Real estate tech startups are dying fast. According to industry estimates, their failure rate went from 75 percent to 90 percent with unsuccessful companies closing up shop within 20 months of being funded.
Despite the enormous amount of capital being funded to establish a real estate tech revolution, it is highly likely that the startups that are trying to take real estate into the next level will flop.
Many failed startups have seemingly winning ideas but failed to flourish because they were not financially viable. For instance, San Francisco-based Campus which was launched in 2013 closed down because the 23-year-old CEO Tom Currier was unable to turn the startup into "an economically viable business." The startup opened 30 co-living houses with 150 residents and made the headlines but still was unable to pay its bills.
Across the nation, there are currently 175 companies involved in the real estate tech sector said Noel Fenton, co-founder of Silicon Valley-based Trinity Ventures.
"Some may go out of business, others will consolidate," he predicted. "Ninety percent of them will not be around in five years."
Fenton's company, Trinity, is one of the earliest and most prolific investors in the real estate tech sector. It has put in more than $725 million in aspiring startup companies, including an estimated $56 million in modernized real estate ventures such as the commercial listings platform LoopNet and the online transaction system Dotloop which deals with paperwork involved in real estate transactions.
Things are looking bleak for real estate tech but Fenton is convinced that today's situation is a characteristic of the early stages of a tech boom.
Meanwhile, VTS co-founder Nick Romito said that the fate of startups depend if they can reach $2 million in annual revenue. He said that the threshold is a good predictor whether the founders of the startup can get enough momentum to build early success.
