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Commercial real estate lending startup Lev brings in $30M on a $130M valuation
Commercial real estate has been slow to embrace technology; though it has an addressable financing market of more than $40 billion, putting together a deal is still mostly manual, paper-heavy and complicated.
New York-based Lev is taking on this problem by automating workflows online and gathering hundreds of millions of data points into machine learning software to ensure financing accuracy. To do this, the commercial real estate financing transaction platform raised $30 million to give it a $130 million valuation just two years into its inception.
The latest financing comes four months after the company raised $10 million in seed funding led by NFX. Greenspring led the latest round, with participation from First American Title. Existing investors NFX, Canaan Partners, JLL Spark, Animo Ventures and Ludlow Ventures also joined in to give Lev total investments of more than $34 million, according to Crunchbase data.
Lev founder and CEO Yaakov Zar previously co-founded Boston-based Dispatch, which built tools for home services businesses. It was when he and his wife went through the homebuying process — and their mortgage fell through — that Zar decided to look at real estate financing.
He channeled his frustration into becoming a licensed mortgage loan originator. After relocating to New York, Zar was helping a friend at a nonprofit organization refinance their building and got a firsthand look at what he said was a fragmented commercial real estate mortgage industry.
Companies like Blend are addressing the problem of real estate lending, Zar told TechCrunch, but very few are focusing on commercial real estate, where lending is sensitive to interest rates and total amortization. In addition, property owners have a burden of refinancing every five to 10 years.
“Legacy businesses like JLL, which is an investor, Cushman Wakefield and CBRE work on lending, but they are much more ‘relationship focused’ than tech focused,” Zar said. “We think that it is a necessary part because the deals are so large and complex that you need a relationship for them, but transactions less than $1 billion are pretty straightforward. On experience and product, no one is close to us.”
Initially, Zar and his team wanted to build the “Rocket Mortgage of commercial real estate lending,” but found that to be difficult because real estate brokers are putting together their own pitch books for lenders. Instead, Lev is building a technology platform of more than 5,000 lenders with information on what projects they like to finance. It then analyzes a customer’s portfolio and connects them in minutes with the right lender, taking 1% of the loan amount for each transaction as payment. Lev is also working to be able to close deals online.
Zar wasn’t looking for funding when he was approached by investors, but said he was introduced to some people who liked the company’s growth and trajectory and decided to accept the funding offer.
He intends to use the new funding on product development, with the aim of giving a term sheet in seconds and closing a loan in seven days. Right now it can take a week or two to get the term sheet and 45 to 90 days to close a loan.
The company has about 40 employees currently in its New York headquarters, Miami R&D center, Los Angeles outpost and remotely. Continued investments will be made to expand the team.
Lev grew 10 times in volume in the past year, closing approximately $100 million of loans in 2020. Zar expects to close over $1 billion in 2021.
“Customers come back to us repeatedly, and there are a ton of referrals,” Zar said. “We want to be the platform on which capital market transactions are processed. You need an advantage to network and find great deals. I don’t want to mess with that, but when you find it, bring it to us, we will close it and provide the asset management with the best option to close online and manage the deal from a single platform.”
Meanwhile, Pete Flint, general partner at NFX, told TechCrunch that he got to know the Lev team over the last 18 months, checking in on the company during various stages of the global pandemic, and was impressed at how the company navigated it.
As co-founder of Trulia, he saw firsthand the problems in the real estate industry over search and discovery, but as that problem was being solved, the focus shifted to financing. NFX is also an investor in Tomo and Ribbon, which both focus on residential financing.
Wanting to see what opportunities were on the commercial real estate side, Flint heard Lev’s name come up more and more among brokers and industry insiders.
“As we got to know the Lev team, we recognized that they were the best team out there to solve this problem,” Flint said. “We are also among an amazing group of people complementing the round. The folks that are deep industry insiders will put a helpful lens on strategy and business development opportunities.”
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JLL, Khosla lead Jones’ $12.5M Series A for real estate vendor compliance
Commercial real estate tenants and property managers have to abide by strict liability rules that any vendor entering the property must have insurance certificates and meet other requirements. The approval process for this currently can take days and is still largely done on paper.
Enter Jones. The New York-based commercial real estate startup is curating a marketplace of pre-approved vendors for tenants and property managers to find and hire the people they need in a compliant way.
To continue advancing its network, the company announced Monday it raised $12.5 million in Series A funding led by JLL Spark and Khosla Ventures that also included strategic investors Camber Creek, Rudin Management, DivcoWest and Sage Realty. This new investment brings Jones’ total raised to $20 million, according to Crunchbase data.
Jones, founded in 2017, also manages certifications and approvals, moving the whole process online. Its technology can process an insurance certificate in less than an hour and reduce the overall vendor approval time to 2.5 days — from 12 days — with 99.9% accuracy, co-founder and CEO Omri Stern told TechCrunch.
The accuracy portion is key. With much of the work being done by hand, current accuracy is at about 30%, he added. In addition, the certifications are lengthy, and it is typically up to property managers to parse through the insurance documents to identify what is missing rather than spending time with tenants.
“In the consumer world, a homeowner expects to go on a marketplace and find a service and hire them,” Stern said. “Office managers and tenants can’t get their preferred vendors through the approval process, so we want to provide a similar digital experience that they can consume and use in real estate.”
He says Jones’ differentiator from competitors is that all of the stakeholders are in place: a group of high-profile real estate customers, including Lincoln Property Co., Prologis, DivcoWest, Rudin Management, Sage Realty and JLL.
Yishai Lerner, co-CEO of JLL Spark, agrees, telling TechCrunch that commercial real estate is one of the largest and last asset classes that is undergoing a technology transformation, similar to what fintech was 20 years ago.
He estimates the U.S. market to be $16 trillion, of which technology could unlock a lot of the value. That opportunity was one of the drivers for JLL to create JLL Spark, where Jones is one of the first investments.
Though Lerner spent time with property management teams on the ground, he became up close and personal with the problem when his wife, while moving offices, found out her vendors were not allowed in the building because they didn’t have the right insurance.
“We learned that property managers spend half of their time just working to verify the compliance of vendors coming into their building,” Lerner said. “We wondered why there wasn’t technology for this. Jones was doing construction at the time, and we brought them into commercial real estate because they had an example of how technology could solve the problem.”
Meanwhile, the Series A comes at a time when Stern is seeing Jones’s SaaS tool take off in the past 10 months. He would not get specific with growth metrics, but did say that what is driving growth is “competing against the status quo” as companies are searching for and adapting workflow solutions.
The company intends to use the new funds on product development in both quicker and easier approvals and bringing on new vendors. Jones already works with tens of thousands of vendors. It will also focus on integration, offering an API that could be used in other industry verticals where compliance is necessary.
Stern would also like to continue building the team. Having brought in real estate experts, he is now also looking for people with backgrounds in fintech, cybersecurity and insurtech to bring in additional perspectives.
“We are building an incredible company with the opportunity to be the next big digital marketplace,” he added.
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After 80% ARR growth in 2020, Saltmine snags $20M to help employees return to a ‘new normal’ office
What is working in the office going to look like in a post-COVID-19 world?
That’s something one startup hopes to help companies figure out.
Saltmine, which has developed a web-based workplace design platform, has raised $20 million in a Series A funding round.
Existing backers Jungle Ventures and Xplorer Capital led the financing, which also included participation from JLL Spark, the strategic investment arm of commercial real estate brokerage JLL.
Notably, JLL is not only investing in Saltmine, but is also partnering with the San Francisco-based startup to sell its service directly to its clients — opening up a whole new revenue stream for the four-year-old company.
Saltmine claims its cloud-based technology does for corporate real estate heads what Salesforce did for CROs in digitizing and streamlining the office design process. It saw an 80% spike in ARR (annual recurring revenue) last year while doubling the number of companies it works with, according to CEO and founder Shagufta Anurag. Its more than 35 customers include PG&E, Snowflake, Fidelity and Workday, among others. Its mission, put simply, is to help companies “create the best possible workplaces for their employees.”
Saltmine claims to have a 95% customer retention rate and in 2020 saw 350% year over year growth in monthly active users of its SaaS platform. So far, the square footage of all the office real estate properties designed and analyzed by customers on Saltmine totals 50 million square feet across 1,500 projects.
Saltmine says it offers companies tools to do things like establish social distancing measures in the office. Its platform, the company says, houses all workplace data — including strategy, design, pricing and portfolio analytics — in one place. It combines and analyzes floor plans with project requirements with real-time behavioral data (aggregated through a combination of utilization sensors and employee feedback) to identify companies’ design needs. Besides aiming to improve the workplace design process, Saltmine claims to be able to help companies “optimize their real estate portfolios.”
The pandemic has dramatically increased the need for a digital transformation of how workplaces are designed and reimagined, according to Anurag.
“Given the need for social distancing capabilities and a greater emphasis on work-life balance in many office settings, few workers expect a complete ‘return to normal,’ ” she said. “There is now enormous pressure on corporate heads of real estate to adapt and modify their workplaces.”
Once companies identify their new needs, Saltmine uses “immersive” digital 3D renderings to help them visualize the necessary changes to their real estate properties.
Singapore-based Anurag has previous experience in the design world, having founded Space Matrix, a large interior design firm in Asia, as well as Livspace, a digital home interior design company.
“I saw the same pain points and unmet needs in office real estate that I did in the residential market,” she said. “Real estate is the second-largest cost for companies and has a direct impact on their largest cost — their people.”
Looking ahead, Saltmine plans to use its new capital to (naturally) do some hiring and continue to acquire customers — in particular, seeking to expand its portfolio of Global 2000 companies.
Saltmine has about 125 employees in five offices across Asia, Europe and North America. It expects to have 170 employees by year’s end and to be profitable by the end of fiscal year 2021.
The company’s initial focus has been in North America, but it is now beginning to expand into APAC and Australia.
JLL Technologies’ co-CEO Yishai Lerner said JLL Spark was drawn to Saltmine’s approach of making data and analytics accessible in one place.
“Having a single source of truth for data also facilitates collaboration across teams, which is important, for example, in workspace planning,” he told TechCrunch. “This reduces inefficiencies and improves workflows in today’s fragmented design, build and fit-out market.”
JLL Spark invests in companies that it believes can benefit from its distribution and network — hence the firm’s agreement to sell Saltmine’s software directly to its customers.
“As JLL tenants and clients continue to embrace the future of work, they are seeking technology solutions that keep their buildings running efficiently and effectively,” Lerner said. “Saltmine’s platform checks all of the boxes by streamlining stakeholder collaboration, increasing transparency and simplifying data management.”
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Atmos wants to make building a house a one-click effort
Homebuilding is not for the faint of heart, particularly those who want to build something custom. Selecting the right architect and designer, the myriad contractors, the complexity of building codes and siting, the regulatory approvals from local authorities. It’s a full-time job — and you don’t even have a roof built over your head.
Atmos wants to massively simplify homebuilding, and in the process, democratize customization to more and more homeowners.
The startup, which is in the current Y Combinator batch, wants to take both the big decisions and the sundries of construction and combine them onto one platform where selecting a design and moving forward is as simple as clicking through a Shopify shopping cart.
It’s a vision that has already piqued the attention of investors. The company disclosed that it has already raised $2 million, according to CEO and co-founder Nick Donahue, from Sam Altman, former YC president and now head of OpenAI, and Adam Nash, former president and CEO of Wealthfront, along with a bunch of other angels.
It’s also a vision that is a radical turn from where Atmos was before, which was centered in virtual reality.
Donahue comes from a line of homebuilders — his father built home subdivisions as a profession — but his interests initially turned toward the virtual. He dropped out of college after realizing process engineering wasn’t all that exciting (who can blame him?) and headed out to the Valley, where he built projects like “a Burning Man art installation and [an] open-source VR headset.” That headset attracted the attention of angels, who funded its development.
The concept at the heart of the headset was around what the team dubbed the “spatial web.” Donahue explained that the idea was that “the concept of the web would one day flow from the 2D into the 3D and that physical spaces would function more like websites.” The headset he was developing would act as a sort of “browser” to navigate these spaces.
Of course, the limitations around VR hit his company as much as the rest of the industry, including limits on computation performance to build these 3D environments and the lack of scaling in the sector so far.
The thinking around changing physical spaces though got Donahue pondering about what the future of the home would look like. “We think the next kind of wave of this is going to be an introduction to compute,” he said, arguing that “every home will have like a brain to it.” Homes will be digital, controllable and customizable, and that will revolutionize the definition of the home that has remained stagnant for generations.
The big vision for Atmos going forward then is to capture that trend, but for today at least, the company is focused on making housing customization easier.
To use the platform, a user inputs the location for a new home and a floor plan for the site, and Atmos will find builders that best match the plan and coordinate the rest of the tasks to get the home built. It’s targeting homes in the $400,000-$800,000 range, and its focus cities are Raleigh-Durham, Charlotte, Atlanta, Denver and Austin.
It’s very much early stages for the company — Donahue says that the company has its first few projects underway in the Raleigh-Durham area and is working to partner and scale up with larger homebuilders.
Image Credits: KentWeakley / Getty Images
Will it work? That’s the big question with anything that touches construction. Customization is great — everyone loves to have their own pad — but the traditional challenge for construction is that the only way to bring down the cost of housing is to make it as uniform as possible. That’s why you get “cookie-cutter” subdivisions and rows of identical apartment buildings. The sameness allows a builder to find scale. Work crews can move from one lot to the next in synchronicity saving labor costs and time while building materials can be bought in bulk to save costs.
With better technology and some controls, Atmos might be able to find synergies between its customers, particularly if it gets market penetration in individual cities. Yet, I find the longer-term vision ultimately more compelling for the company. Redefining the home may not have made much sense three months ago, but as more people work from home and connect with virtual worlds, how should our homes be redesigned to accommodate these activities? If Atmos can find an answer, it is sitting on a gold mine.
Atmos team pic (minus two). Image Credits: Atmos
In addition to Altman and Nash, Mark Goldberg, JLL Spark, Shrug Capital, Daniel Gross’ Pioneer, Venture Hacks, Yuri Sagalov, Brian Norgard and others participated in the company’s angel/seed round.
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