Even before the commission crunch, real estate agents have struggled to make ends meet. Through brokerage partnerships, Upfront aims to ease access to credit for working agents.
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Diagram Ventures led a $2.5 million funding round for real estate fintech platform Upfront, a tech solution that streamlines credit access for working real estate agents through brokerage partnerships, Inman has learned.
ROC Venture Group also contributed to the round, $1.5 million of which arrives as equity. The remaining $1 million is debt funding.
“Payday loans and credit cards exploit financial needs by trapping agents in a debt cycle with high interest rates,” Upfront CEO Mukund Venkatakrishnan said in a statement Wednesday. ”At a time when the real estate industry is facing big commission pressure and sales volume is at a historic low, we saw an opportunity to create real estate-native financial products that truly serve their users.”
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Upfront’s model aims to provide brokerages with the financial incentive needed to lasso new talent — often a prohibitively costly hurdle for new entrants without capital, according to an announcement Wednesday.
Expenses for agents, meanwhile, can range from marketing commitments and lead generation to association dues and continuing education. Software, clothing, vehicle expenses, conferences, subscriptions and other necessities for business growth are rarely provided by brokers, and an agent’s 1099 employment status can limit institutional funding options.
The company said it can reduce time to access capital by 66 percent, relying on future commission payouts to back the funds. “The company’s unique model includes partnering with brokerages to drive down fees for agents and offer greater transparency, with no credit score impact,” executives said in the announcement.
“It’s expensive to be a real estate agent, and it’s time to bet on the critical role agents play in the home transaction process,” Upfront co-founder Pierre Calzadilla, a former broker and 16-year proptech veteran, told Inman in an email. “Upfront believes in the critical services agents provide, and we will empower them to reinvest in their business and financial well-being.”
Calzadilla said Upfront’s fee structure makes its model more competitive than rivals without burdening agents. The company charges a 50-66 percent lower one-time fee, he said, than his competitors, whom he declined to name.
“In New York commissions can take 90 days to receive from contract signing, and for a listing agent it could 3 to 6 months everywhere in the U.S.” Calzadilla told Inman. “We would reduce time by a pretty big order of magnitude – almost 0 – once the contracts have cleared contingencies. Our average client to date has been a 6.5 percent fee for up to $20,000 with 60 days til closing, and an additional 30-day grace period.”
Upfront is one of four initial startups to comprise a cohort of companies formed by minority-minded proptech accelerator Equity Angels. Katherine Winston and Kenya Burrell-VanWormer united to build the accelerator to provide professional mentorship, fractional executives and fundraising preparation for companies launched by entrepreneurs from diverse demographics.
Upfront isn’t alone in its launch of a financial solution for real estate agents. Tongo, a company that offers a line of credit to real estate agents, also rolled out its Financial Benefits Platform in September, serving brokers or their back-office teams in commission split management and fund deliverance.
“Millions of professionals in the real estate industry work on commission and have irregular income streams,” Tongo co-founder Brandon Wright acknowledged earlier this month, echoing the challenges Upfront executives pointed out Wednesday. “This hinders them from building their credit scores and delays retirement because contributions to savings and retirement accounts aren’t routine or automated.”
Editor’s note: This story has been updated to more accurately reflect Upfront’s fee structure.