Orchard, which operates a home buying and selling marketplace, has closed on a $69 million Series C round led by Revolution Growth.
Existing backers FirstMark, Navitas, Accomplice and Juxtapose also participated in the financing, which exactly doubles the New York-based startup’s total equity raised since its September 2017 inception to $138 million. This latest round also marks Orchard’s second capital raise in the past year.
Orchard (formerly called Perch) started out with the mission of helping people buy homes before they’ve sold the ones they currently own by providing them with the needed cash.
It has since expanded its offerings, broadening into the fintech space.
The company launched a title and escrow unit, dubbed Orchard Title, in the fall of 2018. Earlier this year, Orchard began the initial pilot of its integrated mortgage offering in Texas markets.
And in July, it announced its formal launch of Orchard Home Loans. (More companies are moving in this direction. Knock this year shifted into lending).
At that time, CEO and co-founder Court Cunningham said that Orchard had heard repeatedly from customers that they wished the company could help them with their mortgage as well.
“When something is seamlessly designed into the experience, you’re more likely to use it,” he said.
‘Turning traditional real estate on its head’
Orchard’s mission is to make the whole process of buying and selling a home simpler and more efficient. It is one of a slew of other startups with the same mission.
“The process today is not consumer friendly – a third of consumers would rather get a root canal than go through the process of selling their home,” Cunningham said in a Zoom interview this week. “So we’ve worked to redesign this from the ground up…we’re turning traditional real estate on its head.”
It’s doing that, he claims, by a “more modern approach to search using photos as a search modality.” The company also allows people to buy a new home before they sell their old home.
“Our vision is to bring real estate into the modern age by allowing customers to manage their entire experience through one simple digital platform,” Cunningham said.
The way it works is Orchard asks a prospective customer some questions about their current home and goals via an online form. It then conducts a free home assessment to prepare a cash offer and pairs a customer up with one of its advisors. That advisor then helps the customer to “tour any home” in their area. When they are ready, Orchard then uses its cash to make a contingency-free offer. Upon closing, customers are able to move in when ready and won’t have to start paying a mortgage until their old home sells.
Orchard claims that it’s able to sell a customer’s old home on the market “90% of the time.”
“We also give them something called a guaranteed sale price,” Cunningham added.
Once their old home sells, Orchard then transfers the new home into the customer’s name. The company charges a one-time 6% fee on the sale of the customer’s old home.
“We feel like real estate agents that are not adding a ton of value should charge a more modest fee or, you need to create value and share it back with the consumer to justify that 6% fee,” Cunningham said, “and that’s what we’re doing.”
Before a customer starts shopping for homes, Orchard notes, they get pre-qualified for a mortgage to help them gauge what they can afford to buy. They can work with any lender of their choice, including Orchard Home Loans. Orchard will then use its cash to purchase and hold the new home for them until their old one sells. Once the sale of the old home is complete, the customer uses the mortgage, which they have pre-qualified for, to finalize the purchase of their new home.
“We’re effectively giving you a bridge loan for your new home, and an insurance policy that the old home will sell, all for no extra cost versus the traditional Realtor,” Cunningham said.
Orchard’s headquarters are in New York City, and it offers its services in Colorado, Georgia and Texas, having recently expanded to Denver and Atlanta.
In January, Orchard raised $36 million in a Series B round led by Navitas Capital. Orchard has also raised a total of $220 million in debt financing since its September 2017 inception.
At the time of its Series B raise in January, the company said it had seen “10x year-over-year revenue growth” and that it had over 150 employees. This week, Cunningham said Orchard has 250 employees, and has seen 5 to 6 times year-over-year revenue growth.
“Our revenue is growing faster than our costs, which is the path to profitability,” he said. “So, why the raise? We believe this is a massive market opportunity similar to what Uber, Airbnb and Amazon had, and we don’t want to be timid in pursuing it.”
Over the next year, Orchard plans to launch a suite of new products and services, as well as expand to new markets. It currently has a short list of two to four new markets it plans to expand to over the coming year. That expansion will also include significant hiring — potentially up to 200 more employees over the next year, according to Cunningham.
Patrick Conroy, principal at Washington, D.C.-based Revolution Growth, is joining Orchard’s board as part of the transaction. In the firm’s view, Orchard has “dramatically simplified the customer experience for home buying.”
“The trillion-dollar residential real estate industry has long been dominated by legacy brokerage firms with limited platform technology and inconsistent franchise operations,” he said. “Through the technology they built, Orchard offers consumers a ‘one-stop-shop’ for brokerage, title, escrow, financing and other ancillary services. And compared to other ibuyer competitors who shut down home buying operations during the pandemic, Orchard has grown its market share.”
Revolution Growth has invested in other real estate technology companies previously, including CLEAR and Convene. Clear is a provider of biometric identity and access solutions for travel, entertainment, and hospitality venues, and Convene is a tech-enabled operator of flexible meeting and office space solutions for enterprise partners.
Led by AOL co-founder Steve Case, Ted Leonsis, and Steve Murray, Revolution Growth is part of Revolution’s family of funds including Revolution Ventures and the Rise of the Rest Seed Funds.