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Term Sheet — Wednesday, July 25

5 Qs WITH A DEALMAKER

Fifth Wall Ventures has a pretty narrow investment thesis. It invests exclusively in startups focused on real estate technology across sectors such as hospitality, retail, and construction.

The firm, which launched last year, raised $212 million for its debut fund from a star-studded roster of investors, including CBRE, Prologis, Hines, Lennar, Host Hotels & Resorts, Equity Residential and Macerich Properties. Just last month, it held a first close on its second real estate tech fund, which has a target of $400 million.

Real estate technology has produced many of the largest private companies of the last decade (ie: Airbnb & WeWork), so Fifth Wall is eager to take advantage of that opportunity. It created an LP base of the largest owners of real estate who could act as “kingmakers” (and potential acquirers) for the early-stage companies the firm invests in.

Fifth Wall’s portfolio includes companies such as Industrious, Opendoor, Harbor, Lime, and ClassPass. Term Sheet caught up with co-founder and managing partner Brad Greiwe to discuss its position in the VC ecosystem, its recent investments, and the state of the real estate market.

Below is an excerpt of our conversation. Read the full Q&A here.

TERM SHEET: You led Industrious’ $80 million Series C round earlier this year. I wrote in Term Sheet that it’s hard to ignore that the co-working space startup will go head to head with rival WeWork, which is backed by SoftBank’s mammoth Vision Fund. How do you think about SoftBank when you’re making investment decisions?

GREIWE: Softbank’s entry into the VC market has changed the dynamics of how I think about funding. For a real estate-focused fund like ours, we’re actually encouraged by it because our space offers pretty large opportunities where investors can deploy a whole array of different types of capital focused on different types of returns. I think SoftBank’s funding of WeWork is telling because they’re very keen on betting on the evolution of flexible office space.

Flexible space, overall, is about 2% of the U.S. commercial office space. JLL and CBRE anticipate that this could grow to anywhere between 10 to 30% by 2030. So WeWork is in no way prepared to — or capable of — capturing all of that growth. There will be many, many companies that will take advantage of that opportunity.

So we think Industries and their focus on a more enterprise-level clientele is well-positioned to carve out a unique niche there and continue to grow accordingly.

Opendoor just raised $325 million at a valuation of more than $2 billion. You invested in the company’s Series D round. What is the opportunity you saw there?

What Opendoor did was completely change the way consumers would think about transacting with homes. Opendoor can do it on a national scale, and that unlocks infinite amounts of opportunity. When you think about the inefficiencies associated with buying and selling homes right now, it’s ranked as one of the most stressful things you can do in your life. A transaction platform that’s built to accommodate that process and make it more appealing to a broader set of the population will convince more and more people that they have options. We really think they’ve only begun to scratch the surface of the growth model. Keep in mind that we helped bring Lennar into the fold (TS note: Opendoor raised $100 million in debt financing from national homebuilder Lennar.)

Think about the innovation that Opendoor provides to an incumbent like Lennar, which is the largest homebuilder in the U.S. Imagine a situation where you buy a Lennar home, and at any point, you can sell your home to Opendoor and move in to a new Lennar home if you want an upgrade. OpenDoor makes that process seamless. You’ll see it become much more mainstream in the coming months and years.

A big risk is that if the housing market cools or crashes, Opendoor might be stuck holding more homes on its balance sheet, potentially eating into its equity if they decline in value. How does the company navigate that risk?

GREIWE: Their valuation model is very keen on understanding and recognizing that value shift occurring and can essentially price their homes in a way that will either allow them to buy at a better price or decelerate their purchasing.

Keep in mind that what people don’t really understand is that the housing market didn’t fall off a cliff. It slowly went down over time. I mean, it dropped to very concerning lows, but that happened over a period of months. Even if you don’t have a sophisticated valuation model, anybody would be able to see that coming and adjust the strategy accordingly.

Term Sheet recently interviewed the CEO of Harbor, a tokenized securities startup in which you’re an investor. He told me that commercial real estate is an attractive asset to tokenize. How do you see this playing out in the real estate market?

GREIWE: Tokenization is probably the most interesting thing we think about on a daily basis because companies like Harbor are going to create opportunities like we’ve never seen before. The most important takeaway that we should all be focused on is the democratization of access to the largest wealth creator that the world has ever seen.

Right now, anyone’s ability to invest in real estate is very limited. It’s either, you buy a share in a REIT and you have exposure to a very limited number of gateway cities or you purchase an asset on your own, which is out of reach for most people. Imagine a world in which tokenization becomes ubiquitous, fractionalized ownership in real estate becomes widely available, and you’re able to invest in your own community. [Read more about tokenized securities here.]

What types of properties do you think will get tokenized first?

GREIWE: Institutional owners are going to be the first to participate because they have the flexibility and the knowledge to be more creative and thoughtful about how to leverage tokenization. I don’t think you’ll see it happen in the single-family home space or smaller retail players. Honestly, if we’re going to make this thing real, the large institutions will have to be the ones to bring it about because they’re the ones that can work on the regulatory change and everything that’s required to weather any storms that come from it if they find the technology useful.

Read the full Q&A here.

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VENTURE DEALS

23andMe, a Mountain View, Calif.-based maker of a direct-to-consumer genetic testing kit, will raise $300 million in funding from GlaxoSmithKline. The deal could value the company at up to $2.5 billion. Read more.

Metromile Inc, a San Francisco-based car insurance startup, raised $90 million in Series E funding. Tokio Marine Holdings and Intact Financial led the round, and was joined by investors including New Enterprise Associates, Index, Future Fund and Section 32.

Equidate, a San Francisco-based stock market for private technology companies, raised $50 million in Series B funding. Financial Technology Partners led the round, and was joined by investors including Panorama Point Partners, and Operative Capital.

Guild Education, a Denver-based provider of an education benefits platform for working adults, raised $40 million in Series C funding. Felicis Ventures led the round, and was joined by investors including Salesforce Ventures, Workday Ventures, Rethink Impact & Education and Silicon Valley Bank. Existing investors Bessemer Venture Partners, Redpoint Ventures, Harrison Metal and Cowboy Ventures also participated.

Rescale, a San Francisco-based provider of enterprise big compute in the cloud, raised $32 million in Series B funding. Initialized Capital, Keen Venture Partners and SineWave Ventures led the round.

Patientco, an Atlanta-based patient billing and payments technology company, raised $28 million in Series B funding. Accel-KKR led the round, and was joined by investors including  participation from existing investor BlueCross BlueShield Venture Partners / Sandbox Advantage Fund.

Skillshare, a New York-based online learning community, raised $28 million in Series C funding. Union Square Ventures led the round, and was joined by investors including Burda Principal Investments, Amasia and Spero Ventures.

Aaptiv Inc., a New York-based provider of premium digital fitness content, raised an extension of Series C funding from Bose Ventures. Aaptiv has raised a total of $23 million in Series C funding.

Campfire, a network of shared spaces, raised $18 million in Series A funding. Kwai Hung Group, Sa Sa Int’l Holdings Ltd and Fast Global Holdings Ltd, a subsidiary of Rykadan Capital Ltd, led the round, and was joined by investors including Ring Capital Ltd and Potent Assets Ltd.

Siemplify, a New York-based provider of security operations and incident response solutions, raised $14 million in Series B funding. Jump Capital led the round, and was joined by investors including G20 Ventures and 83North.

Impraise, a New York-based provider of feedback and performance software, raised $10.6 million in Series A funding. Keen Venture Partners led the round, and was joined by investors including HenQ.

TradeGecko, a Singapore-based SaaS inventory and order management platform for small to medium businesses, raised $10 million in Series B funding. Investors include TNB Aura Fund 1, Aura Venture Fund, Perle Ventures and 33 Capital.

Madaket Health, a Cambridge, Mass.-based healthcare SaaS platform solution, raised $10 million in Series B funding. Qiming Venture Partners led the round, and was joined by investors including Experian Ventures, The PNC Financial Services Group, and Salesforce Ventures.

ScaleFactor, a smart finance and accounting platform, raised $10 million in Series A funding. Canaan Partners led the round, and was joined by investors including Broadhaven Ventures, Citi Ventures, Next Coast Ventures, Flyover Capital and Firebrand Ventures.

Happeo, a Finland-based software startup, raised $8 million in funding. Investors include DN Capital, Maki.vc and Vendep Capital.

EV Connect, a Los Angeles, Calif.-based provider of electric vehicle charging solutions, raised $8 million in funding. Ecosystem Integrity Fund led the round, and was joined by investors including Montage Capital.

HealthCrowd, a San Mateo, Calif.-based healthcare communications platform-as-a-service, raised $7.2 million in funding. TVC Capital led the round, and was joined by investors including Startup Capital Ventures and Healthy Ventures.

AllCloud, an Israel-based cloud solutions provider, raised $7 million in funding. Investors include Discount Capital and Hallett Capital.

Zorroa Corp., a search and analysis platform that extracts intelligence from visual assets, raised $7 million in funding. Gradient Ventures led the round.

Instant Magazine, a Netherlands-based software company, raised $5.4 million in funding. Investors include Connected Capital.

Knock Knock, a San Francisco-based developer of chat-native games and technologies, raised $2 million. Raine Ventures led the round, and was joined by investors including London Venture Partners and Ludlow Ventures.

HEALTH AND LIFE SCIENCES DEALS

Alector, a South San Francisco-based biotechnology company focused on developing therapies that harness the immune system to cure neurodegenerative diseases and cancer, raised $133 million in Series E funding. Investors include Deerfield Management, AbbVie Ventures, Federated Kaufmann Fund, Section 32, Euclidean Capital, Foresite Capital, Lilly Asia Ventures, New Leaf Venture Partners, Perceptive Advisors, Casdin Capital, Polaris Partners, OrbiMed, MRL Ventures, GV, the Dementia Discovery Fund, and Mission Bay Capital, Amgen Ventures.

PRIVATE EQUITY DEALS

K1 Investment Management invested $25 million in RFPIO, a Beaverton, Ore.-based provider of request for proposal response software.

Clearview Capital and Starboard Capital Partners recapitalized Apothecare Pharmacy LLC, an institutional pharmacy targeting the behavioral health sector in group homes and community-based settings. Financial terms weren’t disclosed.

Bertram Capital acquired BearCom, a Garland, Texas-based provider of wireless communication solutions for two-way radios and other voice and data technologies. Financial terms weren’t disclosed.

Lightyear Capital and Oak HC/FT invested in Therapy Brands, a provider of mental and behavioral health software. Financial terms weren’t disclosed.

Norwest Equity Partners invested in Wahoo Fitness, an Atlanta-based technology-focused fitness company. Financial terms weren’t disclosed.

OTHER DEALS

Hitachi Vantara, a wholly owned subsidiary of Hitachi, Ltd. (TSE: 6501), agreed to acquire REAN Cloud LLC, a Herndon, Va.-based cloud systems integrator. Financial terms weren’t disclosed.

IPOs

Bloom Energy Corp., a Sunnyvale, Calif.-based power cell maker, raised $270 million in an offering of 18 million shares priced at $15 apiece, the high end of its range. The firm posted revenue of $376 million in 2017. Alberta Investment Management Corp. (7.5% pre-offering), Advanced Equities Financial Corp. (6.6%), Kleiner Perkins Caufield and Byers (15.9%) , Kuwait Investment Authority (10.7%), and New Enterprise Associates (8.8%) back the firm. J.P. Morgan and Morgan Stanley are underwriters in the deal. It plans to list on the NYSE as “BE.” Read more.

Tenable, a Columbia, M.D.-based cybersecurity firm, plans to raise $240 million in an offering of 10.9 million shares priced between $20 to $22. That’s up from a prior proposed offering of 9.2 million shares priced between $17 to $19. It posted revenue of $187.7 million in 2017. Insight Venture Partners (35.2% pre-offering) and Accel (34.4%) back the firm. Morgan Stanley, J.P. Morgan, Allen & Company, and Deutsche Bank are underwriters.The firm plans to list on the NASDAQ as “TENB.”  Read more.

Aquestive Therapeutics, a Warren, N.J.-based central nervous system therapies maker, raised $68 million in an upsized offering of 4.5 million shares priced at $15 apiece, in the middle of its $14 to $16 range. The firm posted revenue of $66.9 million in 2017. Bratton Capital Management and Genpar Monosol back the firm. BMO Capital Markets and RBC Capital Markets are underwriters. It plans to list on the Nasdaq as “AQST.” Read more

EXITS

Partners Group Holding AG is nearing a deal to acquire data analytics company Information Resources Inc, a Chicago-based developer of big data and predictive analytics, from New Mountain Capital for over $2 billion, including debt. Read more.

FIRMS + FUNDS

Tailwater Capital, a Dallas, Texas-based private equity firm based, raised $900 million for its Tailwater Energy Fund III LP as well as $100 million co-investment for a platform company in the fund.

Graphite Capital, a U.K.-based mid-market private equity firm, raised more than 470 million pounds ($618 million) for its ninth fund.

Patriot Financial Partners, a Philadelphia-based private equity firm, raised more than $365 million for its third fund, according to an SEC filing. The target is $400 million.

Ridge Ventures, a San Francisco-based early-stage venture firm, raised more than $130 million for its fourth fund, according to an SEC filing.

PEOPLE

Capital Dynamics appointed Elizabeth Philipp as a managing director and head of North American business development. Previously, she worked at Angelo, Gordon & Co.

Ignition Partners appointed Preeti Rathi and Kellan Carter as partners.

Jadian Capital named Andrew Fredman and James Walker as partners.

Yellow Wood Partners promoted Jennifer Roach Pacini to vice president.

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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.