Doma, formerly known as States Title, announced today that it has entered into a merger with a SPAC. The company, which announced its new name today as well, will be merging with Capitol Investment Corp. V, the fifth SPAC administered by Capitol Investment.
The transaction values Doma at $3 billion, and includes a fully committed PIPE (private investment in public equity) of $300 million and an expected $345 million in cash from Capitol Investment Corp. V. The company expects up to $510 million in cash proceeds, leaving existing shareholders with at least 80% of equity in the company.
PIPE investors include funds and accounts managed by BlackRock and Fidelity, among others, as well as leading homebuilder Lennar, an existing Doma shareholder, and cofounder and former CEO of Zillow Group Spencer Rascoff.
Doma, which Insider recently selected as one of the hottest proptech startups right now, launched in 2016 to bring the residential real estate transaction online. The company's software uses machine learning to drastically increase the speed and accuracy of title underwriting and escrow services, which are requirements for any closing.
The company has operated its own title agency, North American Title Company, since combining with a Lennar subsidiary at the end of 2018. It provides title underwriting services to lenders, real estate and title agents — and, in a transformative move direct to homeowners.
The company's new name, the Latin word for home, was selected as the San Francisco-based firm looks to expand beyond title insurance to other services crucial for property sales and closings, such as home appraisal and warranty.
The move comes as residential real estate tech booms
The company is going public during a time when home sales are the highest they've been in over a decade. The pandemic has reshuffled where Americans want to live and low interest rates have sparked waves of refinancing. CEO and founder Max Simkoff told Insider in February that usage of the company's core product "far exceeded projections that were set for 2020" due to the sheer number of transactions performed that year.
The sales boom has boosted proptech startups involved in digitizing, streamlining, or otherwise modernizing any part of the buying or selling process.
"Every company that touches mortgage is having a record-breaking year," Nima Wedlake, a principal at Thomvest Ventures, told Insider at the end of 2020.
While the sales volumes and refinancing levels will eventually lose steam, digital providers like Doma that gained market share in 2020 are unlikely to relinquish it in the future.
"The alternative to not using and paying for software is even more inefficiency, or worse not doing deals," Kurt Ramirez, founding partner at Nine Four Ventures, told Insider at the end of last year. "Once software starts to take over, the genie is out of the bottle."
The rise of the SPAC model
The SPAC model has also boomed in 2020 and 2021, seeing record usage of the black-check acquisition model to bring companies public. SPACs are companies that go public, raising funds to eventually merge with a private company. This merger brings the private company to the public market, without the additional reporting requirements of the traditional IPO process.
The SPAC model has particularly caught on in proptech, bringing companies like OpenDoor and Porch public, with deals still in the process of closing for Latch, View, and Matterport.
2021 is shaping up to be a hot year for proptech firms in the traditional IPO market, too, with SoftBank-backed residential real-estate brokerage Compass releasing its S-1 documentation on Monday evening.
While the SPAC boom is a product of the last year, Capitol Investments is a veteran in the space. Capitol has brought four companies public since 2009, including Two Harbors Investment Corp, one of the largest mortgage REIT in the US. It has recently announced its sixth and seventh SPACs.
Simoff will remain the CEO of Doma, while Mark Ein, chairman and CEO of Capitol Investment Corp. V, will join the company's board of directors.
