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Flipping houses is not for the faint of heart, no matter how fun or easy HGTV might make it seem.

One startup wants to make the process less complicated by offering a different way of borrowing money to finance such a purchase. Established in late 2020, Back flip offers a service to real estate investors for securing short term loans. Beyond helping users secure funding, Backflip’s technology also helps investors find, track, summarize and evaluate potential investments. Think of it as a cross between Zillow and Shopify.

Backflip originates loans through its subsidiary, Double Backflip, LLC. Interestingly, its processing team includes former employees of Better.com, a digital mortgage lender that has had its share of ups and downs mostly related to its management and market conditions, but was praised for its technology.

“We help investors find properties and curate their plans, analyze the deals they might want to invest in, and hopefully make better buying decisions with lower risk,” CEO and co-founder Josh Ernst told TechCrunch in an interview.

Backflip launched a stealth private beta in 2021 that ran through the first half of 2022. Entering the market at a time when interest rates started to soar was challenging, says Ernst, who is a former investment banker and venture capitalist (he supporting the likes of Polychain Capital). And yet, the company managed to grow its revenue almost 5x in 2023 and reach an annual revenue of $10 million. It also claims to be “nearly profitable.”

And today, the company is announcing that it has raised $15 million in a Series A funding round led by FirstMark Capital, an early investor in Airbnb, Shopify and Pinterest, TechCrunch has exclusively told.

Existing backers Vertical Venture Partners, LiveOak Venture Partners, Revel Partners, ECMC and real estate firm Crow Holdings also participated in the round, as did angel investors. All in all, Backflip is up $28 million in equity – and $67 million in debt financing.

To put some context on how much business has been conducted on the Backflip platform so far, Ernst said that users analyze an average of $5 billion in properties each month on the platform and that the startup has funded more than 900 homes since mid 2022. launched. Users have realized an average gross profit of $82,000 per property on the platform, and typically repay their loans in six months.

Most Backflip loans are for 12 months (called a bridging loan) but are provided at an interest rate 2% to 4% higher than a typical residential loan, according to Ernst.

Investors can either sell the property and pay Backflip back or refinance and move to a longer term loan through another lender.

“Our interest rates are higher than a retail bank, so our customer pays more for our loans than a bank,” says Ernst. “But what we do is give them money, underwrite the asset, underwrite the business plan and underwrite the person.”

The conventional (and cheaper) lending process, he says, is slower. And with Backflip, customers don’t need a W-2 to qualify for a loan. Also, the company bundles the rehabilitation and construction loan so that it is easier and faster for an investor to move quickly through all these transactions.

“We underwrite business plans, assets and people, not just W-2 income… and we provide capital for home renovations and provide credit for retrofit pricing,” Ernst said.

The company does not currently charge subscription fees. Its business model is to serve as a marketplace for the financial products. It makes money through a take rate on the loans on the loan origination business, which it operates through a partnership with capital providers.

“We help underwrite the property and all the time, we get more and more data that can then be used to make a quick and accurate underwriting decision on a particular loan product, which our members use to buy the property and renovating the property,” Ernst said.

So the investors get the money from Backflip, which originates the loans and then in turn sells the loans.

Adam Nelson, managing director of FirstMark, told TechCrunch that the opportunity to flip is huge. In the United States, more than 50% of homes are over 40 years old, according to research 2023 by the National Association of Home Builders and “no up to the standard of new home owners and institutional single-family residential buyers,” he said.

“The entrepreneurs in the ‘fix and fix’ industry provide an important service to bring the existing housing stock up to specification and put their own capital and sweat equity on track to do so in both bull/bear housing market,” he said.

Nelson is impressed by the company’s ability to grow nearly 5x year over year “with an efficient <1x burn multiple," he added.

“We see Backflip as the operating system for this $100 billion+ annual transaction market, with the potential to add value and monetize many different parts of the fix and flip transaction and ultimately institutionalize the class assets,” added Nelson.

Currently, the startup has 47 employees with headquarters in Dallas and Denver.

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