Patch Homes, a modern finance company that helps homeowners tap into their home equity without selling their home or taking on additional debt through its innovative home equity sharing product, has announced a $5 million Series A funding round led by Union Square Ventures with participation by new investors Tribe Capital and existing investors Techstars Ventures, Breega Capital, and Greg Schroy.
“We know that homeownership is a journey that doesn’t end when you buy a home. Patch was created to partner with homeowners to help them unlock their home equity so they can achieve their financial goals along every step of their homeownership journey,” said Patch co-founder Sahil Gupta. “This funding will allow us to rapidly grow our team and continue our expansion, so that we can partner with even more homeowners.”
The funding allows Patch Homes to build on its rapid growth and scale up its team to meet rising consumer demand for a home finance product without monthly payments or interest. In less than two years since launching its Home Equity Sharing product in California, Patch has underwritten homes collectively worth more than $3.5 billion, expanded into 11 metro areas across the United States, and grown origination 20x year-over-year in 2019.
“Patch’s founders are taking a customer-centric approach to providing a new and important financing option for homeowners,” said Union Square Ventures partner John Buttrick. “Patch approaches their customers as equity partners – not as debt contractors – resulting in aligned incentives and incredibly positive customer feedback to-date. Our team at USV feels fortunate to be joining Patch on their journey, and we look forward to supporting their expansion efforts into new markets.”
Unlike a traditional debt product – a HELOC or a Home Equity loan – Patch’s partnership approach allows homeowners to access as much as $250,000 of their home equity without the burden of monthly payments or interest. Through its equity sharing model, Patch is helping fill the huge void created by banks and other lenders who take an increasingly narrow view of who qualifies for home equity loans or HELOCs. Patch leverages machine learning techniques to analyze thousands of data points on the asset, the market, and the owner to take a more holistic view of the homes they want to invest in.
“From our early interactions with Sahil and the Patch Homes team it was clear they were taking a different approach to helping homeowners by aligning interests for all parties,” said Tribe Capital co-founder and partner Ted Maidenberg. “Your home is the majority of net worth for Americans yet liquidity options are rooted in debt products; Patch financings break that mold and the team has built sophisticated data-driven underwriting and monitoring platform to enable rapid growth of this new product. We are thrilled to partner with the team and look forward to supporting them in the future.”
A critical factor in Patch’s growth over the past year has been an equity partner with a long term alignment with Patch and its homeowner partners. Patch Capital Partners (PCP), a Chicago-based real estate private equity firm founded by former Guggenheim Partners Managing Director Adam Hitchcock and Coolhouse Labs Founder Jordan Breighner, is the exclusive home financing partner of Patch Homes and intends to invest an initial $100 million in capital in Patch contracts.
“A key reason behind our belief in Patch’s ability to solve this important problem is that they have a stable source of capital from a partner who believes in their approach and allows them to stay focused on their customer-centric mission,” Buttrick said.
