Founders Fund has made its first investment in the Middle East by backing UAE-based proptech startup Huspy. The $37 million Series A round, one of the largest at this stage in MENA, was led by Sequoia Capital India.
The round also welcomed participation from Fifth Wall, the largest VC firm backing real estate and proptech startups. Chimera Capital invested in the company as well as existing investors from its undisclosed seed round last April, such as Breyer Capital, VentureFriends, COTU, BY Venture Partners, and Venture Souq.
Software has disrupted every traditional industry from high volume businesses with low ticket items like food to medium volume businesses with medium ticket items like vehicles. Low volume business with high ticket items, the category where real estate falls under, isn’t exempt. Startups such as Opendoor, Place, HomeLight, QuintoAndar, and Loft have democratized access to owning and renting homes and offices with varying products.
Real estate continues to be an in-demand asset class worldwide, with 2021’s global commercial sales volumes exceeding the 2020 total by 59%. While the startups above are focused on the U.S. and Latin America, Jad Antoun and Khalid Ashmawy launched Huspy in 2020 to tap into the home-buying opportunity in the Middle East.
Most property transactions, offline and online, in the Middle East are fragmented. According to Antoum, customers engage over five real estate agents before closing the purchase of a home; also, mortgage processes are lengthy and fragmented, taking up to eight weeks to complete.
“There’s a problem zero visibility and ugly transaction process on where to start from when searching for a house,” said the co-founder and CEO to TechCrunch on a call. “And many people end up overpaying for the mortgage and not closing the house they want. This was the problem we sort out to address.”
Antoun saw an opportunity in the real estate space after working for Beco Capital, a venture capital firm that backed Property Finder, one of the region’s largest real estate portals. The firm is also an investor in most of the Middle East’s unicorns, such as Swvl, Kitopi, and Careem.
However, unlike Property Finder and other user-generated classifieds platforms, Huspy wants to bring some streamlining and precision to how users access real estate products. Its platform features a suite of digital solutions for buyers, property agents, and mortgage brokers.
The company’s home finance product scraps banks weekly — which gives it visibility on the mortgages — and allows users to lock in their loans and get quotes in minutes. According to Antoun, Huspy closes the transaction for customers three times faster than other platforms. It acquired Dubai-based Home Matters this January to ramp up growth in this category.
Earlier this year, Huspy launched its second offering to complement its mortgage product: a property marketplace. On the platform, users see a list of properties they can book to visit and pay as Huspy closes the transaction on their behalf. To summarise both business segments, Huspy starts at the top of the funnel, streamlines the process, and completes transactions on users’ behalf.
“When you are a venture capitalist, you have the opportunity to see a lot of what’s happening. Proptech was always dear to my heart,” said the chief executive. “If you look at the space, a typical customer journey involves visiting the portal, which has 25 to 30% of fake listings. But every listing that we have on a platform is verified.”
For its mortgage product, Huspy partners with banks and agencies. For its marketplace, the proptech platform integrates with the CRM of agencies via an API which allows it to list credible properties on sale. Since Huspy has a distribution network in the real estate market owing to its mortgage play to thousands of customers, it can convert faster than classifieds.
“Our conversion rate is north of 90%, so every time the phone of an agency rings, they always pick up customers on our platform versus a portal because our conversion is much higher,” the CEO argued.
Huspy claims to process $2 billion in annualized gross merchandise volume (GMV), growing 25% month-on-month in revenue. It makes money from charging banks 1% per mortgage transaction and 2-3% to real estate agencies for closing a transaction.
The Huspy team
Antoun says Huspy is the market leader in the UAE and possesses better unit economics than other proptech platforms in the region. He said the new funding would rev Huspy’s expansion as it doubles down on growth across the UAE and Spain, two markets with a total addressable market of $13 billion. The company–whose team consists of talent previously from Loft, QuintoAndar, and Uber spread across Dubai and Madrid–plans to move into other parts of Europe even as it invests in technology development to cater to future demand.
GV Ravishankar, the managing director at Sequoia Capital, the lead investor in the oversubscribed round, said his firm is impressed with Antoun and Huspy’s mission to transform the home buying and financing experience in the MENA region.
“In a short span of time, the company has demonstrated its strong value proposition for the real estate ecosystem and has become the market leader in mortgage broking in the UAE with healthy unit economics,” he said. “And Huspy’s ethos to build for the long term with a deep focus on having the best team in the region resonates deeply with us.”