In this Research Note, we examine what’s behind the Costar acquisition of Matterport, the US digital twin business founded in 2011. This analysis is based on Matterport’s investor presentation 20th February 2024, 10K Annual Reports, and recent press releases.

CoStar Business

Founded in 1987, CoStar Group is a $2.5 billion revenue company, operating some of the most widely recognized real estate information solutions and online property marketplaces including Apartments.com, LoopNet, CoStar, and Homes.com, all of which feature Matterport’s 3D virtual tours. CoStar Group was one of the first adopters of Matterport’s technology. It currently has almost 300,000 Matterport digital twins available in the CoStar information product and online property marketplaces.

Matterport Transaction Details

CoStar Group will acquire all outstanding shares of Matterport in a cash and stock transaction valued at $5.50 per share (Matterport's share price reached a high of $27.86 in November 2021), representing an equity value of approximately $2.1 billion and an enterprise value of approximately $1.6 billion based on the closing price for CoStar Group common stock on April 19, 2024.

Matterport revenue for 2023 is reported as $157.7 million, up 16% from the prior year, so the deal represents somewhere in the region of a 10x revenue exit multiple.

Matterport Highlights

Since its founding in 2011, Matterport, headquartered in California, has been a first mover in digitizing, accessing and managing buildings, spaces and places online, with their 3D capture technology and AI-powered insights. The firm has around 440 employees.

Their technology platform uses spatial data collected from a wide variety of digital capture devices to transform physical buildings and spaces into dimensionally accurate, photorealistic digital twins that provide their subscriber's access to building information and insights. This has resulted in the world’s largest library of spatial data with more than 38 billion square feet digitized to date.

With approximately 11.7 million spaces under management in their spatial data library as of December 31, 2023, the company are continuing to penetrate the global building stock and expand their footprint across various end markets, including residential and commercial real estate, facilities management, retail, AEC, insurance and repair, and travel and hospitality.

Matterport announced that it had surpassed one million subscribers on 2nd April 2024, with a 75x subscriber growth in just five years, growing from 13,000 subscribers in late 2018 to over one million today. The company’s SaaS-first approach has driven subscription revenue to 60% of total revenue, from less than 50% one year ago.

Strategic Rationale

CoStar Group intends to support and invest in research and development opportunities to further develop Matterport’s spatial technology, including the application of AI and machine learning to extract information from the 3D spatial data library as well as using generative artificial intelligence to imagine and reimagine physical spaces.

The transaction should increase the development and deployment of Matterport’s advanced AI and digital twin technology in commercial and residential real estate.

This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.