London’s Nested Raises $9.9M as PropTech Gets Hot

London-based Nested has raised $9.9 million to expand its “property tech” operations, representing a big win for the suddenly popular startup niche.

This marks the second funding round for the young company, which launched last year, bringing total capital raised to nearly $11.5 million, among the larger sums for a proptech startup.

Nested guarantees a minimum price on a home-for-sale and to take it off the hands of the seller within 90 days.  The current round was led by Passion Capital and was joined by GFC, the venture arm of Rocket Internet, and Balderton Capital, according to Crunchbase.

Here’s how it works: Nested provides an instant online valuation for a property and then guarantees to sell the residence for 95% to 98% of the valuation in return for a 2.5% (+VAT) sales fee. If the property sells for more, Nested will split the unexpected profits, keeping 30% of the gain. (Originally, when Nested announced its founding, the startup planned to charge only 1.8% in fees and would keep only 20% of excess profits.) If the property doesn’t sell within 90 days, Nested will assume a mortgage and give cash to the seller.

Founder Matt Robinson says in its first four months of live operations, Nested has been processing five sales per month.

“I see no impediment to us doing 100 sales per month or more by the end of the year,” he said.

Proptech has suddenly gotten hot. OpenDoor, a U.S. company that buys homes outright, fixes them up, and then sells them, raised $210 million last December at a valuation of $1 billion.

Robinson believes the Nested service can help bolster the London housing market where transactions are down 32% from 2016.

“Our ability to secure millions of pounds worth of funding just months after starting reflects the high demand among consumers and the recognition that this sector sorely needs to innovate,” he said.

In the aftermath of the financial crisis, many families in the U.S. were unable to relocate because they couldn’t sell their homes. Relocation firms — which help sell houses, pack, and provide other related services — went out of business or consolidated with other companies. Some relocation packages may buy homes from senior executives who move for  a new position; but most just offer to pay the costs of buying and selling a new home. Nested represents an innovation on that, bringing a service down the economic food chain to less well-heeled individuals. The real question is, How well will Nested manage in a market with falling prices? Will the algorithms capture where the market is headed?

On its website, Nested argues that the classic brokerage model incentivizes real estate agent to cut deals regardless of price, whereas Nested shares the upside with sellers. That sounds only partially true: agents get a percentage of sales price in the classic model. The higher the price, the more they earn. But the classic model doesn’t satisfy the need for homeowners to immediately get cash from their homes — typically their most valuable asset. Nested does.

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