- Greg Schwartz left Zillow after 13 years to start his own real estate tech company, Tomo Networks.
- At first financing, the months-old startup raised a growth-size seed round of $40 million from Ribbit Capital, NFX, and several others.
- The first-fime founder says he banned the pitch-deck and instead used a 20-page document filled with Easter eggs that helped him make sure potential investors read the whole thing.
- Visit Business Insider’s homepage for more stories.
Tech investors are lobbing money at Tomo Networks, a six-month-old tech startup that aims to take the paperwork drudgery out of buying a home. It’s helmed by a 13-year Zillow executive, Greg Schwartz, who’s never raised venture capital before.
Schwartz, cofounder and CEO of Tomo Networks, went on a four-month fundraising marathon to raise an initial seed round for his company.
Seed rounds are typically under $5 million, according to Crunchbase, but Schwartz and his cofounder Carey Schwaber Armstrong, also a Zillow alum, were aiming to raise $40 million. That’s because, Schwartz said, real estate is a “capital intensive industry” and their roadmap calls for hiring an army of software developers.
They pitched 50 investors over Zoom and landed slightly above their target from investors Ribbit Capital, NFX, Silicon Valley Bank’s venture arm, and others.
Tomo Networks is building digital products for buying a home. It’s starting with digital mortgages, a product that lets consumers apply for a loan, provide the necessary documents, and make payments from one elegant app.
The company’s first fundraise was notable for another reason: no pitch deck.
“We did no slides. We banned the deck,” Schwartz told Business Insider.
Instead, he and Schwaber Armstrong used a 20-page Google Doc to make their pitch. It laid out the company’s “belief systems,” he said, and had a number of “Easter eggs,” meaning odd bits of info hidden within those pages, so the cofounders could tell in meetings if the investor really read it. Only the serious investors would, they reasoned.
For example, when investors told the founders they laughed at the story of the elephant and the ballerina, which were placeholders for the two cofounders, the founders knew they had definitely made it to the end of the pitch document.
How a seed-stage startup was able to raise a growth-size round
Schwartz led the media and marketplaces businesses at Zillow before leaving to take a “gap year” last November. But holed up in the basement of his ski cabin during the pandemic, he ended up starting his new business in May.
He has a few theories on why the company’s seed round was oversubscribed.
For starters, every investor they spoke to had either rented or bought a home and knew the pain points. “They all had ideas on how to improve the process,” Schwartz said. “That opens doors immediately.”
Second, the total value of the housing stock in the US alone topped $33 trillion at the end of 2019, according to research by Zillow — and investors take care to put their money into startups with large market opportunities.
And it’s hard to imagine a better time to spin up a real estate tech startup than this year.
The pandemic has forced people to stay home, and so more Americans are taking advantage of low mortgage rates to gain backyards and roomier home offices or buying new homes altogether. The number of existing homes sold in August set a pace that hasn’t been seen since late 2006, before the Great Recession, the National Association of Realtors reports.
The real estate industry has completely reworked the closing process to allow people to get it done digitally, and many states are passing legislation to permit the use of electronic signatures and notarizations during the health crisis.
Schwartz, who bought a house this year that he only saw on a video call with his realtor, said consumers will refuse to go back to the old paper-based ways of buying a home before the pandemic. The industry only goes “forward from here,” he said.
“The idea of going into an office with a mask on to sign a bunch of documents is arcane,” Schwartz added. “If you want to sign the documents at midnight from your couch, you ought to be able to.”
Tomo Networks is far from the first startup to sell investors on digital mortgages, however. The category is crowded with startups like Better.com, which is in talks to raise new funding at a $4 billion valuation, as well as legacy real estate businesses like Zillow and Redfint that are going beyond listings to help consumers buy and sell their homes.
Schwartz said Tomo Networks will expand after introducing digital mortgages in the first quarter of next year.