Paris Dean wants to remove the middleman from the home sale process to save buyers thousands of dollars in Realtor fees.
His Towson startup Sparen connects homebuyers and sellers directly without going through a Realtor. This makes Sparen different from other websites like Zillow, which are advertising platforms for Realtors, not a way for people to directly buy homes.
A 2020 pilot program of the startup showed strong consumer interest with $112 million in real estate purchased through Sparen in 72 days. The company is now preparing for a second product launch in March and is currently raising $1.7 million in venture capital, founder Dean said. The company currently has $1.4 million in commitments including from McKeever Conwell's RareBreed Ventures.
The second launch already has 16,000 users waitlisted in Maryland. Sparen plans to roll out to a new state once every two months, starting with Michigan and Florida. The funding from the round will go toward engineers and marketing.
Sparen Director of Business Dalmar James compared the startup to Ebay. Before the e-commerce giant, there was no centralized place to directly run an estate sale online, which is comparable to what homeowners looking to sell their homes directly go through. Typically, real estate agent commission fees are around 5%-6% of a home’s sales price, according to RedFin. The average cost of a home in Maryland is $359,500 according to the same website, so real estate fees often cost both parties a combined $17,975.
Sparen's second launch will feature software built in-house to ensure it is compliant with banks' security measures. Dean originally hired a third-party developer based in California, but later realized that the developer outsourced most of its work to India. Banks did not want a website with an average transaction over $300,000 that a foreign entity could access, forcing Dean to rebuild the site from scratch.
Government agencies such as the Department of Defense do not want employees to buy homes through companies that rely on software from other countries because of the sensitive personal data that can be shared. By building the software in-house, Dean plans to appeal to clients who require a large amount of security protection.
Sparen can also be used to help Black, minority and other disadvantaged people that have been historically left out of the real estate sector or taken advantage of by large operators that gain control of their homes, James said. By offering an easy-to-use platform for people to sell their homes, James hopes they can avoid predatory home buyers such as hedge funds.
“People talk about gentrification and that's an economic phenomenon,” James said. “And one that most black communities don't really have any power in. They're usually the victims of it, rather than controlling their Fate and being able to really capitalize on the value they've spent their lives building."
Dean believes some of the difficulties he has faced fundraising are because many venture capital firms don’t understand the desire to get rid of the middleman in real estate transactions because of their own wealth. Black founders like Dean also often face barriers in getting funds from a lack of connections, compared to white peers.
“It's a lack of intellectual curiosity,” Dean said. “They don't want to understand anything that they don't have to deal with."
Chief Financial Officer Hakim Dyer said the company does not plan to be very reliant on venture capital and that future growth will primarily be driven by cash flow.
"We're pretty old-fashioned business people," Dyer said.
Dean is originally from Detroit. He managed a real estate portfolio with around $250-$300 million assets under management. He came to Baltimore because he was in the inaugural class of the TechStars Equitech accelerator. After TechStars, the head of the StarTUp at The Armory at Towson University, Patrick McQuown, convinced him to join the Towson accelerator and co-working space.
