Matterport Deep Dive
Digitization and datafication of the built world
In this issue of Moneyball Investing I’ll be covering Matterport (MTTR). Matterport went public in July 2021 through a SPAC sponsored by The Gores Group. Let’s dig into who Matterport is, what is does, and what the future may hold.
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What is Matterport? 🤷♂️
Matterport is leading the digitization and datafication of the built world. The company has developed a spatial computing platform that allows users to turn physical spaces into dimensionally-accurate and photorealistic digital twins. This provides customers with meaningful data insights needed to manage spaces.
Matterport currently boasts 404K subscribers, 5.6 million spaces under management in over 150 countries, and 15 billion square feet data points captured.
Watch the video below to see a demo of how Matterport’s technology works:
Addressable Market & Use Cases
Matterport believes that buildings and physical spaces are the largest asset class in the world. Digitization and datafication of the built world unlocks significant operational efficiencies and property values. Historically, though, real estate and physical spaces have been kept offline, thereby underutilizing the wealth of data and information that can be leveraged to improve different aspects of the building lifecycle from planning, construction, and operations to documentation, appraisal and marketing.
Similar to how Google transformed physical road maps into data-rich, digital maps and location services, Matterport digitizes buildings and creates a data-rich environment to better understand the full potential of each space that is captured. In addition, just as the geo-spatial mapping platforms of today have opened their mapping data to industry to create new business models such as ridesharing, e-commerce, food delivery marketplaces, and even short-term rental and home sharing, open access to Matterport’s structured spatial data is enabling new opportunities and business models for hospitality, facilities management, insurance, construction, real estate and retail, among others.
Per the Company’s Investor Presentation, Matterport states that its total addressable market (TAM) is over $240 billion, and could be as high as $1 trillion as the market matures. Spatial data-driven property insights and analytics is poised to experience meaningful growth as artificial intelligence, machine learning, and deep learning technologies become more integrated into society. This should lead to additional monetization avenues for Matterport in the form of deeper market penetration. For this reason, the Company states that its TAM could reach north of $1 trillion.
The beauty of Matterport’s spatial data library is that it serves several different end markets as the platform delivers value across a diverse set of industries and use cases:
Retailers can manage thousands of store locations remotely
Real Estate Agencies can provide virtual open houses for hundreds of properties and thousands of visitors at the same time
Property Developers can monitor the entirety of the construction process with greater detail and speed
Insurance Companies can more precisely document and evaluate claims and underwriting assessments with efficiency and precision
The concept of digitization and datafication represents a greenfield opportunity for growth across the physical space category and asset class. From the early stages of design and development to marketing, operations, insurance and building repair and maintenance, Matterport’s software provides customers critical tools and insights to drive cost savings, increase revenues and optimally manage their buildings and spaces. Since Matterport’s platform and data solutions have universal applicability across industries and building categories, the company has established a significant advantage as it can address the entirety of this large market opportunity.
How Does Matterport’s Spatial Data Platform Work?
The universal applicability of Matterport’s service provides them with significant scale and reach across diverse verticals and geographies. As the company continues to transform buildings into data worldwide, Matterport is quickly becoming the de facto business intelligence engine for the built world.
Matterport’s technology is powered by Cortex, which is the company’s proprietary AI-driven software engine that uses deep learning and machine learning to recreate a photorealistic, 3D virtual representation of an entire building structure, including contents, equipment, and furnishings. The finished product is a detailed and dynamic replica of the physical space that can be explored, analyzed, and customized from a web browser on any device, including smartphones.
While photographs and floor plans can be helpful, these forms of 2D representation have limited information and tend to be static and rigid. This means they lack an interactive element critical to a holistic understanding of a building or physical space. Matterport’s Cortex combats the limitations of static 2D images thereby eliminating the need for physical office visits. Cortex helps move buildings and spaces from offline to online and makes them accessible to customers in real-time and on demand from anywhere.
Each incremental capture of a space grows the richness and depth of Matterport’s spatial data library. Spatial data represents the unique and idiosyncratic details that underlie and compose the buildings and spaces in a humanmade environment. Cortex leverages billions of data points that Matterport has captured and stored to improve the 3D accuracy of its digital twins. This data library is very important because it delivers significant commercial value to Matterport’s subscribers by generating data-based insights that allow them to confidently make assessments and decisions about their properties. For example:
Property Developers can assess the amount of natural heat and daylight coming from specific windows
Retailers can ensure each store layout is up to the same level of code and brand requirements
Factories can insure machinery layouts meet specifications and location guidelines
Artificial intelligence and machine learning technologies utilize spatial data to create a robust virtual experience that is dynamic, realistic, interactive, informative and permits multiple viewing angles. These advancements also make costly cameras unnecessary for everyday scans because subscribers can scan their spaces by simply tapping a button on their smartphones. As a result, Matterport is a device agnostic platform, propelling them to rapid scale and establishing them as the market leader for digitizing and indexing the built world.
Growth Strategies
The image below illustrates Matterport’s growth strategy:
Unlock the SaaS Flywheel: The cash raised from the SPAC will allow Matterport to continue investing in product development. R&D will ultimately improve the Cortex software engine, allowing Matterport to expand its solutions portfolio and cross-sell/up-sell to subscribers.
Expand Use Cases: By expanding use cases and introducing new applications Matterport will be able to drive subscriber growth. Matterport stated that it plans to increase investments in industry-specific sales and marketing initiatives to increase sales efficiency and drive subscriber and recurring revenue growth, particularly from large enterprise subscribers. Additionally, improving the data library will allow Matterport to address the workflows of industries currently served, while also expanding solutions and reaching new industries such as manufacturing and oil and gas.
International Expansion: Matterport estimates that less than 0.1% of the global building and physical spaces market is penetrated by digital transformation. With the vast majority of the world’s buildings outside of the United States, the company expect significant opportunities in pursuing the digitization and datafication of the building stock worldwide.
Matterport uses a “land and expand” model to capitalize on the potential for geographic expansion. This creates a powerful network effect allowing them to expand further into under-penetrated countries and unlock additional properties and spaces.
3rd Party Marketplace: Through integration with its open, scalable, and secure enterprise platform, organizations across numerous industries have been able to automate workflows, enhance subscriber experiences and create custom extensions for high-value vertical applications. Matterport aims to develop strategic partnerships with leading software providers to enable more effective integrations and enlarge its marketplace of third-party applications.
Partnerships Highlight:
Financial Results and KPI’s
The table above illustrates Matterport’s financial results for 2019, 2020, and the first half of 2021. One can see that the company grew revenue by 87% between 2019 and 2020. Moreover, Matterport generated this growth from all revenue streams. Subscription revenue grew by 68%, while product revenue nearly doubled from $18.6 million in 2019 to $33.1 million in 2020. This revenue growth has allowed Matterport to make meaningful investments in product development and marketing, thereby propelling more growth throughout 2021.
For the first half of 2021, Matterport reported $56.4 million in total revenue, and is on a run-rate of $118 million in revenue as of Q2 earnings. This explosive growth is a tribute to the power of Matterport’s underlying technology. Cortex is able to compound each new capture and piece of data added to Matterport’s platform thereby becoming smarter and stronger. Matterport’s ability to turn data into insights with incremental data from new captures enables the company to develop new features for subscribers. In turn, Matterport is able to attract more subscribers and retain existing customers for longer periods of time. This leads to a higher lifetime value per subscriber, and allows Matterport to keep acquisition costs low. We can see the dynamic of these attractive unit economics in the summary tables as illustrated by increasing Net Dollar Expansion across their customer base, resulting in increased margins and reduced losses across the entire portfolio of products and services.
Risks and Concerns
Competition: There are a number of competitive alternatives to Matterport in the market today. Zillow has developed its own 3D Home Tour software, and there are several other 3D tools available in the market. If Matterport wants to succeed in the digitization of physical property it will need to identify and penetrate additional markets and use cases and limit itself to real estate, specifically home tours.
Valuation: As of the time of this post, Matterport has a $4.7 billion market cap. Its TTM Revenue is $105 million, thereby implying a Price/Sales Ratio of 45x on a TTM basis.
Leadership
Additional Resources
Jonah Lupton CEO Interview:
Meet Kevin CEO Interview:
Investor Relations Link: https://investors.matterport.com/
Q2 Earnings Presentation: https://investors.matterport.com/static-files/9fe4dc86-4c63-4efa-a378-5895f969e646
S-1 Filing: https://investors.matterport.com/static-files/0f8ee0ee-b534-40f8-afaa-99bcb7e7e549
🚨 Disclaimer: The stocks mentioned in this newsletter are not intended to be formal recommendations. Rather, this newsletter is for educational and entertainment purposes. I encourage readers to do their own research and conduct their own due diligence before buying any stocks mentioned in my write-ups.
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