Matterport / Gores Holdings VI SPAC merger

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While SPAC (special purpose acquisition company) stocks have cooled off as of late. There are some like Gore Holdings VI (NASDAQ:GHVI) stock, that we believe has tremendous potentially as a business opportunity. GHVI chose Matterport as its merger partner. The merger valued the company at $2.9B. However we believe that the overall opportunity is much bigger. The stock currently trades at $13.64 (April 9th 2021). To support the transaction, the companies will raise about $295 million from investors including Tiger Global Management, Senator Investment Group, Dragoneer Investment Group and Fidelity Management & Research Co. The deal is expected to close soon. The combined company will be renamed Matterport Inc. and plans to trade on the Nasdaq under the symbol MTTR.

Matterport is the world leader in immersive 3D technology, offering a platform for prosumers and professionals to easily capture, edit and share 3D models of physical spaces. Today the killer application that the company has found a “product market fit” for is real estate (especially in a Covid / post Covid world). Real estate is the largest asset class in the world worth $230 trillion globally, comprising an estimated 4 billion buildings. Real estate is one of the slowest in terms of technological adoption. Most real estate owners have yet to adopt indoor surveying and integrating technology solutions in their buildings. With real estate being slow to adapt, Matterport attempts to seize this opportunity by offering the industry tools to build a virtual world. The company started as a camera company building specialized indoor cameras but has now pivoted to data and SaaS models for delivering the data and imagery. Customers first scan their spaces with a compatible camera or iPhone — they do so by taking pictures at multiple points to get a panoramic and interactive view of the space. As pictures are taken, Matterport’s deep learning software called Cortex AI, creates a robust and highly accurate 3D digital twin of the space. Customers can customize the 3D model by setting starting points or adding Mattertags (pop-up descriptions or links anywhere in the model), for instance. After the customer is satisfied, he or she can publish the 3D model by sharing it on social media, embed it on a website, or integrate it into other platforms. Example Redfin uses the Matterport technology to show all the 3D renderings and doll house views of all its listings.

Through this sophisticated, yet powerful, technology, Matterport has created the largest spatial data library in the world, with more than 4.4 million spaces under management and 10 billion square feet of space scanned. The company has over 250,000 customers across 150+ countries, including Airbnb, Hyatt and many more. Today the navigable virtual tours are presented in Matterport’s proprietary photo-realistic digital media format. The Matterport platform helps to create 3D “digital twins” of physical buildings. These “twins” have become a valuable tool for property appraisal, renovation projections and even pandemic-related “return to work” planning. In short, it’s yet another “future of real estate” play. To be clear as a pure real estate play this company trades at a relatively high valuation at today’s price it’s around $3.9B and still unprofitable. Compare this with the new age real estate plays like Zillow at $35B, Open Door at $20B and Redfin at $6.5B.

It is however a wrong approach to view this as a real estate or property tech company. The real estate play is but a small part of the story and undoubtedly it’s getting a lot of attention due to covid. Also we believe that real estate will remain a cash cow for the company and enable it to grow its SaaS model in this domain.

We believe that the true opportunity is far bigger than real estate, it is “Data”.The real story is the billions of square feet of data / imagery they have of homes, malls, warehouses and factories. As we look at 3D & machine vision applications for Gaming / Virtual Worlds / Industrial digitization and automation the basic and fundamental need is data. To train any model you need good, clean data that is segmented, mapped and labeled. Every inference machine learning / artificial intelligence model needs to be trained. The better the data, the better the training and better the AI Inference engine. Matterport with 10 billion sq. feet mapped is probably the single largest source of indoor imagery and videography. Here are some stats.

Today Matterport has a revenue run rate of $100M in 2021 and is used in 150 countries (see attached presentation). It has a subscription model and has seen an 18X growth in subscribers in 2020 (Covid has turbo-charged this growth in real estate).

In addition to real estate in our opinion the big markets will be

  • Gaming and Virtual Worlds
  • Industrial / Warehouse automation and robotics
  • Construction tech
  • Location based advertising and targeting

Other smaller markets and use cases are

  • Security & first responders
  • Indoor navigation
  • Insurance
  • Training and Education

For all of these use cases, there is a need for 3D imagery of existing or virtual spaces. In that sense we see Matterport becoming both a provider of data and tools like Autodesk, Adobe and others to enhance, augment and build on top of the existing data libraries. The market lead that the company has and the data it has collected and virtual models, data segmentation and proprietary tool chest its engineers will build are a significant moat for any new entrant to navigate and rebuild. While it is true that the cost of imaging using a good smartphone is falling and data / imagery of indoor spaces can be easily crowdsourced, the technology and software stack that Matterport has built and the new cash will enable them to build will help them stay ahead of any potential threats.

The management team consists of Silicon Valley veterans from PayPal, Google, eBay and LinkedIn with seasoned product and engineering expertise. In addition the Gores Group is probably one of the most experienced firms when it comes to SPACs and has a history of successfully executing transactions and growing companies. We believe the investor community is myopically focused on the real estate angle while in reality this company and its data is going to eventually be as valuable as Google Maps or Apple Maps for indoor spaces in a myriad of industries.

(The link to this investor ppt after the SPAC transaction lays out a lot of the details and financials.)

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