Moderne Ventures has raised roughly $230 million for its third fund, tapping investors in part on the thesis that relationships with companies in the real-estate industry give the firm a leg up in spotting promising technology.
Chicago-based Moderne targets seed- to Series B-stage deals with a particular specialty in backing startups in real-estate and related sectors such as finance and insurance. Roughly 30% of investors in Moderne’s new MV Core Fund III are companies in the real-estate sector or related industries, giving the firm insight into problems the industry seeks to tackle and potential customers for its portfolio companies, said founder and managing partner Constance Freedman.
“This is how we can supersize our returns,” Freedman said. “They’re helping us find things that customers actually want since they are the customers.”
Venture firms typically raise most of their capital from sources such as institutional investors, endowments and public pensions.
Freedman said Moderne’s team spends time with its corporate limited partners to understand their real estate-related challenges.
“They’re some of the largest owners and operators globally in those sectors. And so when they tell me about some problem, it’s generally indicative that the industry is trying to solve that problem,” Freedman said.
Freedman said the approach is proving especially valuable in helping Moderne decide which artificial-intelligence technology to back. Moderne has ongoing discussions with real-estate companies about how generative AI could improve their business and what technology should be ignored.
Moderne targets real-estate technology that can be applied in other industries to hedge against swings in the real-estate market affecting startup bets.
“What I learned in 2008 is that if you just focus on [real-estate sectors], your companies aren’t going to fare well when there’s a downturn and of course these industries always have downturns,” Freedman said.
Moderne began raising its new fund in early 2023 and finished roughly midway through this year. The collapse of Silicon Valley Bank, a slowdown of LP commitments to venture and a paltry exit environment made for a tough and longer than expected fundraising process, Freedman said.
Moderne previously raised a $200 million fund in 2020.
In addition to strategic LPs, Moderne tapped institutional investors, which Freedman said offer a more reliable commitment to the firm’s funds. Corporations can waver on venture fund commitments for various reasons, including shifting strategy, allocation to research and development, and company performance.
Moderne’s exits include residential real-estate startup Homesnap, which was acquired by property-data company CoStar Group, and the public offering for Porch, a home service and repair-management company. Porch went public via a special-purpose acquisition company deal in 2020.
Before founding Moderne in 2015, Freedman launched and managed real estate-focused Second Century Ventures with the sole LP being the National Association of Realtors.
Write to Marc Vartabedian at marc.vartabedian@wsj.com
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