The rapid growth of cloud and open source software have given rise cohort of tech unicorns. These unicorns have tackled and changed industries in finance, transportation, BI, real-estate, and others. Besides Airbnb, real-estate technology (proptech) companies are, due to the market’s younger age, still relatively low-key compared to their counterparts in more mature industries. With an increasing rate of venture dollars spilling into proptech, my call is that this is about to change.
Upwards of $16 billion in venture capital has flowed into real estate-related startups across the category in 2019. Let us look at who some these startups are and who are the VC investors putting their money into the global proptech market. In this entry, we will focus on home equity.
The market is definitely hot, but the addressable markets are enormous and adoption is still relatively low and accelerating. We believe that now is a good time to invest in early-stage proptech, provided it’s done prudently.Zach Aarons, MetaProp
Proptechs operating in the homeownership space are mostly driven by business model innovation. These companies buy home equity with cash and share any gains or losses in the home value over time. Unlike a lender, home equity companies invest alongside homeowners, providing cash and participating in the proceeds at the time of a sale. Companies operating in this space either rent the home back to the homeowner (rent-to-own/leaseback) or participate as co-investor.
The following are some of the highest-funded proptech companies in the home equity market.
Hometap is a way for homeowners to buy property without taking a loan. The company buys up to 20% of the home for cash, sharing gains or losses in the property value for 10 years.
Their total disclosed equity funding is $12M (all from series A)from General Catalyst and American Family Ventures.
Their latest funding was series B for $43M from Andreessen Horowitz, GIC, Caffeinated Capital and Lennar.
The renter selects a home on the market which Divvy then purchases. The renter then builds equity in the home with every rent payment.
Unison buys a portion of the home, whether directly from someone who already owns the home or by co-investing the downpayment. Unison then shares in the gains or losses in the value of the home.
Their total disclosed equity funding is $92.8M from F-Prime Capital and Citi Ventures.
EasyKnock buys 70% of the homes in cash and rents it to the homeowner for up to five years. After the period, the homeowner can either buy the home back or sell it. EasyKnock keeps the right to sells the home itself with a 1.5% commission, giving the homeowner back the remaining sale earnings.
Their total disclosed equity funding is $319.7M from Blumberg Capital and Montage Ventures.
I believe we are still in the early innings of proptech — maybe 3rd or 4th inning. I always like to make the comparison to fintech. Technically speaking, real estate is a larger asset class than financial services. — Ryan Freedman, Corigin Ventures
Ribbon offers homebuyers to upgrade the offer they have, to cash regardless of where they are in the mortgage process making the purchase more affordable and provide certainty of moving in on-time.
Their latest funding was series B for $30M + $300M Debt from Bain Capital Ventures, Greylock Partners, NFX, Nyca, Thomvest Ventures, and Goldman Sachs.
Figure offers an alternative to the HELOC loans (federally-regulated home equity line of credit), but also has launched a product that buys a home from an owner and then leases it back to them. Figure’s loans use a proprietary blockchain system named Provenance.
Their total disclosed equity funding is $1.17B from Ribbit Capital, DST Global, RPM Ventures and DCM Ventures.
I see a big opportunity for startups with a strong technology component to provide solutions for the mismatch between the way consumers want to live today and the aging housing supply that was built for a previous era with different needs and demographics.Pete Flint, NFX
There are multiple others also operating in this space like Homeward, Flyhomes and Patch Homes.
While startups focusing on home equity approach proptech from the transaction perspective, there are multiple other parts of the real estate value chain that is in the process of being disrupted. Whether that is from the construction, maintenance, legal or from the property management side.
The amount of money spent in real estate is enormous, and the data and tools we use today are still based on insights from a decade ago. Homeownership is the low hanging fruit for investors in proptech, but it is helpful to keep in mind, that it is just the start of the life-cycle of owning a home. The younger generation, raised on the Internet, is used to, and demands getting help managing their daily life with online tools. So too will they expect more from the Internet when it comes to real estate management.
For us, at Moowle, these insights are invaluable and credit goes to TechCrunch and Business Insider as the source of some data.