Early-stage proptech startups have a potential new source of capital in 1Sharpe Ventures, which recently closed its $90 million inaugural fund.
Roofstock co-founder and chairman Gregor Watson and real estate investor Rob Bloemker started the venture firm in 2021, and had their first close last year. The pair say the fund was “oversubscribed.” For the unacquainted, Roofstock is an online marketplace for investing in leased single-family rental homes that in March raised $240 million at a $1.9 billion valuation.
Oakland, California-based 1Sharpe Ventures was born out of another of the pair’s endeavors, 1Sharpe Capital, an institutional asset manager with equity real estate investments and a credit fund.
The new firm will invest in 30 to 40 early-stage companies in the real estate technology world, with check sizes ranging from $500,000 to $2 million. Specifically, it is targeting pre-seed to Series A-stage companies. Half of the total amount raised -- $45 million -- will be reserved for follow-on investments, according to Watson.
So far, the firm has made five investments, backing startups such as construction tech startups Cottage and FlockHomes, and a Brazilian fintech company still in stealth. It is open to investing in North America, Latin America and Europe.
As it seeks potential investments, 1Sharpe is focusing on three categories: financial transactions and access to capital; real estate human capital; and data and intelligence. For example, 1Sharpe is interested in creating financial products that make real estate more equitable and that can “create opportunities for economic mobility.”
“We believe that purchasing and owning real estate can be much more efficient and that the environments where we live and work should be healthier, more sustainable and more enjoyable,” Watson said.
Watson and Bloemker together have founded and built nine real estate finance and technology platforms, including Roofstock, Dwell Finance, Lessen, Azibo and Creative Juice, among others. Combined, they have invested more than $8 billion in real estate and technology platforms and portfolios encompassing construction lending, multifamily investing, single-family rentals and land development.
That experience, Watson believes, gives 1Sharpe an advantage in that the firm can offer its portfolio companies more than capital.
“We sit in a unique seat where we really understand capital markets and real estate. We've done billions and billions of dollars of real estate transactions, but we've also built a number of high-growth technology companies so we can understand and translate between those two worlds,” Watson told TechCrunch. “And I think that it just gives us a competitive advantage because we can help these companies who have really bright technologists that don't understand capital markets and vice versa.”
For Watson, formally becoming an investor was a logical move after he found himself spending about 60% of his days meeting with founders and other venture investors.
“I have a real passion for building businesses and working with entrepreneurs. And so that's where I wanted to spend my time,” he told TechCrunch. “I love helping people go from zero to one. I love seeing ideas come to life.”
And his vision is a long-term one.
“I'm excited by the fact that we get to spend more time with entrepreneurs, really getting to know them. This is a long-term relationship, right? You're getting married and investing in these businesses,” Watson said. “And having a shotgun marriage doesn't always end up with the best outcome.”
Today, 1Sharpe Ventures has five employees. Ginny Miller serves as a principal and oversees investment strategy and execution. Feng Wang is head of capital markets at 1Sharpe and former founding team member of LendingHome. He aims to help portfolio companies optimize strategic capital structure. Vice President Kathleen Collins will focus on sourcing and performing due diligence on potential new investments.
In terms of its time frame to invest, 1Sharpe is being “very patient,” noted Watson.
“I learned during the last downturn in 2008 that patience is a virtue...and we want to continue to stay patient because we think we're going to see a lot of great talent leaving some of the larger technology companies and starting their own things,” he said.
As such, Watson expects the firm will invest the first half of its fund over the next two to three years.
“The best thing about this downturn is it reminds entrepreneurs to focus on burn -- go back to -- ‘what are the unit economics,' like Business 101, and then go and change the world using technology,” he said.