Written by FirstMark Partner Adam Nelson
Given our excitement about the Real Estate ecosystem, it should not come as a surprise that we jumped at the opportunity to lead Backflip’s Series A. Backflip not only embodies everything that we’ve written about Real Estate above but has put the promise into action, reaching top decile growth, capital efficiency and already surpassing a $10m net revenue run rate.
Click here to read the full announcement on TechCrunch.
The only thing more exciting than the performance of the business is the potential opportunity ahead. Backflip has over 18,000 loyal members but is just scratching the surface of a market that, without proper institutional capital products, still accounts for over $190 billion of transaction volume in the US. Backflip’s aspirations are not only to become the operating system for managing that activity but also to be a marketplace for all the transactions surrounding the “fix and flip” process.
While I first was a bit skeptical about the prospects for the “fix and flip” industry (it’s in dire need of a rebrand), I realized that this set of entrepreneurs provides a necessary service in transforming the ageing housing stock of the US into desirable homes the next generation of home buyers can afford. As a country, we are massively underinvesting in housing, and the result is that over 50% of houses are over 40 years old, we are experiencing a 3 million unit housing shortage, and median home values have outpaced median household income by ~2x over the past twenty years. This trend is only getting worse and Backflip is enabling the entrepreneurs who are tackling these problems head on.
While the long-term vision is to offer a suite of products to their community, today, Backflip primarily monetizes via their loan origination which has had zero losses of principal to date. Backflip’s approach and underwriting processes are designed to achieve investment-grade credit ratings and have led to a track record of exceptional loan performance that should help drive institutional capital markets to support these entrepreneurs.
Backflip is giving the SMB real estate entrepreneurs who are reinvigorating the US housing supply the tools to succeed in their business. In doing so, Backflip has enabled its members to realize an average gross profit of $82,000 per property on the platform and has driven members to come back for Backflip projects multiple times per year.
The combination of product craftsmanship, customer empathy, community, and capital markets prowess is incredibly hard to find but Josh and Jake, Backflip’s founders, represent that in spades. They are bringing an enduring company-building philosophy to the world’s most enduring asset class and we are so excited to join them on this journey to build a truly generational company and community.
As we’ve done in the past, sharing our investment memo for a deeper glimpse into what got us so excited about Backflip.
