Proptech investor Brendan Wallace doesn’t think Lime is a scooter company. He thinks it’s a real estate company, and its recent IPO says he might be right.
Fifth Wall, which Wallace co-founded in 2016, is now closing in on a decade of proptech investing, and Lime’s Nasdaq debut on July 1 gave the firm its latest exit in a run of them.
When Fifth Wall originally invested in Lime in 2018, the company was doing roughly $2 million in revenue. Last year, the company generated $886 million in revenue, reached nearly 20 million riders across 230 cities, surpassed 1 billion rides, and produced $100 million in free cash flow. Lime also doubled down during COVID, when the category was under extreme pressure, and many investors walked away.
Fifth Wall has spent the past decade making a bet most of the real estate industry didn’t see coming: that some of the biggest winners in proptech wouldn’t describe themselves as real estate companies at all.
Wallace says that Lime is Exhibit A, arguing its real asset isn’t the scooter fleet but the curb space those scooters occupy, along with the municipal concessions that come with it.
Inman caught up with Wallace recently to talk about what he saw in Lime eight years ago, how that same lens is reshaping his read on artificial intelligence and autonomous vehicles, and why he thinks the line between “tech company” and “real estate company” is getting harder to draw by the year.
The following conversation has been edited for length and clarity.
Inman: You invested in Lime in 2018. What did you see in the company back then that made you think it was going to be a success, and what made you think this was a built-environment play rather than just transportation?
Brendan Wallace: I think you kind of hit the nail on the head with the question itself. Most people look at the micro-mobility space and see the category as the “scooter fad” and scooters cluttering sidewalks. What we saw was that curb space itself is a form of real estate. You could argue it’s actually the most important kind of real estate.
Eight years into the Lime story, seeing how ubiquitous Lime has become and all the concessions they have, it’s pretty clear it’s a real estate company. I’d say that was less obvious then.
Maybe the genesis of that view was a company called Motivate, the original docked city-bike market. That company went through a near-death experience, and its rescuer wasn’t the transit authority, but Related Companies, one of the largest and most sophisticated real estate owners in New York. What they saw was that those docked locations, those concessions, are some of the most valuable real estate in New York.
So when we looked at dockless micromobility, our view was: the end state of dockless is docked. Ironically, that’s where this ends — you’re going to have docked scooters in cities. You’re already starting to see that with Lime. The race is who can get there first.
I think anyone who tells you they knew Lime or Bird was going to be successful — no one really knew. We made a well-educated bet on the team, the capital base, the quality of the management team. It bore out.
Today Lime is in about 230 cities in 30 countries, does $700 million of net revenue, $140 million of EBITDA and is cash-flow positive. It’s done a billion rides since inception. It’s transformed how people get around in many cities.
So the short answer is: we didn’t see a mobility company at the outset. We saw a real estate business, but a new flavor of real estate business, one built at the curb.
That’s interesting, because so much of that starts as something niche and small, with the potential to really explode. What do you think ties it all together? Is it just that it’s a physical asset — could be almost any type of physical asset — that makes it real estate?
Real estate is actually a pretty easy industry to describe, if you give it an expansive definition: Real estate is how you use physical space as an input to the economy. If anything you’re doing has an input of physical space, that’s real estate.
That three-dimensional space could be GPUs in a data center, an office building, a parking lot, a farm, the curb space where a Lime scooter sits, an edge data center, a stationary battery, a microgrid. There are all kinds of formats that space can take, but that’s real estate.
There are more and more creative ways people are using space to create the economy than ever before, and a lot of that is precipitated by technological change. That’s a really cool thing to be part of, and it’s the core of what I do at Fifth Wall and how we identify companies. The idea that we can identify, very early, consumer behavior changes that will radically transform how physical space is used in the economy is a really exciting thing to think about.
How do you think real estate is being reshaped by micro-mobility, and also through the lens of Waymo and self-driving technology?
The transportation industry and the real estate industry are so intimately intertwined it’s hard to disambiguate them. At the beginning, it’s easy to discount any new form of transportation as a purely technological phenomenon without a real estate dimension.
Go back in time from the horse and buggy to the railroad to the personal automobile to commercial trucking. All of those, in their commercialization, dramatically transformed the physical footprint. It just usually takes real estate owners quite some time to get there.
The more recent incarnations are micro-mobility — how Lime is changing the way people move around cities — and vehicle autonomy, both consumer and commercial autonomous vehicles.
As it relates to micro-mobility, I think it mainly changes the addressable market of walking. When we first underwrote Lime, I remember saying in our investment committee — a weird thought but a true one — “How big is the addressable market of walking?” Because that’s really what Lime does: It extends the walkable distance people are willing to go without getting in a car.
And that market turned out to be pretty big, based on the sheer number of rides Lime is doing. A lot of people take Lime as their daily commute. I believe about 40 percent of all rides on Lime are commuter rides, not joyriding.
That’s a real change in consumer behavior, especially considering the alternative: a 7,000-pound car that sits idle 98 percent of the day, driven from one parking space to another and left there. That one fact alone changes the complexion of space use in a city. I think that’s the whole point of the business.
You launched Fifth Wall in 2016. How has your investment thesis changed since then, and how has it continued to evolve?
There are so many ways it’s changed, but I’ll give you one that Lime highlights.
It’s kind of orthodoxy in venture that capital-intensive businesses are bad. You want to avoid things that consume lots of cash or have real estate capital intensity. I somewhat subscribed to that view at the beginning of Fifth Wall.
But now, looking at our performance and returns, most of our returns have actually come from extremely capital-intensive businesses with real estate dimensionality.
We’ve had a number of exits in that category — most obviously Opendoor, then Industrious in co-working and now Lime. I did the math: About 60 percent of our Distributions to Paid-In capital (DPI) has come from these capital-intensive businesses. So capital intensity is not a bug for our category — it can be a feature.
The second thing: The line between what’s a real estate company and what’s a technology company is getting pretty blurry. Back in 2016, that bright line was pretty clear. Now, looking at a lot of companies in Fifth Wall’s portfolio — Opendoor, Lime, Industrious, a company called Clikalia, Loft, Homebound — many look and feel much more like real estate companies, but we’re capitalizing them in a venture format. That’s actually where we’re having enormous success building the business.
You’ve now got roughly a decade of Fifth Wall data since 2016. What early signals have you found that indicate a proptech firm will succeed, compared to ones that don’t?
It’s a good question. We’re constantly trying to figure this one out ourselves.
It’s always difficult to know for certain, but I’ll answer with a slight wrinkle: Increasingly, what I’m looking for is a view that technology, and AI in particular, has sped up the pace of social, demographic and consumer-behavior disruption. The way people interact with physical space is changing faster than ever.
A simple example: Who thought, back in 2015, that a significant number of people would be taking dockless scooters downloaded from an app to get to work? No one thought that. Now a lot of people do. Behavior change is happening faster and faster, and I think AI has supercharged that.
What that means is entirely new asset classes of real estate are going to emerge that don’t start out describing themselves as real estate companies. There’s a long history of this: cell towers, cold storage, data centers. None of those were seen as real estate businesses when they started. It took the real estate industry five to 20 years to recognize them as such.
So the entrepreneurs I’m excited about right now are the ones who see a new behavior change that’s going to change how we use space — the way Lime saw the value of curb space. Edge data centers, edge batteries, autonomous delivery, last-mile logistics — I think entirely new real estate companies will be built in these categories.
Many will begin their lives capitalized as venture-backed businesses, but they’ll pivot and grow into being real estate companies. I’m very keen to identify those, because I think they represent the biggest winners in our space.
Other than Lime and celebrating 10 years, what’s something you’re working on at Fifth Wall that you’re excited about?
Fifth Wall is in the business of helping the real estate industry see the future and capitalize on it. What’s exciting about AI today is that it’s an opportunity for real estate owners to take control and build things themselves in a way they never could before — to build, develop, own, control and make proprietary their own technology to support their business. The best real estate firms are doing that, and we’ve never seen that before at Fifth Wall. That’s something I’m super excited about.
The second thing is the emergence of new real estate businesses evolving within the real estate asset class. It’s dawning on the real estate industry that these are entirely new asset classes, and Fifth Wall is helping tell that story. Talking about Lime as a real estate company will probably surprise a lot of people, even your readers.
“It’s a scooter company” — but it’s not, really. It’s like saying a data center business is a chip business. It is, in a sense, but that’s not the power of the business. Lime is a scooter company insofar as it controls curb real estate — that’s what makes it valuable, not the scooters. The scooter is the means; the curb real estate, the concession, is what matters.
Same with a data center: It’s not the chip on its own that matters. It’s the chip in a location, commingled with other chips, with access to energy and fiber networks, that turns it into a real estate asset.
That’s the thing that’s always hard for people to understand — things that seem like technology aren’t always technology. Many of them are, in fact, real estate businesses, but you have to look at them differently.
