In the decade since its founding, Beverly Hills-based Fifth Wall has grown dramatically. Today, the investment firm, which focuses on PropTech, has roughly 115 strategic partners, $3.1 billion in commitments and assets under management, and has aided roughly 170 companies in their growth.
One recent investment was in downtown-based Atoms Inc., a ghost kitchen startup by billionaire Travis Kalanick that emerged from stealth with a $1.7 billion funding round this summer.
Brendan Wallace, the firm’s founder and chief executive, sat down with the Business Journal to discuss his career, PropTech as an investment class and the firm’s future. His answers have been edited for length and clarity.
Tell me about how you got your start and what got you interested in investing in PropTech.
My career began as a hybrid of real estate and technology, which are two industries that don’t typically converge and don’t really – or hadn’t until Fifth Wall came along – really collided in a meaningful, institutional way.
I started my career in real estate. I graduated from Princeton, and then I worked at Goldman Sachs in their real estate investment banking group, and then I worked at Blackstone in Blackstone’s real estate private equity group, and then the GFC came along, and it seemed like a good time to get out of the real estate industry.
In 2008, I went to business school at Stanford, and like a lot of people, that was my first time out in California, my first time in Silicon Valley, and I caught the tech bug. Another classmate and I launched a tech company as students – we literally launched it from our dorm room – grew that, raised a few rounds of venture capital and built an enterprise technology that we eventually sold to Workday and became what is today Workday Recruiting…
I then went on to start another company in the ridesharing space, where we built an incumbent to Uber in Latin America and Spain, a company called Cabify.
What was the idea behind Fifth Wall?
My thesis was that as software eats the world, it’s going to eat very significant parts of it, including the real estate industry, and as I looked at the real estate industry, I didn’t see any venture capital funds focused on it. I saw that some corporate VCs had launched arms of large, institutional real estate players, but none really had the quality of portfolio or the quality of team that I thought could really capture the space, and so I made the decision to launch the first focused venture capital fund for the real estate industry.
We ended up raising $212 million in our first fund, and what made that fund unique was that it was the first institutional capital raised for real estate tech…Being in L.A. gave us a lot of exposure to the real estate industry, which is massive here and now we’ve gone on to raise from a lot of L.A.-based real estate organizations, companies like Kilroy and Hudson Pacific and Macerich and (now based in Texas) CBRE and Public Storage – all these are L.A.-based (or formerly based) real estate titans that have invested in our funds.
The company recently refocused and moved its headquarters back to L.A. from New York. Can you tell me about that?
We built the firm for the first three or four years in Los Angeles. We were entirely based in L.A. We had a full team here in L.A., and then COVID was this kind of punctuating moment in our firm’s development, where instantly we had to go towards working remotely. And I was candidly surprised by how well – at least at the outset – remote work thrived at Fifth Wall. We were probably investing better than we ever had. We were attracting more investors. We were operating in a truly remote environment in early 2020 in a way that was totally surprising to me…
I saw it as an opportunity. I was like, ‘Well, maybe we can build a larger platform by leaning into kind of a hybrid work environment where we have work remote and in office, and we can also build a multi-nodal kind of office footprint, where we would establish a footprint in New York, establish a footprint in San Francisco, establish a footprint in London, in Singapore, in Abu Dhabi, and so we began to kind of expand our physical footprint, and during that period, we also launched thematic focus funds. We launched a fund focused on energy and sustainability. We launched a fund focused on Europe, and we kind of built those from those newer offices.
What I saw, though, as we were building this, is the power of working in an office, I think, is now probably more appreciated than ever, because while there’s a lot to recommend remote work, there’s a lot of drawbacks to it, and what I saw is that it’s very hard to instill the kind of culture, the kind of entrepreneurialism, the kind of commerciality that naturally grows in the substrate of an office environment…
We’ve been fortunate. We’ve had 10 IPOs across the platform. Of the 10, eight of those deals were originated here in Los Angeles. Our best returning deals came out of this office. Our highest performing investors came out of this office. So in 2023, 2024, I made the decision to say, look, I value the footprint that we have, but for Fifth Wall in particular, the alpha that we can generate in an office environment with a culture that can grow in that office environment is hard to maintain across multiple offices, so I brought all our most talented investors, our most valued team members, many of whom we’d hired in other locations, they all came back to Los Angeles.
How much are you typically investing and how are the investments structured?
Fifth Wall is a traditional venture capital fund, so we buy non-controlling, minority stakes in fast-growing tech businesses, and we can go as early as a seed check. So, that can be as small as half a million dollars, all the way to $5, $10 million in a series A-type investment.
On the other end of the spectrum, we also will make very significant, larger investments, like the one we did in Atoms that was $135 million. We have a very wide aperture, but in nearly all of the instances, we’re buying non-controlling minority stakes and supporting entrepreneurs as they’re growing.
We exit through an IPO, or through a company selling itself. Those are typically the avenues through which we get liquidity for our investors. We raise all of our capital in commingled pools of capital and funds.
Something that we have started to do more recently is actually build some of our own companies. So where we have a thesis, or we have a unique advantage in building a solution that we don’t see in the market, we will build those solutions ourselves. We have a couple that we’re working on right now that are at the intersection of the traditional real estate industry and real estate capital markets, and what is now possible with generative and agentic AI. We’re building two companies currently in that space.
What makes you interested in investing in a company?
The way I look at companies that we invest in is one: it has to be a big, important problem that the company is solving. We gravitate more towards the kind of heavier, seemingly more intractable, more valuable problems. We try to avoid the more boutique-based problems.
The second thing is we put a lot of emphasis on the entrepreneur. There’s an art and a science to identifying the right entrepreneurs, but it’s way more art than science. There’s a certain feeling you get around great entrepreneurs…
The last thing that we focus a lot on is distribution: how can we stack the deck in favor of our portfolio companies? And what we do at Fifth Wall is, because we have (roughly) 120 strategic LPs across our platform, we try to structure contracts and distribution deals and partnerships with our strategic LPs, and these strategic LPs are some of the biggest names in real estate. These are groups like CBRE and Marriott and Related and Public Storage and Digital Realty. They are the incumbents, the kind of kingmakers in the real estate industry.
That’s something that we focus on a lot: how can we sway the outcomes in our favor through these strategic investors that Fifth Wall has brought into its funds?
You have had 10 IPOs at this point. What is your involvement when a company reaches that point and have you noticed any changes in the overarching IPO market?
From an exit perspective, we’ve been very fortunate to have 10 IPOs. That’s kind of unique, I think, for a 10-year-old firm, and the IPOs we’ve had have been across so many different themes and categories. Everything from the fintech theme to micromobility and Lime to financial markets and Opendoor to marketplaces and enterprise software and companies like ServiceTitan and Procore.
We tend to exit sometime after the IPO. We don’t have a hard and fast rule about when we exit, but we tend to exit once companies have liquidity in the public markets, typically because our investors are really giving us capital to manage in the private, illiquid market, so once they become liquid and you have that exit potential, we tend to exit somewhere between six months to three years after the IPO.
Very recently, we’ve had a number of IPOs, including BitGo, including Lime, and we have a number of others that are, I think, imminent.
One thing you are seeing is that the IPO market is becoming somewhat backlogged because there are so many large offerings. So companies like SpaceX and now Anthropic are going out. These are quite literally the largest companies on Earth doing IPO issuances. The sheer volume that that consumes means that a lot of companies that are kind of in the – call it $5 to $20 billion range – are in some ways compelled to wait until those larger issuances go out. That’s a relatively new dynamic. There weren’t a lot of trillion-dollar-plus IPOs until recently. What that does is it puts pressure on the public markets to metabolize these new issuances, and a lot of focus is put on how those companies trade after the fact… The impact of that is that probably more companies than ever before are on deck. They’re waiting to go out and IPO, even though they’re ready.
What do the next few years look like for Fifth Wall?
What I’m particularly excited about is the potential to build entirely new real estate companies from scratch, and I think that was something that was historically very hard to do. If you look over the last 25 years, there have not been a lot of large, new real estate companies built. Most of the large publicly traded REITs are older and were created decades ago.
Three converging trends are creating these first-derivative real estate opportunities. Those trends are AI, autonomy and robotics. Those three trends will create entirely new asset classes of real estate. Fifth Wall has a front-row seat to the companies that are pacing that change and the flagship companies in those categories, and so we’re in a unique position to identify what are those new asset classes? How would one build a company around that? How would one capitalize a company around that? And I think that’s very exciting.
Will future raises be in general funds or more specific ones?
There will be a mix. There will be general funds that give you versatility and a wider aperture to invest in companies from the seminal stage through to adolescence, but I think a few of these ideas will mature faster and as they do there will be more specialized vehicles. It could be funds or in corporate structures, but I expect some of the larger ones may be specialized.
