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 States Title, has announced a massive $123 million Series C round of funding at a valuation of $623 million.
Greenspring Associates led the round, which totals more than all of States Title’s previous funding rounds combined, according to Crunchbase data. With the latest investment, States Title has now raised a total of $229 million since its September 2016 inception.
New investors Horizons Ventures, Eminence Capital and HSCM Bermuda also provided “significant investment.” All of States Title’s previous backers also participated in the Series C round, which included a “large investment” from Foundation Capital, and additional capital from Assurant, Fifth Wall Ventures, Lennar Ventures and SCOR Global P&C Ventures.
What it does
I hopped on the phone with CEO and founder Max Simkoff, who described States Title as “a technology-driven solution for closing mortgages instantly.” While it initially was founded to instantly underwrite title insurance, the company has expanded that same approach to handle “every aspect” of closing and escrow.
“For the first two years we built what you’d consider a full-stack insurtech company, but now we’re an end-to-end title and closing platform,” he told Crunchbase News.
The company took its first product to market in the spring of 2018, using machine intelligence to underwrite title insurance.
“We trained a machine to do in less than a minute what it would historically take, start to end, two to four days,” Simkoff said.
The startup’s technology also can reduce the time of a closing from 30 to 45 days to 20, he added.
The value proposition behind using States Title is simple, he said.
“We make the antiquated title and escrow experience faster, simpler and cheaper, by providing an instant customer closing experience and enabling mortgage originators and Realtors to be more efficient, which leads to lower costs for everyone involved,” he said.
Unique growth path
States Title’s approach to growth has been unusual. In 2018, it approached Lennar Homes–one of the nation’s largest homebuilders–to buy out its title and insurance businesses (North American Title Company and North American Title Insurance).
Lennar agreed to sell the business for a minority stake in States Title, in addition to structuring a credit facility, and the startup ended up acquiring those operations from Lennar in 2019.
“Overnight, we went from being a 25-person insurtech startup to acquiring the eighth-largest title and escrow company in the U.S. and having just over 1,000 employees,” Simkoff told Crunchbase News. “It was kind of a minnow-swallows-the-whale type scenario.”
States Title then gained national scale and distribution, lots of transactional data and, of course, revenue with the deal. The startup ended 2019 with close to $200 million in revenue, he said.
States Title’s customers are some of the largest mortgage lenders in the U.S., including one of the top two largest bank lenders and two of the top ten largest nonbank lenders. Transaction volume grew by 100 times in 2019 compared to the year prior, according to the company. States Title’s newly combined business has closed or issued insurance policies for nearly half a million real estate transactions in the past year.
Its goal with the new capital is to primarily invest in R&D, which includes “aggressively” staffing up its data science and engineering teams. It’s also building out a new operations and service delivery model.
Jim Lim, managing general partner of Greenspring Associates, said the company’s automated and patented technology “streamlines the laborious title and escrow process.”
“Especially in the current economic climate, the mortgage industry needs to be re-imagined with transformative technological solutions to reduce costs and improve the customer experience,” he added in a statement. States Title is leading the vanguard of this transformation.”
Illustration: Li-Anne Dias