Featured Article

ZeroDown is constructing a new path to home ownership

Part real estate fund, part tech startup, ZeroDown wants to make it easier to buy a home in the Bay Area

Comment

Houses and Palm Trees near San Jose California downtown district
Image Credits: Sean Duan / Getty Images

Even rich San Francisco residents can’t buy a home.

Sure, if your startup just went public, you might be amongst a small class of people able to put in all-cash offers over the asking price. But most people living in the Bay Area, even those with six-figure salaries, only aspire to become homeowners.

“Owning things is a pretty central idea to the American enterprise,” said Abhijeet Dwivedi, the co-founder and chief executive officer of ZeroDown, a new startup hoping to make home ownership in the Bay Area a reality for more people by combining the security of ownership with the flexibility of renting. “Anyone who has gotten rich in the last 240 years has done so by owning things.”

ZeroDown, as the name suggests, couples technology and a debt-fueled real estate fund to allow home-buyers to forgo the traditional down payment process required to purchase a home. The company, which charges a $10,000 fee per home, is a graduate of the Y Combinator startup accelerator’s winter cohort. Today, it’s announcing a $30 million round of capital from former YC president Sam Altman and consumer technology venture capital fund Goodwater Capital.

Earlier this year, ZeroDown had the VC community buzzing. At just a few months old, the San Francisco-based startup was already fielding offers from funds. Why? Because its founding team is made up of Dwivedi, the former chief operating officer of Zenefits; Laks Srini, Zenefits’ former chief technology officer; and Hari Viswanathan, a former Zenefits staff engineer.

Ultimately, the trio raised a bucket of capital at a valuation north of $70 million, sources confirm to TechCrunch, (the company declined to comment on its valuation). That’s quite the vote of confidence for a capital-intensive real estate business but the founders reputation preceded them and early backing from Altman, who invested before the company decided to enter YC, peaked the curiosity of early-stage VCs.

ZeroDown co-founder and chief executive officer Abhijeet Dwivedi.

“Sam Altman was the first person we called to discuss the idea … and he wanted to back the team,” Dwivedi said, noting that Altman didn’t suggest the team go through YC, rather, a desire to feel like “beginners” again inspired their decision to complete the three-month program, which is more often made up of first-time founders.

Amidst all the buzz, ZeroDown skipped out on Demo Day in March, the culminating event of YC that gives startups a couple of minutes each to entice investors into supporting their big idea. ZeroDown didn’t need to make a showy pitch. Fundraising hadn’t been and wouldn’t become a difficult process.

TechCrunch noted all this in a story earlier this year highlighting how competitive investing in YC startups can be for venture capitalists. ZeroDown may have raised at the highest valuation for a startup fresh out of YC but it certainly wasn’t the only member of the winter cohort to raise significant capital before graduating from the accelerator. Catch, Overview.AI, Truora, MiddeskGlide and FlockJay, among others, had signed term sheets before the big day, for example.

Parker Conrad, the co-founder of Zenefits, similarly opted to go through YC with his latest startup, Rippling. Right off the bat, Rippling raised a $7.5 million seed round followed by a $45 million Series A.

Using ZeroDown

ZeroDown seems to be serving those who have an individual or combined salary of more than $200,000, stock options and some money put away — aka not exactly your average Joe.

Here’s how the service works:

  1. ZeroDown determines whether a potential customer qualifies, factoring in total annual income before taxes, stock grants, recurring monthly loan payments and credit.
  2. A customer picks a qualifying home, typically one priced between $550,000 and $1,750,000. ZeroDown purchases the home.
  3. The customer begins leasing the home from ZeroDown.
  4. The customer is given five years to pay ZeroDown the cost of the down payment.
  5. Every month throughout the five-year period, the customer earn purchase-credits — similar to earning stock options at a startup — that represent a percentage of their ZeroDown home’s value. If they live in the home for at least two years, they can put those credits toward purchasing the home or they can can move out after two years and redeem the purchase-credits for cash back.
  6. If a customer reaches the five-year mark and wants to stay put, they must purchase the home at that time.

The idea is to give people more flexibility and power in the home-buying process: “It gives people time to build up more savings or get a higher salary,” Dwivedi explains. “Their buying power five years out is hopefully higher than it is today.”

ZeroDown earns money from its $10,000 price tag and through a 24/7 concierge service it provides to customers. It’s partnered with Sheltr to connect ZeroDown users to services they might need as homeowners, including a babysitter or a plumber, for example.

“It’s meaningful to give people a place to call their homes,” -ZeroDown CEO Abhijeet Dwivedi.

Under the hood, ZeroDown has two businesses running simultaneously. One is a technology startup supported by the $30 million equity financing and 20 employees. The other is a real estate fund supported by a “decent sum” of debt capital (Dwivedi declined to disclose the precise amount). This unique business structure helps ZeroDown minimize risk, he said.

“The fund has to do its job to hold the assets and provide a return and the tech company has to do its job of executing very well,” Dwivedi said. “The templates to run both of these types of businesses exist independently in the market.”

Seperately, however, things get more complicated, which is why a solution like this hasn’t come out of Silicon Valley in the past.

ZeroDown is tapping into a particular pain point, one intensified in the Bay Area where 81% of homes cost more than $1 million, according to data compiled by Trulia.

For now, ZeroDown is focused on that market but in the long term, the team hopes they can expand to new geographies and assist a wider and more diverse population of potential homeowners.

“It’s meaningful to give people a place to call their homes, a place where their memories are founded, a place where they live,” Dwivedi said.

To fund Y Combinator’s top startups, VCs scoop them before Demo Day

More TechCrunch

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

13 hours ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

15 hours ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo

Sony Music Group has sent letters to more than 700 tech companies and music streaming services to warn them not to use its music to train AI without explicit permission.…

Sony Music warns tech companies over ‘unauthorized’ use of its content to train AI

Winston Chi, Butter’s founder and CEO, told TechCrunch that “most parties, including our investors and us, are making money” from the exit.

GrubMarket buys Butter to give its food distribution tech an AI boost

The investor lawsuit is related to Bolt securing a $30 million personal loan to Ryan Breslow, which was later defaulted on.

Bolt founder Ryan Breslow wants to settle an investor lawsuit by returning $37 million worth of shares

Meta, the parent company of Facebook, launched an enterprise version of the prominent social network in 2015. It always seemed like a stretch for a company built on a consumer…

With the end of Workplace, it’s fair to wonder if Meta was ever serious about the enterprise

X, formerly Twitter, turned TweetDeck into X Pro and pushed it behind a paywall. But there is a new column-based social media tool in town, and it’s from Instagram Threads.…

Meta Threads is testing pinned columns on the web, similar to the old TweetDeck

As part of 2024’s Accessibility Awareness Day, Google is showing off some updates to Android that should be useful to folks with mobility or vision impairments. Project Gameface allows gamers…

Google expands hands-free and eyes-free interfaces on Android