The Southeast-focused homebuying startup Ribbon will expand nationally after announcing a $150 million fundraising round this week.
The company, which enables individuals to make cash offers in competitive housing markets, will now push into the Midwest and West Coast, CEO Shaival Shah said in an interview.
Over the next 18 months the company will target mid-range homeowners in those regions who are being outbid by large investors and institutional buyers speculating on the single-family rental market.
“We’re much less focused on trying to help the hedge fund manager buying a $2.5 million home, than on helping the everyday family buy a $250,000 home,” he said.
Deal flow on its platform is up 15-fold since January, the company said in a release this week. By 2023, it wants its services available in at least half the country.
Ribbon’s Series C round this week included $75 million in funding and $75 million of additional working capital. Greenspring Associates led the round, and existing investors Greylock, Bain Capital Ventures, NFX, Nyca, Thomvest and Jake Seid also participated.
First American Financial, Waterfall Asset Management, TriplePoint Capital and Spencer Rascoff’s 75 & Sunny Ventures were among the new investors.
Founded in 2017 with bases in New York and Charlotte, North Carolina, Ribbon is one of a few proptech companies looking to streamline homebuying for smaller buyers. For a 1 to 3 percent fee, the company — with its brokerage and lender partners — will guarantee a close on all-cash offers. For second-time homebuyers, the company will buy the target home on the buyer’s behalf to prevent the problem of dual mortgages. It will also rescue deals that fall apart at the eleventh hour.
The company says its services help individual buyers beat out slower-moving institutions in the housing market gold rush and win deals at favorable pricing.
“If all else is fairly equal, the home seller is always going to choose to sell to a consumer” instead of an institution, Shah said.
Ribbon has stiff competition with its cash-offer promise. Startups like Orchard, Knock, Homeward and Homelight offer similar services. In California, Ribbon will compete with Reali, which recently raised $250 million in a Series B round.
Unlike Orchard — which announced its own $100 million funding round a week ago — and Reali, Ribbon is not a consumer brand. Rather, the firm is a platform with agent, lender and title company partners, a model it says offers consumers greater choice.
Until now, Ribbon has focused on the Southeast, which Shah described as the most resilient housing market over the last five decades. It operates in North Carolina, South Carolina, Tennessee, Georgia and Florida.
“It’s because it has a very, very strong homeownership rate and homeownership mentality,” Shah said of the region. “That’s why you don’t see a lot of fluctuation that you see in other parts of the market.”
The lone outlier is Texas, where it also operates. The Northeast is off the table for now, due to higher price points and transaction costs, he said.