Brazilian Unicorn Loft Denies Receiving Down Round

The Brazilian proptech is said to have received a fresh injection of funding from Andreessen Horowitz, and which allegedly reduced its valuation by 65% to $1 billion

Photo: Diego Ramos Real Estate Photography / Courtesy
November 30, 2022 | 10:07 PM

Bloomberg Línea — Brazilian proptech Loft is said to have received a fresh injection of funding from Andreessen Horowitz, and which allegedly reduced its valuation by 65% to $1 billion, down from the $2.9 billion valuation the company achieved following its previous fundraising, according to two people familiar with the matter.

Loft, which operates digital platforms for buying and selling real estate and financial services for real estate transactions, denies the down round took place, however.

Consulted by Bloomberg Línea, Loft said in a statement that “there is nothing new in relation to new investment rounds”.

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“Any information conveyed to the contrary does not match the reality of the facts. It is pure speculation,” the company said.

In Brazil and abroad, startups in different sectors accept lower valuations while needing resources and experiencing difficulties in obtaining capita, as occurred with Swedish payments fintech Klarna, whose valuation would have dropped 85%, from $45.6 billion to $6.5 billion earlier this year following a fundraising led by Sequoia Capital.

The Brazilian startup, which has other financing alternatives in the capital markets, such as real estate funds and real estate receivables certificates to take credit for its projects, has received $800 million in private investment rounds to date.

Loft’s 47 investors include California’s Andreessen Horowitz, D1 Capital Partners, Advent International, DST, Monashees, QED Investors and Vulcan Capital.

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Loft used part of the proceeds from its previous funding to acquire companies in the real estate market.

In 2021, Loft bought CredPago and CrediHome, a home loan origination startup. The company also acquired Foxter, TrueHome in Mexico, 123i, a condominium portal, and Vista.

Consumer credit companies, in particular, are facing a challenging scenario in the face of rising interest rates, which increase the cost of borrowing and may put pressure on defaults.

Sources familiar with the subject, who asked not to be identified because the matters are private, said that Loft was out of cash and therefore accepted the down round.

Three months ago, in August, Loft transferred Nomah, its short-term stay startup to Mexican Casai and invested in the new company formed by the merger.

According to a source who asked not to be identified, the transfer of Nomah to Casai would have been a condition of the investors for Loft to receive the new funding.

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Andreessen Horowitz fused Casai and Loft and invested in the new company resulting from the merger.

Like other startups in the Brazilian market and abroad, Loft has laid off 543 people from its team since April. On the occasion of the first 159 layoffs, the company told Bloomberg Línea the redundancies were due to acquisitions.

Loft announced that it will start buying and selling houses in São Paulo, Rio de Janeiro and Porto Alegre, having previously only traded apartments on the marketplace.

Recently, the company also announced its new brand in Mexico, “Loft Mexico”, by renaming Mexican digital real estate trading startup TrueHome, which it had acquired in October 2021. The deal kicked off the expansion of the Brazilian company in Latin America.

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Loft founders Mate Pencz and Florian Hagenbuch met while working at Goldman Sachs. They founded a startup in Brazil, Printi, which was acquired by US company Vistaprint. They also founded a fund dedicated to seed investment, Canary, and in 2018 launched Loft.

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Hagenbuch recently left executive duties to take over as president at the head of the areas of culture and integration. Day-to-day management is in the hands of Pencz and the new COO, Marcel Regis, a 25-year veteran of Ambev and AB Inbev who joined Loft in June.

In April of this year, Pencz told Bloomberg Línea that, with the high interest rates, the company has observed a slowdown in the real estate credit market since the end of 2021.

In the same month, co-founder Kristian Huber also told Bloomberg Línea that, although the company has governance and compliance aligned to carry out an IPO, Loft could still raise funds with private investors and that there was no rush to go public.

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Tech companies are struggling this year as the market moves away from risky assets as interest rates rise.

Startups like Kavak, Clara and Clip took on debt through lines of credit provided by large US banks, as an alternative to raising capital without reducing valuation. The trade-off is usually the cost of borrowing or guarantees.

According to the Association for Private Capital Investment in Latin America (LAVCA), investments in venture debt accounted for 13% of the capital invested in the first half of 2022 in startups in the region.

In Brazil, one of Loft’s main competitors is QuintoAndar, which received a valuation of $5.1 billion in its last round of investments in 2021. In addition to the two Brazilian startups, Colombian companies La Haus and Habi (the country’s newest unicorn) and Chilean company Houm are other venture capital-backed startups vying for land to digitize real estate transactions in Latin America.