Real estate tech started the year off with a bang, as home trade-in platform Knock closed a $400 million equity and debt financing round. Knock’s success began in their first market of Atlanta, where the company has two offices and almost half their employee base.
The round, which the three-year-old company is labeling a Series B, was led by Foundry Group with participation from existing investors RRE Ventures, Corazon Capital, WTI, and FJ Labs, and new investor Company Ventures. With this funding and a Series A round from early 2017, Knock has taken in over $600 million in equity and debt.
A good portion of the funding goes to allowing the company to buy new homes outright. This is because Knock’s business model requires the company to have homes ready for its users before they sell their old ones.
Founded in 2015 by Trulia founding members Sean Black, CEO and Jamie Glenn, COO, Knock came into the traditional real estate space to support home sellers that need to move fast while buying their next home at the same time — think partners with new cross-country jobs or last-minute downsizing.
Knock helps customers on both sides of the transaction by solving the problem of illiquidity. A user enters all the details about the home they’re selling and Knock’s data-crunching algorithm provides a trade-in price quote for the current state of your house. The platform uses that quote to identify new potential homes, and Knock helps you swap to the new house before even putting the old house on the market.
Once you move, the team prepares your old home to be sold, rolls any repairs into your new mortgage, and markets it to potential buyers to get the best offer in the shortest amount of time.
“We’ve found this is the best way to bring more certainty, convenience and cost-effectiveness to the home buying and selling process,” says Black.
“We effectively make an all-cash offer that gives them a competitive edge [on the new house], helping them win bidding wars and get an average 3-5 percent discount off the list price. This additional access to debt will enable us to buy more customers new homes in a more cost-effective manner.”
Knock thus provides a very different service than other iBuyer real estate platforms like Opendoor or Zillow Instant Offers. Black explains that it largely comes down to timeline.
“Knock offers the first and only Home Trade-in, solving for a need that other new companies in the real estate space do not. We are targeting a different consumer who wants the greatest value out of their equity on both the home their buying and the one they’re selling,” he says.
The platform also offers a predictive home search tool called Knock Deals, which ranks house prices in your preferred neighborhood, plus a machine learning-powered forecast tool that predicts which homes will sell below their original list price.
Black tells Hypepotamus that, as their first market, Atlanta remains their largest in terms of transaction volume. The startup has helped 4,000 people trade in their homes in the last two years, with over 2,000 customers in 2018 alone, according to Black.
Knock now serves four additional markets, including Charlotte, Raleigh-Durham, Dallas, and Fort Worth.
“We’re excited to be seeing similar growth rates in other Southeast markets we’ve entered like Charlotte and Raleigh-Durham,” Black tells Hypepotamus.
In addition to providing capital for home buying, the funding will go towards hiring to support many more market launches, says Black. They plan to double the number of markets they serve in 2020.
“We’ve been building the necessary people, process and technology, and collecting thousands of data points, to advance our model and deliver the best possible version of this service,” he says.