Pine has acquired fellow Toronto-based tech startup Properly, including its brokerages and home search and discovery platform, as it looks to expand beyond just mortgages.
Founded in 2021, Pine began as a digital mortgage broker and recently became a mortgage lender. But as Herlick noted, mortgages come late in the home-buying process, and in order to reach more Canadians, Pine’s plans always involved moving upstream.
“We believe that there’s a really big opportunity in Canada to create the number one centre for real estate information.”
– Justin Herlick, Pine
Properly began considering a sale earlier this year, bringing on investment bank Raymond James to explore its options. For Pine, which was looking for its next move, the timing could not have been better. After seeing the news, Pine co-founder and CEO Justin Herlick expressed interest and Pine joined the bidding process, reaching an agreement after a six-week process.
“We had a lot of respect for the technology and the team that Properly had built,” Herlick told BetaKit in an interview. “We felt that it was a really natural fit, both being real estate innovators. Although we were playing in opposite parts of the spectrum, we thought coming together could be really helpful.”
Per Herlick, Pine’s acquisition of Properly enables Pine to cater to folks earlier in the home-buying journey. “Even if you’re not going to buy for a couple of years, we want to get our brand and our mindshare into the atmosphere.”
The all-cash deal closed in September and followed a separate transaction between Properly and United States (US)-based Compass. Herlick and Properly co-founder and former CEO Anshul Ruparell declined to disclose the acquisition price.
“Pine has an exciting vision for the future of home buying in Canada and we wish them all the best,” Ruparell told BetaKit.
Pine has built a digital mortgage experience that spans the entire mortgage process from application to loan. Pine seeks to eliminate what it calls unnecessary costs and lengthy processes related to in-person mortgage applications. Pine claims it has already processed billions in mortgage applications, but the company’s broader mission is to support customers throughout the entire home-buying journey.
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Enter Properly, a well-funded, tech-enabled real estate platform founded in 2018 with the aim of improving the home-buying and selling experience. In the following years, Properly made progress towards this goal, but as the real estate market began deteriorating in 2022, Properly faced difficulties, pausing its geographic expansion plans, laying off staff, and pivoting away from its home sale guarantee offering, Sales Assurance.
“We launched Properly to make Canadian real estate customer-centric and over time we supported thousands of buyers and sellers with novel services like Sale Assurance,” said Ruparell. “After five years of growth, shifting housing market conditions led us to reevaluate our growth assumptions, resulting in M&A discussions with Compass.”
Some members of Properly’s team are joining Pine as part of the Pine deal, but Ruparell and his co-founders, Sheldon McCormick and Craig Dunk, are not. For his part, Ruparell told BetaKit that Compass acquired “the bulk of Properly’s assets and IP” in August, while Pine acquired the startup’s “Canadian real estate brokerages and search portal” through this acquisition.
When asked to clarify the details of these transactions, however, Herlick told BetaKit that Pine had acquired all interests in Properly, including “100 percent of all Properly Homes Inc. equity (all legal entities associated with Properly/Properly Brand, all lines of business, all IP, etc.),” with the exception of an IP license.
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Ruparell confirmed to BetaKit that the IP Compass acquired is that of Properly’s Sales Assurance offering, while Herlick indicated that the assets that Compass purchased were “Properly’s remaining cash on balance sheet, which was then used to issue Compass shares back to Properly’s venture capital investors.”
Herlick described Properly’s current website as comparable to HouseSigma or Realtor.ca and stated that Pine’s goal in acquiring Properly is to make it into Canada’s top real estate website. According to Herlick, unlike in the US—where Zillow has the majority of market share—Canada is not dominated by a single real estate website.
“We believe that there’s a really big opportunity in Canada to create the number one centre for real estate information, whether it’s real estate news, or it’s real estate data, or its real estate listings,” said Herlick.
For now, Pine plans to keep the two brands distinct: Properly will be a real estate brokerage and search platform, while Pine will be a mortgage provider. Over time, the startup will explore whether it makes sense to combine under one name as it looks to integrate Properly’s platform with its own to offer a seamless online experience from home discovery to finalizing mortgages. In the meantime, Pine intends to offer Properly customers mortgage rates.
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While Pine has no more acquisitions planned over the near term, Herlick sees potential for the startup to explore additional M&A in the long run as it looks to execute its goal of becoming a “Wealthsimple for home buying.”
To date, Pine has secured $40 million CAD in funding from a group that includes Greylock, Inovia Capital, Original Capital, BoxGroup, Ludlow Ventures, Thomvest, Global Founders Capital, and Intact Ventures. This includes $13 million in previously undisclosed funding that Pine closed in mid-2022 from new investors like Garage Capital and existing backers, bringing the size of its Series A round to $34 million. According to Herlick, who declined to share the exact breakdown, the majority of this extension was equity and the remainder was venture debt.
According to Herlick, Pine has not yet become a Canada Mortgage and Housing Corporation (CMHC) approved lender. The CEO said that while gaining this status is still part of Pine’s strategy, it hasn’t been an obstacle to its growth. To facilitate its loans, Pine has utilized a forward-flow agreement that allows it to avoid cash flow risk on its balance sheet.
“We’ve just moved into an understanding that the environment is tougher.”
– Justin Herlick, Pine
Pine has now launched its lending program across the country except for Québec, and Herlick said this has been a “tremendous lift” for Pine’s business, helping it more than double its revenue per customer and enabling it to pass more savings along to clients at a time when many are seeking mortgage renewals and banks are typically not offering competitive rates.
The CEO claimed that the past three months have been record-breaking for Pine, noting that the company’s revenue is now in the millions, but did not disclose specific figures.
As the economy has worsened and interest rates have risen, Herlick noted that mortgage originations have fallen, and many mortgage companies have struggled. “The whole industry has shrunk,” he said. But despite these challenging conditions, Herlick claimed that Pine has performed well. The CEO attributes this to a few factors, including avoiding overhiring following its Series A round and launching its business at a time when rates were already increasing.
While Pine has been able to avoid layoffs, Herlick said the startup has placed a big focus on efficiency, hiring less than it would have otherwise and keeping its marketing spend steady. Per the CEO, Pine remains well-capitalized, with over three years of runway left after this deal. “We’ve just moved into an understanding that the environment is tougher,” said Herlick.
For his part, Herlick believes that Pine’s approach will work regardless of economic conditions. “We’re in a tightening phase right now,” he said. “I don’t think we’re going to see zero percent interest rates anytime soon. But I think, when we get back more to a neutral state, the brand value that we’ve built over these past few years of being an innovator and being a company that really wants to help Canadians will be even better.”
UPDATE (10/05/23): This story was updated to include additional information from Properly concerning the Compass acquisition.
Feature image courtesy Properly.