LAVCA recently spoke with  🏠 proptech founders from Loft (Brazil) and Flat (Mexico) about their strategy, funding, model, and growth, as well as potential for the sector in Latin America.

Flat Co-Founder Bernardo Cordero participated in the 2019 LAVCA Venture Investors Annual Meeting on Sept. 26 in New York, alongside CEOs of Grupo ZAP, EmCasa, and La Haus. Access highlighted proptech investments presented to event attendees during the program.

According to LAVCA data, proptech made up 4% of the total capital committed by VCs to the region in 2018, with US$79.5m invested across 12 deals.

Company: Loft
Investors: monashees, Canary, Andreessen Horowitz, Thrive Capital, David Velez, Fifth Wall Ventures, QED Investors
Interview with: Mate Pencz

Loft is a Brazilian 🏘️ proptech that aims to reinvent the process of buying and selling real estate, founded by Mate Pencz and Florian Hagenbuch (Co-CEOs) in 2018.

• Pencz and Hagenbuch are former founders of Printi, and currently also Partners at Brazilian VC Canary.
  

Pencz and Hagenbuch wanted to do a marketplace play with vertical integration, something with a big market that they could create from Brazil and globalize. That said, Pencz doesn’t necessarily see globalizing as required for their success: “We don’t need to grow outside of Brazil to be relevant. There are real and big problems to solve in the local market: Healthcare, logistics, finance, insurance…”  And of course real estate: “There is no mortgage broker system here, no transparency for consumers,” says Pencz of the home purchasing process in Brazil. 

Brazil’s strategic advantage:  “We stayed in Brazil for privileged access to capital and talent,” says Pencz. Talent: Loft has over 150 full-time employees. “We never would have been able to hire that many people in six months in Silicon Valley.”

Capital: “Our Series A & B were proof of this,” Pencz says; the company has raised about US$100m to date over “two oversubscribed rounds”:

• In 2018, Loft raised a Series A from monashees and Canary, and US funds Andreessen Horowitz and Thrive Capital, with participation from the founders as well as angels including David Velez (Nubank). 
• In 2019, Loft raised a US$70m Series B led by Fifth Wall Ventures and Andreessen Horowitz, at a reported valuation of ~US$370m, with participation from QED Investors. 

Funding:  Loft’s Series B is typical of the recent proptech investments LAVCA is tracking, in that local and global GPs came together to syndicate the round. Brazilian proptech QuintoAndar reached unicorn status in 2019 with a US$250m from SoftBank, Dragoneer, KaszeK, and General Atlantic; Flat, featured below, raised a US$4.5m round from ALLVP, Next Billion Ventures, Picus Capital in Germany, and others. (See the graphic for more recent rounds). 

Despite the arrival of notable global investors to the market, Pencz says, “We [Brazilian entrepreneurs] are still underfunded, even with this Softbank effect. You have more good entrepreneurs and markets to disrupt than capital in Brazil.  Macro-perspective, the market is still under-funded versus other markets like India.”

Company: Flat
Investors: ALLVP, Liquid 2 Ventures, Next Billion Ventures, Picus Capital
Interview with: Victor Noguera and Bernardo Cordero

Flat is a Mexican 🏠 proptech employing the iBuyer model to make the home-buying process less painful on both sides of the transaction. Co-founders Victor Noguera and Bernardo Cordero met at UC Berkeley and later co-founded STARTegy Venture Builder. 

• Nogueira, from Spain, previously served as a venture advisor to Quona Capital.
• Cordero spoke about proptech at LAVCA’s 2019 Venture Investors Annual Meeting, with Gustavo Vaz (EmCasa), Jeronimo Uribe (La Haus), and Lucas Vargas (GrupoZAP).

The iBuyer model: Flat started with the traditional iBuyer model — buy, renovate, sell.  Whereas it typically takes 6-8 months to sell a home in MX; Flat buys house in cash in a matter of days.  

Cordero and Nogueira say the model is somewhat similar to Loft in Brazil, and as with the Brazilian market, there is no single big player in Mexico. “We see a lot of listing sites in Mexico, brokerage services with new angles, but they are not solving a lot of the issues we see in the market.”

While popularized in the US, the founders also argue iBuyer is one of those models that should work better in Mexico and Latin America, because it’s solving for: 

• Access to info on real estate, such as historic pricing (no centralized source in Mexico)
• More complex operational aspects (notary services, contractual, trust issues, complex)
• Time to sell / liquidity

Funding: In September, Flat raised a US$4.5m pre-seed round led by ALLVP, with participation from Liquid 2 Ventures, Next Billion Ventures, Picus Capital, and angel investors. The company also expects to raise debt financing: “We raised money and then started buying homes, versus building prototype and then raising money.”