Digital mortgage lender Tomo is growing, even as rising interest ratings threaten to derail the runaway housing market and a beleaguered competitor pulls out.
Tomo, co-founded in 2020 by former Zillow executives Greg Schwartz and Carey Armstrong, raised $40 million in a Series A round and expanded to two new states, the company announced this week.
The Stamford, Connecticut-based startup says it more than doubled its valuation to $640 million with the fundraising, which follows a massive $70 million two-part funding round in late 2020 and brings its total equity financing at $110 million. A $312 million valuation participated in the previous funding round.
Tomo now operates in nearly a third of the United States After expanding into Michigan and Ohio, the company said it plans to cover half of the national market by the end of the year , as well as doubling its workforce to 300.
The company, which aims to cultivate an e-commerce-like experience for its customers, is hoisting its sails in a tumultuous mortgage market, fueled by unprecedented demand, record house prices and rising interest rates, which reduced the demand for refinancing.
“It’s a tough neighborhood, with sharp elbows,” Schwartz said. “At the end of the day, we focus on speed, cost and experience.”
Earlier this month, competitor Better.com laid off around 3,000 staff, around a third of its staff, citing a “dramatic” drop in mortgage volume – although the public relations fiasco surrounding the missteps of CEO Vishal Garg with prior layoffs may have played as well. a role.
Tomo and his investors are betting that by focusing on mortgage purchases, ensuring on-time loan closings and bypassing the “easy money” of refinances – where Better.com and Rocket Mortgage, its other main competitor, focus — it can grow the business and capture market share, Schwartz told The Real Deal.
He may only need to keep an even keel. The Mortgage Bankers Association expects the volume of mortgage purchases to continue to grow despite rising rates, even as demand for refinancing declines. The association recently projected $1.77 trillion in purchase mortgage volume in 2022 and $1.85 trillion in 2023, compared to $1.65 trillion in 2021.
Schwartz cited finding and retaining skilled labor as a challenge and a priority. “It’s quite difficult to hire world-class talent in technology, sales and marketing right now,” he said. “I spend half my time hiring and coaching.”
SVB Capital led Tomo’s Series A, with participation from existing investors Ribbit Capital, NFX and Zigg Capital. Telesoft Partners and proptech venture capital firm Parker89 joined as early investors.
With the new funds, the company plans to increase its investments in “software development, data science and industry relations,” he said.