-side, as we all know, and venture capitalists have accepted that we’re at a point where valuations are coming down, but entrepreneurs haven’t. There’re a lot of things not happening.”
Benson runs Moderne alongside Constance Freedmand. Their latest fund closed, oversubscribed, at $200 million in August, 2021. The firm has backed companies such as, ICON, Porch, Better Mortgage, Homesnap and Easyknock.
Echoing Benson’s take was Vik Chawla of Fifth Wall Ventures, a very active financier of real estate technology companies.
“The valuation correction was broadly healthy,” Chawla said. And relative to the funding activity of 2021, he added, “Future investors will look back at it and scratch their heads.”
Fifth Wall may be among those digging at their scalps, given what his firm’s co-founder, Brad Greiwe, said at 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’s too big. Venture capitalists see the opportunity as too massive to ignore.”
What a difference a year makes.
Chawla is remains optimistic on investing, he said, and believes the companies under their guidance are looking at the current market as a time to drive “real 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 well-needed clarity on the function of venture capital funds as building blocks for companies.
“There are a couple of things to bear in mind here,” Peters said. “Venture 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 went through this boom period of raising venture capital funds. And we have more venture capital funds and those funds are better capitalized than they have ever been, and that capital is going to need to be deployed,” she said.
As part of a real estate family, Peters admits she had some trepidation about the role of venture capital in the industry, describing it at one-time as a “bad feeling.”
“But there’s a long history of external 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 coming in to stimulate growth via innovation. Net net, I’m very pro increased venture investment in our industry.”
Spurring innovation is a big part of what venture capital can do for a firm, according to Chawla, allowing entrepreneurs to really focus on product.
“If you look at why some of these companies build such good products, I would actually say its partially a function of venture capital,” he said. “I don’t see that changing.”
Any talk of a recession tends to force executives in any industry to self-examine, and look to shore up any risk-prone areas of the operation. Benson said it’s an ideal time for companies to look at technology.
“Fundamentally, what our companies should be trying to do is either drive efficiency, with less humans, or drive the top-line,” she said. “I actually do think we’re going to see our LPs adopt this technology even in these more difficult times.”
Moderator Hurst wrapped the session by putting each VC on the spot to name a company that they “would bet on,” and assuring the audience, “This isn’t investment advice.”
Chawla led with a company called Aurora Solar, which develops a vertical software solution to sell, plan and deliver residential solar installations.
While Benson didn’t name the company, her firm has bet on an EV (electric vehicle) charging station manufacturer for apartments and commercial properties.
Peters named Welcome Homes, and also mentioned her firm is keen on the disruption occurring in home finance.