Finovate Blog

The $175 million in Series C funding raised by Latin American digital real estate platform Loft this week offers an insight into how proptech is providing new investment opportunities within the emerging markets of countries like Brazil and Mexico.

“We’re aiming to reinvent the way people move homes by building the most consumer-focused real estate marketplace,” Loft founder and co-CEO Mate Pencz said. Loft’s digital platform leverages transaction data and machine learning to price apartments at the unit level. This brings both liquidity and transparency to a market the company says suffers from a lack of data transparency, excessively-high selling prices, and long transaction times.

The company plans to also use the funding to fuel its continued growth in Brazil and throughout Latin America. Expansion to Rio de Janeiro is anticipated for early 2020, with Mexico City to follow soon afterward. Loft also plans to grow its product portfolio in the new year to include mortgages and insurance.

“Loft is creating a consolidated source of truth on inventory and transaction prices that has, until now, been fundamentally missing from the Latin American real estate market,” Vulcan Capital general partner Rafael Costa explained. “This, together with Loft’s highly accurate and intelligent pricing tools, is transforming real estate transactions and providing a truly unmatched customer experience for sellers, agents, and buyers,” Costa said. Vulcan’s investment in Loft is the first and only Latin American investment in the company’s portfolio.

TechCrunch’s Anna Escher compared Loft to U.S.-based home-selling marketplace platform Opendoor in her reporting on the funding announcement. And while the San Francisco-based property management technology company has quite the head start, including a $3.8 billion valuation, Loft has made strong strides in its initial year of operation. The company announced more than $150 million in annualized revenues last year and transacted more than 1,000 properties. Beginning with 100 employees, Loft finished 2019 with more than 450 on its team, with plans to add more talent early this year.

Loft competes with firms like QuintoAndar, a SoftBank-funded unicorn based in Brazil, and Mexico’s Flat, which includes investors such as ALLVP and Next Billion Ventures. Proptech represents a modest amount of the overall capital VCs have invested in Latin America, rising to 4% of all VC funding in 2018. Nevertheless, this constituted a sizable increase in both the amount invested (503x) and number of deals (5x) over the previous year, as reported by the LAVCA in its Annual Review of Tech Investment in Latin America. The figure also rivaled investment in other areas such as security & infrastructure, digital security, and e-commerce. Overall, the report indicated that fintech represented 25% of all VC spending in Latin America in 2018.

The investment in proptech Loft also reflects the breadth of funding Latin American fintechs are receiving. Last week, Latin American SME lenders Cora and Rebel made headlines with million dollar fundraisings that will help bring credit to underserved businesses. Challenger banks in Mexico have attracted VC interest, as well, with neobanks Albo and Flink both announcing year-end funding last week.

What does the fintech landscape look like for startups in 2020? Among all the forecasts and predictions we’ve been reading and re-reading, is reporting from the Wall Street Journal that suggests that fintech startups seeking successful exits may face tougher challenges in 2020 than in 2019.

As the Journal’s Yuliya Chernova reports, in 2019, only three U.S.-based, VC-backed, fintech startups went public: Bill.com, Oportum, and Sezzle – two of which are Finovate alums. Even so, this tops the previous year’s total of two such firms: EverQuote and Green Sky.

“Venture investors value startups on growth, but Wall Street wants to see profits,” Chernova begins. She goes on to note how observers and analysts alike are citing the failure of WeWork and the stock struggles of newly-public companies like Uber and Lyft as indications that the affection – and capital – that VCs poured into these tech innovators may not be shared by an increasingly cynical Wall Street investing community.

As Finovate Senior Research Analyst Julie Muhn noted in a post titled “M&A is the New IPO,” last summer, there are a wealth of reasons why fintechs have found successful exits more challenging at this end of the decade. She wrote that between the availability of VC funding, and M&A opportunities on the one hand, and the cost and “bad track record” of fintech IPOs on the other, a growing number of fintechs are figuring out that it is often better to saddle up with a fellow traveler than to try and “go it alone” in the public markets.

Writing in the Digital Banking Report, publisher Jim Marous summed it up: “(W)hy would successful fintechs, who appear to have a bottomless pit of funding at their disposal, subject themselves to the massive scrutiny that comes from going public? Fintech firms don’t see a slowdown of the funding fire hose and have no desire to lose control of their vision.”

Just to get a sense of the flow from that “funding fire hose,” CB Insights reported in December that fintech startups last year raked in more than $24 billion in funding through Q3 of 2019. This represents a gain of 500% since 2014. The firm’s Global Fintech Report Q3 2019, highlights the record-setting fundraising by Southeast Asian fintechs, and notes that the $12.9 billion raised by U.S. fintechs through Q3 2019 had already topped the previous year’s full-year tally of $12.5 billion. European fintechs similarly outperformed, bringing in $5.1 billion in VC funding through Q3 2019 compared to $3.8 billion in all of 2018.

And for those who feel as if this fintech funding flow is evidence of an unsustainable bubble rather than healthy – if not vigorous – growth, fintech analyst and Forbes senior contributor Ron Shevlin suggests looking closer.

“Ignore the pessimistic view,” he wrote. “Dismissing opportunities for further fintech investment is short-sighted … The margin opportunity in banking today isn’t necessarily coming up with a ‘better’ bank, but instead, helping to improve banks profitability. Opportunities for fintech startups abound within banks.”‘

For a look at the recent capital-raising accomplishments of our own Finovate alums, check out our year-end feature, Finovate Alums Raise More than $3 Billion in 2019.