There’s so many players in the real estate tech game, it’s hard to keep up. (We’ve tried in numerous pieces such as this one). Now an Austin upstart called Homeward has entered the crowded scene in an ambitious attempt to take on bigger established players with its offering, and it’s just raised $4 million in equity funding and $21 million in debt funding to help it in its mission.
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CEO Tim Heyl founded Homeward last year after having worked in the industry for the past decade, first as a broker then as the owner of a title company. During that time, he said he saw firsthand many of the problems in the industry. One conundrum that he frequently ran into was people not wanting to make an offer on a home without knowing for sure their current house would sell in a certain amount of time.
To address that, a number of companies in the “iBuyer” market such as Opendoor and Offerpad will buy homes, usually at a discounted rate, to give sellers the freedom to move on quickly. But Homeward is tackling the problem from another angle.
Homeward will make an all-cash offer on behalf of a customer wanting to buy a house. Meanwhile, that customer can hire an agent to list their home without feeling pressured to sell it in a certain amount of time or at a discounted price. Once Homeward buys a home, it will lease back the property to its customer until they sell their house and can buy back the mortgage. During the process, Homeward offers a predetermined guaranteed price for its customer’s home with the promise that if it’s unable to sell the house for at least that amount, it’ll buy the house from them.
Heyl believes Homeward’s “alternative iBuyer” model is a better deal for customers. (While Homeward’s model sounds similar to the one being operated by Knock, which recently raised a $400 million Series B, Heyl said the difference is that Homeward “is an open platform that agents can leverage with their customers rather than competing against agents as Knock does.”)
He also said the downside of the traditional iBuyer model is that “customers leave a ton of equity on the table.
“It’s similar to trading in your car,” Heyl told Crunchbase News. “With a car, leaving 5 to 10 percent on the table might be worth it for the convenience. However, losing tens of thousands of dollars of equity in a house is a bigger deal.”
Heyl shared the experience of an individual in Georgia who received an offer of $138,000 for their home from an iBuyer. Their agent contacted Homeward, who offered a guaranteed price of $150,000, and then made an offer on another house on behalf of that individual. Because it was an all-cash offer, that person got a discount of $15,000 and then went on to sell their home for $168,000.
So far, Homeward has a presence in Texas, Georgia and Colorado. It plans to use its new funding to improve its web and mobile experience, and scale its initial offering in the three markets in which it currently operates.
“We’re evolving our product based on feedback from them,” Heyl told Crunchbase News. “Once we feel it’s the right time, we can scale nationwide.”
Austin-based LiveOak Venture Partners led the $4 million funding round, which also included participation by the founders of Austin-based OpCity (a LiveOak portfolio company that was acquired by Realtor.com for $210 million in August 2018), ApartmentList, “and a few other real estate tech startups.” The debt funding was secured from Genesis Capital and Austin-based Keystone Bank.
Homeward makes its money by charging customers a 1.9 percent convenience fee. Heyl claims his company’s service pays for itself in the discounts it can bring and by making its offer more likely to be accepted.
Homeward will also use the money to scale its team, which consists of internal underwriters, home valuation analysts and licensed real estate agents in addition to operations, products and engineering staff.
Krishna Srinivasan, founding partner at LiveOak Venture Partners, said his firm recognized early on after meeting with Heyl that his company fit nicely into LiveOak’s thesis of “backing exceptional entrepreneurs with incredible domain expertise who are going after big problems.”
Homeward marks LiveOak’s third real estate tech investment. Besides Opcity (which connects real estate agents and mortgage loan officers to pre-screened leads), the firm has also backed Austin-based OJO Labs, an AI-driven personal assistant for real estate agents and home buyers.
“Obviously we all know there is an incredible amount of activity on a nationwide basis and believe there’s still technology and novel business models that have not quite come into the industry yet,” Srinivasan told Crunchbase News. “In Homeward, we see the potential to disrupt existing business models and that’s been proven in the fact that the company is seeing tremendous success in a very short period of time.”
To that end, Heyl notes that Homeward has been “consistently growing its revenue by a factor of 20 to 30 percent month-over-month in 2019,” and doubled the size of the team in the first six months of 2019. Looking ahead, he said the company plans to grow headcount by 50 percent over the next six months.
There’s no question that real estate tech continues to attract VCs. Last week, we reported on Fifth Wall Ventures raising $503 million for its second real estate tech-focused fund. Which startups win or lose remains to be seen. But you can bet we’ll be watching.
Illustration: Li-Anne Dias