Real estate startups have a palpable presence on the third annual Forbes Fintech 50, featuring the top companies in the financial technology (fintech) sector.
According to Forbes, $27.4 billion was invested in fintech startups in 2017, which marked a 16 percent increase from the previous year, and with seven real estate startups among the top 50, there’s a lot of money being spent to disrupt the industry.
“It’s not surprising that there are so many real estate financial technology companies populating the Forbes Fintech 50,” said Brendan Wallace, the co-founder and managing partner of Fifth Wall Ventures, a real estate venture capital firm, in an interview with Inman. “Real estate is the world’s largest asset class and the largest capital market. And it is clearly one of the least efficient as real estate capital markets have been laggards in the adoption of technology.”
In real estate, many of the big-name proptech companies are focused on consumer services such as finding and managing listings, but the fundamental underlying processes of buying or selling a home remain unchanged. And in 2018, an antiquated experience just won’t cut it.
“Consumers are demanding faster, better, cheaper — and the large institutions have not met this demand,” said Constance Freedman, founder of Modern Ventures, a venture capital firm that backs housing and lending technology companies, including Better Mortgage, which made the list. “It has made way for startups challenging the status quo, forging new relationships with these institutions and providing a better experience for real estate professionals and their clients.”
According to Freedman, in many cases, these startups aren’t looking to replace big banks and lending firms, but rather partnering with them.
“For example, Better is backed by Goldman Sachs and largely partners with them; Covered Insurance, Hippo and LeaseLock are each partnered with and backed by major insurance companies and reinsurers,” she said. “Real estate brokerages that offer their own lending and insurance products and services are also partnering with these startups to provide a digital, modern experience for their clients.”
Even with seven companies making the list, Wallace believes there were a number of startups that Forbes overlooked.
“I was surprised not to see some of the fastest-growing real estate fintech companies on the list including: Ethos Lending in consumer mortgage; Opendoor as a solution for consumer liquidity for homes; Hippo which is revolutionizing the process of securing home insurance; and Harbor which is architecting the requisite regulatory infrastructure to support tokenization of real estate securities,” Wallace said.
Despite those potential oversights, here are the seven companies that did make the cut, listed in alphabetical order:
Using an individual’s income and credit score, Better Mortgage — a digital-only mortgage originator — can estimate the loan you qualify for in three minutes and can provide you with a pre-approval letter in 24 hours, making it easy to compete with all-cash offers in a competitive marketplace.
Better Mortgage was founded by Vishal Garg — the former founder of now-defunct online lending platform MyRichUncle — and has received $65 million from a number of backers. Its loans are purchased by Fannie Mae and some of the nation’s top banks. The institution purchasing the loan pays Better Mortgage, not the consumer.
Blend — which was founded by Palantir-alum Nima Ghamsari and has raised $166 million in funding — employs a cloud-based white label software to speed up the mortgage approval process with
some of the nation’s largest lenders. Wells Fargo and U.S. Bancorp are already using the service, and this week the startup announced it had been approved as a provider of asset verification for Fannie Mae’s Day 1 Certainty program.
“Blend can digitize an otherwise archaic, painful, and largely offline process of securing a consumer mortgage,” Wallace explained. “In effect, Blend has the potential to modernize the loan origination and processing workflows of large incumbent mortgage lenders.”
Right now, Cadre is an invitation-only service, but that hasn’t stopped the company from closing more than $1 billion in total deals on its platform, which allows affluent individual and institutional investors to invest in quality real estate.
Founded by Ryan Williams (President Donald Trump’s son-in-law Jared Kushner was a co-founder, but he does not appear on the company website) the company aims to disrupt real estate investment funds and commercial brokers by offering these investors technology-driven insights and lower fees.
Ben Miller, the founder of Fundrise and son of Washington, D.C.-based developer Herbert S. Miller is a legacy in the real estate business. His platform allows any individual with over $500 a chance to invest in a real estate portfolio that will be managed by the company’s team of experts.
GreenSky provides homeowners with on-the-spot loans of up to $65,000 for home improvement projects. The loans are offered through GreenSky’s network of contractors and and bank partners — which shifts the default risk off of GreenSky — and as a bonus, most users don’t end up paying any interest thanks to promotional offers.
Since the company’s founding by billionaire David Zalik, it’s raised $560 million and provided homeowners with over $10 billion in loans. GreenSky is currently valued at $4.5 billion.
When you finally sign the lease to a new apartment, or first move into a new home, adding renters insurance on top of all the money you just spent can feel like a drag. New York City-based startup Lemonade is hoping to ease some of that burden by offering insurance for as low as $5 a month to renters and $25 a month to homeowners. And the entire policy can be managed through an app.
The company was founded by Daniel Schreiber and Shai Wininger and has raised $180 million in funding. Thanks to a business model that focuses on cutting administrative costs, Lemonade is able to keep about 20 percent of their users’ premiums.
LendingHome — founded by Matt Humphrey, who sold a daily deals site for $100 million at age 24 — was first launched four years ago as a way to streamline the process of providing bridge loans for house flippers and fixers. They’ve since moved into providing personal mortgages in 14 of the 25 states they serve.
“With a vertically integrated solution, Lending Home represents a powerful solution to real estate investors and the data they are able to accumulate on a real estate investors’ track records should improve the credit underwriting and therefore pricing they are able to offer borrowers,” Wallace said.