Sundae -- a San Francisco startup with a marketplace that matches distressed homeowners with investors -- in a Series C funding round raised $80 million co-led by Fifth Wall and General Global Capital.
Sundae keeps raising money, all the while hurling insults at its main competitors: real estate wholesalers, calling them "predatory fix and flippers." The irony: Sundae is a real estate wholesaler, only an institutional one that's pretending to be more virtuous than the other guys. In fact Sundae's CEO, Josh Stech, says, "Our goal is to displace wholesalers."
Sundae raised over $130 million
Although Sundae is just another middleman trying to get a cut of the action between sellers of distressed properties and the investors who want to buy those distressed properties, whatever Sundae is selling, investors are buying.
In total, the company has raised around $132 million in funding from investors, including QED Investors, Wellington Management, Founders Fund, Susa Ventures, Navitas Capital, First American Financial, Crossover VC, Intersect Capital, Gaingels, Oberndorf Ventures, and Prudence Holdings.
How Sundae works
Sundae works as a sort of discount version of a multiple listing service (MLS). When homeowners sell using a real estate agent, that agent usually lists the home on a local MLS so that buyers can find the home. But homeowners of "as-is" properties often don't think to sell their home the traditional way, or can't, and are often ripe for wholesalers who inevitably approach them.
Sundae wants to get those owners before the wholesalers do. Its strategy is to entice homeowners of distressed properties to list on the Sundae marketplace. Sundae does this by offering a $10,000 cash advance to anyone who lists on the Sundae marketplace, as long as the house meets Sundae's qualifications upon inspection. Sundae also claims to net customers more money overall. This strategy seems to be working, as Sundae realized a 600% year-over-year revenue increase from June 2020 to June 2021.
The difference between regular wholesalers who deal in off-market distressed properties to assign to investors and Sundae is the marketplace, which gets investors competing for homes. Theoretically, homes sell for a higher price since bidding wars are likely to happen.
How investors use Sundae
Sundae started in four California markets and has since expanded to 14 markets in the following states:
Investors who want to use Sundae must first register with the Sundae marketplace and then look for a home. If they find one they would like to purchase and if their offer is accepted, the investor pays a fee to Sundae to assign them the property -- exactly like what a traditional wholesaler does. The only difference is instead of deals being strictly off-market, Sundae lists its wholesale deals on its marketplace.
The Millionacres bottom line
Sundae is growing and is using its latest funding round to expand to even more markets and hire more employees, meanwhile trying to disrupt the wholesale industry. If you buy distressed properties where Sundae operates, you might want to check it out and compare this company with the way you normally do business. Sundae at least gives you another choice.