Tomo Networks, a Connecticut-based digital mortgage startup, just picked up $40 million in a seed round as it mobilizes to build a compelling product in an increasingly crowded market.
Founded by ex-Zillow executives Carey Armstrong and Greg Schwartz, Tomo says it will offer a platform to streamline home buying for both the consumer and their real estate agent.
That’s about all the company would say; Tomo’s press release didn’t elaborate on its business model or the tech stack aside from the usual talking points: the current process is too analog, time-consuming and stressful; there hasn’t been meaningful disruption, etc. The seed round investors from Ribbit Capital, NFX and Zigg Capital, though, have experience with real estate startups (NFX’s GP Pete Flint founded Trulia) and no doubt have faith in the founders. Individual investors also include hedge funders Alex Sacerdote, Kurt Mobley & Eli Weinberg; former Zillow CEO Spencer Rascoff; and Ted Ackerley of Seattle-based Ackerley Partners LLC.
In a press release, Tomo said it was hiring across the country, with teams centered around Austin, Seattle and Stamford, Connecticut.
The pandemic has dramatically increased the adoption of digital mortgage tools. Large banks, well-capitalized IMBs and scores of startups have dedicated significant resources to integrating notarization, e-signings, and digital document processing.
Ellie Mae, one of the market leaders in the space, in September was acquired by Intercontinental Exchange in an $11 billion deal. The move was merely part of ICE’s larger play in the growing mortgage tech space.
Over the last few years, ICE has also acquired MERSCORP Holdings, the owner of Mortgage Electronic Registration System, and e-recording and collaboration services firm Simplifile.
Blend, a digital mortgage startup founded in 2012, reached unicorn status this year with its $75 million Series F raise, which valued it at $1.7 billion.
And Rocket Companies, the largest mortgage lender in America, has rolled out several digital mortgage tools – including Rocket Pro Insight – aimed at consumers and real estate agents.
Now let’s come back to those two ways Zillow can get you a mortgage.
Zillow can be the lender with their main lending priority to try to win your loan when you’re looking to buy a home they own.
Despite receiving requests for offers from sellers every five minutes, Zillow only bought 686 homes from sellers from its April 2018 launch date through the end of 2018.
This means most sellers reject their offers in these early days of Zillow buying homes, and then Zillow connects them with a real estate agent.
But they plan to ramp up to buying 5,000 homes per month within 3-5 years.
They also hope Zillow Home Loans will make 3,000 loans per month in this same timeframe — largely to people buying these Zillow-owned homes.
For the rest of you just shopping for a mortgage that has nothing to do with a Zillow-owned home, Zillow will introduce you a local lender in your area.
So even while they’re looking to serve you as a realtor and lender in the new ways described above, they also want to connect you to local realtors and lenders if you just want to research mortgages and properties on Zillow but don’t want to work with them directly.
It’s a win for you either way.
And it’s a win for realtors and lenders too, since 157 million of you visit Zillow per month, and many of you want to get introduced to a local pro after you’ve researched mortgages or properties on Zillow.