Backflip flips over its latest capital raise

Fix-and-flip lender Backflip raised $184 million of new capital to help fund its operations through a number of equity and debt transactions.

The additional capital comes on top of the $15 million Series A round it completed in April with a group of nine investors, led by Firstmark.

Including and through the Series A, Backflip raised a total of $50.4 million in four rounds, according to Crunchbase.

Part of the new transaction includes a $20 million joint venture with previous investor (from the Series A) ECMC. The second equity portion involves a $10 million Backflip-managed private credit fund.

On the debt side, Performance Trust arranged a $100 million warehouse line of credit, while Setpoint provided a $54 million credit facility.

The fix-and-flip product is one of those included in the broader category called residential transition loans. The company refers to its clients as "members" and noted a year ago that 53% of its loans were made to people of color.

For the trailing 12 months up to the time of this announcement, Backflip had a $375 million run rate, with members analyzing an average of $10 billion in properties each month through its app.

"Raising these private credit vehicles and the warehouse facilities allows Backflip to offer ever-improving capital products to our members doing the important work of rejuvenating obsolete homes," said Jake Rome, co-founder and chief operating officer, in a press release. "We are grateful for the trust and support of our capital partners, and are excited to be on the front lines of a rapidly institutionalizing investment asset class."

Backflip pointed to Morningstar DBRS comments on Sept. 19 regarding the sector, noting that the first-ever rated transaction came in February from Toorak Capital Partners.

Approximately $4 billion of RTL were included in securitizations in the first half of 2024, rated and unrated, representing a 546% increase compared with the first six months of the previous year, Backflip pointed out.

The Morningstar DBRS report said 100 RTL securitization transactions have been completed since 2016. Since that first Toorak deal, Morningstar DBRS has either rated or performed presale reports on eight other RTL securitizations.

"Historically, the RTL industry has been somewhat fragmented with variations in operational processes, lending approaches, and target borrowers. However, some aspects of this appear to be changing with the emergence of rated RTL securitizations and an expanded investor base," said Corina Gonzalez, associate managing director, U.S. RMBS ratings at Morningstar DBRS, in the commentary for the report. 

"This trend toward standardization is a key turning point for a growing asset class, when word spreads and what was once a niche product gains mainstream acceptance," she added.

Many Backflip originated loans are included in securitized transactions, a company spokesperson said. The company is keeping its options open regarding directly securitizing its product in the future.