Fifth Wall’s Brendan Wallace On Why The Best Proptech Bets May Not Look Like Proptech

Brendan Wallace has spent a large portion of the past decade investing in technologies that influence how real estate is acquired, constructed, and operated. Today, the co-founder of Fifth Wall views artificial intelligence as a catalyst that is reshaping the categories of companies worth supporting and broadening the very meaning of proptech.

Established in 2016 and based in Los Angeles, Fifth Wall has evolved into one of the premier investment firms dedicated to real estate technology, managing approximately $3 billion in capital and commitments. Its portfolio features prominent names such as Procore, OpenDoor, Blend, and Hippo.

Notable successful exits for the firm include ServiceTitan, which completed its initial public offering in 2024, and flexible workspace operator Industrious, acquired entirely by real estate giant CBRE in January 2025 at a valuation exceeding $800 million.

The firm counts leading real estate and hospitality enterprises—including CBRE, Hines, Hilton, and Marriott—among its investors, providing the startups in its portfolio with a direct pathway to prospective clients.

Wallace, who functions as CEO and chief investment officer, brings professional background from both perspectives of this dynamic. He previously worked in real estate finance for Goldman Sachs and Blackstone before co-founding workforce analytics startup Identified (acquired by Workday in 2014) and ridesharing company Cabify.

As AI simplifies the replication of certain products, Wallace recognizes escalating potential in startups that leverage technology to directly own and operate real estate assets.

During a recent conversation with Crunchbase News, we explored this evolution, examined why traditional proptech funding metrics might miss the sector’s largest investments, discussed the implications for entrepreneurs, and highlighted the housing issues he believes still demand solutions.

This interview has been lightly edited for brevity and clarity.

Crunchbase News: Our recent proptech funding analysis showed capital tracking roughly even with or slightly ahead of last year, yet spread across a smaller number of transactions. What does that indicate about the current market?

Brendan Wallace: My perspective is that metric might obscure the true volume of capital entering the space, because what was once categorized strictly as narrow proptech likely accounts for a smaller portion of where proptech investors are allocating funds.

We are seeing an increase in horizontal solutions that match or exceed the quality of many vertical solutions. For instance, our growth fund recently made a substantial investment in Higgsfield, a visualization software company. Most observers automatically associate it with film production or rendering scenes. However, we observed real estate agents and commercial leasing brokers utilizing it to showcase spaces.

For an unconstructed property, you can input architectural blueprints, generate an entire home, place your family inside, and navigate through a complete walkthrough. That capability has surpassed industry-specific spatial visualization tools that would have traditionally qualified as narrow proptech.

Another emerging segment involves capital moving toward full-stack enterprises—actual real estate companies. We recently committed $135 million to Atoms, and I would be surprised if that transaction fell under the conventional proptech label.

These represent the two primary categories likely omitted from standard tracking: horizontal software, illustrated by Higgsfield, and businesses that reinvent physical space through autonomy, AI, or robotics. They are constructing a physical entity, acting directly or indirectly as a real estate enterprise.

To what extent is AI propelling this transition toward software catering to multiple industries?

Wallace: It serves as a major driver. Without a profoundly superior offering that cannot be independently duplicated, the rationale for purchasing external software diminishes. To be clear, a rationale still exists, but it is noticeably weaker.

No real estate enterprise possesses the capacity to develop visualization software equivalent to Higgsfield’s, and I doubt they ever will. Conversely, a tenant engagement application they might have previously purchased and deployed across their properties can now be replicated internally over an extended weekend.

The necessity to acquire these third-party products has declined, shifting greater value toward premier horizontal solutions, whether foundation models or specific functional use cases like audio, visual, or sound.

While I lack the exact figures, it would be fascinating to determine how much real estate organizations spend on foundation models relative to proptech applications. If forced to estimate, we are likely approaching or have reached an inflection point where foundation spending surpasses applications.

Nobody classifies Anthropic as a proptech entity, yet it may be capturing a substantial share of upstream proptech capital, alongside an even larger portion downstream once transactions reach the application layer.

Has AI altered the benchmark for what constitutes a venture-scale proptech software enterprise? What must a startup offer beyond simply integrating AI into existing workflows?

Wallace: We are still navigating those parameters, but the offering must undoubtedly be irreplaceable. Any company lacking an extremely defensible intellectual property moat faces severe challenges, a trend likely to persist.

Simple point-solution applications are growing less attractive to venture investors because major laboratory labs or individual corporations now possess the capability to build comparable interfaces independently and at a rapid pace.

Conversely, specialized AI development studios are currently engineering solutions tailored for the real estate sector. We invested in Antares, often described as a Palantir for real estate. Antares collaborates with several of our strategic limited partners by embedding personnel in-house, pinpointing operational challenges suitable for AI intervention, designing proprietary intellectual property exclusively for the enterprise, and transferring it upon completion.

This follows a development-fee structure rather than an IP licensing model. This trend appears across various industries and is distinctly visible within real estate.

In certain sectors, entrepreneurs contend that domain expertise provides specialized AI firms with an edge over generalized models. How enduring do you consider that competitive advantage?

Wallace: I maintain a more optimistic outlook regarding the capability of foundation models and general intelligence to adapt swiftly to niche use cases.

I would not dispute that specialized legal expertise, for instance, holds value. Nevertheless, I believe that protective moat erodes over time, potentially leaving companies on a perpetual treadmill.

Consider the contrast between ChatGPT in 2023 and Claude today. Fundamentally, they share the same architecture, yet they function as entirely different systems. The sophistication, memory retention, personalization capabilities, and responsiveness to natural language commands exceed anything anticipated in 2023.

Projecting forward to 2029, the arguments holding true today will likely apply to a lesser degree, diminishing further over a three-year horizon.

Does construction technology remain an area of concentration for Fifth Wall?

Wallace: It remains a focus, albeit a reduced one. Reviewing our performance, success has generally skewed toward two models: pure software enterprises—spanning marketplaces, consumer software, and enterprise software—and full-stack businesses.

Introducing physical execution fundamentally alters the risk profile. Consequently, it should surprise no one that construction tech broadly constitutes perhaps the most significant graveyard in venture capital. Perhaps a larger category exists, but none comes readily to mind.

Why do you suppose construction tech continues to draw substantial financial backing?

Wallace: Because it addresses an enormous market and a critical problem. Introducing enhanced efficiency to construction targets one of the largest global markets. The potential prize is so immense that major funds will naturally gravitate toward it.

For entrepreneurs pursuing seed or Series A rounds, what opportunities would you advise them to explore that might have lacked fundability several years ago?

Wallace: Entrepreneurs can actively construct new real estate enterprises. While previously excluded from traditional venture mandates, this is an area we are eager to support.

For example, implementing an improved strategy for acquiring multifamily properties, eliminating operational expenses, and managing processes, operations, and administration through AI represents a viable path. Today, this is highly fundable by Fifth Wall and numerous venture funds—a scenario that likely did not apply five years ago.

I would encourage founders to investigate the creation of full-stack, capital-R real estate ventures.

The secondary opportunity centers on data. Real estate is distinguished by exceptionally opaque data, differing from most prominent financial markets. Nothing achieved in proptech over the past decade has fundamentally altered that characteristic.

Where can generative AI extract actionable signals from this opaque data to improve capital allocation choices? Real estate fundamentally operates as a cash-flowing asset. Although we rarely compare it directly to bonds or equities, it shares those characteristics and should be treated accordingly.

Can we derive meaningful signals by analyzing expanded or alternative datasets, or apply generative AI to forecast property performance? Quantitative models long established in securities markets now possess the potential to influence real estate, supported by computational capabilities previously unavailable.

Are there alternative opportunities capturing your interest that rely less heavily on AI?

Wallace: We are fascinated by the nexus connecting land, real estate, and associated financial instruments. Constructing most recognized real estate requires land as a foundational input. However, many property owners prefer not to own the underlying land or absorb its associated risk profile.

Is there a mechanism to decouple land ownership from building ownership and operations? That challenge focuses on financial engineering rather than AI. Emerging financial solutions within that category command our attention.

How might AI, robotics, and autonomy transform the types of real estate enterprises built by entrepreneurs?

Wallace: I am drawn to innovators who conceptualize real estate through a sociological framework, observing how emerging catalysts alter human utilization of space compared to historical norms.

This phenomenon has historical precedent. E-commerce established the contemporary industrial real estate sector. Cloud computing, the internet, and subsequently AI generated the data center industry. Mobile phones and smartphones birthed cell towers, while genome sequencing helped establish the lab-space asset class.

We stand on the threshold of three new catalysts that will generate entirely fresh real estate asset classes: AI, robotics, and autonomy. In many respects, these technologies are deeply interconnected.

Do you anticipate a reduction in the number of dedicated proptech venture firms, and what implications would that hold for founders?

Wallace: I do expect a decline in vertical funds in the strictest sense of our earlier discussion. Specialized venture capital funds dedicated exclusively to industry-focused consumer and enterprise software will likely experience decreased activity and contracting funding volumes.

Conversely, venture capital investment flowing directly into real estate enterprises is poised for dramatic expansion.

If you were founding a company within this sector today, which challenge would you prioritize solving?

Wallace: Housing dictates everything. Housing expenses govern our economy, and the United States continues to contend with a profound housing affordability crisis without a clear resolution.

Multiple pathways exist. One involves constructing homes with greater speed, quality, and economy—the domain of construction tech. Another focuses on reducing housing finance costs by introducing efficiency into the mortgage market.

Despite substantial historical investments and returns in that segment, I would argue the problem remains unsolved. Securing a mortgage remains cumbersome, archaic, sluggish, and excessively costly.

Connected to this challenge is regulatory reform to enhance housing affordability. While beyond the unilateral capacity of a single entrepreneur, opportunities exist to streamline municipal interactions with this crisis.

This touches the intersection of regulatory technology, advocacy, and advisory services. How do we ensure housing remains accessible within the cities residents inhabit? That issue persists unabated; despite market fluctuations, housing costs continue to rise rather than decline.

Related Crunchbase queries:

• Global Venture Funding To Proptech Startups In 2026
• Global Physical AI Venture Funding In 2026

Related reading:

• Sector Snapshot: Proptech Funding Holds Up, But Investors Are Placing Different Bets

Illustration: Dom Guzman

Frequently Asked Questions

• What is Fifth Wall? Founded in 2016 and based in Los Angeles, Fifth Wall is an investment firm focused on real estate technology with about $3 billion in capital under management.
• How is AI impacting proptech according to Brendan Wallace? AI is expanding the definition of proptech by making horizontal software solutions and full-stack, AI-driven real estate businesses increasingly attractive investment targets compared to narrow vertical applications.
• Why is construction tech a challenging investment sector? Construction tech involves physical execution which significantly alters the risk profile, making it historically one of the most difficult sectors for venture capital returns.