A new London “PropTech” (property technology) startup that promises to sell your house within 90 days or else lend you a guaranteed amount of interest-free cash to buy your next property has raised £3 million ($US3.8 million) and is launching to the public.
Nested has raised the sum from:
- Well-known London seed fund Passion Capital;
- Tim Bunting, a partner at venture capital firm Balderton;
- Tom Hulme, a partner at Google Ventures;
- Paul Forster, the founder of jobs website Indeed;
- Germany’s billionaire Samwer brothers, founders of venture builder Rocket Internet.
The business is the brainchild of Matt Robinson, one of the cofounders of London direct debit startup GoCardless, early SongKick executive Phil Cowans, and trained architect, James Turford.
Nested lets people get an immediate cash offer on the value of their house, just a fraction off the full valuation. If you like the offer, Nested will then take over the process of selling your house for you and if that is not done within 90 days it will lend you the cash it guaranteed at the beginning, interest-free, to let you buy a new house.
Nested does not actually take ownership of the house and when the house does sell, if it goes for more than the valuation Nested gave you, you get 80% of any upside and Nested takes 20%. (It also charges a minimum 1.8% fee.)
An example: Your house is worth £100,000, Nested offer you £95,000 guaranteed. You take it and go house-hunting. Your house eventually sells for £120,000 — that’s £20,000 above Nested’s valuation. Nested takes 20% of the £20,000, while you keep the rest — £16,000. You end up with £95,000 in cash after 90 days and a nice £16,000 windfall when it eventually shifts. (All these figures are just to illustrate the point of course.)
Robinson says the aim of the startup is to bring liquidity to the property market and take the hassle out of selling.
“It’s based around chains, which are the bête noir of anyone trying to buy or sell a house,” says Robinson.
“If you want to go and buy a house and you already own a house, you can’t buy this one until you’ve sold that one. It means that a transaction goes from being 6 weeks to 6 to 12 months, possibly even longer. Worse still, 1 in 3 fall through because no one has certainty in the market.”
“For us, it’s giving people the piece of mind and financial freedom to do what they want to do in life. It’s more powerful than you realise because in the market if you’re a cash buyer or a certain buyer, you can pay up to 5% less. Actually, we’re potentially allowing people to go and buy better houses.”
On the surface, the business model seems like a big gamble: what if Nested guarantees a £85,000 on a £100,000 house that ends up selling for £75,000? Surely it’s out of pocket?
Robinson says: “Obviously we have to be sure so the amount we guarantee is based on data and expert opinion, which is: ‘This is the number we don’t think the property will sell below,’ which, actually, in history you can back that out.
Look at the biggest crash in financial history and how much did property prices fall in 90 days. Every time we give out a guarantee it’s risk tested to make sure we can fulfil that even in the worst possible economic environment.
He adds: “Yes it is [bullish] but it’s the right business for me to build. We had great success with GoCardless, I mean people criticised the UK for not trying to build these massive businesses. This is easily a billion dollar company — a multi-billion dollar company.
This is easily a billion dollar company — a multi-billion dollar company.
“This transforms how people sell property. They no longer have to go through this antiquated process, they can go online and be done. It’s kind of like the Amazon for house sales. So yeah, I think it’s massively bullish, not just in terms of the financial piece but also the customer experience.”
Robinson says there are good reasons — “new baby on the way, moving for the start of school, or a new job” — and bad reasons — “the 3 Ds: debt, divorce, and death” — why people would typically turn to Nested.
The company has already been offered £10 million worth of property but Robinson says Nested is being picky and has only just taken on its first property.
Robinson says: “I’m normally a very bearish individual, as much as the business I’m starting is kind of a bullish move, we’ll be running it in a very bearish way.”
Nested is currently only accepting properties in London worth below £1 million. The startups current funding allows it to take on 5 properties at a time but Robinson says: “We have to raise a phenomenal amount of money.
“There’s a somewhat similar business in the US called Opendoor. Those guys have raised in the hundreds. [Opendoor has raised close to $110 million, according to Crunchbase.] They buy people’s houses, it’s an amazing model, it’s different to what we do but I think it’s really cool. It would be similar over here. We would need to raise in the hundreds to build the type of business I’m talking about. That being said a lot of that would be from debt.”
He adds that the Samwer brothers “are billionaires and they want to pour as much money as possible into this so we can raise money very, very quickly.”