In just three years of existence, San Francisco-based company Sundae execs have reported raising at least $135 million in venture capital and expansion into 20 markets across the country. Co-founded by former executives at residential bridge lender LendingHome, Sundae taps into homesellers discontented by real estate agent fees as well as the growing pool of home investors.
But the fast-growing business hit a snag last week, announcing layoffs to 15% of its workforce.
“In order to protect our future and ensure Sundae is around for decades to come, we made some tough but important decisions,” Josh Stech, CEO of Sundae stated. “These decisions impacted 15% of our team members, primarily in our youngest markets.”
A spokesperson for Stech did not answer a question regarding the number of employees Sundae had. However, a TechCrunch article from last July pegged Sundae’s headcount at “180 mostly remote employees.”
But the TechCrunch story also reported the company is “closing in” on an $80 million round of fundraising, which would result in new hires. As of last July, Sundae operated in 14 markets. Today the company is in 20 locales, including three new operations in South Carolina and additional offices in California.
One employee who had been laid off and spoke on the condition of anonymity said she had received assurances no layoffs would take place. However, she said, company circumstances quickly changed.
“I received a Zoom seminar invite on the morning of June 16,” she said. “I couldn’t see who was invited, so I assumed it was a layoff announcement.”
Her assumption was confirmed once her Slack messaging platform became deactivated.
“I was surprised and not surprised at the same time,” she said of the layoffs, noting the company had acknowledged “slower than expected growth” in the third and fourth quarters of 2021.
Stech described the pink slipped employees as, “Wonderful people we would have loved to keep under different circumstances. We did our best to communicate these changes in a way that aligned with our values of empathy and transparency.”
For the areas in which it operates, Sundae is a matchmaker between home seller and home investor.
“Sundae’s marketplace helps homeowners sell their property in as-is condition, quickly and for the best price,” Stech explained.
Under the business model, a homeowner reaches out to Sundae to sell their home for cash. Representatives at Sundae conduct an in-person home inspection and evaluate the cost of any repairs or refurbishment. Then, with a valuation and repair number, Sundae kicks the home over to a pool of registered investors who bid for it.
For the seller, the stated appeal of such a model is that Sundae – unlike a real estate agent or an iBuying company – does not charge a 5-6% fee off the sale price. Sundae, instead, makes its money from fees investors pay. Also, like an iBuyer, the seller is able to quickly exit their abode.
As for investors, Sundae provides a pipeline of possible asset purchases. About 18% of all homebuyers in the fourth quarter of 2021 were investors, according to Redfin, with an investor defined as any institution or business who does not plan to use the house as a primary residence.
However, in practice, the former employee said, the arrangement doesn’t always work.
“A lot of times they were struggling to convert the homeowner because the offers they would get would be rather low compared to what the homeowner felt the home was worth,” she said.
Sometimes the potential seller would then ditch Sundae, the former employee claimed, and take their business to an iBuyer like Opendoor.
Stech co-founded the company with Andrew Swain, now Sundae’s chief financial officer, the same position he held at LendingHome, an online mortgage bank specializing in short-term bridge loans.
Connie Kim contributed reporting
