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Brazil’s Loft adds $100M to its accounts, $700M to its valuation in a single month
Nearly exactly one month ago, digital real estate platform Loft announced it had closed on $425 million in Series D funding led by New York-based D1 Capital Partners. The round included participation from a mix of new and existing investors such as DST, Tiger Global, Andreessen Horowitz, Fifth Wall and QED, among many others.
At the time, Loft was valued at $2.2 billion, a huge jump from its being just near unicorn territory in January 2020. The round marked one of the largest ever for a Brazilian startup.
Now, today, São Paulo-based Loft has announced an extension to that round with the closing of $100 million in additional funding that values the company at $2.9 billion. This means that the 3-year-old startup has increased its valuation by $700 million in a matter of weeks.
Baillie Gifford led the Series D-2 round, which also included participation from Tarsadia, Flight Deck, Caffeinated and others. Individuals also put money in the extension, including the founders of Better (Zach Frenkel), GoPuff, Instacart, Kavak and Sweetgreen.
Loft has seen great success in its efforts to serve as a “one-stop shop” for Brazilians to help them manage the home buying and selling process.
Image Credits: Loft
In 2020, Loft saw the number of listings on its site increase “10 to 15 times,” according to co-founder and co-CEO Mate Pencz. Today, the company actively maintains more than 13,000 property listings in approximately 130 regions across São Paulo and Rio de Janeiro, partnering with more than 30,000 brokers. Not only are more people open to transacting digitally, more people are looking to buy versus rent in the country.
“We did more than 6x YoY growth with many thousands of transactions over the course of 2020,” Pencz told TechCrunch at the time of the company’s last raise. “We’re now growing into the many tens of thousands, and soon hundreds of thousands, of active listings.”
The decision to raise more capital so soon was due to a variety of factors. For one, Loft has received “overwhelming investor interest” even after “a very, very oversubscribed main round,” Pencz said.
“We have seen a continued acceleration in our market share growth, especially in São Paulo and Rio de Janeiro, the two markets we currently operate in,” he added. “We saw an opportunity to grow even faster with additional capital.”
Pencz also pointed out that Baillie Gifford has relatively large minimum check size requirements, which led to the extension being conducted at a higher price and increased the total round size “by quite a bit to be able to accommodate them.”
While the company was less forthcoming about its financials as of late, it told me last year that it had notched “over $150 million in annualized revenues in its first full year of operation” via more than 1,000 transactions.
The company’s revenues and GMV (gross merchandise value) “increased significantly” in 2020, according to Pencz, who declined to provide more specifics. He did say those figures are “multiples higher from where they were,” and that Loft has “a very clear horizon to profitability.”
Pencz and Florian Hagenbuch founded Loft in early 2018 and today serve as its co-CEOs. The aim of the platform, in the company’s words, is “bringing Latin American real estate into the e-commerce age by developing online alternatives to analogue legacy processes and leveraging data to create transparency in highly opaque markets.” The U.S. real estate tech company with the closest model to Loft’s is probably Zillow, according to Pencz.
In the United States, prospective buyers and sellers have the benefit of MLSs, which in the words of the National Association of Realtors, are private databases that are created, maintained and paid for by real estate professionals to help their clients buy and sell property. Loft itself spent years and many dollars in creating its own such databases for the Brazilian market. Besides helping people buy and sell homes, it offers services around insurance, renovations and rentals.
In 2020, Loft also entered the mortgage business by acquiring one of the largest mortgage brokerage businesses in Brazil. The startup now ranks among the top-three mortgage originators in the country, according to Pencz. When it comes to helping people apply for mortgages, he likened Loft to U.S.-based Better.com.
This latest financing brings Loft’s total funding raised to an impressive $800 million. Other backers include Brazil’s Canary and a group of high-profile angel investors such as Max Levchin of Affirm and PayPal, Palantir co-founder Joe Lonsdale, Instagram co-founder Mike Krieger and David Vélez, CEO and founder of Brazilian fintech Nubank. In addition, Loft has also raised more than $100 million in debt financing through a series of publicly listed real estate funds.
Loft plans to use its new capital in part to expand across Brazil and eventually in Latin America and beyond. The company is also planning to explore more M&A opportunities.
This article was updated post-publication to reflect accurate investor information.
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How two-year-old Loft nabbed $175M led by Andreessen Horowitz
Loft may have better product market fit in Brazil than Opendoor does in the U.S. And now the São Paulo-based property tech company has growth funding to prove it.
Andreessen Horowitz is doubling down on its first Brazil investment with Loft, a two-year-old real estate marketplace. The $175 million Series C was co-led by Vulcan Capital.
In the U.S., sites like Opendoor give us visibility into how much your house or properties you’re interested in are worth. That transparency doesn’t exist in Latin America.
Loft founder and co-CEO Mate Pencz describes the residential real estate market in Latin America as a $6 trillion opportunity. As it exists now, lack of data transparency around property listings results in low-quality listings, disproportionately high asking prices and prolonged selling times. This creates a painful experience for buyers, sellers and brokers. The market is locked up, but Loft thinks it can create transparency and liquidity with open data sets for property value.
Loft has been supported by some pretty big Silicon Valley names since its genesis in 2018. Loft raised equity capital from angel investors such as Max Levchin of PayPal, Joe Lonsdale of Palantir, Opendoor founder Eric Wu, Mike Krieger of Instagram, David Vélez of Nubank and Josh Kushner of Thrive Capital, whom Pencz met during undergrad studies at Harvard. It helped that Loft was not Pencz’s first entrepreneurial rodeo — the founder started web-printing company Printi, which exited to Vistaprint in 2014 for a $25 million stake.
Growth-stage funding will enable Loft to scale
Pencz says they’ve transacted on 1,000 properties in their key market of São Paulo, and plans to tackle new cities with the “Uber growth model” of replicating the same service in new cities, like Mexico City. Loft is currently operative in Brazil, and has big plans for Mexico in 2020. Penzc has poached the Latin American head of Uber Eats, Juan Pablo Ramos, to launch Loft’s services in Mexico City within the next two to four months. As Loft mobilizes in Mexico, this could mean trouble for Flat, an existing Opendoor clone in Mexico, which will now fight for market share against a heavily funded competitor.
Loft’s São Paulo HQ
When it comes to marketing, Loft isn’t thinking about Facebook or SEO performance advertising. Pencz sees more value in physically integrating the Loft brand into the fabric of new neighborhoods through festival sponsorships and community events, while leveraging broker channels. “Partnering with brokers and being perceived as a positive brand with a high NPS are the two key pillars of Loft’s expansion strategy,” says Pencz.
The founders began by physically measuring buildings and making estimates about how much houses and apartments were worth. The founders didn’t stop there — they envision the future of Loft as a one-stop shop with services like renovations, property financing for mortgages and insurance through banks. The company wants to completely upend real estate in Latin America, and those big ambitions have piqued investor interest.
Andreessen Horowitz and Vulcan Capital co-led the Series C, with participation from QED Investors, Fifth Wall Ventures, Thrive Capital, Valor Capital and Monashees.
So, what is a16z’s Latin America strategy?
Andreessen Horowitz general partner Alex Rampell notes that while Loft marked the firm’s entry into Brazil, the fund has been active in Latin America for a few years: a16z invested in Colombia’s delivery unicorn Rappi, Uruguayan restaurant management platform Meitre and Colombian point of sale lender ADDI. And, a16z joined in Loft’s $70 million Series B that closed in March 2019.
Rampell, who previously invested in Opendoor and sits on the board of TransferWise, says that a16z doesn’t really have an investment strategy when it comes to Latin America. Instead, the idea with Loft was that while the iBuyer Opendoor for transactional multiple listing services isn’t by any means a proprietary business model, it may work better in a country like Brazil — where buyers and sellers are slowed down by bureaucratic policies and lack of fair market value data — than in the U.S. To put it simply, Loft has better product market fit in Brazil than Opendoor does in the U.S.
Loft hopes its customer-friendly Nubank-esque branding will win over new users
Rampell references the U.S.’s Groupon and Korea’s Coupang for comparison. The Groupon model blew up in Asia as Coupang’s valuation reached $9 billion. Groupon rose fast and fell hard, and now its founders are on to their next entrepreneurial ventures.
“There’s a lot of value in multiple listings services, and the opportunity might be better for a market like Brazil, especially if you back the right entrepreneurs — because that’s all that really matters in the end,” says Rampell.
Loft monetizes through the sale of properties and ancillary products. Cuts from referral and partnership fees from banks or insurance companies will continue to help Loft monetize, in addition to the $275 million in capital it has raised during its two short years in existence.
Pencz declined to comment on Loft’s valuation.
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