Believing in Nested — the story of a relationship that goes back many years

Investing in ‘lines not dots’ is a cliche in venture but it is rarely as much the case as it was with us and Nested.

As announced over the weekend in The Sunday Times and Techcrunch, Balderton is delighted to have participated in the latest funding round of Nested alongside our friends at Northzone. The company raised £20M of equity alongside £100M of debt, putting them in great shape for the coming years.My partner Tim Bunting led this deal for Balderton but all the Balderton partners have been involved in the Nested journey, and I drew the long straw to put a few of our thoughts down in words.The history of Balderton with Matt Robinson and Nested goes back a long way. I first met Matt in 2011 as an ex-Mckinsey entrepreneur starting a business called Groupay (James Wise here has known him much longer). Groupay went to Y Combinator and then became Gocardless which Balderton followed closely, investing in late 2013, and which has been a great success story so far.Matt ended up officially leaving Gocardless as an exec in late 2015, although he stays on the board and has been incredibly helpful over the years. Matt then started Nested, which he discussed with a number of us at Balderton in the early days.We then hosted Nested as one of the first companies in, free coworking and networking at our office for successful repeat entrepreneurs starting their next business. It was hard to say goodbye but Nested finally outgrew the space here and successfully raised significant equity and debt capital from the likes of Passion and Global Founders. This year they have secured £100M of debt funding allowing them to really scale and we are able to participate in the associated equity round.Investing in ‘lines not dots’ is a cliche in venture but it is rarely as much the case as it was with us and Nested.As a reminder, Nested sell your home for the best possible price in the market and can advance you money for your home before it even gets an offer, making you chain-free.So what is it we are most excited by at Nested?

Fantastic team.

Matt is someone we know very well and are really impressed by. In Europe, we have more and more successful repeat entrepreneurs that we can back, of which Matt is one. Having done it before is not the answer to everything but it does allow companies to move faster and avoid mistakes. At Nested Matt is joined by James Turford, Phil Cowan (another repeat entrepreneur) and a group of incredibly smart individuals including the 6th employee at Funding Circle.

Colossal market.

The value of residential property in the UK alone is £6.8 trillion, of which multiple hundred billion changes hands each year, generating sales fees of £3-5B. This is a rare case where just being UK leader would be a $B company.

Addressing a clear pain point.

Housing chains lead to the collapse of many housing sales as potential buyers cannot sell their property in time (an estimated one-third of offers fall through). They also lead to huge amounts of stress, selling a house ranks second behind divorce in pools of the most stressful personal life events. The only way to guarantee a quick sale before Nested was to accept a price well below the market value of the home. The market is crying out for a solution like Nested and as you can imagine the company has had lots of inbound interest.

Barriers to entry.

Nested is not an easy model to copy. For them to make money they need a highly accurate house valuation engine – unlike Zoopla Nested’s P&L is directly affected by how accurate their price estimates are. This requires a lot of technology and data, plus learning from prior transactions. Nested also need to find properties that will sell fast so they can recycle capital quickly. As they provide guarantees to homeowners they need a significant balance sheet, most of which is debt, which can only be unlocked by a successful trading history and risk management processes. Finally, they need to build a strong brand, as user trust is crucial to their success.We are delighted to continue our journey with Nested. The road ahead will have its challenges, not least Brexit, but they have the team, expertise and capital to come through as a substantial success story.