The U.S. economy may be in a precarious state right now, with a presidential election looming on the horizon and the country still in the grips of the coronavirus pandemic. But partly thanks to lower interest rates, the housing market continues to rise, and today a startup that has built technology to help it run more efficiently is announcing a major growth round of funding.
Snapdocs, which is used by some 130,000 real estate professionals to digitally manage the mortgage process and other paperwork and stages related to buying a home, has raised $60 million in new equity funding on the heels of a few bullish months of business.
In August 2020 — a peak in home sales in the U.S., reaching their highest level in 14 years — the startup saw 170,000 home sales, totaling some $50 million in transactions, closed on its platform. This accounted for almost 15% of all deals done that month in the U.S. Snapdocs is now on track to close 1.5 million deals this year, double its 2019 volume.
On top of this, the startup’s platform is being used by more than 70% of settlement agents nationally, with customers including Bell Bank, LeaderOne Financial Corporation, Googain and Georgia United Credit Union among its customers.
The Series C is being led by YC Continuity (Snapdocs was part of Y Combinator’s Winter 2014 cohort), with existing investors Sequoia Capital, F-Prime Capital and Founders Fund, and new backers Lachy Groom (formerly of Stripe and now a prolific investor), Maverick Ventures, and DocuSign, a strategic backer, also participating.
“Like us they are on a mission to defragment an ecosystem,” King said, referring to it as a “perfect complement” to Snapdocs’ own efforts.
Snapdocs is not talking about its valuation. Aaron King, the founder and CEO, said in an interview that he believes disclosing it is nothing more than “grandstanding” — which is interesting considering that the industry he focuses on, real estate, is all about public disclosures of valuation — but he noted that most of the $103 million that the startup has raised to date is still in the bank, which says something about the company’s overall financial health.
And for some further context, according to PitchBook data estimates, Snapdocs was valued at $200 million in its last round, in October 2019.
Snapdocs’ central premise is that buying a house requires not just a lot of paperwork but also a lot of different parties to be on the same page, so to speak, to set the wheels in motion and get a deal done. There is not just the mortgage (with its multiple parties) to settle; you also have real estate brokers and agents, the home sellers, inspectors and appraisers, the insurance company, the title company and more — some 15 parties in all.
The complexity of all of them working together in a quick and efficient way often means the process of buying and selling a house can be long and costly. And that’s before the pandemic — with the problems associated with social distancing and remote working — hit us.
Snapdocs’ solution has been to build one platform in the cloud that helps to manage the documents needed by all of these different parties, providing access to data and the ability to flag or approve things remotely, to speed the process along. It also has built a number of features, using AI technology and analytics, to also help identify what might be potential issues early on and get them fixed.
King is not your typical tech startup entrepreneur. He began working in mortgages as a notary when he was still in high school — he’s effectively been in the industry for 23 years, he said — and his earliest startup efforts were focused on one aspect of the complexities that he knew first-hand: he saw an opportunity to lean on technology to get notarized signatures sorted out in a legal, orderly and quicker way.
He then got deeper into identifying the possibilities of how tech could be used to improve the larger process, and that is how Snapdocs came into existence.
Given how big the real estate market is — it’s the largest asset class in the world, by many estimates — and how many other industries tech has “disrupted” over the years, it’s interesting that there have been so few attempting to solve it. One of the reasons, it seems, is that there hasn’t been enough of a crossover between tech experts and mortgage experts, and Snapdocs is a testament to the virtues of building a startup specifically around a hard problem that you happen to know really well.
“Most people have identified this as a tech problem, and a lot of the tech — such as e-signatures — has existed for 20 years, but the fragmentation of real estate is the issue,” he said. “We’re talking about a mass constellation of companies and workflow. But we’re obsessed about the workflow of all of these constituents.”
That’s a position that has helped Snapdocs build its standing with the industry, as well as with investors.
“I’ve known the Snapdocs team for many years and have always been amazed by their focus and execution toward bringing each stakeholder in the mortgage process online,” said Anu Hariharan, partner at YC Continuity, in a statement. “In 2013, Snapdocs began as a notary marketplace before expanding horizontally to service title companies and, more recently, lenders. By connecting the numerous parties involved in a mortgage on a single platform, Snapdocs is quickly becoming the “operating system” for mortgage closings. Mortgages, much like commerce, will shift online, bringing improved efficiency and a far better customer experience to the outdated home-closing process.” Hariharan has real estate experience herself and is joining the board with this round.
There have been a number of companies taking new, tech-based approaches to the market to find new and faster ways of doing things, and to open up new kinds of value in the market.
Opendoor, for example, has rethought the whole process of selling and buying houses, taking on a role as a middleman in the process both to take on a lot of the harder work of fixing up a home, and handling all of the difficult stages in the sales process: it’s a role that has recently seen the company catapult to a valuation of $4.8 billion by way of a SPAC-based public listing. An interesting idea, King said, but still only accounting for a small sliver of house sales.
Others, like Orchard, Reonomy and Zumper, have all also raised large rounds on the back of a lot of promise of the market continuing to grow and the opportunity to take part in that process through new approaches. It’s a sign that “safe as houses” still has a place in the market, even with all the other unknowns in play.
“Over the next five years the real estate industry will be completely digitized, so a lot of companies are trying to figure out what their place are, and how to provide value,” King said.