Insights on technology and real estate.

The retail world is changing fast. The dramatic growth and increasing popularity of Digitally Native Vertical Brands (DNVB) across multiple categories combined with the ubiquity of Amazon is altering the traditional landscape dramatically and permanently. In 2019, this evolution will continue to pick up speed as DNVBs expand their online footprint while simultaneously outgrowing their digital roots and putting down physical ones by opening stores in cities across the country. Read on for Fifth Wall’s 2019 predictions.

**Fifth Wall Ventures

Industry: Venture Capital, Real Estate

Year Founded: 2016

Employees: 23

Location: Venice

Money Raised: $285 million**

Fifth Wall Ventures co-founder Brendan Wallace is an advocate for new technologies and not just in his professional life as the managing partner of a venture capital firm focused on real estate technology.

Wallace, 37, typically zips the four blocks from his house to Fifth Wall’s Venice headquarters on a Lime scooter, one of the ride-share vehicles that have become almost ubiquitous in Los Angeles.

Wallace’s commute highlights a core theme for Fifth Wall: working to connect tech startups with large, established real estate players. Through these connections, Fifth Wall aims to identify startups that can guide legacy real estate firms through the sector’s digital transformation.

With Lime – which Fifth Wall invested an undisclosed sum in as part of a $70 million round in February – the firm is using its real estate connections and strategic partners to help the on-demand scooter company find parking for its bikes and scooters in high-density areas.

Privately held Lime recently inked a deal with one of Fifth Wall’s limited partners, Santa Monica-based Macerich Co., which announced plans this summer to help the company stage scooters in cities across the United States and internationally.

Macerich, the third largest mall operator in the United States, has plans to make Lime the exclusive scooter operator at its properties, including at Santa Monica Place, an open-air shopping mall located at the south end of the 3rd Street Promenade. Fifth Wall helped facilitate the deal, Wallace said.

Marching toward $1B

Several similar relationships have been forged by Fifth Wall, which is investing out of an initial $212 million fund that closed in May 2017.

The firm is now in the process of raising for two more funds, which together are planned to be more than $600 million, according to filings with the U.S. Securities and Exchange Commission.

If the money is raised as planned, the company would have roughly $885 million in capital at its disposal, including $212 million raised in its first fund and $73 million of special purpose vehicles, or SPVs. An SPV’s assets are limited to the acquisition and financing of specific assets as a method of isolating risk.

If the new funds become oversubscribed – the firm’s first fund was, according to Wallace – Fifth Wall could wind up with over $1 billion in its investment pool.

The firm claims that its current investments have boosted its portfolio companies aggregate revenue by nine figures.

“We have delivered over $100 million in revenue to our portfolio of companies,” said Wallace of his firm’s investments’ impact.

Besides Macerich, the strategic limited partners who have invested in Fifth Wall include downtown-based CBRE Group Inc., a commercial brokerage; Equity Residential, a real estate investment trust focused on high-end apartments; Hines, a privately held real estate investor; Lennar Corp., which is among the nation’s largest homebuilders; Host Hotels & Resorts, a real estate investment trust that invests in luxury hotels; Lowes Cos. Inc., the home improvement retail giant; and ProLogis Inc., one of the largest industrial real estate companies in the world.

All Fifth Wall’s strategic real estate partners committed at least $15 million to the firm’s initial fund.

In exchange for the buy-in, the partners get a return based on the performance of Fifth Wall’s portfolio companies. Fifth Wall gets the money, but the big-name backing also acts as a helpful tool when pitching startups because the close connection to these real estate giants can lead to secondary deals, like the Macerich/Lime partnership.

Time for tech

Fueling interest in Fifth Wall is a recent awakening by big real estate firms’ realization that their industry was largely untouched by the technological revolution. Companies in the space began to hire chief information officers, chief digital information officers and information technology directors to spearhead tech investment.

“They started to allocate real budget to technology,” Wallace said.

Fifth Ventures, as it was envisioned by Wallace and his co-founder Brad Greiwe, 35, aims to span the void between these mammoth-sized, legacy real estate companies and technology startups.

“We act as the bridge between the largest real estate companies on earth and real estate technology entrepreneurs,” Wallace said.

In the case of Lime, a real estate firm like Macerich sees the vehicles as a way to draw more consumer traffic to malls or highly urbanized areas like Santa Monica and Venice, according to Wallace. To be a destination for scooter riders, retail operations can build hubs to charge the scooters, driving traffic near their shops.

“The real estate market in L.A. is so conditioned by transportation, (more) than anywhere else in the world,” Wallace said, noting Lime plans to expand overseas eventually.

He refers to Fifth Wall’s Lime scooters investment and the 26 other commitments the firm has made as “digital touchpoints.”

“The touchpoints between real estate and technology could influence where you live or work,” Wallace said. “We believe transportation will dramatically impact all real estate asset classes and values in cities.”

Prestigious pedigree

Wallace and Greiwe earned their spurs in the world of high finance and met after their paths crossed while working indirectly for private equity firm Blackstone Group’s $4 billion public offering back in 2007.

“The core thesis of Fifth Wall came through Brad and I advising on technology in real estate with Blackstone,” Wallace said.

Wallace, who grew up in a real estate investment family in Manhattan, attended Princeton University where he studied politics and the economy, and wrote his senior thesis on the impacts of big stadiums and entertainment venues in large urban areas. He reluctantly confesses that he won the John G. Buchanan Prize in Politics while at Princeton. Established in 1909, it is awarded annually to the senior who has attained the highest “standing” in the politics department during junior and senior years.

Greiwe went the route of Harvard University, where he studied economics. He grew up in a prominent Cincinnati family that was also involved in the real estate business, and lived in the city’s Indian Hill neighborhood, considered the Midwestern city’s most affluent.

Greiwe is also co-founder and chief technology officer of Dallas-based Invitation Homes Inc., the largest owner-operator of single-family rental homes in the United States. The company raised $1.54 billion last year in an initial public offering. Invitation Homes owns and manages close to 50,000 single-family rental homes in 13 metropolitan markets.

Mountain View, California-based Hippo Insurance, which launched last year to provide streamlined insurance policies that cut premiums by up to 25 percent, is the latest startup to be partnered with a traditional real estate firm by Fifth Wall Ventures.

Fifth Wall, which led the startup’s $25 million series B funding round in January, arranged the partnership between Lennar and Hippo.
“It’s very consistent with the Fifth Wall model: connecting real estate incumbents with these startup companies,” Brendan Wallace, Fifth Wall’s co-founder, said in an interview.

Launched last year by Blackstone Group alumni Wallace and Brad Greiwe, the venture capital firm says it creates partnerships between traditional real estate companies and tech startups that will service the needs of its investors, offering a circular supply of customers and investors to startups.

Fifth Wall previously introduced Lennar to invest in OpenDoor, a home-flipping startup that can provide a service to Lennar customers, allowing them to “trade-up” and buy a larger Lennar-built home through Opendoor. Lennar and Fifth Wall raised $135 million in its last funding round.

In June, the venture capital firm launched a second real estate technology fund valued at $400 million, according to an SEC filing. In addition to Hippo, Fifth Wall has led funding rounds in co-working company Industrious and property software startup VTS.

Hippo was founded last year by Assaf Wand, a former associate with McKinsey & Co. The firm has since raised $109 million and will use the new funding to accelerate growth on a national scale. Wand said the company now has $20 billion in insured value and services 14 states.
Wand said the company was “eager” to expand its footprint and launch new products.

It is also backed by Felicis Ventures Abstract Ventures, Aquiline, Comcast Ventures, GGV Capital, Horizons Ventures, Munich Re, Pipeline Ventures, RPM ventures and Zeev Ventures.

Eric Feder, vice chairman of Lennar Commercial, will join Hippo’s board of directors and said the partnership reflects the company’s goal to streamline the insurance process for its home buyers.
Hippo competes with startup Lemonade in the tech-driven home insurance space. Lemonade, backed by SoftBank, has raise $180 million for a valuation of $600 million.

Facial-shop company Heyday raised $8 million in Series A funding, spearheaded by Fifth Wall Ventures with participation from existing investors such as Lerer Hippeau and Brainchild Funding and newcomers M3 Ventures and CircleUp, according to an announcement.

The funding will help fuel the brick-and-mortar expansion of Heyday in Los Angeles and ultimately nationwide. Heyday currently operates five locations in New York, where it was founded, and opened its first Los Angeles shop at 7228 Beverly Boulevard in West Hollywood this past July.

In addition to physical outposts, Heyday, whose self-declared mission is to take the “facial out of the spa” and make it part of a regular, more accessible integrated self-care regime, includes a digital and e-commerce platform where customers can book appointments, subscribe to monthly service plans, buy skin-care products and get professional advice.

“Heyday is a company we are incredibly excited about,” Brendan Wallace, co-founder of Fifth Wall, told Commercial Observer. “It’s a really good example of an omnichannel brand which is a big part of Fifth Wall’s built-investment strategy. That strategy, particularly in partnership with our retail real estate owners, is to identify brands we think can be the future of retail.”

Wallace said that Fifth Wall has expanded its original investment thesis over the last six months to not only focus on property-oriented tech as a way to connect “new, young, dynamic companies” with “large incumbents in the real estate industry,” but to also support the firm’s large retail real estate partners, including Macerich, by backing new brands, particularly those digitally native or omnichannel ones. Other retail brands recently backed by Fifth Venture include coworking company Industrious, outdoor product retailer Cotopaxi and custom furniture brand Interior Define.

Adam Ross, co-founder of Heyday, said “given that real estate is going to be a key pillar of our business and that they [Fifth Wall] seem to have a long-term view toward building brands across the country, their values and ours aligned.”

“We’re under no obligation to do anything with their partners, but if there are developments or buildings we want to go into with their partners, that’s fantastic, that’s a win. For us that’s something that is going to evolve as we open more locations here,” he added.

The rise of digitally-native brands has fundamentally altered the retail landscape. But these companies are also quickly recognizing the transformative value of offline. Today, over 90% of retail sales still take place in the physical world. Given the unparalleled reach and unique engagement offered by brick and mortar, many digitally-native brands are embracing a truly omnichannel model. Some are even going offline from the beginning.

Heyday is an innovative, digitally-enabled brand transforming the beauty and wellness industry. The three-year-old company is upending the 17 billion dollar United States skincare market through both in-person, customized facial treatments and a curated mix of at-home skincare products. The company delivers expert skincare with a human touch across five Heyday studios in New York as well as one in Los Angeles, and HeydaySkincare.com brings its unique assortment of curated beauty brands and products online.

Given Heyday’s inventive Built World model, Fifth Wall is excited to lead the company’s $8 million Series A financing, and further support its omnichannel growth. Fifth Wall is joined by returning investor Lerer Hippeau Ventures and welcomes new investors M3 Ventures and CircleUp Growth Partners.

Digital Disruption
Heyday's clearly offline facial treatment is the cornerstone of its business, but the digitally-enabled customer journey quickly departs from traditional brick-and-mortar models. Heyday customers start online—98% of appointments are booked through HeydaySkincare.com—and continue with a digital survey that gathers their skincare routines, personal preferences, and lifestyle factors. This forms a holistic, highly detailed view of each customer's skincare needs in order to provide both customized facials in person and tailored recommendations online. The company leverages products and techniques used in Heyday's facial treatments, as well as product purchasing histories, to form digital profiles that deepen Heyday’s understanding of each customer.

In aggregate, this digital model is even more powerful; since launch, Heyday has provided over 200,000 facial treatments and sold over 100,000 skincare products—and each data point has improved the company's macro insights across skincare products, techniques, and preferences. The Heyday experience, which has garnered a cult following, is a testament to that.

Brick-and-Mortar Foundation
From its founding, Heyday has used real estate to strategically drive its business. Spending about 75% less on advertising than the typical digitally-native brand, the company instead uses artfully outfitted and methodically located facial studios to reach its customers. Being located in the right space, on the right block, and in the right neighborhood has allowed Heyday to embed itself into the fabric of the communities it serves, becoming an essential component of its customers' skincare routines.

Fifth Wall Connection
Fifth Wall’s network of the largest retail real estate owners and operators in the United States all want brands like Heyday to succeed. Whether it's providing advantageous leasing terms, value-added services around design and build, or guidance on long-term brick-and-mortar strategy, our Anchor LPs are supporting and accelerating the most innovative companies in retail. Ultimately, Fifth Wall is helping counterparties become partners aligned around a common vision for the Built World future in general, and the retail industry in this specific case. The retail-focused investors on Fifth Wall’s team, led by Kevin Campos and Dan Wenhold, provide another dimension of support to digitally-native retailers and their real estate partners. Each having led offline operations for digitally-native brands prior to joining Fifth Wall, Kevin and Dan are able to share first-hand experiences and insights, as well as identify emerging trends and valuable learnings from the industry's latest developments. As an addition to Heyday's board of directors, Kevin will support the selfcare startup as it expands its national retail operations.

Exceptional Team
Powering this visionary remodeling of skincare is an exceptional team with deep consumer experience. Co-founders Adam Ross and Michael Pollack built this concept from scratch, drawing on their respective beauty and agency backgrounds. Heyday's new COO Ashley Peterson, who hails from digitally-enabled restaurant (and recent unicorn) Sweetgreen, brings hands-on experience scaling a beloved omnichannel concept to nearly 100 locations.

Retail Renaissance
Heyday not only reflects the dynamic disruption of beauty and wellness, but also the renaissance of retail. As digitally-native retailers lead the way with fresh concepts, brands, and online experiences, many in that cohort are pivoting back to the Built World to reach, engage, and grow their followings—scalably and profitably. Heyday has embraced an omnichannel philosophy from day one, leveraging brick and mortar to accelerate its business, while still innovating across all customer touchpoints. With our industry-leading consortium of real estate owners and operators, Fifth Wall is uniquely positioned to meaningfully influence Heyday's outcome through unparalleled connections and support, as well as deep operational retail expertise. Fifth Wall is thrilled to support Heyday as it transforms the future of retail.

WiredScore, a New York-based real estate tech firm that certifies office buildings for internet connectivity, has raised $9 million in Series A funding, according to an official release.

The funding was secured from Bessemer Venture Partners, Los Angeles-based Fifth Wall, Sterling Ventures and commercial real estate investors including Legal & General, KingSett Capital, U+I, Town Centre Securities, Momeni Digital Ventures and Savitt Partners.

Last October, an investment group led by Bessemer and Fifth Wall, acquired WiredScore’s majority share when company co-founder Jared Kushner divested, which Forbes estimated was valued at between $5 million and $25 million, based on Kushner’s financial disclosure form that July.

The $9 million funding follows a flurry of global expansion for WiredScore, which during the first three quarters of 2018 entered eight new cities—Chicago, Atlanta, Montreal, Glascow, Birmingham (UK), Marseille, Frankfurt and the Reinhart Westphalia region (Dusseldorf and Cologne) —and seen a 45 percent increase in certified buildings.

“As businesses become more dependent on digital connectivity, we are seeing a shift in the landlords’ responsibility to deliver well-connected buildings, Arie Barendrecht, WiredScore co-founder and CEO, said in the release. “No longer does the solution to connectivity issues sit solely between a tenant and their internet service provider. The reality is that the driving factor in powerful, reliable connectivity is the building infrastructure provided by landlords.”

WiredScore was founded in New York in 2013, launched in the UK in 2015. Clients include EQ Office, Brookfield, Hines, Tishman Speyer, Boston Properties and Google. The current investment will be geared toward expansion into new markets, including Dallas and Los Angeles, new product and service areas and additional employees, according to WiredScore.

“Through the certification processes, landlords can rectify any shortcomings,” Vik Chawla, a principal of Fifth Wall, told Commercial Observer. “As the U.S. economy increasingly tilts towards the technology industry, we anticipate that WiredScore-certified buildings will attract tenants at high proportions and at higher rents than their non-certified counterparts.”

WiredScore launched Wired Certification, which rates the infrastructure, connectivity and tech capacity of commercial buildings, in 2013 in partnership with then-Mayor Michael Bloomberg and the City of New York.

Despite being a $900 billion industry in the U.S., the over-the-road freight industry remains almost wholly unchanged since the advent of trucking in the mid-1900s. The space is ripe for new, tech-enabled freight shipping and brokerage solutions creating seamless experiences for both shippers and recipients. Although various niche aspects of the industry have been addressed, Shipwell has emerged with the first end-to end solution accounting for every stage in the freight shipping chain. Shipwell has the trifecta needed to become the category king in the crowded space of tech-enabled freight logistics - the right team and the right strategy at the right time.
Fifth Wall is excited to announce it's leading Shipwell's Series A round to continue streamlining and modernizing the freight brokerage industry. With this investment, Fifth Wall principal Vik Chawla will also join Shipwell's Board of Directors. Other global investors participating in the round include First Round Capital, Base 10 Ventures, Capital Theory and Village Global. Founded in 2016, this investment round brings Shipwell's total funding to date to $12.1 million.

While the outlook for the American economy is bright, underpinning its growth are outdated services organizing a national network of trucks zig-zagging America's highways and delivering billions of dollars of goods every day to customers and businesses. Shipwell saw a better way. At its core, Shipwell combines transactional shipping with a SaaS platform to connect freight carriers with brokers and shippers. It provides real-time quotes as well as shipping management and tracking capabilities so businesses and their customers get faster shipping, better visibility, and competitive prices.

Where is the link with Fifth Wall? Shipwell's full-service, digitized brokerage platform can streamline the way many of our strategic real estate Anchor LPs and portfolio companies approach large-scale freight shipping.

There is great potential for relationships in the industrial space for our Anchors. In addition to the obvious use case for Shipwell customers who own warehousing, landlords can use Shipwell to become effective facilitators for their tenants. Some Anchor LPs are already engaged in this shipping ecosystem on behalf of their tenants, while others act as transport hubs. Beyond these, however, there are easy tie-ins within a number of key categories of Fifth Wall Anchors that regularly ship or receive freight - developers, of course, but also our retail, office, and homebuilding partners.

There are also natural synergies between Fifth Wall portfolio companies and Shipwell. For startups developing increasingly expansive e-commerce businesses across the U.S., Shipwell can build out parts of its product to address the needs and major pain-points of fellow portfolio companies. With the size of the national freight shipping industry continually increasing, there are countless opportunities for integration of Shipwell's logistics and freight brokerage services with our growing number of portfolio companies.
Ready integration with our strategic Anchors and portfolio companies is just one of the key areas dictating Fifth Wall's interest in a startup. There is also the trifecta of a perfect opportunity, when a startup enters a category at the right time, with the right strategy, and with the right team.

A staggering 80% of all physical goods in the U.S. are on the back of a truck at some point, but the process of quoting, booking, and tracking those trucks is still incredibly manual. Undeveloped and backward technology in a laggard, multi-billion dollar industry has created a vortex of incredible potential. Shipwell's easy-to-use online platform - already shipping for everyone from Fortune 100 companies, like Shell and Samsung, to technology startups like Lumi - comes at a time when e-commerce shows massive year-over-year growth and businesses need a way to ship freight as effectively as sophisticated companies like Amazon.

Given the state of the market, Shipwell has taken a smart approach to the the freight brokerage landscape. While new entrants are actively seeking to disintermediate brokers from the freight ecosystem, carriers, shippers, and brokers all benefit from use of Shipwell's platform. Shipwell links into the API of over 500,000 freight carriers across the U.S., allowing freight brokers, carriers, and shippers (i.e. retailers, wholesalers, etc.) the ability to quote, book, dispatch, remit payment, and send invoices in real-time through the cloud. By acting as a friend and end-to-end "breath of fresh air" for the entire existing market, Shipwell is poised for positive disruption of the tech-enabled freight logistics space.

The Bright Future of an Industry In Flux
Fifth Wall's investment in Shipwell is about more than simply investing in a shipping company, but rather a chance for our Anchors and portfolio companies to be a part of what we see as a crucial aspect America's continued economic growth.
Fifth Wall can significantly influence Shipwell's outcome given our extensive network of retailers, as well as retail and logistics real estate owners. They are the preeminent player developing long-needed technologies which will advance and modernize a space pivotal to the American economy. As the number of goods shipped by individuals and businesses continues to increase, Fifth Wall is excited to play a part in digitizing the future of the freight shipping industry.

Shipwell, a startup pitching a marketplace for domestic ground shipping and fleet and cargo management services for freight trucking companies, has raised $10 million in a new round of funding.

A booming American economy coupled with failing infrastructure and a low-margin business reluctant to adopt new technologies have put stress on domestic logistics companies in the $900 billion market for U.S. trucking services.

Shipwell combines a marketplace for shippers to connect with freight companies and online tools to manage those shipments. In effect, the company is pitching a version of the proprietary logistics management toolkit that has made Amazon so successful, to any retailer or outlet.

“We coordinate the freight, we pay the truckers, we help optimize the fleets,” says Shipwell president and co-founder, Jason Traff.

Those services — and the company’s growing business among small and medium-sized suppliers to the construction industry — brought the Austin-based company to the attention of Fifth Wall Ventures, the Los Angeles based investment firm whose limited partners are among the biggest construction companies in the world.

For Fifth Wall the opportunity was clear. “Shipwell’s full-service, digitized brokerage platform can streamline the way many of our Anchor LPs and portfolio companies approach large-scale freight shipping,” the firm’s principal — and newest Shipwell board member — Vik Chawla wrote in a blog post announcing its most recent deal.

Fifth Wall led the company’s Series A round, which also included the new investor Global Founders Capital and previous investors First Round Capital, Base 10 Ventures, Capital Theory and Village Global .

The company’s business isn’t for big shippers that deal with thousands of shipments per-day, but rather the small and medium sized businesses that spend $100 million or less per-year on freight. And the small-fleet shipping companies that make up the bulk of the industry.

“In addition to the obvious use case for Shipwell customers who own warehousing, landlords can use Shipwell to become effective facilitators for their tenants,” according to Chawla. “Some Anchor LPs [the limited partners that provide capital for Fifth Wall to invest] are already engaged in this shipping ecosystem on behalf of their tenants, while others act as transport hubs. Beyond these, however, there are easy tie-ins within a number of key categories of Fifth Wall Anchors [sic] that regularly ship or receive freight—developers, of course, but also retail, office, homebuilding anchors.”

“We focus on the longer tail. If you are doing $50 million in freight per-year then you’re doing dozens of shipments per week,” said Traff. “Most of our freight is less than a truckload or a full truckload freight and it’s more long-haul.”

It hasn’t been a straight road for Traff and his co-founder Gregory Price. Traff originally got the startup bug in Asia, where he launched a company that would sell low-cost copies of old masters paintings. When he sold that business he moved back to the U.S. and pitched an idea to Y Combinator that eventually became Leaky, a car insurance company.

When Leaky shut down and its business was acquired by Navion in 2013, Traff moved to Austin to figure out his next move.I t was there that he ran into a fellow Massachusetts Institute of Technology alumnus named Greg Price and the two began hatching schemes for the company that would become Shipwell.

The two men began planning the business in 2016 and only launched the service in the beginning of this year. “Supply chains were very complex and there was a lot of building to do,” Traff said.

Shipwell makes money by charging a commission on freight services and fees for its freight management software platform.

Ultimately this could create a new model to unify a fragmented industry. “This connective approach makes all of the difference in an industry with so many small companies at play,” Chawla wrote. “A surprising 89% of freight trucks in the U.S. are owned by carriers with fewer than five total trucks, and 99% of freight carriers possess fewer than 10 total trucks in their fleet. Despite the big business of freight shipping in the U.S., it’s actually a fragmented market of small businesses.”