How Loft changed its business to become the 3rd largest unicorn in the country


The recent contribution of 425 million dollars put the Loft at the top of the list of the most valuable real estate startups in Latin America. To be more exact, the market value of 2.2 billion is not only higher than that of competitors in Asia and the United States and in the question of Brazilian unicorns, it is second only to Nubank and Wildlife. Anyone looking at these figures may not imagine that a year ago the company went through a crisis and needed to reformulate its business to take off.

The episode occurred in early 2020. At the time, Loft had just completed a round of Series C with $ 175 million in funding that came from venture capital funds Vulcan Capital and Andreessen Horowitz. The capital injection raised the company to unicorn status, giving a market value in excess of 1 billion dollars. Everything seemed to be going well.

But appearances can be deceiving. The founders Florian Hagenbuch e Mate Pencz, alongside the third founder, entrepreneur João Vianna, knew that the business was still problematic. To make money, the company basically still profited only from the difference between what it paid to buy and renovate a property and what it received when that apartment was sold. The problem was how to scale this model.

In early 2020, Loft had only 300 apartments on its platform. All in São Paulo. It was little. Data from the São Paulo Section of Colégio Notarial do Brasil, obtained exclusively by EXAME, show that the number of properties transacted by public deeds in the state of São Paulo has increased by 26% in the last decade. In 2020 alone there were 336,968 transactions.

There was no other way to increase this number without raising more money to buy more real estate. Even with cash on hand with the last contribution received, the company went to B3 to seek more money. But, unlike the flurry of technology companies that went public last year, Loft had no intention of going public with a stock offering.

Instead, the company launched a 360 million reais real estate fund with the aim of buying more properties. “This type of operation, which is part of the growing securitization movement, allows a company to issue equity without having to resort to the IPO (initial public offering)”, says Arthur Vieira de Moraes, professor and specialist in real estate funds at Prime Time Zone Research.

But that would not cure the problem – just alleviate it momentarily. The definitive solution was suggested even before the foray to the scholarship. In internal meetings between the founders, investors and employees of the startup, there was a consensus that it was time for the company to open its platform for third-party ads, betting on a model in rapid growth in Brazil: the marketplace.

A study by Ebit Nielsen points out that Brazilian e-commerce is increasingly dependent on marketplaces. Made with data from the first half of last year, the survey reveals that 78% of sales on the Internet occurred through marketplaces. In figures, this means that the retailers that operate by this model moved 30 billion reais – 56% more compared to the same period in 2019.