What’s Next for Real Estate Venture

On the “ is it hot or not” index of venture investing, consumer-facing Internet pretty clearly qualifies as “hot” lately, while real estate would definitely rank as “not.”

But where the two sectors meet, VCs are finding some compelling investments. For instance, even amid what many consider a frothy period for Internet IPOs, the recent debut of real estate website Zillow caught many by surprise. Shares of the real estate data company tripled in first-day trading before settling back to earth last week. Even at its now reduced share price, the company’s still valued around $800 million – not bad for a money-losing business with revenues of just over $30 million last year.

More notably, Zillow managed to make hay despite its core focus in the one of the worst-performing sectors in the U.S. economy. Its best-known feature –the fluctuating house price estimates, or “Zestimates” once keenly followed by homeowners to gauge their ever-increasing home equity – now serves mostly to measure how far underwater mortgages have sunk.

Yet even with real estate industry in dismal condition – or perhaps because it is in such dire need of turnaround help – real estate plays continue to attract attention and funding from venture investors. Some such as Home Value Protection, a Kleiner Perkins-backed developer of services for hedging downside risk on real estate purchases – are geared toward enabling buyers and sellers to weather through a distressed environment. Others, such as Smarter Agent, a provider of a mobile platform for realtors to show listings and interact with customers, are wagering that while the property downturn is likely temporary, the need for souped-up technologies for buying and selling real estate is not.

“We’re probably in the most beat-up sector in America right now…But I think that’s being counterweighted by the growth of mobile,” says CEO Brad Blumberg, who co-founded Camden, New Jersey-based Smarter Agent with his brother, Eric, who serves as president. The ten-year-old company has raised about $18 million to date, Blumberg says, including a $6 million round earlier this year. Ira Lubert, chairman of Philadelphia-based private equity fund Independence Capital Partners is its largest investor, along with several angels.

Over the past year, I’ve counted at least a half dozen sizeable real estate venture and angel deals, not counting vacation and temporary rentals. While that’s not exactly a phenomenal show of confidence, it’s not bad for a beaten-down sector. If one categorizes Airbnb as a real estate deal, which it kind of is, then the numbers for total dollars invested in recent months are well over $150 million.

Many within the industry, meanwhile, remain optimistic that while real estate may be down, it’s coming back.

“I would call this the once-in-a-decade buying opportunity,” Blumberg says. “Now would be obviously a great time for a renter if you can afford to buy. From an investment point of view, you’re going to read in three years of the fortunes that are being made.”

The following slideshow offers snapshots of a few companies with a real estate focus that have managed recently to secure sizeable angel and venture investment.

[slideshow]

[slide title=”Home Value Protection”]

Location: San Francisco

Business Description: Website still under development. Provides services aimed at enabling homebuyers to remove or hedge downside risk on real estate purchases.

Funding: Raised $17.6 million to date, including $13 million in April, from Kleiner Perkins Caufield & Byers.

[slide title=”Smarter Agent”]

Location: Camden, New Jersey

Business Description: Mobile platform for real estate professionals

Funding: Raised $18 million, including $6 million this year, from angel investors including Ira Luberg, chairman of Independence Capital Partners.

[slide title=”Agni Property Services”]

Location: New Delhi

Business Description: Provides online real estate search and brokerage services.

Funding: Raised $12 million in July, 2010 from Foundation Capital and Helion Venture Partners, according to Thomson Reuters.

[slide title=”RentJuice”]

Location: San Francisco

Business Description: Provides online rental relationship management software for brokers and property managers.

Funding: Raised $6.3 million in January from backers including Highland Capital Partners and NextView Ventures.

[slide title=”SmartZip Analytics”]

Location: Pleasanton, Calif.

Business Description: Provides analytics tools for researching home values, investment quality, and risk for real estate investments.

Funding: Has raised $7.5 million since 2009 from backers including Claremont Creek Ventures, Intel Capital and Javelin Venture Partners.

[slide title=”DocuSign”]

Location: Seattle

Business Description: Not exactly a real estate company, but real estate is one of the larger industries it serves. DocuSign provides an online document delivery and signature service to the real estate industry and other sectors, including healthcare, insurance and lending.

Funding: Raised $27 million in a December round, bringing total funding since 2004 to $66 million. Backers including Frazier Healthcare and Technology Ventures, Ignition Partners, Scale Venture Partners, Second Century Ventures and Sigma Partners.

[slide title=”Redfin”]

Location: Seattle

Business Description: Operates a real estate website containing aerial photos, property listings and data about prior home sales for several metropolitan areas.

Funding: Has raised $31.5 million since 2005 from backers including Draper Fisher Jurvetson, Greylock Partners, Madrona Venture Group, Vulcan Capital and BEV Capital.

[slide title=”RealDirect”]

Location: New York

Business Description: Provides a Web-based marketing platform for buyers and sellers of New York City real estate.

Funding: Raised $1.5 million June from backers including Bendigo Partners, Greenhill SAVP and High Peaks Venture Partners, according to Thomson Reuters.

[slide title=”Trulia”]

Location: San Francisco

Business Description: Operates a residential real estate search engine.

Funding: Raised $30.7 million between 2005 and 2008 from backers including Accel Partners and Sequoia Capital.

[/slideshow]