When executives at online Mortgage bank Better.com decided earlier this year to go public. Instead, Better will reach the public markets by merging with blank check company Aurora Acquisition Corp in a $ 7.7 billion SPAC deal.
While SPAC companies’ stock performance was shaky at best after the merger this year, the Better team believed they could get a better deal by combining it with Aurora (and additional investments from SoftBank) than they would if they had decided to bankers and institutional clients sell to investors through a traditional IPO roadshow.
“When an investment bank signs up to sell your shares to the public, there is no price guarantee or certainty of execution,” said Vishal Garg, CEO of Better. “We just weren’t confident that the investment bankers would be able to execute the execution.”
Better’s leadership can hardly be blamed for this lack of self-confidence. Last year, two more online mortgage lenders – Rocket Companies and LoanDepot – went public through traditional IPOs, priced below the price range due to lackluster demand from institutional investors.
The same thing happened with real estate agent Compass, which lowered its target range on the day it went public and has continued to drop its share price since going public.
“A traditional public offering makes sense for a story your traditional investment banker can understand and categorize,” Garg said. “If you can easily be categorized as an enterprise SaaS company or a payment company, a public offering makes sense.”
But the Better team has bigger ambitions than just being seen as mortgage lenders and being compared to other financial services companies. With the mortgage loan at its core, Better has added a number of additional products and services including real estate brokerage, property insurance, and homeowner insurance.
Better plans to begin offering home services and improvement loans in the second half of this year, and eventually expand to other financial and insurance products such as personal, auto and student loans, as well as life and disability insurance.
“We’re not that easy to categorize,” said Garg.
Make mortgages cheaper, faster and easier
Like many digital disruptors who wanted to turn established industries upside down, Better was born out of a person who wanted to solve a problem for himself. Sometime around 2012, Vishal Garg, founding partner of One Zero Capital and founder of online student loan company MyRichUncle, was hoping to buy his “dream home” but got stuck in the process of securing a mortgage and lost the bid for a buyer who got the business faster could complete.
As the apocryphal founding story suggests, there were few options for someone wanting to apply for and secure a mortgage online – or even get a mortgage pre-approval letter. So Garg set out to build it.
“The original vision was to go from tenant to homeowner process. cheaper, faster and easier, ”said Garg. “We have developed a product that allows you to get a pre-approval letter online in five minutes instead of five days or five weeks.”
Sarah Pierce, who joined the company as one of the first 30 people and now leads all sales and operations, said Better was able to achieve its goal of getting a mortgage approved faster by using its borrower risk assessment technology.