By Alex Robinson, Co-founder and CEO
Today, we are announcing a $75M Series C investment in Juniper Square, led by Redpoint Ventures. We want to take this opportunity to tell you more about our story: where we’ve been, where we are today, and where we’re going next.
In 1792, twenty-four stock brokers stood under a tree (as the legend goes) in New York City and signed the Buttonwood Agreement, thereby agreeing to the first set of market standards around the purchase and sale of public stock. Over the next few centuries, equity trading matured into a highly efficient, well-functioning market with a clear and shared set of standards among market participants.
In contrast, the market for trading ownership stakes in real assets did not evolve to be similarly efficient. The diverse, distributed nature of buildings and land has meant that buyers and sellers transact without reliable information, without the efficiencies of a centralized market, and without a trusted mechanism for settling their trades. As a result, every trade is bespoke, and carries very high transaction costs. The comparative lack of market standards has constrained and complicated investors’ ability to move quickly and make good decisions, and has prevented the market from functioning as efficiently as it should.
We believe this massive and diffuse asset class with no centralized market infrastructure is finally ready for its own Buttonwood moment. So much so that we’ve made it our mission at Juniper Square: to turn private real estate, the world’s largest asset class, into a well-functioning market.
What Makes a Market
A well-functioning market has three properties: organized, accessible, dependable, and comprehensive information; people willing to trade; and a trusted mechanism for making trades.
Today, information needed to trade ownership of real estate investments is very hard to come by. Even the largest institutional investors, often known as limited partners or “LPs”, who routinely commit $250M+ per investment, are gathering data, sometimes one to two quarters old, via spreadsheets in an attempt to understand and value their holdings. It’s not an overstatement to say that some of the world’s largest owners of real estate struggle to understand which buildings they own. And if you’re an individual investor in real estate, you’re lucky if you get a quarterly PDF with some basic information about your investment. You’re almost certainly left guessing as to what it’s worth, and you have no ability to trade your interest as the market is closed off and illiquid.
On the contrary, as a public markets investor, even if all you have is $250 to invest, modern brokerage accounts like Fidelity or Schwab bring the entire market digitally to your fingertips. Price history, major stock owners, asset fundamentals, and analyst views sit right next to the trade button for every asset, portfolio or index. Even better, this information is consistent across assets for you to easily benchmark. Every company’s financials are prepared according to the same accounting principles, and are subject to regular audit by an established third party. This doesn’t mean errors or fraud will never happen, but Enron is a household name because what happened there is so rare.
Improving access to information means that markets function better. Assets are fairly and regularly priced, market participants have the inputs they need in order to make good decisions, transaction costs go down, and capital is allocated to its highest and best use for society. Public markets already enjoy this benefit, yet there are $100T of private assets in the world that do not; imagine the value for society that would be unlocked if they did.
Second, markets are dependent upon people—specifically, buyers and sellers. High-functioning markets have sufficient numbers of buyers and sellers collected in one place, which creates liquidity. Parties can easily find each other, resulting in lower coordination costs and increasing the likelihood that any given buyer or seller finds a willing counterparty.
When you log on to Fidelity to sell a share of Microsoft’s stock, you’re joining the exchange where all buyers and sellers of that stock have agreed to meet in order to coordinate their transactions. You don’t have to personally find a buyer for your Microsoft stock; the market has already sorted buyers and sellers by their interests, and can seamlessly connect you so you can transact, without even knowing who or what the counterparty is. In the private markets, by contrast, it would be unheard of to transact without knowing every detail of your counterparty.
The fragmented and inherently local nature of real estate has meant that buyers and sellers are spread out thinly across a very large market space. There’s no one place where all market participants in real estate are gathered, which makes it really hard for buyers and sellers to find each other. And because of a lack of trusted mechanisms for trading (more on this below), once parties do find each other, they have to invest ridiculous amounts of time and resources into diligence so they can transact.
Imagine the potential if all the buyers and sellers for an asset class as large as real estate were all gathered together in one place. If one party wanted to sell their interest, they could instantly be connected at virtually zero cost to another party who wanted to buy it. And if you had the information you needed to determine a market-clearing price, well you’d have almost everything you need to make the market, except a trusted mechanism for making the trade.
Well-developed markets have a trusted mechanism for conducting and settling trades. No potential investor in Microsoft sends attorneys to Redmond to review paper files of the company’s records. You click buy, and the market system does the rest. Trusted entities like the DTCC store an independent record of ownership and custodians manage the movement of money and updates to this record. As a result, complex transactions become simple, cheap, and auditable, and brokers can pass that savings on to investors in the form of nearly costless trades. And buyers and sellers can click a button to transact, knowing with confidence that at the end of the day the digital record or proceeds of the security they just bought or sold will settle fairly, reliably, and without dispute.
Imagine the impact on the real estate market if it was as easy to buy and sell a share of a building as it is to buy and sell a share of Microsoft. A future state in the private markets of “nearly costless trades” is very much a real possibility. All that stands in the way is organizing the information across a very large market space, networking the highly fragmented market participants at scale so that they meet in one place in order to transact, and making high-stakes and highly complex transactions easy, trusted, and secure. This is exactly what we aim to do at Juniper Square, and we are well on our way to achieving that vision.
Our Progress to Date
Three years after launching, Juniper Square now serves real estate managers and their investors at an unprecedented scale. Tens of thousands of commercial real estate buildings have their ownership recorded in our system. Many hundreds of investment firms, and more than 100,000 of their investors, use our system to communicate with each other, report on performance, and manage their real estate investments. More than $800B of real estate assets, or 5% of the commercial real estate market in the U.S., is managed by our customers using our platform.
Our product gives real estate investment firms an operating system for managing their investments. From a CRM for investor relationships, to purpose-built tools that help raise more capital more quickly, to automating the complex process for new investor subscriptions, firms use Juniper Square to raise capital in ways never before possible. When it comes to managing existing investments, Juniper Square automates everything from the calculation of fees and returns, to payments, to investor reporting, and in the process dramatically reduces the time and effort firms spend on managing their back office, while in turn providing unprecedented levels of access, reporting, and transparency to investors across more than 250,000 investment positions. Our software has become central to our customers, and in any given week 94% of them will perform some critical business function, like calculating investor returns or issuing payments to investors, using our platform.
In other words, we have made tremendous progress toward solving the real estate market’s information problem, by helping investment managers organize data and make it accessible to their investors.
Our historical product focus has been on improving life for investment managers while helping them provide a world-class experience to their investors. But for the last year we have also been hard at work in close partnership with dozens of the largest and most sophisticated real estate LPs to develop a product for them that leverages the depth and scale we have already achieved with investment managers. This new product will provide institutional LPs unprecedented levels of access to building-level data across all of their investment managers, including those already on Juniper Square and those off. Never before has even the largest pension fund or endowment been able to get real-time answers to questions like: “How much of my portfolio is invested in office buildings?”, or “How much is in Houston?”. This new level of insight allows institutional LPs to better manage their real estate exposures, make better decisions, and ultimately deliver better returns to their constituents.
With this new product we are accelerating our progress toward solving the real estate market’s centralization problem, and building a common platform around which market participants can unite. More on this to come soon.
Our talented team of real estate and technology experts are committed to helping transform commercial real estate into a well-functioning market, because we believe better markets make the world better. Easier access to capital enables cities and communities to more easily grow their housing supply to meet demand. Expanding access to commercial real estate investments allows pension funds and individuals to more easily invest in an asset class that complements stocks and bonds, and is three times larger than the value of all private companies. The countless teachers, firefighters, and public sector employees whose livelihoods and retirements are dependent upon the financial viability of pension plans directly benefit from improving investment returns from important asset classes like real estate. At the most basic level, expanding access to markets and reducing their costs increases the total amount of wealth available in society, making all of us better off.
The financial markets for commercial real estate today are still far from the end-state that we imagine, but we’re excited to use this new infusion of capital to continue solving the problems we’ve been working on—organizing data and uniting counterparties around a common platform, with an eye toward becoming a trusted mechanism for those counterparties to trade with each other.
As we continue our pursuit of our mission, we need many more talented folks who are passionate about bringing fundamentally new innovations to massive markets to join us. We have open roles in engineering, product, sales, marketing, finance, customer success, investor services, capital markets, and many more departments at the company. Please see this link for our open positions, and please consider joining us on this journey!