Spruce, a new startup looking to speed up the mortgage, has raised $4.5 million in its series A financing from Bessemer Venture Partners, Omidyar Network, and..
Spruce, a new startup looking to speed up the mortgage, has raised $4.5 million in its series A financing from Bessemer Venture Partners, Omidyar Network, and Third Prime Capital along with a slew of private angel investors.
Founded by two former employees of the robo-advisory wealth management company Betterment, the new startup is notable for a few reasons.
First, it’s yet another startup launching to tackle the real estate market — an industry that’s been a huge target for venture dollars — and it’s also a clear sign that the ecosystem in New York is maturing.
When you have startups begetting more startups it’s a strong indicator of the health of a particular ecosystem. The same can be said for the involvement of core group of Betterment employees that invested in Spruce’s Series A.
Betterment chief executive Jon Stein, chief marketing officer Joe Zimmer, vice president of operations, Boris Khentov, and Mike Reust, the VP of engineering, all invested in their former co-workers’ new venture.
Founded by Patrick Burns, former product manager at Betterment and Spruce’s chief executive, and Andrew Weisgal, the chief operating officer at Spruce and former head of data science at Betterment, Spruce is angling to reduce the time to close a real estate deal by improving title insurance assessment and issuance.
That arcane corner of the real estate market can take as much as 45 days and costs property buyers and seller up to roughly $4,000 according to a statement from the company.
It’s also an incredibly lucrative practice. Roughly $15 billion in annual premiums flow to title insurance and most of that is retained by agents. That number doesn’ t even include another $5 billion in extra fees charged for closing and escrow services.
The guys at Spruce guesstimate that fees to title companies may be the single largest closing cost in buying or refinancing a home.
https: //vimeo.com/217687814
“After hearing of countless frustrating experiences from the mires of real estate transactions, we saw a great need to apply those same principles, knowing that doing so could have a big effect, ” Burns wrote to me in an email.
The learning experience for Burns began with some channel surfing and binge watching HGTV. On the show Burns wrote that he would watch house flippers nickel and dime over building costs, but eat thousands of dollars in closing fees to ensure that they would receive title insurance.
In a blog post published earlier today, the company stressed the importance of title insurance, noting that it protects the property rights of real estate owners.
Here’s the problem, as Spruce sees it.
