When considering new investments in fintech – I rely on my product, platform, and infrastructure framework. The most compelling product companies solve two problems simultaneously. First, they identify a funding gap in the market and create or move a financial product online to fill this gap. When that happens, these companies can scale very quickly (Ladder, Hugo, LendingClub, Brigit). Second, to drive long term defensibility, product companies must either use technology to transform the margin structure of their industry – or facilitate the lowest cost providers of capital.
We led RenoFi’s seed round because it is doing both. The home renovation market is massive – $354 B in 2019 alone. Even in the depths of the last recession, the home improvement market was $235 B. During COVID, top of funnel for all home renovation platforms have been growing as people have sheltered in place and considered new needs in their current home – or look to purchase a new home that needs work. In fact, since the first week of April, each successive week has brought RenoFi its best week ever. And yet - during this economic turbulence, homeowners are consistently left with terrible options for financing those renovations. Most often they are forced to use cash or access insufficient or expensive home equity lines of credit to renovate their homes.
Why insufficient? Lines of credit do not take into account the future value of the renovated home, limiting a homeowner’s borrowing ability. Through its technology-powered underwriting platform, RenoFi enables lenders to offer consumer-friendly, next-generation renovation financing – RenoFi Loans. RenoFi Loans give homeowners the ability to borrow against their post-renovation home value, closing an existential funding gap in this massive market.
RenoFi is building a differentiated network of credit union partners to fund these loans. Given their mandates, credit unions consistently provide some of the lowest cost of capital in lending (2019 avg Bank HELOC rate 6.04%, Credit Union 5.13%). And they are nimble, innovation-minded partners. However, they have struggled to build a digital presence and find new members online. By building a network of credit unions, RenoFi is building a symbiotic network, helping credit unions build their memberships while also providing the lowest cost of capital loans to consumers.
RenoFi Loans will become the best way for consumers to finance home renovations in terms of ease of use, speed and cost of capital. In addition to the unique product offering, the founding team of Justin Goldman, Lee Miller, and Rob Shedd was a big draw for me and we are very happy to be partnered with them. Justin and Rob previously built Zoomer (acquired by Grubhub)) and having lived through the early days of the food delivery wars, they bring a ton of creativity and grit to problem-solving.
We didn’t anticipate that a global pandemic would fundamentally transform how Americans think about their homes, but that is exactly what has happened. Thrilled that RenoFi Loans are providing a win-win-win solution at this difficult time for so many.