Despite current economic uncertainties and the ongoing coronavirus pandemic, the U.S. housing market remains robust, fueled in part by reduced interest rates. This positive trend is highlighted by the significant funding round recently secured by a startup focused on streamlining the home-buying experience. 

Snapdocs, a platform utilized by approximately 130,000 real estate professionals to manage the digital aspects of mortgages and related home-purchase documentation, has announced $60 million in new equity funding following a period of strong business performance.

In August 2020, a peak period for U.S. home sales – reaching a 14-year high – the company facilitated 170,000 closed home sales, representing roughly $50 million in transactions. This constituted nearly 15% of all U.S. home sales for that month. Snapdocs is currently projected to finalize 1.5 million transactions this year, a doubling of its 2019 volume.

Furthermore, the platform is employed by over 70% of settlement agents nationwide, serving clients such as Bell Bank, LeaderOne Financial Corporation, Googain, and Georgia United Credit Union.

This Series C funding round is spearheaded by YC Continuity (Snapdocs participated in Y Combinator’s Winter 2014 program), with participation from existing investors Sequoia Capital, F-Prime Capital, and Founders Fund, as well as new investors Lachy Groom (formerly of Stripe), Maverick Ventures, and DocuSign, a strategic investor.

“They share our commitment to simplifying a complex system,” King explained, describing DocuSign as a “natural complement” to Snapdocs’ own objectives.

Snapdocs has chosen not to disclose its current valuation. Founder and CEO Aaron King stated in an interview that revealing this information is simply “attention-seeking” – a noteworthy perspective given the emphasis on public valuation disclosures within the real estate sector – but he did mention that the startup retains the majority of the $103 million in funding raised to date, indicating strong financial stability.

For additional context, PitchBook estimates place Snapdocs’ valuation at $200 million as of its last funding round in October 2019.

Snapdocs addresses the inherent complexities of home buying, which involves extensive paperwork and coordination among numerous parties. Beyond the mortgage process itself – which includes multiple stakeholders – the transaction involves real estate brokers, agents, sellers, inspectors, appraisers, insurance providers, title companies, and potentially fifteen parties in total.

The challenge of effectively coordinating these entities can lead to lengthy and expensive home-buying and selling processes. The pandemic, with its associated social distancing and remote work requirements, further exacerbated these difficulties.

Snapdocs provides a cloud-based platform designed to manage the documentation required by all involved parties, offering data access and remote approval capabilities to accelerate the process. The platform also incorporates AI-powered features and analytics to proactively identify and resolve potential issues.

King’s background is unconventional for a tech startup founder. He began his career in mortgages as a notary while still in high school – representing 23 years of experience in the industry – and his initial entrepreneurial endeavors focused on leveraging technology to streamline the notarization of signatures in a secure and efficient manner.

He subsequently expanded his vision to encompass the broader potential of technology to improve the entire home-buying process, leading to the creation of Snapdocs.

Considering the substantial size of the real estate market – often cited as the world’s largest asset class – and the widespread disruption technology has brought to other industries, the relative lack of innovation in this sector is striking. A key factor appears to be the limited intersection between technical expertise and mortgage industry knowledge, and Snapdocs exemplifies the benefits of building a startup around a well-understood, challenging problem.

“Many have viewed this as a technology issue, and much of the technology – such as electronic signatures – has been available for two decades, but the fragmented nature of real estate is the core challenge,” he stated. “We are dealing with a vast network of companies and workflows, and we are intensely focused on optimizing the workflow for all participants.”

This approach has fostered strong relationships within the industry and attracted investor confidence.

“I have followed the Snapdocs team for years and have consistently been impressed by their dedication and success in bringing all stakeholders in the mortgage process online,” said Anu Hariharan, partner at YC Continuity, in a statement. “Starting as a notary marketplace in 2013, Snapdocs has expanded to serve title companies and lenders. By connecting the many parties involved in a mortgage on a single platform, Snapdocs is rapidly becoming the “operating system” for mortgage closings. Mortgages, like commerce, will increasingly move online, resulting in greater efficiency and a significantly improved customer experience.” Hariharan, who has experience in the real estate sector, will be joining the board of directors.

Several companies are introducing innovative, technology-driven approaches to the market, seeking faster and more efficient methods and unlocking new value.

Opendoor, for instance, has reimagined the home selling and buying process by acting as an intermediary, handling renovations and navigating the complexities of sales. This approach recently propelled the company to a $4.8 billion valuation through a SPAC-based public listing. King acknowledged this as an interesting concept, but noted it still represents a relatively small portion of overall home sales.

Other companies, such as Orchard, Reonomy, and Zumper, have also secured substantial funding based on the anticipated growth of the market and the potential for innovation. This demonstrates that “as safe as houses” remains a viable investment strategy, even amidst broader economic uncertainties.

“The real estate industry will be fully digitized within the next five years, prompting many companies to define their roles and deliver value,” King concluded.