Fifth Wall Co-Leads $80 Million Series C Round in Residential Real Estate Marketplace, Sundae
A large percentage of American homes need major renovations. What happens when those homes need to go to market?
American housing stock is aging.
According to Realtor Magazine, the median age of owner-occupied housing stock in the United States is nearly 40 years old. That number only tells half the story — housing stock age can vary dramatically depending on where in the country you are. In New York, the median age of housing climbs up to 60 years; Massachusetts and Rhode Island have median housing ages of 55 and 56 years respectively. Travel down to the Mid-Atlantic, to Washington D.C., and that number shoots up again to almost 80 years old.
Under the best circumstances, older homes have charm and character. Sometimes, they may even have historical importance. More often though, they’re in need of serious remodeling and renovation. For your average homeowner, selling an older home becomes a complex transaction. Realtors may be reluctant or unable to help, knowing that older homes spend longer on the MLS, as traditional buyers may struggle to find financing for homes that need significant renovation.
This precarious position creates a “fix-and-flip” marketplace, where homeowners could become targets to predatory buyers, who, knowing sellers are desperate, come in with lowball offers. Because these sellers may already be unable to seek help from other, more traditional home selling channels, they may feel pressured to accept unfair offers that might cheat them out of their home’s true value, and also come with hidden fees and terms that further disadvantage them.
That’s why today I’m proud to announce that Fifth Wall is co-leading the Series C financing in Sundae, a full-stack digital marketplace where sellers can list their home for no fee, and interested buyers, nationwide, can make offers on them. We are excited to announce we co-lead the investment alongside GenGlobal, with additional participation from Wellington, QED, Susa, Founders Fund, Crossover Ventures, Intersect Capital, Gaingels, Prudence, and Oberndorf Ventures. This round of investment brings Sundae’s total funding to $135 million to date. Angel investors also participating in the round include Actor/Producer and Grammy-winning artist Will Smith, world renowned DJ Kygo, three-time NFL Superbowl champion Richard Seymour, NFL All-Pro DK Metcalf of the Seattle Seahawks, and three-time NBA Champion & Gold Medalist Klay Thompson of the Golden State Warriors.
A marketplace that works for buyers and sellers of “houses that need love”.
Sundae is one of the first dedicated platforms for individuals specifically interested in “fixer-uppers,” or as Sundae calls them, “houses that need love.” For sellers, nationwide marketplace competition helps deliver the best sale price with standardized and transparent terms. For buyers, both those looking for investment properties and those who are interested in renovating a place to live, now have access to homes that may have previously been quickly swept up by buyers like We Buy Ugly Houses.
Sundae stood out to us for a few reasons. First, we believe that it has the potential to be a pace-setting company in a massive market that we only expect to grow. Homes in the United States continue to age, while new housing lags. And according to a recent study by the Joint Center for Housing Studies at Harvard, not only does home age (and thus the likelihood for necessary renovations) continue to climb, the desire to enter the DIY and remodeling market is growing for new homeowners, who view “fixer uppers” as a more affordable and accessible option to competitive and often very expensive new housing.
In the future, we envision a number of our partners can help Sundae catalyze its growth, from providing customer acquisition channels to facilitating material-supply partnerships.
A founding team who intimately understands proptech and scaling successful start-ups.
The experience and leadership of Sundae’s founding team was yet another defining factor in our investment. As a firm, we’ve known Josh Stech, the co-founder and CEO of Sundae, since his days at digitally-enabled mortgage lender LendingHome, where he was a founding partner and SVP of Execution. His co-founder, Andrew Swain, has an extensive background in proptech and scaling high-growth start-ups, having worked as the CFO of Airbnb and LendingHome before joining Sundae. We have a lot of conviction in Josh’s and Andrew’s ability to lead the first mover in this space.
Aging home stock keeps growing, but it remains a labyrinthine (and underserved) market.
Finally, Sundae is a natural extension of Fifth Wall’s real estate technology thesis, as it’s a company that is capitalizing on an underserved market with an incredible amount of opportunity for growth. The market of aging homes continues to expand, and will need to be transacted upon. Sundae allows buyers and sellers to do so in a frictionless way.
Right now, most digital home buying platforms, such as Opendoor, are focused on homes that are more high-end and don’t require as much work. Traditional MLS isn’t a great way to list these homes either, as they’re neither investor-oriented nor oriented towards buyers who are specifically in the market for homes that may require more significant remodeling or renovation.
Sundae serves a segment of the residential real estate market that has been overlooked until now. Its marketplace model simultaneously solves a crucial pain point for sellers by disrupting the wholesale industry, while delivering a platform that property investors can count on for reliable investment opportunities.
Sundae’s expansion across the United States.
Sundae plans to use this round of funding to focus on geographic expansion. Right now, the company is active in 14 markets. Its vision for 2021 is to expand to many more markets by replicating the playbook it’s built in areas like California, Georgia, and Florida. Further down the road, its plan is to become the de facto full-stack transactional platform for any home that needs work done.
After geographic expansion, it hopes to build out more supporting services, like lending and title and homeowner’s insurance. In addition, there is also an opportunity to continue to aggregate invaluable data on the housing market: Who is buying which homes? For how much are they selling?
Sundae’s seasoned team of real estate experts and its category-defining brand has cemented the company as one of the leading players in the off-market real estate sales industry. Fifth Wall is thrilled to support the company in its nation-wide expansion as it redefines the off-market distressed residential real-estate and property investing space.
Forward-looking statements and opinions as to real estate markets or any other matters, as expressed in this post, are those of the individual author(s), but are not necessarily the views of Fifth Wall as a firm, and cannot constitute a guarantee of future success or profitable results. As a result, investors should not rely on such forward-looking statements and/or opinions, or on anything else contained in this post, in making their investment decisions.
The information discussed above is presented solely for informational purposes and should not be interpreted as an offer or recommendation to buy or sell securities.
The portfolio companies described above may not be representative of all investments in funds managed by Fifth Wall, as the number and composition of investments will vary over time. There can be no assurance that any investment will be profitable or that future investments will have similar characteristics or results. Certain portfolio companies may be excluded from this list if the company requests that it not be publicized or included on this website. The inclusion of a portfolio company in the above list should not be considered a recommendation or endorsement of Fifth Wall by that company.
