Seattle real estate startup Flyhomes is reloading its war chest with $141 million in new funding to carve out a spot in the competitive race to transform how homes are bought and sold.
Flyhomes raised $21 million in equity along with $120 million in debt. The startup will deploy the funds to expand existing services to help people buy houses, launch new ones and continue to grow headcount.
The company is battling a competitive field of real estate giants and fast-growing startups, all aiming to transform the transaction. However, Flyhomes contrasts itself with the popular “iBuyer” market, a group of companies that includes Seattle mainstays Zillow and Redfin that are raising gobs of cash to buy thousands of homes, spiff them up and sell them — in theory — for a profit. Flyhomes is closer to a traditional brokerage, both in the way it makes money and how it courts people looking to buy homes as customers, rather than going after sellers.
“In the iBuyer case the business model is different; they make money on the delta of the price they sell the house at versus what they buy the house at,” Tushar Garg, Flyhomes co-founder and CEO said in an interview with GeekWire. “We only make the money on the commission. Our business model is very much like a traditional broker, but you can think of it as a traditional broker with super powers.”
Flyhomes stands out because it is operating in some of the hottest real estate markets in the country, whereas the iBuyers focus more on less-competitive areas with lower prices. Today, Flyhomes operates in Seattle, San Francisco, Boston and Portland, with plans to expand to Southern California later this year.
The company purchases houses directly with cash and then holds onto them until its buyer clients secure financing. The goal is to present its customers as the equivalent of cash buyers, which in turn helps sellers get the most for their property.
After Flyhomes fronts the cash for customers to buy new places, the startup wants to help clients sell their old homes. For the last three months, Flyhomes has been quietly testing a service called Trade Up in Seattle and San Francisco that makes it easier for customers to pull off the headache that is buying and selling a place at the same time.
Flyhomes is publicly acknowledging the new program for the first time today. Through the Trade Up service, Flyhomes cleans the house up for showings, lists it and tries to make the sale.
At the beginning of the process, Flyhomes and the customer agree to a guaranteed price on the home. If the company fails to sell the house within 90 days, Flyhomes will buy it outright from the customer. If the house sells for higher than list price, Flyhomes gives the proceeds back to the customer.
“As we are able to make things more efficient we want to pass the savings along to the customer,” Garg said.
Flyhomes has now raised a lifetime total of $40 million in equity, along with an undisclosed amount of debt. Canvas Ventures led the equity side of the new Series B round, along with participation from existing investor Andreessen Horowitz. The debt funding came through multiple lenders, including Genesis Capital, which originates loans for Goldman Sachs.
Seattle is quickly becoming a hotspot for companies seeking to use technology to re-imagine how homes are bought and sold. Here is what some of the major players have been up to in recent months.
- Zillow Group is among the most aggressive players after making a surprising pivot earlier this year to focus on home sales. In the most recent quarter, Zillow bought 1,535 homes and sold 786, and that segment brought in nearly $249 million in revenue. The Zillow Offers program powered the company to overall revenue growth of 84 percent last quarter.
- Redfin’s home sales division, RedfinNow, reported a hair under $40 million in revenue in the last quarter. Redfin has even bigger expectations for the program this quarter, projecting $67 million to $72 million in revenue from Redfin Now.
- Redfin was also part of a surprising collaboration with Opendoor, a leader in the iBuyer market. The alliance allows customers in Atlanta and Phoenix to request an “instant offer” from Opendoor on Redfin’s website or mobile app to buy the house.
- Fast-growing high tech real estate brokerage Compass, which opened an engineering center in Seattle last year, raised a whopping $370 million to push its valuation north of $6 billion.
“This is a very interesting time, a truly transformative time for real estate industry,” Garg said. “Customers expect more than what has ever been offered before.”
Garg and his co-founder Stephen Lane, both former Microsoft employees, started the company to create a millennial-focused home-buying platform. Lane was inspired by his own experience buying a house and the aspects of the process he found lacking. Flyhomes’ first plan involved rewarding house hunters with airline miles when they purchase a home.
Today, Flyhomes has 135 employees based out of its Seattle headquarters and offices in San Francisco, Portland and Boston. The company plans to grow to 200 people by the end of the year, Garg said.
Since it was founded in 2015, Flyhomes said it has helped more than 1,000 clients close on more than $1 billion worth of homes. In May 2018, when the company last raised funds, Flyhomes said it had helped 400 people close on more than $300 million in homes in its lifetime. That means in the last year or so, Flyhomes has more than doubled its lifetime customer base and more than tripled the volume of homes bought and sold.
Flyhomes quietly added mortgage services in June 2018 — it has closed 300 loans valued at $150 million — as well as title and escrow and home repair divisions. The moves follow a footprint established by Redfin and later Zillow of adding new services to control the entirety of the transaction. The only way to truly disrupt the industry is to have a hand in every part in it, and that’s what Flyhomes as well as some of its larger competitors are trying to pull off.
“Working under one umbrella just gives (customers) a much more consistent end-to-end experience, and that’s our goal, to enhance the experience across the board,” Garg said.