GeoPhy, an AI-powered real estate valuation platform has raised USD $33 million from investors to boost its global expansion. Index Ventures, the London and San Francisco-based venture capital firm, led the Series B round. They were joined by existing investors Inkef Capital and Hearst Ventures.
Co-founded by two former architects, Teun van den Dries (CEO) and Sander Mulders (CTO), GeoPhy aims to bring greater transparency and accuracy to the global property market. In the wake of the 2007 financial crisis — triggered, in part, by a poor understanding of securities pegged to real estate — financial institutions of all stripes are striving to get a clearer picture of the present and future value of property portfolios.
“We aim to understand the value of every building in the world,” van den Dries says. “We’re trying to shift the whole paradigm of property valuation.”
Currently focused on commercial real estate (CRE), GeoPhy’s technology captures thousands of data-points from public and private sources, including satellite images and sales data. It scours a growing database of 150 million property records for relationships between asset values and features such as location characteristics, demographics, and economic data like interest rates and stock indices. It also considers innovative ‘hyperlocal’ factors such as transport links, green spaces, density of independent coffee shops, crime rates, and even the tone of reviews for local businesses.
The standard approach to CRE asset valuation relies on a combination of intuition and limited, anecdotal data. The process can take between 30 to 45 days and cost between USD $4,000 - $6,000. The method is necessarily retrospective, and predictions about future income streams are proprietary and difficult to obtain.
By contrast, GeoPhy’s use of supervised machine learning, sifts through the breadth of traditional and unconventional data available today to provide detailed, bias-free insight about the current value and potential appreciation of CRE assets at scale for a fraction of the time and cost. Currently, the average gap between a standard CRE appraisal and the actual sales price is between 5-6% in the US and UK. GeoPhy’s technology brings that error down to near 0%, and reduces the median absolute percentage error in the US/UK from 15% to 5%.
GeoPhy has garnered interest from a wide spectrum of clients including major rating agencies, banks, pension funds, investors, national regulators and large government-backed enterprises in the US and Europe. Customers include Fannie Mae, the US mortgage provider, FTSE Russell, the British corporation that sells stock market data services, and Walker & Dunlop, the US-based CRE finance and lending group.
Van den Dries, GeoPhy’s CEO, commented: “Real estate is foundational to all areas of economic activity — to everyday life, in fact — but much of it is based on inaccurate or biased data. Furthermore, there’s an information asymmetry that distorts the market and leads to volatility. By providing a quicker, more reliable and intelligent service, GeoPhy helps its customers make better decisions, and promotes a better functioning market.”
Jan Hammer, Index Ventures partner who joins the board, added: “GeoPhy is bringing much-needed innovation to the antiquated property sector. Much of the world’s wealth is in real estate, yet we understand very little about how to accurately value it, or about the forces that have an impact on it. This is a critical issue for everyone from portfolio managers to central bankers, and we believe GeoPhy’s technology has the potential to improve how the market operates.”
Real estate is the world’s largest asset class, with global investment in CRE reaching an estimated USD $730 billion in 2018. Due to rising wealth in the global economy, real estate continues to be a preferred source of investment for wealth storage, capital appreciation, and income return.
Founded in 2014, GeoPhy aims to transform antiquated commercial real estate (CRE) processes with data-driven valuations and analytics powered by machine learning. Its AI-powered valuations uncover value drivers that help steer acquisition due diligence, portfolio monitoring, and site selection for institutional lenders and investors in the real estate and financial sectors. Headquartered in Delft, the Netherlands, GeoPhy also has offices in New York, London and Kaunas (Lithuania).