Data and technology are bringing changes to commercial real estate financing, an industry that has traditionally been slow to adopt innovation. The availability of data from both lenders and borrowers has allowed real-time data to be a determinant of credit decisions. Tech-enabled platforms allow borrowers to seamlessly connect to non-bank lenders, marketplace lenders, and traditional lenders. Lev is a commercial real estate full-stack financing platform that digitizes all facets of the commercial real estate financing process that handles transactions from beginning to end – origination, diligence, and closing. The company leverages machine learning to optimize the workflow of a financing, resulting in fewer errors and faster turnaround times, giving more flexibility to borrowers and lenders. In 2020, Lev closed $100M worth of financing on its platform and this year is on pace to close $1B+.
AlleyWatch caught up with CEO and Cofounder Yaakov Zar to learn more about the commercial real estate market, the company’s strategic plans, latest round of funding, which brings the total funding raised to $42.4M, and much, much more.
Who were your investors and how much did you raise?
We have just raised a $30M Series A financing, led by Greenspring Associates, with participation from First American Title, NFX, JLL, Canaan Partners, ANIMO Ventures, and Ludlow Ventures.
Tell us about the product or service that Lev offers.
Lev is a digital commercial real estate transaction platform that uses proprietary technology to underwrite and automate deal processes, along with market-leading capital markets professionals, to secure the best financing for CRE owners and investors. We are building the full-stack, digital solution for the lifecycle of a commercial real estate investment to help commercial real estate owners and investors get the best financing for their property.
What inspired the start of Lev?
When my wife and I were living in Boston, we decided to buy our first apartment. We went through the process of getting a loan and were approved. A week before closing, the lender told us that our building had been rejected by FHA 7 years prior and we could not be approved for their first-time home buyer loan. We were so upset that I went and got a mortgage broker license, just to understand how the process works. A couple of years later, I helped a non-profit I’m very close with in NYC to refinance their building and was exposed to the complexity of commercial mortgages. After selling our previous company, Dispatch, to Vista Equity Partners, I decided this was a problem worth solving and launched Lev at the end of 2019.
How is Lev different?
Lev has rebuilt the way CRE deals get done. Lev’s capital markets analysts are superpowered by machine learning technology to help understand a borrower’s portfolio, identify the best lenders for each transaction and get the deal closed quickly, keeping clients updated every step of the way. We invest very heavily in our lender database, which is constantly becoming smarter by combining historical data on capital provided by lenders, and real-time data as we receive current term sheets. We believe that the role of the broker is to advise and support, not to hold back deals based on lenders’ contact information.
What market does Lev target and how big is it?
Commercial real estate (CRE) is a $17 trillion market. Lev targets commercial real estate transaction costs, which is a market of over $40B per year across tens of thousands of transactions.
What’s your business model?
Lev takes a commission on the loans we facilitate.
How has COVID-19 impacted the business??
When COVID-19 hit we saw lenders freeze activity and investors who were looking for new relationships. Post-pandemic many lenders were not offering the same type of leverage they did before COVID, which led to investors being more open to using an advisor, which benefitted Lev One of the bigger impacts was the fact that COVID-19 really transformed the digital world, especially in CRE which has historically been slow to embrace technology. This impacted Lev significantly. Clients don’t hesitate to engage during a Zoom meeting and are comfortable accessing our portal to view and upload documents. Lenders are willing to use our digital OM to see information about deals, and schedule virtual tours. This would not have been the case even a few years ago. All these steps validate our investment in technology and help us all get closer to that digital experience.
What was the funding process like?
The process included a lot of thoughtful discussions with extremely diligent and well-educated investors about the current state of our business and where we are trying to go. It was important to hear the thoughts, advice, and insights of as many people as possible. The fundraising cycle is a great time to reflect upon where you are and where you are going as a business, and was incredibly valuable for Lev.
What are the biggest challenges that you faced while raising capital?
There are a lot of moving pieces to a fundraising transaction, and each one has its own set of dependencies. It takes a lot of work, patience, and love to make sure that all of the parties come together in a way that is good for all of the stakeholders involved in the transaction, especially the company itself.
There are a lot of moving pieces to a fundraising transaction, and each one has its own set of dependencies. It takes a lot of work, patience, and love to make sure that all of the parties come together in a way that is good for all of the stakeholders involved in the transaction, especially the company itself.
What factors about your business led your investors to write the check?
Our investors were most excited about our technology and traction to date. I think they were encouraged by our growth and the fact that our customers really loved to work with us, kept coming back and referred us to their friends.
What are the milestones you plan to achieve in the next six months?
We hope to hit $1B of transactions in 2021!
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
It is important to validate the business early. People often don’t understand or agree with what you are trying to build, but it’s powerful to understand what their objections are. If customers are pushing forward, that’s typically good evidence that you’re on to something.
Where do you see the company going now over the near term?
We will soon be the de-facto platform for commercial real estate transactions.
What’s your favorite outdoor dining restaurant in NYC.
Definitely Abaita on 49th Street!
