Opendoor has opened the door, so to speak, so that startups can use their technical know-how in the areas of search, marketplaces and target group segmentation to rethink the very antiquated and analogue world of property. Today, a startup doing this in a specific area of distressed real estate announces a round of growth financing to join its team and grow its business.
Eisbecher – who created a marketplace for homeowners to list and sell outdated or damaged homes, or homes that they may need to move faster for financial reasons; for real estate investors / developers who wish to buy, repair, and then sell or rent these properties; and potentially buying a property for yourself and doing the same – today announces that it has raised a Series B of $ 36 million.
Funding is led by QED investors. The Gründerfonds, Susa Ventures, Navitas Capital and Prudence Holdings also took part. All are past investors from the startup's final round, a Series A valued at $ 16.55 million, also led by QED.
In an interview, CEO and co-founder Josh Stech, who describes the business he operates in as the "home that needs love segment," declined to talk about valuation of the company, and he also declined, To provide details on a number of other points: Sundae does not disclose how many homeowners and developers have used its service (“thousands”). the average selling price for a property; the number of properties moved; and how many of those who bought it or sold it to third parties (the "vast majority", more than 50% but less than 100%, is being bought by investors, not Sundae itself, he said).
He found that the four markets in which the company has commenced operations since it started operations in January 2019 – San Diego, Los Angeles, Inland Empire, and Sacramento – have an annual revenue rate of over $ 400 million in gross merchandise value (the total value of home sales made on its platform). This also speaks to the enormous and interesting amount of data the startup collects for home sales and how it can use it to power its platform in the future.
And as a further measure of its dynamism, this final round comes less than six months after their series A.
With these two equity-based funding rounds to buy real estate themselves and advance $ 10,000 cash to all sellers, Sundae also previously raised a debt fund from wealthy individuals and has a "very large" credit facility from Goldman Sachs that it isn't watering down either, said Stech.
The opportunity Sundae seizes has been a persistent cornerstone of the property market, but it may have become even more important over the past year.
There has long been a relentless boost in the US, both in newer cities with more room for geographic expansion and in older cities where old buildings are being demolished, a drive for new construction. Interestingly, that demand rose sharply during the pandemic, with demand for new homes four times higher than demand for buying "existing" homes.
At the same time, the supply of residential property has rapidly declined and has dropped to just a month in terms of the pace of sales. As Stech puts it, this means: "In 30 days, if no houses are listed, there will be no houses for sale." As a result, the sale of older houses to meet demand has become more prominent.
The problem with distressed properties is that people typically aren't as interested in buying fixer tops these days as they were in the past. Those selling real estate want to showcase ready-to-live-in homes for faster turnaround and lower the sales barrier. This means that distressed homes are usually turned down for sale unless they have some work to do first.
This was an opportunity for developers (or, as they are more commonly called in the US, real estate investors) to buy up these properties and work to make them more sellable. They work on the principle of many Fs: "Find, finance, repair, fill or flip", as Stech puts it.
Sundae basically removes the friction for both the homeowners and the developers: those looking to sell their homes only have to deal with one company, Sundae himself, who will take photos of the property (with the help of Matterport) and give some guidance on how to sell it Offer an advance on the sale at what price in case the owner needs the money even faster, and ultimately bring a number of interested prospects with you, including yourself.
Those looking for investment property can use the service to expand the funnel of homes to discover and work on.
Stech said he had a brainwave about the opportunity here when he finished graduate school at Stanford and moved to Las Vegas, which at the time was at the epicenter of the 2009 housing market crash. He bought a one-bedroom apartment that sold for $ 267,000 in 2007 for $ 19,000 in cash and realized that the market was ripe for taking it.
Admittedly, there is something disturbing about any kind of business that focuses on need: the implication is that building technology can use it and essentially act predatory for people who find themselves in a difficult situation.
Stech said his intent is actually to prevent this very situation by creating a more transparent process that allows sellers to consider offers from multiple developers rather than just one that does not serve the seller's interests. but his own.
"It's shameful what real estate developers have become," said Stech. “The idea has glorified itself and they're making a ridiculous amount of money. Everyone forgets who lost it: the homeowner who is likely to be forced to sell. "
That is not to say that selling in a market removes that self-interest, but it does create the option for a more balanced dynamic where a seller has at least more competition to consider. If particularly tight markets like London's are an example, at best sellers sitting in a property could even get an excellent turnaround on their homes compared to the amounts they originally paid to buy, even if that House may still need a lot of "love" to become habitable through gentrified comparisons.
All of this is especially interesting given the greater forces that have brought us all closer to one place than just being nomads, which increases the greater urge to buy real estate rather than rent when we can financially manage it.
“The concept of home ownership is fundamentally changing. This is especially true in light of COVID-19, which has created more uncertainty and has forced people to rethink their real estate decisions. Homeowners are looking for solutions that make the sales process more efficient, transparent and reliable, especially for the distressed real estate segment, ”said Frank Rotman, founding partner of QED Investors, in a statement. "Sundae's rapid growth is testament to the differentiated offering and trusted brand they have created through a customer-centric approach to market."