THE BASIS POINT

Zooming in on 3 Andreesen Horowitz housing & mortgage fintech bets: Point, Valon, Vesta

 
 

CB Insights reports that, of the 206 venture capital investments Andreesen Horowitz (a16z) made in 2022, almost 25% went to fintech. Sixty percent of these fintech deals closed in the first half of 2022, and 40% closed in the second half. Here’s some notes on 3 mortgage & housing bets they made:

1. POINT

Point is a new take on lending where they’re not so much lending as co-investing with you. They just give you part of your down payment to buy a home, and they get to participate in future appreciation with you.

Point will front about half the down payment at zero interest. But you share about one-third of your home’s appreciation with them for the first 10 years.

We wrote a detailed piece on Point during a previous funding round. Their latest round 9 months ago was a Series C for $115 million. The linked post also covers Point’s primary — and more mature — competitor Unison.

2. VALON

Valon builds software to power mortgage servicing, of which there is $13 trillion in outstanding loans. Servicing is notoriously hard to disrupt because of extreme regulatory responsibility and scale from day one that’s typically required — very few mortgage servicers have small servicing books.

There are two main software players in this space. Black Knight is the oldest player in this market, and has majority market share — they also have other services like product and pricing engines and loan origination software (more on originations below), as well as robust housing data services given all the data they have.

Sagent is the second largest mortgage servicing software player, and making big moves in innovation by developing a new cloud-native servicing platform in partnership with Mr. Cooper, one of America’s largest mortgage servicers with an $850 billion portfolio.

Because servicing is so hard to just develop from scratch and then go sell to big servicers, Valon has taken the approach of acquiring mortgage servicing rights as part of their business. This provides revenue, but it also provides real servicing assets for them to build their software to support. Servicing takes years to get right at scale, but it’s a sector that definitely needs innovation.

Valon’s latest round was a Series B for $60 million was six months ago.

3. VESTA

Vesta is a loan origination software (LOS) platform for the part of the mortgage industry that’s averaged $2 trillion in new loan originations per year for each of the last 29 years.

This is another area of the highly complex and highly regulated mortgage sector that needs innovation. The two main market share players are ICE Mortgage Technology’s Encompass (formerly Ellie Mae) and Black Knight’s Empower.

ICE and Black Knight are now in late stages of an announced merger that’s awaiting regulatory approval. Regardless of whether regulators approve this deal, Vesta is competing with both of these LOS platforms and is a net new, cloud-native platform I’ve hosted a couple times during my demo showcases at industry conferences — and it’s cool to see the core plumbing of originations having been totally re-thought.

The whisper consensus in the industry is that all lenders would love a net new, totally modern originations platform and Vesta is very promising here. The industry is mostly watching for them to deploy with their first large customers, and 2023 should be notable for them as this plays out.

Vesta’s latest around was a $30 million Series A this time last year.

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Link to the CB Insights post below with more a16Z bets.

As for these companies, The Basis Point watches these and all others in mortgage and housing closely, so please please comment or reach out with questions.

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Reference:

Analyzing a16z’s fintech investment strategy: Where did the VC place its biggest bets in 2022? – CB Insights Research

Why spend on a home down payment when Point or Unison will do it for you?

Mortgage servicing giant Mr. Cooper hires fintech Sagent to power giant portfolio. Firms will combine tech to serve $13t industry.

 

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Comments [ 2 ]
  1. Bob Saget says:

    Vesta is all smoke and mirrors. Raised too much money, founders can’t run a tight business, they haven’t gone live with any meaningful customers yet. Founder from Blend was one of the most disliked people in the company.

    1. Appreciate you reading and commenting ‘Bob’ — your anonymous criticism shows some insider knowledge but it could be more constructive 🙂 (which is what we try hard to accomplish for you and everyone else reading The Basis Point). Can you explain what you mean by “raised too much money”? And what should we consider a reasonable timeline for building, selling, and deploying a lender system of record that needs to power every detail of a $2 trillion/year, highly regulated sector?

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