First American, the nation’s second-largest title insurance company, has not been shy about its desire to be at the forefront of the title insurance industry’s technology revolution.
In just the last two years, it has launched or acquired a slew of digital interfaces and platforms designed to help integrate and manage the numerous components of a real estate transaction, including IgniteRE and Docutech. But its tech push doesn’t end there.
During its third-quarter earnings call late last month, First American executives announced that the $292 million of capital the company invested into 16 different venture-backed proptech companies had reached a market value of $669 million as of Sept. 30.
In the third quarter alone, First American recorded $278 million of gains related to its venture investments. The largest gains came from its investment in iBuyer Offerpad ($195 million) and “power buyer” Orchard ($79 million), a company aiming to simplify home buying and selling. Other PropTech investments made by First American include Sundae and Pacaso, which aims to “democratize” second-home ownership with a fractional investment model.
The managing director of First American’s venture investments, Paul Hurst, agreed to answer HousingWire’s written questions about their PropTech investment strategy. Here is how Hurst, via email, responded to our questions. This interview has been edited for length and clarity.
Brooklee Han: First American has invested in 16 different PropTech startups. How and why were these specific startups chosen?
Paul Hurst: When evaluating venture opportunities, we look for companies and technologies that align with our vision for the digital transformation of title and settlement and, more broadly, the real estate transaction (both residential and commercial). We view our venture investments from both a financial and strategic perspective, with the strategic fit being the more important lens. Through our venture investments we gain important insights into these companies, many of which have become strategic partners. Investing in the proptech ecosystem helps us get closer to, and learn about, prospective customers, enabling us to build new products and services which both help proptech companies grow and scale, but also ensures we remain at the forefront of innovation. In that sense, we are investing in future business partners, customers and by extension our own business.
As an investor, we bring much more to the table for these companies than capital. Many new entrants have strong technology pedigrees, but are less knowledgeable about the complexities of real estate transactions. Emerging companies can therefore benefit from our industry experience, our deep understanding of the real estate transaction, and our network of customers and partners across the real estate ecosystem.
The financial opportunity to create additional shareholder value is an important factor as well. As a leader in title and escrow that makes significant internal investments in our own digital transformation, we are in a strong position to identify and filter promising opportunities to deploy our capital profitably. The depth and breadth of our knowledge of the real estate ecosystem and its technology infrastructure give us a significant advantage as a real estate venture investor.
BH: How do these companies fit in with your overall strategy for the future of First American and the future of the home buying transaction/experience?
PH: Our venture investments are part of a larger, comprehensive strategy that leverages First American’s position as a leading innovator in title and settlement. We continue to make sustained, significant investments in First American’s operations, drawing on advanced technologies, such as AI and machine learning, to automate processes, extend our leadership in data breadth and quality, and create the tools to continually streamline and improve the experience of our customers and all the parties involved in real estate transactions.
BH: Would you consider acquiring any of these companies down the road? Why?
PH: We are always evaluating opportunities to add capabilities and talent that help us accelerate the digital transformation of title and settlement and the real estate transaction process as a whole. As is customary with most companies, we don’t speculate about specific acquisitions.
BH: How do these investments impact First American’s place in the real estate transaction ecosystem?
PH: Our venture investment success is a clear sign of First American’s significant role in driving changes in the real estate ecosystem. We’re among a limited number of companies and investors that can bring significant capital, as well as deep knowledge, authoritative data and a high level of technology expertise, to the digital transformation of title and settlement and the real estate transaction process. Moreover, it affirms our position as a premier destination for industry talent and reflects our commitment to attract the very best technology talent required to drive the digital transformation of real estate transactions.
BH: Are there any startups or parts of the real estate transaction you are looking to potentially invest in?
PH: Because of our important role in the real estate ecosystem, we are privy to information about emerging companies and the investment opportunities they may bring us. The real estate market’s strength has brought a steady supply of new entrants targeting all segments of the transaction process. While we can’t discuss specific situations, we are still looking to make new investments in the years ahead and we are evaluating a number of potential investments at any given time.