Doma, formerly known as States Title, will be the next proptech start-up to go public through a SPAC. The company will be listed on the New York Stock Exchange under the ticker symbol "DOMA."
The rebrand was done in order to better articulate the company's plans to further expand into areas such as appraisals and home warranties.
SPAC frenzy continues
As a reminder, a SPAC is a "blank-check" company designed to identify and acquire a private company to take public. SPAC investors are essentially investing in the management team's ability to find a suitable candidate to take public in the near future.
The SPAC wave is full steam ahead for proptech companies. Opendoor (NASDAQ: OPEN), an iBuying leader, used a SPAC to go public in late 2020. Porch (NASDAQ: PRCH), a platform that connects homeowners with service providers, also went public via a SPAC last year.
More recently though, we saw smart lock maker Latch go public through a merger with TS Innovation Acquisitions Corp. (NYSE: TSIA) with a SPAC this year, while Matterport, a company that takes the built world virtual, announced it will also be using a SPAC to go public.
What's Doma up to?
Launched in 2016, Doma was built to instantly underwrite title insurance. Since then, the company has expanded into other areas of closing and escrow. Doma states it can process titles in "as little as one minute," a process that historically takes up to five days.
Doma has facilitated over 800,000 real estate closings since inception. The company has worked with lenders such as Home Point (NASDAQ: HMPT), Sierra Pacific Mortgage, and Chase Bank (NYSE: JPM).
Company performance and projections
Doma did $358 million in revenue in 2019, growing by about 15% to $410 million in 2020. The key metric for Doma, though, is retained revenue, which is the revenue net of premiums paid to agents. Retained revenue figures were $180 million and $190 million for 2019 and 2020, respectively.
One of the attractions for companies using a SPAC to go public is that financial projections can be reported. Doma is expecting top-line revenue of $416 million this year, with $226 million in retained revenue. The company is expecting to lose $103 million this year after losing $35 million last year. Doma expects to take a couple of years before turning a profit.
Not the only mortgage technology headline
Another mortgage technology startup, Valon, raised $50 million earlier this year. Andreesen Horowitz led that financing round, while WeWork's founder, Adam Neumann, participated as well. Valon is tackling a different part of the industry: mortgage servicing.
Flagstar Bank (NYSE: FBC) recently finished up its mortgage accelerator's second cohort. The bank says this is the first start-up accelerator to focus exclusively on mortgage technology, a subvertical of proptech. Flagstar encouraged start-ups focusing on compliance, credit and quality, marketing, origination, processing, sales, servicing, and underwriting to apply.
The Millionacres bottom line
Homeowners and landlords should be excited for companies like Doma to gain widespread adoption. Tools like Doma's can help put downward pricing pressure on the overall cost of the mortgage experience. That being said, if you're looking at investing in the Doma SPAC, expect at least a couple years of heavy losses before the company becomes profitable.