Y Combinator alum Matterport is being bought by real estate juggernaut Costar at a 212% premium

Digital twin platform Matterport has agreed to be acquired by one of its clients, Costar, in a cash and stock transaction of $5.50 per share, giving it a valuation of company worth about $1.6 billion. Matterport’s technology helps businesses create digital replicas of physical spaces.

Costar’s offer represents a whopping 212% premium to Matterport’s last closing share price before the deal was announced on April 22.

The deal appears to be a happy turn of events for Matterport, whose shares had been trading below $5 since August 2022 as the company struggled to meet investor expectations for subscriber growth amid sluggish real estate market and broader macroeconomic slowdown. Matterport shares were trading below $2 per share before the transaction was disclosed.

The company has also tried to improve its profitability over the past year, according to its 2023 financial statements. However, investors are unhappy with the company, whose shares have been struggling since its IPO via a SPAC deal in 2021, which Bloomberg reported valued Matterport at around $2.9 billion.

Matterport shares were trading at $4.76 before the bell on Tuesday, slightly below the trading price of $5.50, indicating that investors may be wary of regulators blocking the deal, or that they could hedge their bets to account for a possible decline in Costar shares. since the deal also has a stock-based component. Costar shares, however, have risen slightly since the announcement, indicating that its investors are happy with the potential benefits of the deal.

Matterport has quickly risen to prominence since its debut in 2011, making 3D imaging cameras, emerging from the Microsoft Kinect hacker scene and joining Y Combinator’s Winter 2012 batch. Its services have gained popularity in the real estate industry despite competition from alternatives such as Cupix, Giraffe360, and Zillow 3D Home.

Digital twin technology has applications in construction technology and insurance, but demand from real estate players is particularly strong as the pandemic has accelerated the shift from in-person to virtual tours, both for commercial and residential properties.

Aside from early mover advantage, the company’s subsequent decisions likely played an equally important role as the market evolved. The company has diversified into helping its customers create virtual tours even with smartphones. And the addition of AI with its in-house solution, Cortex, has added further differentiation to its offering, leveraging its data to generate 3D digital twins supporting additional labels such as property dimensions.

Matterport’s leadership has changed over the years. Its current CEO, former eBay chief product officer RJ Pittman, took the reins in 2018 – but its fundraising trajectory has been fairly smooth. In its first decade, it raised successive rounds totaling $409 million, followed by its public debut in 2021.

“Costar Group and Matterport have nearly identical mission statements regarding the digitalization of global real estate,” Costar founder and CEO Andy Florance said in a statement.

CoStar, which has a market capitalization of $34.84 billion, is a real estate heavyweight that operates marketplaces such as Apartments.com, Homes.com and LoopNet (for commercial real estate). This gives it direct insight into the value Matterport can add to its end users.

In March 2024, Costar wrote in a press release: “There have been more than 7.4 million views of Matterport 3D Tours on Apartments.com, with consumers spending 20% ​​more time viewing a listing for apartment when Matterports were available.” The Company now plans to integrate Matterport Virtual Tours (“Matterports”) on Homes.com.

Speaking at a real estate event shortly after the announcement, Florance was quoted as saying that allowing home buyers to view properties with their own furniture, for example, would allow agents to offer more value and promote their brands.

It will be worth watching what happens to Matterport’s businesses beyond real estate, such as its partnership with Facebook to help researchers train robots in virtual environments.

The deal is subject to regulatory approvals, but it’s more than an asterisk: In 2020, Costar’s attempt to acquire RentPath was derailed by an FTC antitrust lawsuit, and RentPath was acquired by Redfin in 2021 .