Commercial real estate has been slow to adopt the technology; although it has an addressable funding market of over $ 40 billion, reaching a deal is still mostly manual, cumbersome and complicated.
New York-based Lev is tackling this problem by automating online workflows and pulling together hundreds of millions of data points in machine learning software to ensure funding accuracy. To do so, the commercial real estate finance transaction platform raised $ 30 million to give it a valuation of $ 130 million just two years after its inception.
The latest funding comes four months after the company raised $ 10 million in seed funding led by NFX. Greenspring led the final round, with the participation of First American Title. Existing investors NFX, Canaan Partners, JLL Spark, Animo Ventures and Ludlow Ventures have also joined to give Lev total investments of more than $ 34 million, according to data from Crunchbase.
Lev founder and CEO Yaakov Zar previously co-founded Boston-based Dispatch, which designed tools for home service businesses. It was when he and his wife began the process of buying a home – and their mortgage failed – that Zar decided to turn to real estate financing.
He channeled his frustration into becoming a licensed mortgage originator. After moving to New York City, Zar was helping a friend from a nonprofit refinance his building and got a glimpse of what he said was a fragmented commercial mortgage industry.
Companies like Blend are tackling the mortgage problem, Zar told TechCrunch, but very few focus on commercial real estate, where loans are sensitive to interest rates and full amortization. In addition, landowners are responsible for refinancing every five to ten years.
“Legacy companies like JLL, who is an investor, Cushman Wakefield, and CBRE are working on loans, but they’re much more relationship-oriented than technology-driven,” Zar said. “We think it’s a necessary part because transactions are so large and complex that you need a relationship for them, but transactions under $ 1 billion are pretty straightforward. In terms of experience and product, no one is close to us.
Initially, Zar and his team wanted to create “The Rocket Mortgage Commercial Real Estate Loans”, but found it difficult because real estate brokers put together their own introductory books for lenders. Instead, Lev is building a technology platform of over 5,000 lenders with information about the projects they love to finance. It then analyzes a client’s portfolio and connects them in minutes with the right lender, taking 1% of the loan amount for each transaction as payment. Lev also works to be able to do business online.
Zar was not looking for funding when approached by investors, but said he was introduced to people who valued the growth and trajectory of the business and decided to accept the funding offer. .
He intends to use the new funding on product development, with the goal of giving out a term sheet in seconds and closing a loan in seven days. Right now, it can take a week or two to get the terms sheet and 45 to 90 days to complete a loan.
The company currently has approximately 40 employees at the New York headquarters, Miami R&D center, Los Angeles outpost and remotely. Ongoing investments will be made to expand the team.
Lev has grown 10 times its volume over the past year, closing around $ 100 million in loans in 2020. Zar expects to close over $ 1 billion in 2021.
“Customers come back to us over and over again, and there are a ton of referrals,” Zar said. “We want to be the platform on which capital market transactions are processed. You need an edge to network and find great deals. I don’t want to mess with this, but when you find it bring it to us, we’ll close it and provide asset management with the best option to close online and manage the deal from one platform.
Meanwhile, Pete Flint, general partner at NFX, told TechCrunch that he has gotten to know Team Lev over the past 18 months, checking out the company at different stages of the global pandemic, and been impressed with the way the company had handled it.
As a co-founder of Trulia, he saw first-hand the research and discovery issues in the real estate industry, but as that issue was resolved the focus shifted to fundraising. NFX is also an investor in Tomo and Ribbon, both of which focus on residential finance.
Wanting to see what the opportunities were on the commercial real estate side, Flint heard Lev’s name appear more and more among brokers and industry insiders.
“As we got to know the Lev team, we recognized that they were the best team to solve this problem,” said Flint. “We are also part of an amazing group of people completing the tour. People who are deep industry insiders will take a useful look at business development strategy and opportunities. “