Proptech Startup Pacaso Raises $17M to Make it Easier to Own a Second Home
Proptech startup Pacaso emerged from stealth mode Thursday, aiming to make it easier for a larger swath of the population to own a second home, or at least a portion of one.
The company announced a $17 million seed round led by venture capital firm Maveron, with participation from Global Founders Capital, L.A.'s Crosscut and individual investors such as former Starbucks CEO Howard Schultz, real estate coach Tom Ferry, former Zillow executive Greg Schwartz, and Amazon CEO of Consumer Worldwide Jeff Wilke. Pacaso also raised $250 million in debt financing to purchase homes.
The company is the brainchild of dot.LA co-founder and former Zillow Group CEO Spencer Rascoff and dotloop founder Austin Allison.
"This is an entirely new category of second home ownership," said Allison, who sold his real estate startup to Zillow in 2015.People have owned second homes for decades. But it can be expensive to purchase and maintain a property that often goes mostly unused throughout the year. There are 30 million second homes across the U.S. and Europe, but they are only occupied 4-to-6 weeks per year on average, Allison said.
Some decide to split up ownership between multiple parties, but the process can be arduous and complicated, especially when an owner decides to sell his or her stake.
"Pacaso is taking all of those hassles associated with the traditional do-it-yourself process, and all of those risks, and eliminating them," Allison said.
Pacaso (pronounced like "Picasso") wants to increase utilization of these properties — and build its own business in the process.
The startup partners with real estate agents to find homes for customers and helps set up an LLC designed for co-ownership. The buyers pay for their share — anywhere from one-eighth to half — and Pacaso pays for the rest, eventually selling the other "shares" to additional owners. It then serves as the owner representative on behalf of the group, handling various logistics such as maintenance, financing, legal, and more. Its platform also lets owners with scheduling and booking.
Pacaso makes money by charging owners a 10% fee at the time of purchase, and from an annual property management fee equal to 1% of the purchase price.
The business model is common in commercial real estate, but not as much in the vacation home industry. It's different than the traditional resort timeshare structure, which are typically at hotels or resorts versus normal homes.
Pacaso will also purchase part of a home from current second home owners, then sell the rest to vetted buyers.
"Second home ownership provides a canvas for life's memories, and it shouldn't only be accessible to the 1%," Rascoff said. "Through Pacaso's innovative co-ownership model, second home ownership will be achievable by tens of millions of more people, helping to democratize access to second home ownership."
"Democratize" was also a key theme at Zillow, which grew into a real estate powerhouse by surfacing housing data not previously accessible to the general public.
Rascoff is the chairman of dot.LA, which he co-founded in 2019.
Prior to that, he helped start Zillow in 2005 after selling Hotwire.com to Expedia. He was CEO for nearly 10 years before stepping down in early 2019. Rascoff resigned from the company's board in April.
He's still involved in the real estate industry, making small angel investments in startups such as La Haus and Butterfly MX. But Rascoff will be much more active with Pacaso on a day-to-day basis.
Rascoff previously signed a non-compete agreement with Zillow, but it has expired. Even so, Rascoff said he doesn't view Pacaso as competitive, despite Zillow investing heavily in its home-buying and selling arm.
"In fact, we think that the co-ownership concept which Pacaso is pioneering complements Zillow very well because Pacaso's listings will appear on Zillow (and other real estate sites) in order to attract buyers," he explained in an email. "Zillow benefits by having great listing content for its users; Pacaso benefits by having its listings gain exposure to prospective buyers. Pacaso's real estate agent partners benefit by getting a new product (co-ownership) from Pacaso to offer to their clients. Win win win."
Pacaso is the latest in a number of new entrepreneurial ventures from Rascoff, who is co-charing a new "blank check" company, or SPAC, with Alexander Klabin, a hedge fund manager who is set to be executive chairman of Sotheby's Financial Services.
Allison, CEO of Pacaso, stayed on with Zillow following the acquisition of dotloop for more than three years. He admitted that Pacaso "is hard a business to pull off." But he said working with the company should be a relatively easy sell to vacation home owners who want to cut expenses and reduce headaches that come with owning a second property.
"It just does not make a lot of sense to own something you don't use," Allison said.
He said second home owners "just accept the fact that the home sits vacant for a big portion of the year" because they don't have a better option. Most choose not to rent their homes out on sites such as Airbnb due to being uncomfortable with random guests or local laws preventing short-term rentals, he said.
Allison and Rascoff started working on Pacaso before the pandemic. They weren't sure how it would affect the business, but are now seeing strong tailwinds as employees are given more flexibility with remote work.
"People who were aspiring to own a second home before are definitely thinking about it now because the possibility of using it more is now within reach," Allison said.
The lack of available property across the real estate industry also works in Pacaso's favor, he added, since the company is helping unlock latent inventory.
Pacaso is focused on 25 markets across 10 states at launch. It has 25 employees distributed across the country, including in Seattle. Other team members include former Zillow executives such as CMO Whitney Curry, a former director of brand management at Zillow; CRO Andreas Madsen, an ex-Zillow sales leader; and CTO Daivak Shah, Zillow's former vice president of engineering. Doug Anderson, chief product officer at Pacaso, previously held leadership roles at Hotwire and SAP Concur.
Pacaso sounds similar in name to Vacasa, and also operates in the same ballpark as the Portland, Ore. startup. Vacasa, ranked No. 2 on the GeekWire 200, manages more than 26,000 vacation homes in 31 U.S. states and 18 countries, and bills itself as "North America's largest vacation rental management platform."
This story first appeared on GeekWire.
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Three new L.A.-based beverage brands–Bored Breakfast Club, Yerb and Leisure Project–are also using the blockchain to build their companies and engage with customers in different ways. Each is using NFTs to kickstart their direct-to-consumer businesses and build interest in their brands.
The goal is to use the transparency and equity inherent in blockchain technology to attract early adopters—giving them an opportunity to test ideas and products before they’re finalized—and encourage them to invest in a community built around their drinks.
Time will tell if each brand can deliver on that promise.
Bored Breakfast Club
One L.A.-based effort, Bored Breakfast Club, has looked to leverage the popularity of Bored Ape collectible NFTs to help jump start a new coffee subscription service.
Frogtown-based marketing agency Kley is leading the effort to use Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC) intellectual property to build direct-to-consumer coffee subscription memberships that are sold as NFTs on the Ethereum blockchain. The tokens themselves feature a breakfast scene that include BAYC and MAYC characters, and each functions as a coffee subscription membership.
BAYC and MAYC are considered two of the most popular and expensive NFT collections, according to OpenSea, a secondary NFT marketplace that also tracks their value. BYAC NFTs are valued at approximately 74.69 ETH ($244,041) on the platform.
Kley co-founder Brad Klemmer said the idea was to parlay the success of the Bored Apes brand into a new direct-to-consumer offering. Owners of the NFTs get two free coffee shipments and the possibility of more, if the project is a success.
Klemmer said the idea is to build a regular clientele for his coffee brand by shipping it directly to consumers, rather than relying on them to go to a coffee shop or grocery store. “You need a brand and community that puts their product on [consumers’] doorstep on a weekly basis,” he said.
Bored Breakfast Club launched the project on Jan. 10, offering 5,000 NFTs for .08 ETH (approx. $250) each, and promising token holders they would receive a 12-ounce bag of a different variety of coffee for each of two NFT sales thresholds the company surpassed. The NFTs have since sold out, meaning that the project will ship two bags of coffee to each token holder by the end of the month. The company has also created a “community coffee wallet” that could entitle token holders to still more coffee.
A graphic explains Bored Breakfast Club's "wallet" concept.
That’s because the “wallet“ collects funds from a 5% royalty on its NFTs that are bought and sold on the secondary market. Once it collects enough funds, the company will send additional blends to its 5,000 token holders. (Klemmer said they’re waiting to get data from their initial shipments to determine how much it will cost to ship additional bags). That communal “wallet“ will also pay to produce extra bags of coffee and Bored Breakfast Club merchandise to sell to non-NFT holders.
Klemmer said he sees the NFT offerings as a “fun way to buy coffee.” Also, there were “similarities around NFT communities engaging with each other and what the DTC subscription model is trying to be.”
Bored Breakfast Club works with Yes Plz Coffee, which sources, roasts, packages and delivers the coffee to NFT holders.
Yerb
Yerb was born out of entrepreneur Brett Fink's habit of drinking yerba mate with friends, many of them creatives who were looking for a coffee alternative. The traditional South American drink is said to provide a calmer caffeine-imbibing experience than coffee.
Like Bored Breakfast Club, Fink is hoping to use NFTs to drum up interest in his business early on. But instead of relying on the popularity of a particular NFT brand, Fink sees an opportunity to use the blockchain to heighten awareness of his own brand and, hopefully, develop buy-in for its first product.
Fink, who has past experience building and growing consumer-packaged good (CPG) brands, including cannabis brands, thinks NFTs can help build a creative community around a product.
“If you believe what we believe, and want to create a product for the creative process, you can benefit from it, as there is a massive untapped opportunity in NFT and CPG projects,” Fink said. “You need to get people to believe what you believe, then have them be involved and take ownership of that product.”
Yerb’s first yerba mate drink will be bottled in 12-ounce cans but sold through NFTs that cost 0.039 ETH (approx. $77 USD). The company started offering the tokens in February of last year; each entitles the holder to six cans of Yerb’s first release, as well as an additional six-pack of cans every year that they hold the NFT. Yerb is hoping that the offer will help it identify early adopters who will buy-in to the brand as repeat customers.
Non-NFT holders will be able to purchase the drinks once token holders receive the first shipment. Yerb is targeting April 2022 for that release after hitting supply chain issues last year.
Leisure Project
Venice-based Leisure Project is taking a similar approach to Yerb by targeting creatives with an emphasis on community development.
The startup, which bills itself as “the world’s first co-created beverage brand,” hopes to market a kind of natural Gatorade for entrepreneurs, creators and innovators.
Leisure Project was started by former NCAA Division I athletes and brothers Steve Michaelsen, who works at Nike LA, and Alex Michaelsen, who works at TikTok marketing agency GO Ventures in Beverly Hills. The brothers, who have been bootstrapping the project themselves, have spent almost two years creating the brand’s first three flavors.
In December, the Michaelsens announced plans to experiment with minting NFTs that would provide token holders with the first run of their beverages, cheaper pricing on additional flavors and the opportunity to pitch new products. Leisure Project has been sampling its drinks at local NFT events to drum up publicity.
Down the line, the company hopes to use the blockchain to give token holders access to a yet-to-be-defined “creator database” of potential partners and grants.
Leisure Project is in its early stages, but its founders hope establishing buy-in through NFTs and social platforms like Discord will help build an authentic community for their brand, and give them a potentially vital advantage over more-established competitors. “Big brands can’t go backwards and do something community-orientated after the fact,” Steve Michaelson said.
Correction: An earlier version of this post said Bored Breakfast Club would ship four bags of coffee to early NFT holders as sales thresholds were met. The company has since changed that number to two.
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