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Real Estate Startup HomeLight Secures $109M In Debt & Equity

Mary Ann Azevedo — Tue, 05 Nov 2019 14:00:23 +0000

Buying a home is one of the biggest, and most expensive, decisions in a person’s life. Over the past year or so, we’ve written about a slew of startups that have developed technology aimed at making the process smoother and cheaper in one way or another.

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Today, another such startup, San Francisco-based , has announced a $109 million round of debt and equity funding. The financing round includes $63 million in Series C equity from venture capital firms and $46 million in debt financing “to fuel mortgage operations.”

led the round, which included participation from, , , , and others. The financing brings the company’s over its lifetime to about $164 million, according to �� data. Previously, it raised a $40 millionn August 2017.

HomeLight’s initial product focused on using artificial intelligence to match consumers and real estate investors to agents. Since then, the company has expanded to also to agents and home sellers and matching sellers with iBuyers. (Note that although we almost killed using this overused term, we decided to leave it but explain what it is, which is, according to , “the catchall term for online real estate investors who seek to reduce transactional property costs via digital tools”). In July, HomeLight as an entry into the (increasingly crowded) mortgage lending space.

CEO founded HomeLight in 2012 after he and his wife experienced firsthand the pain of trying to buy a home in the competitive Bay Area market.

“The process of buying a home in San Francisco was so frustrating it made me want to bang my head against the wall,” Uher told me. “I realized there was so many things wrong with the real estate industry. I went through a few real estate agents before finding the right match. So when I did find one, it made me feel empowered to compete and win against the other buyers.”

Thus, the concept behind HomeLight was born.

“We decided to first try to help people solve the problem of finding the right real estate agent,” Uher said. “But now it’s grown into so much more.”

HomeLight CEO and Founder Drew Uher

If you’ve ever bought a home, you know how important it is to have good chemistry with your agent. That person gets to know you and your family intimately. They need to be familiar with your target market, attentive and know how to negotiate well on your behalf. Like Uher, some people go through multiple agents before finding someone with whom they are comfortable.

Uher said that even as a graduate of and having worked on Wall Street, he was overwhelmed by the whole process in general.

“I viewed myself as being financially savvy but when it came to navigating the home buying process, I was just out of my element,” he admitted. “There’s a lot of nuances in the way which real estate is transacted that is very specific to the industry.”

How It Works

HomeLight uses “proprietary machine-learning algorithms” to analyze millions (over 40 million it says) real estate transactions and over 1.4 million agent profiles. It claims to connect a client to a real estate agent on average “every two minutes” and that it has “driven well over $17 billion of real estate business nationwide.”

With its “Simple Sale” product, HomeLight aims to be “a Kayak for iBuyers,” according to Uher.

“It helps sellers determine which iBuyer is going to pay the most money for their home, and then connects the seller to that iBuyer,” he said. “For example, some buyers are not able to purchase homes that need a lot of work, or were constructed before a certain year. The diversity of our platform helps with that and pairs very well with our core matching agent product.”

Uher emphasized that HomeLight is not trying to “kill the real estate agent.”

“We’re not so sure that makes sense when it’s time to make the largest financial transaction of someone’s life,” he told �� News. “But when you have six or seven figures on the line, it doesn’t make sense to completely remove the human element in the process.”

, founding partner of Group 11, said in a statement that his firm has been investing in HomeLight since its seed stage, and put money in each round since.

The company, Frances said, “has a seven-year head start on other companies in the proptech space hoping to monetize agent referrals.”

Oren Zeev, managing director of Zeev Ventures, said that HomeLight’s “evolution from a single product company to a real estate platform aligns with our vision for the future of real estate.”

Currently, HomeLight has over 200 employees, up from about 100 at this time last year. Its revenue has been growing at about 145 percent for the last three years, according to Uher. Besides San Francisco, it has offices in Scottsdale, Ariz., Seattle, Wash., and New York.

Looking ahead, HomeLight plans to use its new capital primarily to join startups such as (which recently raised a $160 million Series C that we reported on here) that are in the digital mortgage lending space. It also plans to “get into” the title and escrow business “to help agents and clients work through the closing process.”

I’ve been paying attention to the real estate tech space and all the funding taking place in it as of late (in a former life, I used to be a real estate reporter). In September, I wrote about how raised a $43M Series B round to help in its mission to help more Americans “move from renters to [home]owners.” Earlier this year we saw some massive funding rounds from the likes of Knock and Compass.

And in July, we covered raising $503 million for its second fund to invest almost exclusively in real estate tech companies. I’ve said it before and I’ll say it again: Buying a home appears to still be the American dream for many. And as long as that’s the case, there will likely be demand for services that companies like HomeLight offer. The company does seem to be trying to do a lot of things at once, but I guess only time will tell if that approach is successful, or not.

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Real Estate Startups Raise Massive Rounds To Change The Way People Buy and Sell Homes

Mary Ann Azevedo — Wed, 08 May 2019 12:00:06 +0000

Buying or selling a home can be stressful and challenging. But as we’ve seen across multiple industries in the startup world, the right mix of emotional upheaval and logistical headaches can provide ripe soil for disruption.

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Enter the residential real estate startup market where we’re seeing a variety of models play out. While some companies promise lower commissions than traditional brokerages, others so consumers don’t have to put them on the market. Still others give homeowners a chance to trade in their house and a number of other iterations abound.

Besides talking to a couple of these startups, we’re also going to attempt to quantify this market by looking at the data.

In 2018, U.S.-based real estate companies as a whole raised a combined $4.99 billion across 105 transactions, according to �� data. While that’s down from the $5.8 billion raised in 95 deals in 2017, it’s still a staggering 10 times higher than the $520 million raised by such startups in 2013, as you can see in the chart below.

For the purposes of this piece, we’ll focus on companies in the residential real estate space. Of that $4.99 billion raised in 2018, startups in the North American residential real estate category raised a total of $532 million in the first half of 2018. That was up from 45 companies raising $314 million in all of 2017.

Where We Are Today

2019 is starting out strong. Not pictured in the chart above is the fact that, according to our data (keeping in mind that all deals have likely not been reported yet), there has been $1.9 billion invested in 32 general real-estate related venture deals during the year so far.

In January, , a licensed residential real estate brokerage using AI and big data, closed on a $45 million Series C round. Also in January, New York-based online home selling platform Knock.com raised $400 million in a Series B round that was a mixture of equity and debt. Then in March, Arizona-based online homebuying startup closed a $565 million and San Francisco-based raised a $300 million at a pre-money valuation of $3.8 billion.

Bottom line: If these massive rounds are any indication, 2019 is likely to surpass last year’s numbers. In the meantime, we talked with two of those massive first-quarter funding recipients, and , in an effort to better understand the space.

The Early Innings

co-founded Knock in 2015 with years of experience as part of the founding team at , which went public in 2012 and was by for $3.5 billion in 2014 . (He’s also an investor in other startups including ).

Knock has grown from 30 people at the beginning of 2018 to 150 today with the goal of having 200 employees by the third quarter, Black said. The company in 2018 also tripled its revenue and is on track to double or triple it this year.

Currently, the startup operates in five markets: Phoenix, Atlanta; Charlotte, Raleigh-Durham, Dallas-Fort Worth. Part of the goal with its recent financing is to double the number of U.S. cities served by 2020.

“We’re not looking to move into more expensive markets like New York, San Francisco or Seattle,” Black told �� News. “We’re trying to get into more affordable housing markets where younger generations are moving to, as well as warmer states where people buy homes throughout the year.”

Despite the comparison to other startups in the space, Black argues that Knock has a unique model.

Knock makes an all-cash, non-contingent offer on a home on behalf of the buyer with its own money, aiming to get them a discount. It then represents the sale of their old house and once that transaction closes, it transfers the new house in their name.

Looking ahead, Black remains confident about Knock’s chances in an increasingly crowded space, noting that he believes there’s plenty of room for competition.

“Right now, still all the companies in the space together have low single digit market share. We’re in the early innings really,” he told �� News.

, managing director of (which led Knock’s , agrees.

“It’s not a winner take all market,” he said.

Levine added that – like many investors – he had seen a lot of opportunities in real estate over the last five years.

“Most of which were focused on technology to help facilitate the existing market, and generally speaking , sold to brokers,” he told �� News. “We could never get our heads out around them, as much as we recognized that real estate was a massive market.”

But when Foundry was introduced to Knock from another of its investors, its model was “immediately resonant” to Levine.

“It was simply more aligned with the home buyers,” he added. “I particularly love the segment of the market Knock is working in. It’s a wide swath of the market.”

For example, a typical Knock customer is selling a house for about $285,000 and buying a house in the low $300,000s, according to Levine.

“That was appealing to me,” he told �� News. “Sometimes investors who live in more expensive homes forget they are not necessarily the target market.”

Trading Homes Like Cars

Phoenix-based , raised a massive in March from an undisclosed investor – a round that included debt and equity (although the company declined to break down how much was each). The four-year-old company, which CEO describes as an “on-demand buyer,” has raised about $975 million over time.

Users log on to the Offerpad site, upload photos of their home and then “get a fair market offer within 24 hours,” Bair said.

“We do due diligence and can close on their schedule,” he said.

So, how is this different from Knock or other similar companies out there?

Bair is a former Realtor, and he believes that experience has helped him understand home buyers’ pain points. He is adamant that Offerpad does not serve as a ‘flipper,” as it does not perform “major” home renovations.

“We are a buying service giving people the ability to trade in homes like cars,” he told �� News. “When people upload pictures of their house to our site, we try to give them the best offer.”

The company then conducts “a light refresh” and puts it right back on the market.

“We’re not looking to buy distressed homes or work with people in distressed situations,” he said. “Our model is more about offering convenience and certainty to busy people who don’t want to have to deal with listing their homes and all the headaches that go along with that.”

Like Knock, Offerpad is targeting markets with strong economies and median prices that are not outrageous (it’s in Phoenix, Tucson, Las Vegas, Charlotte, Raleigh, Tampa, Orlando, Houston, San Antonio and Austin, for example)

In 2018, real estate transactions conducted via the Offerpad site grew 125 percent year-over-year, according to Bair. As of early April, the company had nearly 500 employees and had hired 97 people in the first quarter alone. Offerpad charges a 6 to 8 percent fee, depending on the risk it expects to experience when trying to re-sell the house.

As long as the housing market remains relatively hot, startups like these will likely continue to see demand. The true test will be when the market takes a turn.