Fundrise, a direct-to-consumer alternative asset manager, relies on a suite of technologies to research and manage its portfolio. When the company launched its Innovation Fund to invest in tech companies, it turned to enterprises it uses for its own data and property management operations.

“Of the 2,000 venture funds in the country, I would bet you not a single venture fund has a product engineering department, which we do,” said Fundrise CEO Ben Miller on the company’s “Onward” podcast when the Innovation Fund launched last year. “The type of technologies we’re interested in, we actually use. It’s not just theoretical.” 

Examples of this synergy between investment in a company and experience using its tech include Dbt Labs, Jetty, and Inspectify. Dbt Labs is a data services company that Fundrise has partnered with to enhance its analytics capabilities, while Jetty furnishes property management software and Inspectify provides property inspection software that Fundrise uses to manage the properties in its real estate portfolio.

Investing in Data Infrastructure: Dbt Labs

As Fundrise has increased its user base, the amount of data it needs to handle and communicate to its investors, including investment activity and asset valuations, has grown significantly. It also has expanding needs to analyze and communicate data internally. The company turned to Dbt, which has pioneered a platform that allows companies’ data teams to easily deploy and collaborate on analytics code, to help manage this influx of data. 

“We can do things much faster than we could before, and our stakeholders are confident that the numbers they’re working with are correct. Those two factors really resonate together,” said Jack Ploshnick, analytics manager at Fundrise, in a recent article on the company’s partnership with Dbt. 

On the investment side, Fundrise joined top-tier venture capital firms such as Altimeter, Amplify Partners, Andreessen Horowitz, Sequoia, Coatue, Iconiq Growth, Google Ventures, and GIC in Dbt’s latest funding round. It also joins Dbt Labs’ strategic investors Databricks Ventures, Salesforce Ventures, and Snowflake. 

The excitement around Dbt Labs is due to its role as an infrastructure provider for an increasingly data-centric economy, and this role stands to be even more important as the boom of new artificial intelligence technologies that handle large amounts of unstructured data continues to unfold. According to Databricks’ recently published 2023 State of Data + AI report, Dbt is the fastest-growing data and AI company in the world in terms of year-over-year customer growth, more than tripling its user numbers in the past 12 months. 

The Innovation Fund frames this sort of private, up-and-coming, mid-stage tech company as an ideal target. Miller launched the fund with the goal of providing individual investors access to the type of venture investments in private tech companies that are typically only the purview of VC firms and institutional investors. In Dbt, the Innovation Fund is targeting one of its stated areas of focus, data infrastructure, intending to provide a means for individuals to invest early in a potential growth industry tied to the AI boom, despite a lack of available publicly traded AI-based companies. 

“The investment in Dbt Labs gives the Innovation Fund exposure to one of the key companies at the center of the modern data infrastructure movement, and as a consequence, can additionally be thought of as the classic strategy of selling ‘picks and shovels’ during a gold rush,” reads a letter to investors. “Because virtually any company attempting to leverage data to implement artificial intelligence (AI) is likely to need Dbt Labs to be successful.”

Investing in Proptech: Jetty and Inspectify

Fundrise was founded with a primary focus on real estate investment, and real estate remains a cornerstone of the company’s broader portfolio. It currently owns nearly 9,000 multifamily apartment buildings across 10 U.S. markets and 3,500 single-family homes across 30 U.S. markets. Its commercial holdings include properties with over 2,310,800 square feet of industrial space for lease. 

To manage these holdings, the company utilizes a variety of property technology applications. 

It uses Jetty to provide a variety of services for renters in a single platform, including security deposit replacement, renter’s insurance, flexible rent payments, and rent reporting.

The Innovation Fund has invested $2 million in Jetty, which it sees as a mid-stage company that could continue to grow given macroeconomic trends of rental growth and demand for consolidated, easy-to-use tenant-facing technology.

“With 1 in 3 Americans renting their homes, a number that is expected to grow in the coming years, modernizing the rental real estate market with technology is a generational opportunity,” reads a letter announcing the investment. “As the technology in the space matures, we expect the real estate world to follow the established pattern of point solutions going by the wayside in favor of consolidated platforms that bundle several related services.” 

Unlike Dbt Labs and Jetty, both mid-stage companies with hundreds of employees, Inspectify is in an early startup stage. Founded in 2019, the company currently has a valuation of $47 million and fewer than 50 employees. The Innovation Fund has invested $4 million in the company’s latest funding round, which reached $19 million. Inspectify was the fund’s first proptech investment and was based on a close relationship. 

“In fact, we are one of Inspectify’s larger customers, having run nearly 5,000 property inspections through their platform over the past two years, and we consider their product essential to the superior operation of a real estate investment business,” reads a letter announcing the investment.

In an appearance on Sam Dogen’s “The Financial Samurai Podcast,” Miller explained that this collaborative relationship with Inspectify and a large pool of users provides a “value add” for Inspectify that it can’t get from a traditional VC.

“When we sent out our email to our investors saying, ‘Hey, we invested in Inspectify,’ Inspectify’s web traffic doubled. They got a hundred sales leads,” he said. “If we can get more investors, we’re more valuable to the companies we invest in. There’s a potential network effect.”

‘Deep Underwriting’

It remains to be seen how the Innovation Fund’s tech investment strategy will play out, but Miller has made it clear that it’s a long-term approach, with a time horizon of at least five years. As it continues to grow its portfolio, Miller has highlighted the vital role of taking a user’s perspective when identifying investment opportunities.

“We use the technology, we have people on our team who live inside and build with these platforms,” Miller told Dogen when explaining the Fund’s investment in Databricks. “I love having engineers involved with us underwriting companies because we can buy their software and use it or we’re already a big customer. So it’s a deep underwriting.”

Published by: Nelly Chavez