Technology

Real estate firms pivot to energy development amid booming data center demand

Brendan Wallace has a lot on his mind lately. Wallace is the co-founder of Fifth Wall Ventures, a nine-year-old proptech venture firm with $3.2 billion in assets under management. He’s also a homeowner in L.A., which continues to battle raging wildfires. While his place remains intact, many of his friends haven’t been so lucky.

Wallace is becoming accustomed to external forces beyond his control. First, the pandemic drastically altered the landscape for many of Fifth Wall’s limited partners, a who’s who of real estate (CBRE, Cushman & Wakefield, Lennar). Unfortunately for many of those same players, office vacancy rates still stand at roughly 20% nationwide, and analysts don’t expect that number to budge as many companies abandon the idea of a full return to the office.

Proptech has also taken its slings and arrows in recent years, partly owing to high-fliers whose fortunes turned fast, like WeWork, which emerged from bankruptcy last June following a failed IPO and massive restructuring.

Change typically presents hidden benefits, however, and Wallace believes the industry is poised for a bounce back. As he sees it, there are ballooning opportunities tied to asset resilience — or using tech to help real estate assets withstand damage and disruption. He also sees a huge opportunity to help Fifth Wall’s limited partners more aggressively seize on the tech industry’s demand for data centers – and the energy required to fuel them.

We talked with Wallace recently about some of those trends, along with life in L.A. during what has felt to so many like the apocalypse. You can listen in on that full chat here or read on for excerpts from our conversation, edited lightly for length.

You’re in L.A. How are you doing?

It’s just tragic what has happened. Everyone on our team is safe. We’re in Santa Monica and they had to evacuate our office. This is a crucible moment for Los Angeles, and there’s going to be a lot of reflection on the other side of this, with the big political and economic questions that California has been grappling with for a long time coming into the fore. That’s a positive thing, but right now, it’s just devastating to see parts of this beautiful, amazing city destroyed.

How are you thinking about what comes next? There’s going to be a lot of cleanup, a lot of reconstruction. That must represent unexpected opportunities, as unseemly as that is to say.

I wouldn’t say opportunities . . .I do not think that on the other side of this crisis, people are going to stop wanting to live in Los Angeles . . .So I remain optimistic that this will be a moment of rebuilding and reimagination for one of America’s greatest cities. And I would say we at Fifth Wall are excited to be a part of that. What being a part of that looks like? I don’t know yet.

A major issue that homeowners and business owners were dealing with is [even before the fires] is the flight of insurance providers from the state . . .

We’re one of the most active investors in fintech for the residential industry. Fifth Wall invested in Hippo, which is a home insurance company that was very active in California. [Editor’s note: Hippo stopped writing new homeowners’ insurance nationwide last summer.]

I mean, a lot of the regulation that was very well-intentioned and focused on benefiting consumers has actually had the opposite effect, and it’s creating market asymmetries that are exacerbating the very problems we have now, which is a lot of homes being uninsured or people getting their insurance canceled. So what we are excited about is two things: there are better solutions for consumers that could be developed, and we’re interested in potentially investing in them. The other thing that I’d like to see is a streamlining of the amount of bureaucracy that is required to launch insurance companies.

Regulations aside, does the math work out? It’s hard to understand how startups with different regulations can [insure] California when these devastating things happen that make it very hard for insurers to recoup their investments.

It’s very hard to answer that question without looking at a county-by-county analysis. It’s possible that some areas are going to be uninsurable, but it’s also possible that some areas are going to be uninsurable that otherwise would be without regulation, and the latter is what I’m focused on mitigating.

This isn’t just a California problem. It might be more acute in California and the value of homes might be higher in California, but we have to solve this as a nation.

Do you think the wildfires might reshape the way real estate is valued in these high-risk areas? That doesn’t seem to have happened in, say, Miami.

I think it is going to increase prices for a few reasons. There’s going to be a lot of new construction in Southern California that’s going to drive up the replacement cost for homes. People are still going to want to live in these beautiful parts of the country; you aren’t going to see an exodus of people simply because of this.

The increase in insurance premiums is also going to lead to less affordability of homes, and that could have downward pressure [meaning houses might cost slightly less because sellers have to factor in the high cost of insurance]. The net of it, though, is this is going to increase a lot of home prices throughout Southern California and especially in West Los Angeles.

You’re an investor in ICON, a 3d printer of modular homes. Do you see a potential opportunity for that company? We reported that it laid off a quarter of its staff just this month before the fires broke out.

ICON is a really exciting business. Fifth Wall is a small investor in that company. Our thesis was not so much around wildfire prevention or post-natural-disaster rebuilding but around, how do you build homes faster and cheaper and with fewer materials than you do today? What they’ve built is a way of effectively printing a home and in the process, massively reducing the waste associated with home construction.

One of the crazy stats that most people don’t know is that about 5% of all the material in U.S. landfills is material that went to a construction site and then went straight to a landfill. It’s a massive problem that drives up cost for the consumer, makes it harder to operate construction companies, and has a massive carbon footprint. The question, I think, is: how can you scale that up? Can you make that cost effective?

Have you made investment in companies that are specifically focused on making nonflammable materials?

No, but we should, and I think it’s a space that will receive a lot of attention right now. . .[Going forward] retrofitting is going to be the big problem. Most of the homes we need to protect are already built, and they are built with materials that can be very hard to rip out. And so in real estate tech, the bulk of the problem and the bulk of the value that you can add to society is by retrofitting the assets we already have, whether those be buildings or homes or infrastructure assets.

Of course, in rebuilding, we should be very cognizant about the materials used, and we should use the best solutions. But the vast majority of the homes at risk in Southern California already exist today.

Broadly speaking, the proptech sector has seen fewer deals in recent years. Is it fair to say that overall interest in the industry has cooled?

It has absolutely cooled. I think we just lived through – and are still in – cold, bitter capital markets for proptech. You hadn’t seen any big M&A events. Basically none of the focused venture funds, Fifth Wall included, raised any capital during that period. There were very little VC inflows to the space.

The flip side of that is what you’re seeing now — companies that survived this Darwinian extinction event. The companies that made the right cost cuts, that pivoted their business model, that pivoted their marketing, and that went through recapitalizations are emerging on the other side of this stronger, more viable, and more durable in a long term. I do think spring has sprung for the prop tech industry, and you’re seeing lots of positive indicators for the space right now. [Editor’s note: Here, Wallace references the IPO of ServiceTitan, a Fifth Wall portfolio company that makes software for contractors and went public in December, and the recent sale of another portfolio company, Industrious, to its partial owner, CBRE.]

What about this existential threat to the office industry about which we’ve been hearing for years?

Long term [there are questions] about the office industry, but alongside that you’re seeing explosive growth in categories that were never even thought of as real estate before. Data centers are absolutely exploding. And some of those that that explosion is forcing the real estate industry to grapple with big questions. Like, the AI revolution that has everyone enthralled is absolutely not possible without a massive scale up of data centers in the U.S. Yet a massive scale up of data centers in the U.S. is absolutely not possible without massive production of new energy.

Go on . . .

We need racks of servers that can do training and do inference all over the world – and we need lots of them. This is not a surprise or a secret in real estate capital markets; data centers have probably been for the past two years the hottest asset class in the real estate industry. But now there’s an associated problem that’s emerging . . . which is that data center is so energy intensive, the local utility will not allow you to plug in that grid . . .

That’s forcing the real estate industry to say, ‘We have to be in the energy business ourselves if we want to be in the business of computational data centers.’

What are your LPs expecting you to do? Are you going to be investing in fusion startups now?

Fusion is obviously really exciting, but we have a more near-term problem. We need the energy now or next year. Ideally, we do not want those to be fossil-fuel based, dirty energy sources . . so that really leads to the renewables that we know are cost viable, [which is] most obviously solar. [So] the bottom line is, yes, we are investing in solutions to accelerate the development of solar alongside our real estate investors, and real estate companies will become energy development companies themselves.

Technology

Pintarnya raises $16.7M to power jobs and financial services in Indonesia

Pintarnya, an Indonesian employment platform that goes beyond job matching by offering financial services along with full-time and side-gig opportunities, said it has raised a $16.7 million Series A round.

The funding was led by Square Peg with participation from existing investors Vertex Venture Southeast Asia & India and East Ventures.

Ghirish Pokardas, Nelly Nurmalasari, and Henry Hendrawan founded Pintarnya in 2022 to tackle two of the biggest challenges Indonesians face daily: earning enough and borrowing responsibly.

“Traditionally, mass workers in Indonesia find jobs offline through job fairs or word of mouth, with employers buried in paper applications and candidates rarely hearing back. For borrowing, their options are often limited to family/friend or predatory lenders with harsh collection practices,” Henry Hendrawan, co-founder of Pintarnya, told TechCrunch. “We digitize job matching with AI to make hiring faster and we provide workers with safer, healthier lending options — designed around what they can reasonably afford, rather than pushing them deeper into debt.”

Around 59% of Indonesia’s 150 million workforce is employed in the informal sector, highlighting the difficulties these workers encounter in accessing formal financial services because they lack verifiable income and official employment documentation.

Pintarnya tackles this challenge by partnering with asset-backed lenders to offer secured loans, using collateral such as gold, electronics, or vehicles, Hendrawan added.

Since its seed funding in 2022, the platform currently serves over 10 million job seeker users and 40,000 employers nationwide. Its revenue has increased almost fivefold year-over-year and expects to reach break-even by the end of the year, Hendrawn noted. Pintarnya primarily serves users aged 21 to 40, most of whom have a high school education or a diploma below university level. The startup aims to focus on this underserved segment, given the large population of blue-collar and informal workers in Indonesia.

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“Through the journey of building employment services, we discovered that our users needed more than just jobs — they needed access to financial services that traditional banks couldn’t provide,” said Hendrawan. “We digitize job matching with AI to make hiring faster and we provide workers with safer, healthier lending options — designed around what they can reasonably afford, rather than pushing them deeper into debt.”

Pintarnya Founders Press Kit — image credits: Pintarnya (Founders of Pintarnya Ghirish Pokardas, Nelly Nurmalasari, and Henry Hendrawan)

While Indonesia already has job platforms like JobStreet, Kalibrr, and Glints, these primarily cater to white-collar roles, which represent only a small portion of the workforce, according to Hendrawan. Pintarnya’s platform is designed specifically for blue-collar workers, offering tailored experiences such as quick-apply options for walk-in interviews, affordable e-learning on relevant skills, in-app opportunities for supplemental income, and seamless connections to financial services like loans.

The same trend is evident in Indonesia’s fintech sector, which similarly caters to white-collar or upper-middle-class consumers. Conventional credit scoring models for loans, which rely on steady monthly income and bank account activity, often leave blue-collar workers overlooked by existing fintech providers, Hendrawan explained.

When asked about which fintech services are most in demand, Hendrawan mentioned, “Given their employment status, lending is the most in-demand financial service for Pintarnya’s users today. We are planning to ‘graduate’ them to micro-savings and investments down the road through innovative products with our partners.”

The new funding will enable Pintarnya to strengthen its platform technology and broaden its financial service offerings through strategic partnerships. With most Indonesian workers employed in blue-collar and informal sectors, the co-founders see substantial growth opportunities in the local market. Leveraging their extensive experience in managing businesses across Southeast Asia, they are also open to exploring regional expansion when the timing is right.

“Our vision is for Pintarnya to be the everyday companion that empowers Indonesians to not only make ends meet today, but also plan, grow, and upgrade their lives tomorrow … In five years, we see Pintarnya as the go-to super app for Indonesia’s workers, not just for earning income, but as a trusted partner throughout their life journey,” Hendrawan said. “We want to be the first stop when someone is looking for work, a place that helps them upgrade their skills, and a reliable guide as they make financial decisions.”

Technology

OpenAI warns against SPVs and other ‘unauthorized’ investments

In a new blog post, OpenAI warns against “unauthorized opportunities to gain exposure to OpenAI through a variety of means,” including special purpose vehicles, known as SPVs.

“We urge you to be careful if you are contacted by a firm that purports to have access to OpenAI, including through the sale of an SPV interest with exposure to OpenAI equity,” the company writes. The blog post acknowledges that “not every offer of OpenAI equity […] is problematic” but says firms may be “attempting to circumvent our transfer restrictions.”

“If so, the sale will not be recognized and carry no economic value to you,” OpenAI says.

Investors have increasingly used SPVs (which pool money for one-off investments) as a way to buy into hot AI startups, prompting other VCs to criticize them as a vehicle for “tourist chumps.”

Business Insider reports that OpenAI isn’t the only major AI company looking to crack down on SPVs, with Anthropic reportedly telling Menlo Ventures it must use its own capital, not an SPV, to invest in an upcoming round.

Technology

Meta partners with Midjourney on AI image and video models

Meta is partnering with Midjourney to license the startup’s AI image and video generation technology, Meta Chief AI Officer Alexandr Wang announced Friday in a post on Threads. Wang says Meta’s research teams will collaborate with Midjourney to bring its technology into future AI models and products.

“To ensure Meta is able to deliver the best possible products for people it will require taking an all-of-the-above approach,” Wang said. “This means world-class talent, ambitious compute roadmap, and working with the best players across the industry.”

The Midjourney partnership could help Meta develop products that compete with industry-leading AI image and video models, such as OpenAI’s Sora, Black Forest Lab’s Flux, and Google’s Veo. Last year, Meta rolled out its own AI image generation tool, Imagine, into several of its products, including Facebook, Instagram, and Messenger. Meta also has an AI video generation tool, Movie Gen, that allows users to create videos from prompts.

The licensing agreement with Midjourney marks Meta’s latest deal to get ahead in the AI race. Earlier this year, CEO Mark Zuckerberg went on a hiring spree for AI talent, offering some researchers compensation packages worth upwards of $100 million. The social media giant also invested $14 billion in Scale AI, and acquired the AI voice startup Play AI.

Meta has held talks with several other leading AI labs about other acquisitions, and Zuckerberg even spoke with Elon Musk about joining his $97 billion takeover bid of OpenAI (Meta ultimately did not join the offer, and OpenAI denied Musk’s bid).

While the terms of Meta’s deal with Midjourney remain unknown, the startup’s CEO, David Holz, said in a post on X that his company remains independent with no investors; Midjourney is one of the few leading AI model developers that has never taken on outside funding. At one point, Meta talked with Midjourney about acquiring the startup, according to Upstarts Media.

Midjourney was founded in 2022 and quickly became a leader in the AI image generation space for its realistic, unique style. By 2023, the startup was reportedly on pace to generate $200 million in revenue. The startup sells subscriptions starting at $10 per month. It offers pricier tiers, which offer more AI image generations, that cost as much as $120 per month. In June, the startup released its first AI video model, V1.

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Meta’s partnership with Midjourney comes just two months after the startup was sued by Disney and Universal, alleging that it trained AI image models on copyrighted works. Several AI model developers — including Meta — face similar allegations from copyright holders, however, recent court cases pertaining to AI training data have sided with tech companies.

Got a sensitive tip or confidential documents? We’re reporting on the inner workings of the AI industry — from the companies shaping its future to the people impacted by their decisions. Reach out to Rebecca Bellan at [email protected] and Maxwell Zeff at [email protected]. For secure communication, you can contact us via Signal at @rebeccabellan.491 and @mzeff.88.

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