A Dallas-based startup focused on helping small real estate investors has secured $35 million in funding.
The company, Backflip, landed an $8 million seed round and $27 million in dedicated debt financing. It will use the money to expand its product development team and launch it to the public in Texas and Colorado on June 16.
The startup’s mobile app allows its members to find residential properties of up to four units to buy and renovate. The app includes data and tools to help investors find homes to invest in, analyze opportunities and secure financing through in-house lender Backflip Capital.
“We think Wall Street, Opendoor and these other big companies that are doing this at scale shouldn’t be the only companies with access to this kind of technology, this kind of data, let alone this kind of capital,” said Backflip co. -Founder and CEO Josh Ernst. “You really need a platform that can aggregate and scale the hotspot for the little guys, so to speak.”
Since launching in a private beta test last year, the app has been used to scan around $2 billion in properties.
Backflip does not target or work with people who live in the houses, only entrepreneurs who view them as investments and sell or rent them to tenants. Investors can be people who invest in real estate as a side business or have made it a full-time job.
“It was very interesting and awesome to watch the evolution of beta members and really the diversity of different types of people, different backgrounds and different experiences,” Ernst said.
Ernst said, for the most part, its members aren’t competing with low-cost home buyers. Many of the properties they are considering are in need of work and are only getting demand from investors.
“Supply has a fundamental problem. We’ve underbuilt over the last decade-plus as an industry, and we haven’t done a good job of reinvigorating the existing housing stock either,” Ernst said. “There is an opportunity here to really increase supply, which is where Backflip is very focused.”
Ernst, a Dallas native, has lived in New York for more than a decade and worked as an investment banker, investor in various ventures, and co-founder of a warehousing real estate startup. Prior to starting Backflip, he was COO of another Dallas real estate investment firm.
Its co-founder, Jake Rome, comes from real estate private equity and institutional capital.
“We both bring different but deep experiences in institutional capital combined with technology, data and business building, and that really helps us think about bringing something really different, unique and innovative to the market,” Ernst said.
The round is co-led by Austin-based LiveOak Venture Partners and Silicon Valley-based Vertical Venture Partners. Revel Partners, Great Oaks VC and Greg Waldorf – a former Trulia and Zillow board member – are also participating.
Krishna Srinivasan, founding partner of LiveOak, joins Backflip’s board of directors alongside Brad Corona, managing director of Vertical Venture Partners.