Real Estate And Infrastructure Startups: Fundraising Strategies For Early-Stage Companies

With markets recovering quickly from the COVID impact, real estate and infrastructure startups can find the investor backing they need. Customers and homeowners are showing interest in purchasing real estate, and low interest rates are a great incentive.

Many families are now looking to buy their first homes. The lack of inventory to meet rising demand has spurred a flurry of activity. At the same time, homes are more expensive, and construction costs are rising quickly. Multi-family homes are also in demand, alongside single-family residences.

Statistics indicate that these factors have led to the real estate market growing significantly. Tech and the Internet have also triggered activity since buyers can leverage digital marketplaces to search for homes. They can use virtual tours to walk around the house and evaluate it per their needs.

Buyers no longer need to visit the property or meet with real estate agents. They can execute deals over digital platforms, sign ownership deeds remotely using online notaries, and make payments. The availability of government grants to promote real estate and infrastructure startups is another boost.

Statistics Show that the Real Estate Sector is Booming

Once the worst of the pandemic crisis had passed and lockdowns were lifted, people started to invest in homes. Millennials, in particular, are taking advantage of streamlined purchase processes to buy homes. In 2021, residential estate captured 35.5% of the revenue share in the real estate sector.

Commercial property is also attracting buyer interest with a projected growth of 5.1% between 2022 and 2030. Rising travel and tourism are leading to growth in infrastructure and building hotels and resorts.

If you focus primarily on residential real estate, the year-over-year growth rate from 2024 through 2028 is likely to be 4.99%. By the end of the year 2024, the market will reach a valuation of $94.39T. And by the year 2028, this growth will likely translate into a market volume of $114.7T.

These numbers indicate the market sentiment is strong despite crises like the Russia-Ukraine war. Real estate and infrastructure startups continue to raise billions of dollars in funding from different sources.

Some of the established players that rule the industry include Zillow, Compass, OpenDoor, and Trulia. Each of these companies leverages technology to provide buyers with a selection of resources and detailed information about the property.

Buyers and sellers can also access support from experienced real estate agents to help them through the transactions. Making decisions about the real estate they want to deal in is made so much easier thanks to the platforms. Updates about the local market trends help make informed purchases.

Funding for Real Estate and Infrastructure Startups is Readily Available

If you have an innovative idea that can attract investor attention, now is the right time to create your MVP. Historically speaking, the market went through a major crash in 2008, resulting in many people losing their homes.

On the flip side, the crash proved to be beneficial for people who had the money and resources. Many of them were able to purchase homes at low prices and low-interest mortgages. The market has recovered quickly because of the continued activity, regardless of the downturn.

Yet another factor is the demand for housing by millennials and population growth. Demand spurs supply, which is why many construction and infrastructure development projects have been initiated. Since interest rates continue to be low, higher affordability is an incentive for more people to buy.

Aside from buyers, investors have ramped up activities in the real estate sector. Volatility in the stock exchange has prompted them to diversify their investments across different channels. This strategy allows them to spread out the risk, considering that the next recession is expected soon enough.

Funding for the real estate and infrastructure vertical is also gaining traction because of the new technology available. Buyers, sellers, and agents are using digital capabilities to conduct transactions more successfully. The ease and convenience are resulting in rapid growth in the sector.

Consumers can compare prices, listings, amenities, and facilities online before making their final choice. Startups that can develop tools to enable the process are in high demand. Architecture and construction companies also use technology to speed up the designing process.

Designing blueprints, getting approvals, making tweaks, and regulatory compliance are streamlined thanks to the various tools and applications now available. Builders can also scout around for eco-friendly, greener building materials and techniques for cost-effective construction.

Research and Disruptive Ideas Are Attracting Government Grants

Innovation and technology are clearly the drivers of the real estate industry moving forward. That’s where you’ll concentrate your efforts when coming up with an exciting concept for your startup. For starters, know that the federal government is offering several grants to promote scientific research.

Several federal programs are now available to promote research for innovative ideas for developing infrastructure. You could apply for funding to cover the costs associated with building research facilities and overhead expenses. You can also use the money to hire and retain trained scientists.

The US government understands that the world’s more pressing issues today are related to building greener communities. Integrating eco-friendly building practices, energy-efficient homes, and recycling techniques are crucial elements of a sustainable infrastructure. A few examples are:

• The Federal Home Loan Bank (FHLB) system offers Affordable Housing Grants (AHG) to help acquire, rehabilitate, and rebuild affordable housing units. These units are designed for low-income households with an average income of less than 50% of the local community.
• The USDA Rural Development office provides Main Street Grants to promote construction and real estate development in rural downtown locations. Any ESG-driven projects for locations with a population of 50,000 or less can get these grants. Both for-profit and non-profit founders can apply for these endowments if they can match the funding with other capital.
• The U.S. Department of Housing and Urban Development (HUD) has the HOME Investment Partnerships Program (HOME) for low-income households. Non-profit and for-profit developers can apply for these grants to build or repair affordable housing units.
• The Department of Commerce and Economic Opportunity (DCEO) has Illinois Infrastructure Grants to encourage infrastructure development in the state.

Other Investors in Real Estate and Infrastructure Startups

The above-mentioned are only very few of the multiple grants available to startups from the federal government. You can also research endowments that private family offices, philanthropists, and angel investors may give out to deserving candidates.

You’ll find out about their criteria for approving projects before reaching out to them. For instance, VCs and other profit-oriented investors could be more inclined toward supporting startups developing technology and innovations.

Since they focus on high returns, their support is for cutting-edge ideas. If you can demonstrate a fundable idea, you could also get funding to set up research facilities and labs.

Keep in mind that storytelling is everything in fundraising. In this regard, for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor on Facebook, with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

Accelerator and Incubator Programs

Applying to incubator and accelerator programs interested in backing real estate projects is also a great strategy. For instance:

• Plug and Play Tech Center operates out of Sunnyvale and has made 1,285 investments to date. This accelerator program has had 116 successful exits.
• Established in 2001, Rose Tech Ventures operates out of New York City. It supports founders in building the next generation of businesses matching global standards.
• ShelterTech is a fast-upcoming program supporting disruptive housing solutions. The program operates out of Atlanta and is run by Habitat for Humanity.
• URBAN-X is an accelerator program with a duration of 20 weeks and operates out of Brooklyn. It supports founders in developing tech solutions for sustainability.
• Florida-Israel Business Accelerator operates out of Tampa, Florida, and supports Israeli founders wanting to build startups in the US.
• SF Housing Accelerator operates out of San Francisco and is geared toward high-quality, affordable housing solutions.

Venture Capital Firms

Having developed the MVP and set up the startup, you’ll need funding and guidance to have it running. That’s where venture capital comes in. Check out some of these venture capital programs for real estate and infrastructure startups.

• RRE Ventures operates out of the Metropolitan area of New York City and primarily invests in real estate tech companies. Its investment range is from $250K to $3.8M. RRE boasts a portfolio of more than 500 companies specializing in real estate and property.
• Formerly known as 500 Startups, 500 Global has backed more than 5,000 entrepreneurs in building 2,800 businesses across over 80 countries. Its investment range is $150K for a 6% equity stake.
• If you’re looking for higher funding amounts, Camber Creek is a good VC option to approach. This firm offers up to $9M in funding and supports startups working in areas like construction, leasing, and property management.
• JLL Spark is one of the top VC firms in the real estate vertical, with an investment range of $25K to $125M.
• Entrepreneurs developing concepts in areas like smart buildings, ESG, construction tech, Future-of-Work technologies, and property tech can get support.
• Alpaca VC has invested in 86 projects to date, with an investment range of $500K to $50M. It supports startups developing real estate infrastructure, property tech, and construction technology.

Private Equity Firms

Several private equity firms operate in the real estate vertical. Their objective is typically to quickly accelerate the startup and exit for a significant profit. Before approaching them for support, you’ll explore their terms and conditions in detail.

• Founded in 1990, Apollo operates out of New York and has a portfolio of 72 investments. It has had 30 exits.
• Vulcan operates out of Seattle, Washington, and has invested in 29 startups to date.
• Trinity Private Equity Group, headquartered in Southlake, Texas, has had 18 investments.
• Singularity Capital MGMT operates out of Tucson, Arizona, and supports startups integrating AI with real estate.
• Saratoga Partners operates out of New York, New York, focusing solely on real estate startups.

The above-cited examples only give you an overview of the investors to approach for capital for your startup. Also, explore the possibility of attracting offshore investors to support your ideas.

Now that you have an overview of the investors you’ll approach, let’s move on to the next step. Check out this video, in which I explain how to put together an investor outreach strategy. Use the tips to get your project off the ground successfully.

How to Raise Funding for Real Estate and Infrastructure Companies

Before reaching out to potential investors, you’ll create a compelling but concise business plan to talk about the idea. You’ll include information about how you’ll generate revenues and the customer base to target.

If you’ve built companies earlier, that’s a good way to demonstrate business acumen. If not, talk about the founding team and their track record with successful companies.

Getting funding from investors typically involves ceding board seats and decision-making rights. You may also have to give up some percentage of your equity and other collateral like preference shares or convertible notes. These instruments offset some of the risk and guarantee recovery in case the startup fails.

Having a business plan also indicates the startup’s objectives, mission statement, and strategies for achieving them. This is valuable information for investors but also helps founders stay on top of their progress. That’s something investors will also want to monitor.

Keep in mind that investors are more likely to back startups with revenues and an established client base. If you’ve yet to generate revenues, you’ll leverage other strategies to value the company and get funding. Consider partnering with a well-known brand by entering into a corporate venturing deal.

Also, try other strategies like crowdfunding, friends and family rounds, and personal loans. Leverage social media platforms to create hype for your company and build a robust network of contacts before you reach out to investors.

On a Final Note

Real estate and infrastructure startups can attract investor attention if they can come up with exciting new ideas. This vertical is geared toward rapid growth in the coming few years, and the stress is on sustainable housing solutions.

Entrepreneurs with innovative solutions for greener construction and building projects or streamlining deals are sure to get backing. The real estate and property sector has a broad scope and has the potential for integrating technology, AI, and automations.

Any disruptive ideas that can enhance how projects are handled and help customers find the estate they need will be very much in demand.

You may find our free library of business templates interesting as well. There, you will find every single template you will need when building and scaling your business completely for free. See it here.