Empowering Homeowners By Unlocking Home Equity with Michael Gifford of Splitero

A lot of real estate and fintech companies are searching for, like that single transaction. When is homeowners going to sell their house? Whether it's brokerage or flipping or, you know, a mortgage, whatever that is. And I thought about it as like, these people have so much equity in their house right now and it's really hard for them to get that, that we can help them do that. And then we know down the road, 7, 10, 15 years, they'll want to settle or refi or something else and we can, you know, know, and we have an intimate, unique relationship with them from day one that we're best suited to do that with them as well.

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You want tech and tacos? Tacos and tech. You know, we got tacos and tech is on smash border green guacamole keep accountants counting beans Contador Quentan frijoles founders trying to raise some queso la vida San Diego school of be wrapping fire tortillas round jalapenos in these modern times A craft beer and coffee my coating yoga posse fold the body origami we be surfing Coronado eating tacos el gordo the tacos standing puesto lucha libre in sombrero Gotta shout out to coast Angels by the ocean watch the sunset La Jolla shows entrepreneurs trying to get funded when San Diego Startup Week is popping in the summer. Oceanside to Tijuana St. Full of hustlers from couch surfing to penthouses right on the beach. Tech leaders who believe stars are within reach. We interview and founders who be shooting for the Moon SD TechOS with your host, Neil Bloom.

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Tacos and Tech podcast where we interview tech leaders in the San Diego tech ecosystem. We also read the latest tech news on this Week in San Diego Tech News. Follow us and subscribe online to your favorite podcast network. And welcome back to the Tacos and Tech Podcast. I'm your host, Neal Bloom, and I'm thrilled to be live in Spitero's HQ here with Michael Gifford. Hey, Michael, thanks for being on the pod.

Thank you. Thank you for having me. I've been longtime listener, first time on pod, so appreciate the invite.

Yeah, absolutely. No, it was fun to get to know you a little bit this summer. I think it was the first time we really got to hang out down in the Valle on the. What are they called, the CEO retreat down the Valle de Guadalupe. It was a pretty fun time.

It was. It was a great time. We had a great Day. Thank you to you and of course our friends at svb.

And this was an all Eric Otterson and DLA and ARCUS Nexus production. I was lucky to get the invite as well too.

Well, I really enjoyed it.

Yeah, no, it was a good time, but you've been here in San Diego for a bit, so I'm excited to just sit down and get to know you a little bit. You want to give us a quick overview of what Spitero is and then let's take it back to where you. Your background came from.

Yeah, yeah, I've been here since 2009, so quite a while.

Yeah.

Splitero for, for those that don't know, we help homeowners access their home equity without additional debt or new monthly payments. So newer financial product. And my background's all in real estate and finance. And so we're, we're happy. We've been doing this for about three years now. Based here in San Diego, which obviously we're very of proud pro local San Diego, but we help homeowners in five different states right now and expanding that GEO footprint here shortly.

Cool. Awesome. Well, we're going to get to that because one, there's never been a better time. Real estate wise, generational shift wise, housing prices for different generations. We'll get dive deep into that for the genesis of this because I'm sure it has changed a little bit too. But. Yeah, take us back. So your background is in. Is in fintech and finances and I'm guessing it was not in San Diego originally.

It was not. I originally from Wisconsin, very proud of that fact. But I moved here in 2009 and the real estate market was also, you know, a difficult time. The job market in general was very difficult. But I quickly met a family office out of Carlsbad and they wanted to start a foreclosure fund. And so I was managing a team, buying 30 to 40 houses a month at the closure auction.

2009 was a good time for that.

It was a great time for that. It was like, you know, boiler Roomba. We were buying houses.

Yeah.

And so we learned a lot. A lot of the, the folks that work for me too, like, went to start their own flipping operations, as did I. So I did that for a year and a half or so, then started my own fund here in San Diego, buying about 100 houses a year. And we were also doing some infill development.

Okay.

Yeah, so it was, it was, it was an interesting time. We might never see something like that again.

Yeah, interesting. Were you like institutional back like you were raising institutional funds for this, or how are you going about doing it?

Yeah, some institutional funds. A lot of friends and family. I mean, money was very expensive back then too, so it was hard. The. The capital markets weren't as evolved for house flipping as they are now. Yeah. And so it was. It was a lot of just finding you could buy as many houses as you had cash for, which is, you know, the opposite of where we're at now. There's a lot of money in, but there's not a lot of houses.

Yeah. Interesting. Throughout college, me and my dad and my brother flipped houses just one off at a time, and we did the work, too. We swung the hammers. Best part for me was demolition and tile saw. I was the king on the tile saw. That was great.

Tile saw that. That's an interesting one. A lot of people like demo, but not. Not once you get into the difficult trades.

Yeah. You know, just got to get the right angles in the right corners. That's fun. Redoing that work too. I'm guessing not 100 houses at a time. A little harder to do.

Yeah. We had. We had quite the crew of. Not only just. I mean, you think about it, you have a lot of houses in construction, all different phases, a lot of general contractors, all the subs. It's a big operation. Yeah.

What actually brought you to San Diego during the time?

I just had a friend that went to school out here, so came out and visited. Loved it. Finished school in the Midwest and then moved out.

Oh, cool. Oh, so right out of school.

Yeah. Straight out.

Wow, that's awesome. Yeah. Once you see San Diego, you're kind of tainted, you know, like, there's no going back.

No.

It's hard to go somewhere else.

Yeah, for sure. So take us through a little bit about, like, what the market, what. How that's changed and how that's kind of driven you towards creating this, I would say, a software product. Right. In terms.

Yeah. It's as. As we were flipping houses that you go through different phases Right. Of that market, and you're trying to figure out. The real estate market is always constantly evolving. So in 2020, I started looking at a few markets across the nation, and there's serious lack of inventory. At that time, prices were still high, interest rates were still low, and rents were high. And so a lot of homeowners had all this equity in their house, but they couldn't access it. A lot of the traditional financial products are difficult to access. If you don't have a great fico Score or a really good income. And so they would have to sell and they'd usually sell to at that time one of the ibuyers. Right. You'd say Zillow and Redfin and all those folks. And then they'd moved to like a tertiary market. Cause it was difficult for them to find something else to buy in their market or prices were really high and they couldn't afford something and rents were really high. Or they'd move to like you know, their in laws couch which is also not great or use credit cards. And so we started and my co founder and I, David had been just talking quarterly. We've known each other for. Since I moved out here. We worked together. Now this is our third time working together. We started looking at other products and we found the home equity investment and thought like this really has some legs. In 2021 we raised a small seed round for Splitero and started the company. All the leadership kind of started in January 22nd and we have a sprinted market and gone ever since.

Wow. 2022 was just like tail end of ZIRP I guess. Right. So capital is starting to be a little hard to find. Probably a good time. Good time, harder time to raise money, but better time to raise. Probably for like entrepreneurs who want to go out and build for the next 10 years.

It was. So it was an interesting time. We raised our seed round pretty quickly and then started the company. We started scaling it and we went out to raise a Series A in July of 22. And that the VC market was tanked. Yeah, it was just crashing and the company was doing really well and we had a great story but the, the venture funds were just not there. People were pulling back and so it was made it really difficult to raise our Series A. I think I did 190 initial meetings for our Series A which is just, you know, unheard of the prior two, three years. And so it was a lot of work but we got it done in November of 22. We raised.

Okay, it's not bad from raising January 2022, same year, you know, from a seed.

Yeah. November 21 and then. And then November 22. Yes.

A year later. Yeah, yeah. What was the original. Has the. Has it iterated a little bit since you've kind of gone out to market with the product or is it pretty much been what you originally theorized?

Yeah. So we come at this at a different angle than. Than some of our competitors because of our real estate background. And so we've always thought about as home equity investment is our Core product, but, but really we like the attached services. So we also have Splitero Homes, which is a brokerage. It's a really unique brokerage offering because we're invested in your house. No other agent is invested in your house. Right. And so we really want to help you maximize the value when you're ready to sell. And it also helps when people get in trouble. You know, if there's a distress scenario, our brokerage can come and say, hey, what's going on? Let us help. Here's what we think, you know, and so it kind of is dual purpose there, which is unique. And then, you know, as rates come back down, you can think other attached services are, you know, mortgage companies, title company, escrow company, all that will kind of come into the fold. So the, the original vision of the company has not changed. 20, 23, I think changed almost all financial services companies just probably slowed down growth plans. But with, you know, this recent deal with Antarctica Capital, we're back on the growth trajectory and excited about it. So.

Yeah, yeah, really interesting. You kind of created an ecosystem, but you put the homeowner at the center where I feel like the Zillow's and Redfin's kind of put the Realtor at the center of what, the platform they built. Right. So you kind of put it back at, you know, the homeowner seems like. Right. And then you created this ancillary services market to wrap around too. Super interesting.

Yeah, it's a different way of thinking about it because a lot of, a lot of real estate and fintech companies are searching for like that single transaction. When is homeowners going to sell their house? Whether it's brokerage or flipping or, you know, a mortgage, whatever that is. And I thought about it as like, these people have so much equity in their house right now, and it's really hard for them to get that, that we can help them do that. And then we know down the road, 7, 10, 15 years, they'll want to sell or refi or something else. And we can, you know, we have an intimate, unique relationship with them from day one that we're best suited to do that with them as well.

Yeah, it's really smart. So what's the kind of capital you've drawn around this? I mean, traditionally, tech capital doesn't really play in the real estate space. So how do you, how do you blur the lines of getting smart money?

Yeah, it's a difficult question to ask for sure. I think there were, you know, when you're raising your venture round, you are Mostly searching for no's because you got to find someone that like aligns with your vision. We're fortunate to find a really strong early group of investors that liked fintech, proptech companies. And so they, they got it right away. Other, other VCs, you know, some just straight past because they, they couldn't see how it was actually going to work, which was fine. And then on the back end of it, as 2023 was a difficult year in the capital markets, the capital markets really matured as far as like rated securitizations happened. And so that really changed the capital coming into the space. And then fast forward to now, we've got a fairly high yielding asset that we can sell into the capital markets. And so you have a lot of insurance companies and pensions and credit funds and hedge funds and private equity now that want to buy assets from originators like us. So that maturity over the last 18 months has really accelerated our market.

Interesting. And have you stayed just squarely in residential? Have you tiptoed into commercial at all.

Or it's squarely in residential? Yeah, one to four units. There's, you know, we're talking about a market that's in the trillions. So there's a lot, a lot of wood to chop without going to commercial or auxiliary market.

And commercial is like in its own world of hurt right now anyway.

Of course, I'm not even going to touch that.

Yeah. So take us through. Yeah. Like what's been the recent growth, especially in the, like that. The genesis for this recent financing round too.

Yeah. I think that, you know, this product offering got to the place where it's just too big to ignore for a lot of different sectors. And the capital markets is certainly one of those. You have, you know, depending on which county you use, you know, just call it 20 to 30 trillion dollars of home equity right now. Yeah. And what I never understood is homeowners only have one option, access, and it's debt. Right. It's not the right thing for a lot of people and it's very difficult to do. And as the interest rate environment changed, it got even harder to qualify for. So you have a lot of homeowners who can't qualify to access the equity, but they might have 50% equity in their house. And so they're just stuck and they're locked in. They're not going to sell because there's nothing to buy right now. And they also, you know, now homeowners have two assets, they have their house. They also have a low rate mortgage which is Also another asset they want to leave in place. So a lot of people are really stuck and need help. And so that has certainly accelerated not only the home equity investment that we do, but other companies trying to figure out how do we help homeowners access this equity? And I think there'll be a lot of creative alternative solutions for homeowners in.

The next few years, regardless of if we're in a recession right now or not. You think this is just. Obviously people need access to other tools.

They do. And I think whether we're in or out, you know, I think the housing market is very, very much a supply and demand. I think there's. There's still a ton of demand and there's just not a lot of supply in many markets. And yeah, you know, if you look around here, there's not a lot of building going on in San Diego and there's a ton of demand to live here. And so I don't see, you know, a drastic house price drop. Because the other thing is, you know, right now, just not only Southern California, but many markets, mortgage payments are cheaper than rent. So, like, even if someone loses their job, they can't really give up their house because they can't move, you know, somewhere else for cheaper.

Right. Yeah. And the rate that they're locked in, that as well, like you mentioned too. Yeah. Which is still above, I guess, where we were for most of 2019, 2020 and 2021.

Yeah. Yeah.

Where are you seeing. Is there a Geo you mentioned, you know, one to four unit? Like, what are, what are you seeing? Like the, the big success area right now?

Yeah. So we are, I would say we predominantly in California, Colorado, Oregon, Washington, Utah. California just has a massive amount of home equity. Right. And a lot of homeowners have been building it up for, you know, five, six years or more. They have, you know, our average homeowner comes to us and they have over 50% equity in their house.

Yeah.

That is a kind of good place for us to start. You have to have substantial equity in your house. And then really it's. It's a. A few decisions for a homeowner. We're really convenient because we're not a bank, Right. So we're not tax returns. There's no bank statements, there's no income qualification. So we can actually underwrite and help homeowners very quickly to get the funds in their hand. And then the biggest thing for our product is there's no monthly payment. So a lot of homeowners now are also searching for cash flow because things are expensive. And so if you go get a home equity line of credit or a second mortgage, you're immediately making a monthly payment on that. Our product doesn't have it. So it's a, it's a big draw for homeowners.

Huge. So how are they? Is it the realtor that's bringing you in or they're finding the homeowner, new buyer or someone who's sitting on their home for a while is finding you?

Yep. Only existing homeowners right now. Not buyers. But yeah, they find us or we go all direct to consumer. And so we do a lot of social and search and digital and some direct mail. And then honestly, like we have a product where you give a homeowner 100 plus thousand dollars without a monthly payment on, they're going to tell a lot of their friends. So we get a lot of people coming in organically as well.

Interesting. I imagine any of the home services groups as well, the service titans and housecall pros might be good referral partners too.

There they are. Yeah, there's a lot of those that have interested in referral partners for sure. A big thing, California specific, is ADUs. Right. So a lot of the ADU builders want to bring us in because a lot of homeowners don't have, you know, $300,000 building ADU. Yeah. But they have the home equity that can do it. So those are, those are interesting, unique partnerships we're into.

That's awesome. So, yeah, take us through the new financing with Antarctica Capital.

Yeah, we're super excited. It's $300 million financing from Antarctica Capital. They were kind of one of the investors right away that we talked about. As soon as we told them about, they just got it. And they've been great to work with. Chandra Patel is the managing director there. He's joining our board, which is also really exciting. And so that will all go to funding homeowners home equity and then Switchero's growth.

That's awesome. Where does this change at all, like, expand or anything like that, or it's really just you can fund more?

Both. Yeah. We'll start expansion as, as soon as next week. We might have a new state announcement and then we'll go through. We, we get our, you know, licenses as we go into states and so we'll start expanding eastward from our current footprint.

What's that like? Yeah, getting a new state expansion wise.

Yeah, it's licensing right now, products unregulated. And so we go into a state, we apply for both our Mortgage license and our real estate license. There's multiple opinions of which way it's going to go, but we want to just make sure we're covered on both sides. So. Yeah, we apply for those before we originate any state.

Yeah, got it. That makes sense. Really interesting. Is there some tech that goes into kind of your own origination platform or how are you doing that part?

There is. There's a lot of tech built into it, A lot of data, a lot of. Well, the interesting part about real estate is a lot of it's public data that's available. Right. So we can gather a lot of data as soon as the homeowner gives us their information and then we're quickly able to make an estimate for them. We've built everything into salesforce, but there's a lot of different data that feeds in for that. And then on the, on the back end, we have to, you know, do all of our own disclosures and docsed and all that, which goes to title and escrow partners all over the place. So there's a lot of APIs going in and out. But we built a, we built a really strong foundation, keeps our team really efficient.

That's awesome. Well, congrats on this. This is awesome. Where. So let's say you're nationwide, hopefully within a few years in 50 states. Like what's. Where do you see where, where is split arrow headed from there?

Yeah, it's. It's an interesting question because, you know, when you talk about competitors in a market, our. Our biggest competitor is really the traditional financing. So home equity line of credit is what most people use to access the equity in your house. That's typically a 2 to $250 billion a year industry. So I would love in a few years, you know, whether we're nationwide or not, that the home equity investment category, you can see it being 50 to $100 billion category very quickly. I think it's a better product for most homeowners. We're all doing a lot of education for consumers since it's newer, but I think it does go through pretty rapid adoption over the next few years.

Awesome. Well, it's great. I mean, obviously like we said, more and more people needing access to cash, especially for the expansions. ADUs in that piece too, or their junior ADU, they're working on their second one.

Junior ADU, the infinity ADUs, whatever else they have going on.

Yeah, especially in California, where we have an aging homeowner population, the silver tsunami, if you will, people want to either sell and then move in with like their kids or something on their properties. They definitely more of that in California, that's for sure.

There's aging in place. People don't want to move out either and I mean they're not selling anytime soon and, and then it's just, it's, it's crazy how much home equity is.

Just built up there. Yeah. What about for your peers? Like where do you find your Prop Tech peers? Are there some in San Diego and Southern California or where do you, where you chop it up with other entrepreneurs there?

There are, I, you know, I think it's, it's growing here slowly. You're a big part of that obviously in the community around here. We're also, you know, the Bay Area in New York too. There's, there's still a ton there, but people are building interesting things all over. And the one interesting part about real estate is, you know, something might pop up in, in a, in a different market where you usually wouldn't find a VC backed company like yeah, you know, maybe Sacramento first because the housing market is there and it's, it's a very vibrant housing market and so there are a lot of folks that are doing interesting, interesting stuff.

Yeah.

Outside of your typical tech hubs.

Okay, got it. I mean I know like kind of legacy like Loan Depot up in oc I feel like spun out a bunch of people from there. Right.

Yeah, yeah, there are, yeah, we, I think we're uniquely headquartered in San Diego and there are advantages because there's a ton of mortgage talent around.

Yeah, true.

There's a lot of mortgage innovation going on between down here and in Orange county as well. So yeah, I think, think we're, we're uniquely sitting here for sure.

Is that a new sub part of, of Prop Tech is mortgage tech of some sort.

Fintech? Yeah.

Okay.

For sure.

Yeah. Yeah.

I think that, you know, when you can make an argument for either way, most people are going to categorize us as FinTech I think. But, but yeah, I think Fintech and Prop back is very vibrant Southern California because the housing market just supports innovation. There has to be. Yeah. Going on here.

Totally. Where, when you are hanging out with other entrepreneurs here, where are you going for tacos?

I go. So I, I kind of have two. Right. I'm gonna go really og Taco surf in PB for sure. And then if I'm.

What's your order there?

What did I. So my order is the same at the other place I'm gonna mention but they make a really big burrito and like I can't always take down that bigger.

Yeah.

Without taking a nap right after.

Totally.

So I will go hash browns, carne asada, and sour cream.

Oh, yeah, that's it. That's like a deconstructed California burrito.

Deconstructed, no cheese. I'm from Wisconsin, but I don't like.

Okay.

So I never go cheese in it. And if I'm not going there, I like Roberto's in PB as well, because they put bacon in their California breakfast burritos. Bacon carne asada.

Oh, good one.

Sour cream fries.

Okay. Good orders there, for sure.

What about you? You got a new one?

I'm still working my way entirely through city tacos. Ever since I started working across the street from one. I'm like, I will try everything on this menu. But, like, I found what many people do is they always have the Mexicali. You, like, always order a Mexicali and something new. So it's taking a while because you, like, get one taco that you always have and then one new one. But I'm about probably 75% the way through the menu.

Okay. What's your recent fave?

Actually, my partner Al, he loves the zucchini one. That's really good there. It's like a zucchini taco. That's a good one. But the Mexicali, you can't go wrong. Yeah, it's so good. It's got the mashed potatoes in it, you know, that's why. So. Yeah, that's for sure. I did also recently go up in Carlsbad. I had Lola 55. They're also in East Village. And I met the owner at the Lola 55 one. He's, like, just busting tables, you know, he was, like, chief innovation officer for McDonald's at one point and then helped angel, like, fund Sweetgreen and I think Chipotle. And actually, Chipotle was internally funded at McDonald's, and I think spun out. So he's like, big food dude, and he's sitting there busting tables and just, like, telling, like, his love for tacos, and that's why he started Lola. So I'm a little convert on that now, like, supporting him. They got a Michelin not star. They got, like, a Bib gourmand or whatever. And, you know, here's this guy just, like, want to start a little taco spot. So good.

Yeah, I'm gonna have to check it out. Yeah.

Well, let's go do a taco there. That's either La Costa Or East Village. So somewhere in between. This is great. Thanks for spending some time with us. For sure.

Thank you for having me.

Thanks for being here.

We got to talk about the elephant in the room. I can't do the rap. We didn't.

We did.

I didn't get approval for my pr. I heard it. You talked about my good friend Mike Glantz on the podcast and then. And then dropped that I was going to do the rap. Unfortunately, not this time.

It's okay. Well, we'll do it live at our holiday party, Tech the Halls. A silent disco warehouse party where you and Mike can do it together up in front of everyone. How's that? During the silent discount.

Yeah.

When no one can hear you. No. All good. Thanks for offering to do the rap. You can sing it on your own whenever you want. It's a fun one. We kind of put out a recent kind of little music video to go along with it, but we actually want to turn around and ask all companies to film their own team dancing to it. And then we'll weave in the San Diego startup community. Dance into it. Something fun we're trying to see. Yeah, we'll see.

Startups get the party started.

You want deck and doc tacos. Tacos in tech, you know we got Tacos in tech is on smash for the green guacamole keeper Countins counting beans contador quentan frijoles found us trying to raise some queso la vida San Diego school of rappy rapping fire tortillas round jalapenos in these modern times a craft beer and coffee my coating yoga posse fold the body origami we be surfing coronado eating tacos el gordo the tacos standing puesto lucha libre and sombreros gotta shout out to coast angels by the ocean watch the sunset La jolla shows entrepreneurs trying to get funded When San Diego startup week is popping in the summer Oceanside to Tijuana est? Be full of hustlers from couch surfing to penthouses right on the beach? Tech leaders who believe stars are within reach. We interviewing founders who be shooting for the Moon SD TechOS with your host, Neil Bloom. Come on.

Startups get the party. Startup. Startups get the party started. Startups get the party. Startups get the party started. Startups get the party. Startups get the party started.

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Startups get the party. Startups get the party started. Startups get the party. Startups get the party started. Startups get the party startups. Get the party started.

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