Upequity Secures $50M to Revolutionize Mortgage Offers

UpEquity Secures $50 Million in Funding to Revolutionize Home Buying

UpEquity, a pioneering digital mortgage firm specializing in cash offers for homebuyers, has announced the successful completion of a $20 million equity funding round, complemented by $30 million in debt financing.

S3 Ventures spearheaded the equity investment, bringing the startup’s total funding to $77 million since its establishment in 2019, with $29.15 million specifically allocated as equity. Additional investors in this round included Next Coast Ventures, BP Capital Management, Alumni Ventures, Gaingels, Launchpad Capital, and Early Light Ventures.

A Unique Position in the Digital Lending Landscape

While numerous digital lenders currently operate in the market – including prominent companies like Better.com – and several firms facilitate cash offers on behalf of purchasers, UpEquity distinguishes itself by offering both services. This dual capability sets it apart from competitors, as evidenced by recent funding rounds for similar ventures like Accept.inc.

According to Tim Herman, co-founder and CEO of UpEquity, the company has experienced a remarkable 500% year-over-year increase in both revenue and transaction volume. Projections indicate that UpEquity will facilitate mortgages exceeding $1 billion in value over the coming 12 months, having already assisted “thousands” of buyers.

Accelerated Closing Times and Competitive Rates

UpEquity leverages its proprietary mortgage underwriting technology to significantly expedite the closing process. The company currently reduces typical closing times from the industry average of approximately 50 days to just 18 days, with a goal of achieving an average of 10 days within the next year.

Furthermore, UpEquity asserts that it provides more favorable interest rates compared to other companies in the “power buying” sector, without imposing any additional fees. The firm’s capabilities enable clients to effectively function as all-cash buyers, mitigating the risk of losing desired properties in highly competitive markets.

“Single-family homes are now considered an institutional asset class,” Herman explained. “Large investors, such as Blackstone and sovereign wealth funds, are acquiring entire neighborhoods with all-cash offers. This trend disadvantages the average American in accessing homeownership, and we are dedicated to addressing this issue.”

Company Origins and Growth

Tim Herman and Louis Wilson, the co-founders of UpEquity, first connected while attending Harvard Business School. The company was launched in the spring of 2019 and participated in Y Combinator’s summer program that same year. Austin, Texas, was officially designated as UpEquity’s headquarters in 2020.

Since then, the team has expanded from an initial group of 15 to a current workforce of 90 employees.

The Power of Automated Underwriting

“Automating mortgage underwriting unlocks several key benefits,” Herman stated. “It reduces costs, increases speed, and enhances the certainty of the mortgage process. We leverage this speed and certainty to provide our borrowers with a competitive all-cash offer, available at no cost.”

UpEquity generates revenue through a portion of the interest paid by borrowers over the loan’s lifespan. While not all clients utilize the all-cash offer option, Herman indicated that the “vast majority” do.

Challenging the Status Quo in the Mortgage Industry

Herman criticized the broader mortgage industry, asserting that claims of digital transformation have largely been superficial. “Many companies have simply added a user-friendly interface while maintaining outdated technology infrastructure and substantial marketing expenditures.”

“However, beneath the surface, the technology often resembles systems from 1985,” he added. “Our differentiation lies in our exclusive focus on modernizing the back-end processes of mortgage production.” Consequently, Herman believes UpEquity’s primary competition is not other startups, but rather the established mortgage industry’s resistance to innovation and its resulting poor user experience.

Expansion and Future Outlook

UpEquity currently holds licenses to operate in Texas, Colorado, Florida, Illinois, and Georgia, with plans for continued state-by-state expansion.

Charlie Plauche, a partner at S3 Ventures who will be joining the board of directors, expressed confidence in the company’s ability to address a “significant and growing” challenge within the mortgage sector.

“Large institutional investors are aggressively acquiring housing inventory through all-cash offers and expedited closing times,” Plauche noted. “To compete effectively, the average consumer must have access to similar capabilities, and UpEquity empowers them to do so with its accelerated timelines and all-cash offer options.”

Plauche also highlighted the company’s unique value proposition of providing cash offers to buyers without incurring additional costs. “Other mortgage companies often charge up to 2% of the mortgage amount for a cash offer option.”