Following a six-month trial of its digital mortgage platform, San Diego-based Approved has officially launched its Web-based software for home loan applications. In a recent statement, the 20-month-old startup also said it has raised $1 million in what co-founder and CEO Andy Taylor calls a “pre-seed round.”
“Our goal is to create a platform [for both lenders and borrowers] that is just as frictionless as possible,” Taylor said at the downtown EvoNexus incubator, where he has been working with co-founder Navtej Sadhal.
Sadhal and Taylor (pictured above) founded Approved in August 2015, and moved into the San Diego tech incubator last fall. The company now has five employees. In November, when Xconomy included Approved in a list of 12 San Diego Tech Startups to Watch, Taylor said Approved already had raised undisclosed funding from angels and “a prominent Palo Alto VC firm.”
Palo Alto’s Social Capital led the $1 million round with San Francisco-based Precursor Ventures. Taylor said Social Capital was in fact the Palo Alto VC firm that had committed to invest last fall, although the funding was contingent on raising matching funds from other investors. Graph Ventures, Bluesky Equities, and unnamed angel investors joined the round.
Taylor said the idea underlying the development of their mortgage loan platform was to meet consumers wherever they may be. So the Approved system is designed so borrowers can upload original bank statements, W2s, paystubs, and other documents from their desktop or mobile device. Borrowers also can use their smartphone or mobile device to take pictures (i.e. “camera scan” documents) that can be uploaded securely.
Approved said its technology supports “all popular loan programs.” Approved said it makes it possible for any lender to move their home loan business online, and compete with rivals (such as Quicken Loans and its Rocket Mortgage business) that have spent hundreds of millions of dollars developing their own online direct-to-consumer technology.
According to Approved, lenders that participated in its six-month pilot program got the necessary supporting loan documents from borrowers in half the time it usually takes to close a loan. According to the most-recent Ellie Mae Origination Insight Report, closing time for all home loans decreased from 51 days in January to 46 days in February.
Approved also contends that its online process is less expensive than traditional loan applications, where manual processes have helped to drive loan production costs for lenders to $7,747 per loan, according to the Mortgage Bankers Association.
“Lenders spend a lot of money on these manual processes,” Taylor said. “We remove the paper that loan officers have to push, and at the same time make life a little easier for borrowers.”
Approved makes money by charging a monthly subscription for the software-as-a-service it operates on behalf of lenders. “It’s a white label you can brand with your own lending business, with cost based on the number of loans processed,” Taylor said.
A more pressing question for Approved may be how well the San Diego startup can distinguish itself from rivals in a fintech market laden with competition. Potential competitors range from Quicken Loans, one of the nation’s biggest mortgage loan originators, and Loan Depot, to early stage startups like New York-based Morty, Denver’s Maxwell Financial Labs, and Walnut Creek, CA-based Lendsnap.
“The way I see it, Approved is a great democratizer,” Taylor said. “We’re bringing this technology to any lender, big or small.”
One advantage is that co-founders Taylor and Sadhal worked previously at Redfin, where Taylor oversaw the products team and Sadhal oversaw the operation of the Seattle-based online real estate company’s website.
Approved also has a San Diego advantage: Because he’s spent years in the Bay Area, Taylor said, “I can pull of raising Silicon Valley money on a San Diego cost basis. He also sees a benefit to focusing on the residential real estate market in Southern California. “There are more homes bought and sold here than anywhere else on the planet,” he said.
