VC firm’s new ‘retail fund’ aims to help online brands enter brick-and-mortar

A real-estate focused venture capital firm closed a $100 million vehicle that aims to invest in emerging brands and retail concepts to accelerate their physical store expansion.

Fifth Wall’s new “Retail Fund” is backed by retail real estate owners and service providers including Acadia Realty Trust, Cushman & Wakefield, Macerich and Nuveen Real Estate. It will look to accelerate the brick-and-mortar expansion of new brands through retail partnerships with the company’s consortium of more than 50 corporate investors from 11 countries.

Although digitally native brands are rapidly expanding offline, Fifth Wall said it believes that most venture capital investors in e-commerce are not familiar with the challenges or complicated dynamics of brick-and-mortar retail growth. Similarly, many large retail real estate owners aren't fully aware of new potential tenants for their space, the company said.

As part of the Retail Fund's investment mandate, Fifth Wall will work to help new brands and retail concepts navigate the complexities of offline expansion through its real estate expertise and its real estate investor network. It will help its retail real estate owners build relationships with brands at a much earlier stage.

"Digitally native brands often aren't familiar with the challenges of retail real estate expansion," said Kevin Campos, partner, Fifth Wall, who leads the Retail Fund's investments in omnichannel brands. “And we've observed that many traditional VCs lack the experience to be able to meaningfully engage on issues like site selection, store design, merchandising, and staffing. Fifth Wall aims to support brands on these very issues.”

Fifth Wall has already made investments in emerging omnichannel brands and retail concepts, including Allbirds, Carbon38, Cotopaxi, Foxtrot, Heyday, Industrious, Interior Define, Madison Reed, Taft, and UntuckIt.

"When Fifth Wall backed UntuckIt, we had 15 stores and the goal of growing that by another 100 in 5 years,” said company co-founder and CEO Aaron Sanandres. “In part through the help of Fifth Wall's real estate network in the U.S. and abroad, we're already well ahead of those ambitious plans."

Fifth Wall is also focused on concepts that come from outside traditional retail categories but make for complementary tenants in shopping centers, such as flexible office providers. After Fifth Wall's investment in Industrious, Macerich collaborated with the flex office brand to open a location at Scottsdale Fashion Square in a 40,000-sq.-ft. space formerly occupied by Barneys New York.

"Our top properties in top markets are natural platforms for a wide range of innovative concepts, such as Industrious, UntuckIt and b8ta, benefiting from Fifth Wall's expertise and investment,” said Tom O'Hern, CEO, Macerich. “This new Retail Fund, which supports the ecosystem of emerging retailers, is an exciting step."

Founded in 2016 and based in Los Angeles, Fifth Wall describes itself as the largest venture capital firm focused on technology-driven innovation for the global real estate industry. It has approximately $1 billion in assets under management.