Lower Raises $100M Series A Led by Accel - Fintech Funding

Lower, an Ohio Fintech, Secures $100 Million in Series A Funding

Lower, a home finance platform headquartered in Ohio, has announced the completion of a $100 million Series A funding round. This investment was spearheaded by Accel, a prominent venture capital firm.

Significance of the Funding

This funding round is particularly noteworthy due to its substantial size for a Series A. It also represents the first external funding Lower has accepted in its seven-year operational history, having previously relied on bootstrapping. Remarkably, Lower operates profitably, a characteristic increasingly rare in the startup landscape.

Accel has a demonstrated track record of investing in profitable, bootstrapped businesses. Prior investments include companies such as 1Password, Atlassian, Qualtrics, Webflow, Tenable, and Galileo, the latter of which was later acquired by SoFi.

The Connection to Galileo

The introduction between Accel and Dan Snyder, Lower’s founder and CEO, was facilitated by Clay Wilkes, the founder of Galileo. Both companies share common ground: sustained profitability and a history of self-funding before seeking institutional investment, alongside a geographic location outside of Silicon Valley.

Accel’s Perspective

John Locke, a partner at Accel, who will be joining Lower’s board as part of the investment, stated the firm was immediately drawn to Lower’s unique characteristics. “Like Galileo, Lower is poised to become a globally successful, bootstrapped fintech company,” Locke explained. “The combination of a non-traditional regional base and a self-funded origin mirrors our experience with other successful partnerships.”

While Accel led the investment, other unnamed participants also contributed to the round, providing a “majority” of the funding, according to Lower.

Lower’s Mission and Evolution

Founded in 2014 by Snyder, Lower was established with the aim of streamlining the home-buying experience for consumers. The company initially launched Homeside, a retail brand described by Snyder as “a tech-leveraged retail mortgage bank” serving realtors and builders.

In 2018, Lower introduced its direct-to-consumer digital lending platform, aiming to become a comprehensive resource for consumers to save for a home, secure or refinance a mortgage, and obtain insurance through its marketplace. The Lower mobile app, featuring a savings account, was launched this year.

Financial Performance and Growth

Over the years, Lower has facilitated billions of dollars in loans and achieved $300 million in revenue in 2020, demonstrating consistent annual revenue doubling, as reported by Snyder.

Snyder emphasized the company’s commitment to profitability. “We’ve maintained a focus on profitable operation since our inception,” he stated to TechCrunch. “We recognized the substantial size of the mortgage market, but also its inherent inefficiencies, and sought to address them.”

Focus on Digital Experience and Human Connection

The launch of the direct-to-consumer platform was driven by a desire to make homebuying more “digital, transparent, and accessible,” according to Snyder.

However, the company also prioritized maintaining a human element. Snyder added, “We designed the app to allow users to progress through the application independently, but with the option to connect with a representative via chat or phone at any time.”

Target Demographic and HomeFund

Lower’s primary customer base consists of millennials and Gen Z individuals aspiring to homeownership, according to Snyder.

“These consumers are often contemplating the future – forming a family or establishing a long-term home base – and we aim to support them throughout that journey,” he explained to TechCrunch.

The recently launched Lower app features “HomeFund,” an interest-bearing, FDIC-insured deposit account offering a 0.75% Annual Percentage Yield. It also provides a dollar-for-dollar match on rewards for the first $1,000 saved.

Company Scale and Future Plans

Lower collaborates with over 35 major insurance carriers nationwide, including Nationwide, Liberty Mutual, and Allstate. The company currently employs more than 1,600 individuals, with approximately half located in Ohio, an increase from 650 employees in June 2020.

Looking forward, Lower intends to expand its service offerings and has an “aggressive roadmap” for platform enhancements. Currently focused on selling to Fannie Mae and Freddie Mac, Lower plans to launch its own native servicing platform in early 2022.

While maintaining profitability, Snyder indicated a strategic shift towards market share acquisition. “We aim to establish ourselves as a global brand, leveraging this funding to expand our reach,” he stated. “We will continue to invest in product development and build out our capabilities, ultimately becoming the leading, yet currently underestimated, force in fintech.”

Potential for Public Offering

Lower is also considering a potential public offering as part of its long-term strategy.

“We believe we have the potential to become a successful public company,” Snyder told TechCrunch. “We will remain focused on growth and innovation for the next few years, positioning ourselves for a strong public debut.”

Accel’s View on the Market

Accel’s Locke highlighted the significant size of the U.S. mortgage and home finance markets, traditionally dominated by large banks.

“The mortgage process through these banks often remains complex and slow,” Locke explained to TechCrunch. “Lower’s mobile-first approach has the potential to disrupt this landscape, mirroring the success of companies like Monzo, Venmo, Trade Republic, and Robinhood in their respective sectors.”