How Real Matters raised Canada’s biggest private tech financing in three years

Real Matters secured the most money in a private tech financing in nearly three years by tapping public-market investors eager to share in the company’s growth in advance of an IPO.

The cloud-based real estate technology platform raised $100 million in common equity this month. The round brought Real Matters’ total funding to more than $200 million, and valued the business at $653 million.

The investment is the largest involving a privately-held Canadian tech company since late 2013. That’s when e-commerce software maker Shopify closed its $100 million Series C financing.

Markham, Ontario-based Real Matters is one of only five venture-backed domestic companies in the last decade to have raised $100 million or more in a single round, according to Thomson Reuters.

The money was used to buy Linear Title & Closing, a mortgage title and closing services provider, for up to US$96 million. It is the latest in a series of strategic acquisitions by the company, intended to enter new verticals and expand the scope of its property tech and services offering.

Real Matters President and CEO Jason Smith told PE Hub Canada acquisitions are “all about market share” and “increasing opportunities to leverage our platform,” especially in the all-important U.S. market. With the Linear buy, the company generates 95 percent of its revenue in the United States.

The Linear deal was mostly capitalized by an unusual source. For a number of its recent add-on and other growth initiatives, Real Matters has heavily relied on public-market investors, many of them mutual funds, Smith said.

More than 20 such investors subscribed to the $100 million financing through a conventional offering process run by BMO Capital Markets and INFOR Financial. Only one of the subscribers, Toronto investment firm Urbana Corp (TSX: URB), was publicly identified.

Smith said Real Matters opted for a “public-market shareholder base” because it offers a “cost-effective way to raise capital” and allows the company to steer clear of control investments. That is one of the reasons why an eventual IPO is attractive to the company, he said.

In a statement, Smith said Real Matters is looking forward “to coming to public markets in due course.” He declined to comment further.

A handful of private investors also backed Real Matters. Prominent among them is Whitecap Venture Partners, a Toronto-based venture firm that led the company’s seed funding in 2007. Whitecap has participated in most of the subsequent rounds, including this month’s deal, and last May’s US$60 million financing, which it co-led.

Whitecap first invested in Real Matters in a period of “tough sledding,” Whitecap Partner Blaine Hobson said. The financial crisis was underway, along with turmoil in the U.S. real estate market. However, these events also prompted a renewed emphasis of property appraisals, handing the company a major opportunity.

“Real Matters’ moment had arrived,” he said. “Just as everybody else was running for cover, we saw an opportunity to expand.”

The result was explosive growth. Real Matters built a customer base that today includes most of North America’s top mortgage lenders, banks and insurance firms. Its revenue expanded strongly, often putting the company near the top of Deloitte’s annual Technology Fast 50.

In 2015, Real Matters posted revenue gains of 73 percent.

Real Matters is currently working on two more add-on deals. Like the Linear acquisition, these will be strategic nature, aimed at leveraging the platform into new niches and “driving intense organic growth,” Smith said.

By executing on this strategy, Real Matters can become “a great multi-billion dollar company,” he said.

Last June, Whitecap closed its third fund, Whitecap III, at $100 million.

Photo of house-sold sign courtesy of Reuters/Mark Blinch

Photo of Jason Smith courtesy of Real Matters Inc