As fundraising environment freezes, power buyer UpEquity cuts staff

Austin-based mortgage technology platform UpEquity It laid off about 10% of its workforce last week, evidence that rising interest rates are hurting real estate tech companies, too.

Founded in 2019 by Tim Hermann and Louis Wilson, the lender and “energy buyer” allows homebuyers to bid all cash to compete with institutional investors. The company then receives monthly interest payments from homebuyers, who can avoid going through the bank for a mortgage.

UpEquity earns commission from the brokerage or sale of mortgage buyers to purchase their homes. In states where purchase contracts cannot be waived, UpEquity buys the home up front and writes out the mortgage after the deal closes.

Over the past two years — when mortgage rates were low and refinancing opportunities plentiful — UpEquity has raised more than $70 million from investors. The company expected its facility to be $1 billion for 2022.

The sharp rise in mortgage rates – up about 3 points since January – changed those expectations.

“The volume of our purchases is strong, but the volume of our refinancing has evaporated. We are not growing as fast as we hired or expected,” Hermann said.

The company now expects to take out $500 million in loans this year, all purchases.

According to the Executive, UpEquity is also affected by the uncertainty surrounding the fundraising environment for the next 18-24 months. “The fundraising environment has froze,” he said. “It is really important to us that our destiny is not in the hands of the fundraising market.”

In October, the company raised $50 million in a Series B funding round led by the venture capital firm S3 projects. Other investors include Next Coast Ventures, BP Capital Management, Alumni Ventures, Gaingels, Launchpad Capital, And the Early Light Ventures.

“The way we think about it is we have more than two years of runway remaining, given our current burn rate and cash on the balance sheet,” Hermann told HousingWire.

To manage its cash position, the company laid off nine employees last week, out of a total of 93, in its operations division, including processing, closing and training.

A former employee, who asked not to be named, told HousingWire that the company paid one month of severance pay and 1.5 months of health benefits.

The cash raised in Round 2 of Series B was invested in the company’s technology, Hermann said. UpEquity claims that it takes 17 days, on average, to close a position, while the industry average is close to 50 days.

The company also says it helps homebuyers make an all-cash offer that is four times more likely to be accepted than conventional mortgages.

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