Better.com, a virtual mortgage servicer, has acquired $500 million in a round from the giant Japanese investment firm Softbank. The financing round has put the company's worth at about $6 billion. The funding is noteworthy for many reasons.
One of them is that the current estimations are 50 percent higher than the $4 billion it was listed in 2020 when it received $200 million in Series D round. Its value has also increased ten times since its Series C funding round in August 2019.
Second, it shows that mortgages, a historically "unattractive" sector, that needs some desperate transformation, are now officially hot. People listen when SoftBank spends, despite its disputes. The pandemic, combined with traditionally low mortgage rates, sparked an explosion in digital lending that none could predict.
Along with that, the overall zeal in seed funding explains why Better.com was able to raise $800 million in revenue in just a few months. As per the reports, Better outstretched $25 billion in loans, including $14 billion in Q1, 2021.
Moreover, presently the company funds over $4 billion in advances every month and employs 6,000 people, i.e., 4000 up from October 2020. Better.com has already generated above $900 million in cumulative funding since its establishment in 2014.
After an offer to purchase a home for his family dropped apart, Vishal Garg, a former Morgan Stanley analyst, founded this New York City-rooted business in 2016. Garg realized there must be a more innovative method when an all-cash borrower defeated his typical mortgage lender's reliability. He started Better with the money he had saved for earnest money.
In 2016, the firm was accepted as a Fannie Mae servicer/lender while building solid connections with 17 of the country's top mortgage stakeholders. It has acquired $30 million in its Series A financing round. In 2018, Better funded about $1 billion in debts, serving thousands of clients through its low pricing strategy and exceptional customer services. Better have generated $15 million and $16 million in Series B and Series C financing rounds simultaneously. Citi, Activant Capital, American Express, Kleiner Perkins and Goldman Sachs are the company's key investors other than Softbank.
According to the company, its app takes the lending procedure entirely online, allowing consumers to download and eSign papers, and promises to reduce the closing time from 42 days to 21 days. The business has formally identified a report from the National Bureau of Economic Research that found that face-to-face creditors refuse minority borrowers 6 percent more frequently than non-minority candidates and that minority borrowers are often charged higher for their debts. CEO Garg believes that the digital approach is the only approach to overcome these issues. It reduces prejudice toward minorities when opting for mortgage loans.
As per the reports, Softbank is purchasing the stocks and investing in them from Better's current investors. Additionally, it has acknowledged providing all of its voting rights to Garg "as a symbol of its eagerness" to infuse in the business. The company is anticipating going public by the end of this year.