Clever Real Estate is employing a growth strategy that leans heavily on a simple formula: The more useful you make your product, the more people will want to buy it.
The St. Louis-based real estate startup earlier this month did just that with its acquisition of Gravy Technologies, another St. Louis startup that created a mobile app that helps renters purchase their first homes. That function works as a complement to Clever's own technology, which helps to connect home sellers and buyers to real estate agents
Clever co-founder and CEO Luke Babich said he first became familiar with Gravy in 2022 when it announced it had raised $2.6 million in seed funding. Babich continued to keep tabs on Gravy, then approached its leaders about a deal at a time when he assumed they might be pursuing another round of financing, he said. Gravy is a company that would have been attractive to Clever regardless of location, but its home in the St. Louis region made it an even more enticing deal, Babich said.
“We would have done it even if they were based somewhere else. It was fortuitous and fun that they happened to be right around the corner from us,” he said.
Founded in 2017, Clever has developed a platform that connects home sellers with local real estate agents who list the seller’s home for a 1.5% listing fee. Clever says its platform includes 20,000 real estate agents and agents in all 50 states. The 100-employee company has also built out an editorial arm that publishes digital content about real estate and other topics and operates Clever Pro, which provides products for mortgage lenders.
Gravy’s app includes several components designed to help renters purchase their first homes. Through the app, users can open an FDIC-insured savings account to save for a down payment, complete homebuying education courses and participate in a rewards program. Babich said adding Gravy allows Clever to create a “real estate super app” that can include Gravy’s features and components of Clever, such as its real estate education content.
“Gravy gives us a home to put those inside,” Babich said. “It’s just layering more tooling into the same digital platform.”
Clever’s purchase of Gravy also allows it to better help real estate agents and lenders connect with potential customers before they are ready to move forward with a home purchase, Babich said. Real estate agents and mortgage lenders can self-brand Gravy's app, offering rewards through the app.
“Part of our belief is costs in real estate are so high because it’s difficult to create loyalty with consumers for a transaction they only do once every 5-7 years,” Babich said. “We think a key piece of fixing that problem is creating more ways to reward consumers early in the process and build value with them for taking the step that makes them valuable to a real estate professional.”
The addition of Gravy comes as Clever has also launched additional products, including Clever Title, which provides new title and escrowing closing services, and Clever Pro. Babich said Clever Pro specifically has been a growth channel, with 1,000 homes being closed in 2023 through that segment, a 500% year over year increase.
“Anything growing at that clip in this real estate market, we’re putting a lot into it and think there’s a lot of potential there,” Babich said.
Clever ranked No. 65 on Inc.’s 2023 list of fast-growing Midwest companies, reporting three-year revenue growth of 260%. Clever in May 2023 said it raised $2 million in funding, with investors in the financing including St. Louis-based venture capital firm Cultivation Capital; Mike DelPrete of Boulder, Colorado, who describes himself as a real estate technology strategist; and EssentVentures LLC, an investment arm of mortgage insurance firm Essent Group Ltd. (NYSE: ESNT).
Babich said Clever achieved profitability during 2023 and finished last year about "cash flow break even." He said the business didn't reach profitability until several months into the year, so it was break even when you take the full year into account. Babich said Clever expects operating margins to be down in the first quarter of 2023 during a slower period in the real estate market, but the firm expects to be profitable in the remaining three quarters of 2024.
Babich said Clever did not raise any additional financing for its acquisition of Gravy because of its growth and operating margins.
“We spent five years focused on one product and one channel before we started branching out. Now we are in a position where that core business channel is able to fund bets like Clever Pro and bets like Gravy,” he said.
