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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At a time when the clinical health care workforce is suffering from burnout and attrition in the wake of the pandemic, Regard’s technology looks to alleviate some of the pressure on health care workers. The startup’s AI-enabled software is integrated directly into a provider’s system and uses an algorithm to analyze patients’ medical records, allowing physicians to more easily diagnose them.
Since launching its flagship product in 2020, Regard’s technology has been used on more than 30,000 patients, according to the company. The startup charges health care providers around $500 to $700 per month for access, co-founder and CEO Eli Ben-Joseph told dot.LA, with its customers including Torrance Memorial Medical Center, Cedars-Sinai Medical Center and roughly a dozen other hospitals across the U.S.
“We’re building something that’s a game-changer for doctors,” Ben-Joseph said. “It’s helping them catch medical conditions that they would have missed. So regardless of market conditions, we’re able to have value and I think investors saw that and got excited.”
Co-founders from left to right: CEO Eli Ben-Joseph, CTO Thomas Moulia, and COO Nate Wilson. Courtesy of Regard
Founded by pre-med students Ben-Joseph, Nate Wilson and Thomas Moulia in 2017, Regard got its start through Cedars Sinai’s Techstars-backed accelerator program. It was at the accelerator program that Ben-Joseph observed physicians’ workflows and saw the need for a product like Regard’s; he recalled noticing how doctors would constantly pop in and out of a patient’s room, shuttling between the patient and a computer where they could enter data and notes.
“I think that’s why so many doctors are burning out now, as they just don’t have software that really enables them,” Joseph said.
Ben-Joseph—who coupled a bachelor’s degree in bioengineering from MIT with a master’s in computer science from Stanford—noted that Regard’s technology can automatically detect up to 50 of the most common medical conditions, including heart failure, diabetes, obesity, depression and anxiety.
“We have a 90% accuracy rate at the minimum,” he said. “Physicians will look at our software and accept it, but it’s not perfect. We tell physicians to treat it like the relationship [with a] medical student.”
This year’s focus will be different from the typical accelerator: Startups in this group will test their products directly with companies active in the ocean economy for four months, collecting data on what works, what doesn’t and further developing proof of concept. Braid Theory will help these startups come up with their business plan and pitches, and connect them to investors and potential partners in the field. In return, it takes an equity warrant that can be converted after three years.
The startups joining Braid Theory typically span industries like port logistics, aquaculture and energy, all of them aiming to test their technologies and untapped opportunities of the burgeoning industry. The accelerator’s goal is to bring those companies from pre-revenue into commercialization.
And all of them are looking to solve challenges within the blue economy ecosystem, many of which have also been exacerbated by the COVID-19 pandemic. With 31% of all goods floating across the ocean to and from the U.S. pass through the Port of L.A. and the Port of Long Beach, COVID-19 strangled supply chains and increased the volume of goods handled at L.A. 's premiere dock by nearly 16% between 2020 and 2021. This created numerous logistical challenges for the dwindling workforce at the nation’s busiest ports while increasing emissions.
“The thing that we're trying to think about are ways in which we can leverage biological systems and software to make more immediate changes in markets that have a low barrier to entry,” Braid Theory co-founder Jim Cooper said of accelerator’s approach to addressing a wide range of climate and logistical issues.
Cooper founded Braid Theory with his colleague Ann Carpenter after the pair left PortTechLA, a maritime and logistics incubator that shuttered in 2016. The two wanted to create an accelerator for port and ocean startups that went beyond logistics and took into account other promising sectors of the ocean economy, including sustainable fish and plant cultivation as well as tools to make the shipping sector more efficient.
Jim Cooper co-founded Braid Theory with his former colleague from PortTechLA, Ann Carpenter.Image courtesy of Braid Theory
Accelerators like Braid Theory are attempting to fill a void in the blue economy ecosystem. Despite being home to several universities with robust maritime research centers and a giant port infrastructure that could be better optimized, few startups survive in Los Angeles due to a lack of early stage funding, according to a 2020 report from the Los Angeles Economic Development Corporation. The accelerator provides funds and lab space and investor connections to nascent startups tackling a wide range of ocean-related problems.
The same report found that ocean startups, particularly early-stage ones, have a difficult time getting funding to accommodate the need for expensive lab equipment like centrifuges, chillers and pipettes. Startups in the blue economy space are primarily funded through federal and state dollars, NGOs and philanthropies, and competitions. But while angel funding has historically been slow to trickle into blue economy startups, some are starting to take note of the size of the market. In the first cohort, eight out of 12 startups received federal funding and investor funding with the help of Braid Theory.
The accelerator’s first graduating class included Florida-based Tampa DeepSea Xplorers, which makes seafaring autonomous vehicles that can scrape the bottom of the ocean and collect data faster for researchers to use as they study climate change impact or source for different medicines. Irvine-based ReCreate Energy is another graduate, which sources algae to create a more sustainable bio-crude oil that can be used at gas and oil refineries. While FlashQ, a Canada-based AI platform, is trying to reduce truck congestion and the emissions caused by them at the port by creating a scheduling platform that optimizes waiting and shipment times.
“The key is the opportunity, the opportunity was there,” Mimi Carter, a biotech investor with the Pasadena Angels, said of the business opportunities in the ocean market. “We saw a market that was unaddressed and is still an emerging market.”
A cluster of cranes at the Port of Long Beach.Photo by DJANA 575/ Shutterstock
To Carter’s credit, L.A. County boasts 75 miles of coastline that the LAEDC expects by 2023 will produce more than $80 billion in regional output, make roughly $50 billion in gross county product, and create over 200,000 direct and indirect jobs, according to a 2020 report. And, according to the Los Angeles Economic Development Corporation, economic and job growth in this sector relies heavily on the creation and implementation of new technologies, making angel investors necessary players in bolstering the ocean economy.
“Not only do we want to be investing in a sustainable product, but someone we count as a first mover,” Carter said of her investment approach. Already, groups like the Pasadena Angels and Techstars L.A. have made investments in the space. Reece Pacheco, a blue economy angel investor, is quietly working on a new venture fund around the blue tech space that hasn’t been announced yet.
“What we're starting to see is there are entrepreneurs who are either coming up through these research firms, or there are entrepreneurs who have cut their teeth elsewhere but care about the ocean,” Pacheco said.
There’s also Braid Theory’s neighbor (and landlord), AltaSea, the nonprofit research hub that has facilitated a number of partnerships with companies across the world.
“We do want to become the leading destination for the blue economy in terms of technology, finance, the education pathways it takes for students to get into these jobs in the future, and then the actual workforce development for the jobs of the future,” said Terry Tamminen, the new CEO of AltaSea.
Braid Theory’s makeshift shipping container-turned-lab is next door to a slew of other startups and projects in the blue economy space. USC researchers are incubating bubbling cauldrons of kelp that could create biofuels and alternative food sources. While Oceanographer Robert Ballard, who found the Titanic wreckage in 1985, set up a sea exploration program a few doors down.
“The ocean is more than a destination for tourists and a place for Jacques Cousteau and David Attenborough to go diving,” Tamminen said. “It's actually something right at our doorstep that we need to protect for our own survival, but it’s also an economic opportunity.”
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