Startups

Backflip raises $15 million to help real estate investors flip houses

Comment

Backflip home in Dallas to be flipped
Image Credits: Backflip

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 to borrow money to fund such a purchase. Founded in late 2020, Backflip offers a service to real estate investors for securing short-term loans. Beyond helping users secure financing, Backflip’s tech also helps investors source, track, comp and evaluate potential investments. Think of it as a cross between Zillow and Shopify. 

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

“We help investors source properties and curate their pipeline, analyze the deals that they might want to invest in, and hopefully make lower risk, better buying decisions,” 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 began to surge was challenging, said Ernst, who is a former investment banker and venture capitalist (he’s backed the likes of Polychain Capital). Yet the company managed to grow its revenue nearly 5x in 2023 and reach an annualized revenue of $10 million. It also claims to be “near profitability.”

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

Existing backers Vertical Venture Partners, LiveOak Venture Partners, Revel Partners, ECMC and the real estate company Crow Holdings also participated in the round, as did angel investors. In total, Backflip has raised $28 million in equity — and $67 million in debt financing.

To give some context on how much business has been conducted on the Backflip platform thus 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 its mid-2022 launch. Users have realized an average gross profit of $82,000 per property on the platform, and typically repay their loans in six months. 

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

Investors can either sell the property and pay back Backflip or refinance and move into 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,” Ernst said. “But what we’re doing is giving them money, underwriting the asset, underwriting the business plan and underwriting the person.”

The conventional (and cheaper) loan process, he said, is slower. And with Backflip, customers don’t need a W-2 to qualify for a loan. Plus, the company bundles in the rehab and construction loan so it’s 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 renovation and give credit for post-repair valuation,” 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 via take rate on the loans on the lending origination business, which it operates by partnering with capital providers.

“We’re helping to underwrite the properties and all the while, we’re getting more and more data that can then be used to make a quick and accurate underwriting decision on a specific loan product, which our members use to buy the property and renovate 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 at FirstMark, told TechCrunch that the opportunity for flipping is enormous. In the U.S., more than 50% of homes are over 40 years old, according to 2023 research from the National Association of Home Builders and “not up to the standard of new homeowners and institutional single-family residential buyers,” he said.

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

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

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

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

Want more fintech news in your inbox? Sign up for TechCrunch Fintech here.

Want to reach out with a tip? Email me at maryann@techcrunch.com or send me a message on Signal at 408.204.3036. You can also send a note to the whole TechCrunch crew at tips@techcrunch.com. For more secure communications, click here to contact us, which includes SecureDrop (instructions here) and links to encrypted messaging apps.

More TechCrunch

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

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.

23 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.

1 day 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