The Challenges of Digitizing Real Estate in Brazil

The process of buying and selling homes is inherently complex, regardless of location. Numerous startups in the United States are dedicated to simplifying this process for individuals. However, in Brazil, the absence of a Multiple Listing Service (MLS) presents a significantly greater challenge when it comes to digitizing the real estate sector.

Loft Secures Major Funding

A startup aiming to function as a comprehensive resource for Brazilians navigating home buying and selling has successfully attracted one of the most substantial funding rounds ever seen from a Brazilian company.

Series D Funding Announcement

Digital real estate platform Loft has announced the completion of a $425 million Series D funding round, spearheaded by New York-based D1 Capital Partners. The round saw participation from both new and existing investors, including Advent, Altimeter, DST, Silver Lake Waterman, Soros, Tarsadia Capital, Flight Deck, Tiger Global, Andreessen Horowitz, Caffeinated, Fifth Wall, Monashees, QED and Vulcan.

Valuation and Growth

This funding round has valued Loft at $2.2 billion, representing a considerable increase from its near-unicorn status in January 2020, when it secured $175 million in Series C funding.

Rapid Expansion in Latin America

A funding amount of this magnitude is noteworthy for any startup, but particularly for one established just over three years ago in Latin America. The region is experiencing rapid growth, with Brazil’s startup ecosystem maturing at a fast pace. São Paulo-based Loft has also demonstrated significant expansion.

Key Metrics and Listings

In 2020, the number of properties listed on Loft’s platform increased by “10 to 15 times,” according to co-founder and co-CEO Mate Pencz. Currently, the company actively manages over 13,000 property listings across approximately 130 areas within São Paulo and Rio de Janeiro, collaborating with more than 30,000 brokers. A growing preference for purchasing property over renting is also contributing to this trend.

Transaction Volume and Revenue

“We achieved more than 6x year-over-year growth with thousands of transactions throughout 2020,” Pencz revealed to TechCrunch. “We are now expanding into the tens of thousands, and soon hundreds of thousands, of active listings.”

Financial Performance and Profitability

The company’s revenues and Gross Merchandise Value (GMV) also “increased substantially” in 2020, as stated by Pencz, who refrained from providing specific details. He did mention that these figures are “significantly higher than before,” and that Loft is on a “clear path to profitability.”

Impact of COVID-19

“Loft quickly adapted to the changing circumstances brought about by COVID-19, which only accelerated our growth,” Pencz explained.

Founding and Vision

Loft was founded in early 2018 by Pencz and Florian Hagenbuch, who currently serve as its co-CEOs. The platform aims to “bring Latin American real estate into the e-commerce era by developing online alternatives to traditional processes and utilizing data to enhance transparency in opaque markets.” Pencz identifies Zillow as the U.S. real estate tech company with the most comparable model.

Addressing the Lack of an MLS

Unlike the United States, where prospective buyers and sellers benefit from MLSs – private databases maintained by real estate professionals – Brazil lacked such a system. Loft dedicated years and substantial resources to creating its own databases for the Brazilian market. Beyond facilitating home purchases and sales, it also provides services related to insurance, renovations, and rentals.

Expansion into Mortgage Origination

In 2020, Loft entered the mortgage market by acquiring a leading mortgage brokerage in Brazil. The startup now ranks among the top three mortgage originators in the country, according to Pencz. He compared Loft’s mortgage application assistance to that of U.S.-based Better.com.

Team Growth

The startup has expanded its workforce in the past year, increasing from 450 employees last January to 700 currently. A significant portion of this growth has been within the technology team, as noted by Pencz.

Early Investors and Milestones

The Series C investment previously marked Vulcan Capital’s first investment in Latin America and Andreessen Horowitz’s first investment in Brazil.

Total Funding and Backers

This latest financing brings Loft’s total funding to $700 million. Additional investors include Brazil’s Canary and prominent 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. Loft has also secured over $100 million in debt financing through publicly listed real estate funds.

Future Plans

Loft intends to utilize the new capital to expand its operations throughout Brazil and eventually into Latin America and beyond. The company is also considering potential mergers and acquisitions.

Strategic Acquisitions and Global Expansion

“We are entering this year with strong capitalization, and in addition to focusing on our core business, we may also explore strategic acquisitions,” Pencz stated to TechCrunch. “We also aim to establish Loft as a regional and potentially global business, following the example of other Brazilian companies that have recently expanded internationally.”

Investor Perspectives

Andreessen Horowitz General Partner Alex Rampell highlighted the firm’s excitement about Loft’s potential to “be a transactional marketplace for the largest asset class in one of the world’s largest economies.” He noted that Loft began as an iBuyer but has evolved into a dynamic marketplace. The firm led Loft’s Series A in July 2018 and has participated in every subsequent funding round.

D1 Capital’s Investment Thesis

Dan Sundheim, founder of D1 Capital, explained that his firm focuses on identifying opportunities “at the intersection of structural shifts, secular trends, and exceptional management teams.”

“Our analysis of Loft revealed a team with a strong focus and relentless execution, enabling them to achieve scale and build significant data and technology advantages in a short period,” he said in a statement.