(Bloomberg) -- Orchard, which offers cash to homebuyers upfront so they can purchase a new residence before selling their old one, raised $100 million to fuel growth in an ultra-competitive housing market that's pushing shoppers to find new ways to stand out.
The fundraising round values the startup at more than $1 billion, making it the latest unicorn company to tackle the challenge of simplifying the process of buying or selling a home. Boston-based Accomplice led the round, with existing investors FirstMark, Revolution, First American and Juxtapose also participating.
“We can say we're a unicorn, which feels good for about five seconds, and then it's back to the real world of building a business,” Chief Executive Officer Court Cunningham said in an interview. “We're trying to create a modern way to buy and sell homes, and that's capital intensive.”
Cunningham, previously CEO of online marketing company Yodle, started Orchard in 2017 to take on what he viewed as a ripe opportunity: Consumers were frustrated with the traditional way of buying and selling homes, and the $1.7 trillion U.S. housing market was big enough to make tackling the problem worthwhile.
Orchard focuses on people who are trying to buy their next home while selling an existing one, a nerve-wracking process that can cause a transaction to collapse or result in households carrying two mortgages.
In addition to offering cash to help clients buy their next home, the New York-based company provides funds to make light repairs before listing the existing home on the market. Orchard seeks to profit by operating as a brokerage and earning commissions.
The startup's gross transaction volume is approaching an annual run rate of $1.5 billion, Cunningham said. At that level, the startup remains a tiny part of the housing market, but investors see Orchard and companies like it soon having a bigger piece of the pie.
Read more: HomeLight Nabs $1.6 Billion Valuation in Zeev Ventures-Led Round
Publicly traded companies known as iBuyers are pioneering a high-tech approach to home-flipping intended to make selling properties easier. Those firms include Opendoor Technologies Inc., Redfin Corp., and Offerpad Solutions Inc. A fourth, Zillow Group Inc., recently raised $450 million by issuing bonds backed by the homes it buys and sells.
Orchard's business model places it in a group of companies that real estate tech strategist Mike DelPrete calls “power buyers.” Others include Knock, which has explored going public, and Flyhomes, which raised $150 million in June.
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