Doubling Down: OwnHome's $31 million Series A, led by Square Peg and Commbank
Our Doubling Down investment notes deep dive into our follow-on decisions. We reflect on what we got right, what exceeded our expectations, and why we're excited to continue our partnership.
We have sunsetted the AfterWork Ventures Substack. The original post can be found on our website here.
In July 2021, AfterWork Ventures invested in OwnHome’s pre-seed round - when the company was a (very well-written) pitch deck.
In the last nine months, OwnHome has accelerated towards a $31 million AUD Series A, led by Square Peg (one of Australia’s largest VC funds) and with participation from the Commonwealth Bank (Australia’s largest retail bank). We are humbled to be doubling down on our investment by reinvesting in the Series A.
Here’s some kind words from James on working with AfterWork:
“The community that AfterWork has coalesced is incredible - both in the generosity and calibre of its members. They have been thoughtful advisors and sounding boards on hard problems, as well as connectors to the best and brightest talent in Australia. It has been invaluable to draw from this community as we navigate this enormous challenge”. - James Bowe, co-founder of OwnHome
In this note, we break down what we got right in our original investment thesis, what has exceeded our expectations, and what we’re excited to see going forward.
What we got right
In the tl;dr section of our initial internal investment memo, three of our points related to Team. Here are some extracts from our internal deal memo:
James and Tim are intelligent, resourceful, thoughtful, humble, and determined. It seems like solving hard problems is the thing that energises and rivets them.
They have a lot of lucrative / rewarding paths open to them at this point in their careers, but they’ve chosen to invest their time and energies in building OwnHome.
They’ve methodically de-risked different parts of the biz over the course of the last 12 months - customer waitlist, debt funding conversations, strategic bank partnership conversations.
While there’s still a long road ahead, we’re very glad we put our faith in James and Tim. In the last nine months, we’ve seen them grow from capable operators into expert negotiators, magnetic leaders, and compelling visionaries.
Since our pre-seed investment, the OwnHome team raised an initial tranche of debt to fund the purchase of its first homes, settled nine homes for happy customers, and have now secured multiple lenders as backers for their next phase of growth.
To put this accomplishment into perspective - it’s no mean feat to convince deep-pocketed financial institutions to provide a debt facility to a startup with no operating track record. Similarly, it’s not easy to convince prospective homebuyers to trust you with one of the most significant purchases of their life - their forever home. The team’s ability to win the trust of sophisticated debt providers and anxious homebuyers alike is a testament to their negotiating skills, professionalism, and diligence.
OwnHome has grown into a team of eight superstars, with hires hailing from Macquarie Bank, Herbert Smith Freehills, Crimson Education, and CBA’s x15 accelerator. In chatting to the team, their reasons for joining had a common thread: “James and Tim are the most incredible leaders I’ve ever met”.
OwnHome is different; the leaders are different; this team is different.
When I joined, I had working remotely as my ‘non-negotiable’. Within a week of meeting the team, I decided to relocate to Sydney - and I think it was one of the best decisions I’ve ever made. The energy, care, and inspiration that emanates from this team is palpable, as is the trust between team members. James and Tim are relentless in making sure our customers have the most amazing experience, our people feel challenged, fulfilled and supported to launch a generational business that solves housing affordability, together”. - Keri Clarke, Head of Partnerships
Upon watching this Sunrise segment, you’d be forgiven for thinking that James and Tim are regulars on breakfast television, sparring with Shirvo and Edwina like they’re old friends:
In all their media appearances, OwnHome have kept their vision front and centre.
With the growth in house prices outpacing growth in salaries for decades, house deposits have become an entrenched barrier to the housing market, disproportionately affecting those not fortunate enough to benefit from intergenerational wealth transfer.
In creating new pathways and on-ramps to home ownership, OwnHome is playing its role in democratising the dream of home ownership. To hear James and Tim speak to their vision, check out our podcast here:
What exceeded our expectations
OwnHome are creating a new class of financial product for institutional lenders
Australia has a well-established and robust residential mortgage-backed security (RMBS) market. In 2021, $39 billion was issued in new RMBS deals, and the total live balance of RMBS deals was $147 billion as of October 2021.
A RMBS is similar to a bond - it is a bundle of home loans that issuers of mortgages (i.e. banks and non-bank lenders) issue to institutional investors (e.g. superannuation funds). These investments are secured by the bundle of residential home loans within each security, and the home loans are in turn secured against the underlying properties. MBS investors generally receive periodic payments, similar to bond coupon payments.
In Australia, there is a sizeable cohort of people who earn enough to service a home loan, but don’t have the capital to meet the significant deposit hurdle. For these customers, OwnHome can act as an intermediary - OwnHome provides the upfront capital, and charges a monthly fee. The customer benefits from a locked-in purchase price in the future, and part of the monthly fee is used to build up equity towards this future purchase.
In time, OwnHome could bundle these contracts into a security that’s similar to a RMBS; providing an attractive, risk-adjusted return to institutional capital providers, while also protecting customers from a runaway property market.
Unbounded love from customers
OwnHome has settled nine homes for happy customers, and achieved a customer net promoter score (NPS) of 100. This is particularly impressive when compared to NPS at the Big Four banks - ANZ has the NPS highest at 15.4; Commbank and NAB have NPS in the single digits, and Westpac trails the pack at -6.9.
Of course, the challenge will be maintaining a high NPS as operations scale. However, customer stories such as these give us faith that great customer service is baked into OwnHome’s DNA.
What we’re excited for
Advancing the Australian Dream
Already active in New South Wales and Queensland, over the next 2 years OwnHome is aiming to buy 200 homes for customers. From there, OwnHome is ambitious to scale up operations exponentially, following in the path of US based Divvy, which is four years old and already buying 6,000 properties per year. We’re ambitious for OwnHome’s ability to keep pace with Divvy, after all - they’ve already smashed through some milestones in eight months, which Divvy took more than 20 months to achieve.
Growing the team from all stars into a constellation
The OwnHome team are superstars; high-performers on a steep learning trajectory, hungry for the ride of a lifetime.
In the next few months, OwnHome is planning to double the number of Homies, turning their team of eight all stars into a constellation. They’re looking for the best and brightest across engineering, policy advocacy, customer success, structured finance, and business operations. If helping people with the largest financial decision of their lives sounds like a mission that energises you - check out their exciting roles here.
We’re excited to be joined by Square Peg and CBA as Series A investors in OwnHome; and look forward to continuing to earn the opportunity to be long-term capital partners in OwnHome’s growth.
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