Deal Abstract
Deal Link: https://republic.co/nada
Company Site: https://nadahomes.com/
Company Overview: Nada launched in early 2019 on a simple value proposition of better service for a fair price. As a new brand in an established market, we were able to generate over 3,000 client sign-ups through our digital marketing efforts. With over 75% of our realty clients relying on Nada to secure mortgage financing and title services, we validated the market need for a vertically integrated solution while generating over $250k in revenue. Nada's validation during this phase led to the launch of three additional business verticals: Mortgage, Title, and Insurance. Nada's integrated service and technology platform has proven to attract experienced independent real estate agents looking to provide a better service for their customers. Most notably, in early 2020, an established DFW-based brokerage, SubZero Realty, recognized the value in our platform and joined the Nada family. With the merger of SubZero Realty, we are now able to bring more savings to Texas homeowners. This validated our ability to accelerate via a low-cost and efficient platform strategy.
Decision
Invest
Why Investing/Passing
I've decided to invest because I think Nada has a great product, that saves people money, and solves a ton of pain points in one seamless app. Furthermore, the team seems extremely competent and well aware of what they are doing. Reviewing their profiles gave me a lot of confidence that they are the right team to pull this off! There are definite challenges going forward, with regulation, growth, competitiveness of the market and complex bridging of verticals (homebuying, mortgages, titles and insurance). If they some how pull it off, I think it will be a great success for homebuyers and investors.
Financials (References)
Total Amount Raised: 298351
Total Round Size: 1070000
Raise Description: Seed
Seed Minimum Investment: 100
Investor Security Type: Crowd Safe
Valuation Cap: 12000000
Offering Type: Crowd
The 6 Calacanis Characteristics
A startup that is based in SV?
Check: No
Note: Based in the American Heartland of Dallas, Texas
Has at least 2 founders?
Check: Yes
Note: Yes, team has multiple cofounders
Has the product in the market?
Check: Yes
Note: Launched in early 2019
6 months of continuous user growth or 6 months of revenue?
Check: No
Note: User growth isn't clear with the data that they shared on the Repbulic platform. However, in their updates, they've mentioned they recently had their best month ever. So I am leaving as a no, because I can't confirm the past 6 months, but they have recently posted positive results from their updates.
Notable investors?
Check: No
Note: Haven't seen any notable investors... They are in UT's accelerator program, but that hardly brings a level of prestige.
Post-funding, will have 18 months of runway?
Check: No
Note: Can't confirm, as I have no access to their data and monthly burn rates.
The 7 Thiel Questions
The Engineering Question
Score: Good
Analysis: The team is solving a huge pain point for homebuyers through a seamless technology. By covering the real estate, mortgage, title, and insurance verticals they are allowing homebuyers to take care of a significant portion of the home buying experience through their app. Will they change the world for the better, NO, but will they make the home buying a hell of a lot easier, yes!
The Timing Question
Score: Great
Analysis: With Covid pushing for more digital experiences and millennials, who are not afraid to make big purchases online, starting to buy more homes, there is a huge opportunity available. Nada can ride the wave of large online purchases and be a leader in the industry!
The Monopoly Question
Score: Bad
Analysis: There are tons of players in the real estate world, so having a monopoly will be no easy accomplishment. Furthermore, there is a trend of traditional real estate players making a play to be tech-friendly, like Quicken Loans. While I think a monopoly will be impossible, it is a good sign that there are so many players and this can still be extremely profitable given the size of the market.
The People Question
Score: Good
Analysis: While the team lacks a technical co-founder, they sure seem to know what they are doing. The team has 3 founders with a considerable amount of experience in the finance world and some experience in the real estate industry. The team appears to be fairly competent based on their careers and capable of building a very profitable company.
The Distribution Question
Score: Great
Analysis: I think they have a great distribution channel, buy getting a buyer or seller on the platform they can put them through the other channels for mortgages, titles, and insurance and eat the Nada dog food. Also, I feel that many homeowners and realtors will discuss the no fees among each other creating a strong referral network.
The Durability Question:
Score: Good
Analysis: While there are a ton of real-estate players in the game, building an app and getting through the regulatory process is quite an accomplishment. Also, home buying isn't going anywhere, anytime soon (knock on wood). People need places to live.
What is the hopeful secret?
The hopeful secret is that consumers have such an amazing experience on Nada and save a ton of money that they tell everyone they know. Referral marketing and virality seem like wishful thinking for creating the success of the company. However, Nada is saving homebuyers thousands of dollars and I think that is a strong incentive to share their experience.
What has to go right for the startup to return money on investment:
1) Nada needs to provide an amazing customer experience. While the product seems great in its current stage and will continue to improve, home buying is extremely personal, stressful and costly. I'm sure there will be (many first time) homebuyers who have no clue what they are doing and will need to depend on the customer success team for help. If Nada can be an amazing guide for their customers they will have undoubted success.
2) Handle regulatory issues properly. The housing industry is ever-evolving and full of changes, and by being in 4 different verticals, I'm sure there will be constant adjustments that Nada will need to be aware of and as they grow, this list will only get larger and more complicated.
What the Risks Are
1) There are a ton of regulatory issues in the housing industry, if Nada somehow gets caught in-between these issues, or is able to adapt to a change quickly enough, it could spell doom for them.
2) While the housing market will always be here, it can be volatile and have serious and prolonged downturns. If another home buying downturn happens before Nada can gain real traction, it could cause them to fail. I am especially heightened about this with Covid and the unpredictability it will bring in the next few years.
Sources
Linkedin: https://angel.co/company/nada-inc
Updates
This is where I’ll post updates about the company. This way all my notes from offering to post-offering updates will be on one page.
Review these deal memos every time the startup raises a new round
Test if the original thesis still applies
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