“Cash buyers have become a must-have in the nation,” says Wei Gan, co-founder and CTO of Ribbon, a platform designed to turn all buyers into cash buyers. Gan says they he and co-founder Shaival Shah, CEO, have increasingly gone up against cash offers themselves and found the competitive nature of bidding on homes to be challenging. “We founded Ribbon in 2017 and publicly launched in 2018 with the mission of making homeownership achievable,” says Gan. “The big challenge we saw then was that cash offers were beating out everyone else in the market. Now, it’s gotten ten times worse.”
Today, Ribbon announced that it has secured $150 million in funding. According to the press release, “this is inclusive of $75 million in Series C equity financing and $75 million in additional working capital.” New investors include First American Financial, Waterfall Asset Management, TriplePoint Capital, Spencer Rascoff’s 75 & Sunny Ventures, Gary Beasley, Gregor Watson, and Guy Gal, founder of SIDE.
New wave of business models
Ribbon is one of a new wave of alternative financing models offering products that allow buyers to write non-contingent, all-cash offers so they can compete better against institutional investors and other all-cash buyers. “Every seller is looking for certainty. We’re standing in, saying that if the buyer needs more time, we’ll step in and buy the home to allow the transaction to close on time, but we’re not a lender or iBuyer and we don’t offer bridge loans,” says Gan. Ribbon charges “a small transaction fee as part of the transaction,” says Gan. When asked how many homes the company has had to purchase, Gan said, “We don’t share that number publicly, but I will say it’s the minority of homes.
Unlike other similar companies that promote their services directly to consumers, Ribbon works through real estate professionals, lenders, loan officers and real estate brokerages. “This has been the key to our growth,” says Gan. “Enabling, instead of disrupting, the [real estate] ecosystem is important. A lot of brokerages have lending arms that are a core source of revenue for them. We plug nicely into the brokerage, ultimately helping homebuyers.”
While real estate brokerages such as Allen Tate Realtors in North and South Carolina have embraced Ribbon’s services, he notes that one of the fastest-growing channels for them is on the lender side. “Partnering with lenders — local, regional and national — to enable their loan officers to work with real estate agents ultimately helps the homebuyer in this hyper-competitive market where they need cash to win. Our end goal is the same as lenders and real estate professionals — to serve home buyers and sellers.”
Aggressive growth plan
Ribbon recently expanded into Florida, where, according to Florida Realtors data, 3,771 single-family homes were purchased with cash offers in May 2020. In May 2021, the number tripled to 9,376 — a 148.6% increase. They are currently in six states: North Carolina, South Carolina, Tennessee, Georgia, Texas and Florida. As part of their Series C funding they plan to expand nationally, but that’s just one part of the pie.
“When it comes to our strategy, geographical expansion is just one dimension. We will continue to innovate on the financial product side. For example, I think we are still the only company that offers appraisal protection.” Those innovations are taking place “in conjunction with our lender and real estate brokerage partners,” says Gan.
The other dimension is the software side. “A lot of the financial products are powered by our ability to tell you what can bid on a home. What is your max offer? We have a product called Ribbon Hub that allows the agent to make an offer through their phone. It will auto-fill all the core components. We’re seeing agents using our mobile app to put in an offer coming out of a showing because they need the speed,” he says. “Providing this free layer of software is part of our growth strategy.”
Gan says that this new type of financing business model is the second wave of venture-capital infused companies looking to grab a piece of the real estate pie. “What I mean by that is there is no trillion dollar Amazon of real estate — yet. That’s because the first wave was about discovery and search and were run as media companies. This next wave you’re going to see a lot of companies getting deep into the transaction.” While Gan wouldn’t reveal if they would be filing an IPO, he did note that his company, which is trying to transform the home buying and selling experience is going to be a much bigger piece of the pie” and that pie alone, “certainly supports a public company.”
Wall Street and Silicon Valley have been desperately trying to disintermediate residential brokerage for the last 25 years, but they haven’t been able to crack it in a meaningful way. Will this new wave of disrupters manage?
Gan thinks so. “I remember a stat that really stuck out to me. The cash offer percentage nationally, back in 2017, was about 33%, about a third of all offers were cash. That number has grown every year. It’s a problem that’s here to stay, so we think we’re pretty resilient. We’re helping everyday families who don’t have millions in cash lying around. They’re able to compete on the same level as the giant institutional funds buying homes out there. We want to make that whole home transaction process seamless.”