Better.com Digital Mortgage Provider Raises $200M in Series D Round

Better.com, the fast-growing digital mortgage platform, recently raised $200 million in a Series D round. Observers value this New York-based digital-first homeownership startup at around $4 billion.

L Catterton, a private equity firm based in Greenwich, Connecticut, led the Series D round. Other participants in this Series D round included Activant Capital, Ally Financial, American Express Ventures, Ping An Global Voyager Fund, and 9Yards Capital. This latest fundraising round comes ahead of Better.com’s plans to gear up for a potential IPO in 2021. The company selected Morgan Stanley and Bank of America to be the lead underwriters for its planned 2021 IPO.

Michael Farello, a partner at L Catterton, stated: “Better.com has overhauled the process of getting a mortgage, making the process faster, easier and cheaper for Americans. We’re proud to support them.”

How Better.com Works

Better.com Homeowner Insurance
Better.com Homeowner Insurance

The in-house insurance agency of Better.com has a better-known name, Better Cover. Better Cover enables customers to find policies tailored to their needs alongside their mortgage applications with Better Mortgage. Better Cover quickly provides customized quotes from digital insurance companies. These companies include Lemonade and Hippo as well as traditional insurance carriers. For title insurance coverage, Better.com offers Better Settlement Services to provide competitive rates to customers. Better Settlement Services also integrates with customers’ mortgage applications with Better Mortgage.

From Fast to Rapid Growth

Since 2019, the company has experienced a period of particularly rapid growth. In the past year, Better.com’s funded loan volume has expanded over four-fold. It is on track to generate $800 million in revenue this year. The company now has over 3,000 employees, and it is looking to hire considerably more employees to meet accelerating demand. About 500 of these employees are non-commissioned loan officers.

Better.com Wants to Remove Barriers to Home Ownership

Vishal Garg was motivated to found Better.com after experiencing his own challenges in navigating the home buying process. Despite Garg and his wife were both young professionals with reasonable access to capital. Nevertheless, they struggled to obtain pre-approval for a mortgage. By the time they were finally able to obtain mortgage financing, they lost the house they wanted to another buyer. The competing buyer was able to act faster with an all-cash offer. This harrowing experience inspired Garg to create a mortgage platform based on a digital model, which would increase the speed of obtaining a mortgage. It also inspired the introduction of the startup’s other features such as a commission-free structure, with the goal being to level the playing field for consumers.

Competition from Rocket Mortgage

Rocket Companies, a Detroit-based mortgage and real estate services platform, is a formidable competitor. It is the parent company of Quicken Loans. The company went public with a $1.8 billion IPO in August. Rocket Mortgage, currently the largest mortgage lender in the United States, has been an innovator in the fintech space. In as little as eight days, clients can create a Rocket Mortgage online account and sign closing documents. The widespread adoption of its digital tools has enabled the company to provide $145 billion of mortgage loans across the United States in 2019.

Ryan Carpenter serves as Attorney and Managing Director of Carpenter Wellington. Ryan advises clients across a broad set of corporate and commercial matters.

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