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.
<p>The company is the brainchild of dot.LA co-founder and former Zillow Group CEO <a href="https://www.linkedin.com/in/spencerrascoff/" target="_blank">Spencer Rascoff</a> and dotloop founder <a href="https://www.linkedin.com/in/austinallison/" target="_blank">Austin Allison</a>.<br/></p><p>"This is an entirely new category of second home ownership," said Allison, who sold his real estate startup to Zillow <a href="https://www.geekwire.com/2015/zillow-takes-direct-swipe-at-docusign-agrees-to-purchase-e-signature-upstart-dotloop/" target="_blank">in 2015</a>.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.</p><p>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.</p><p>"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.</p><p class="shortcode-media shortcode-media-rebelmouse-image">
<img type="lazy-image" data-runner-src="https://dot.la/media-library/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDQ1MzMxNS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYzMzkzODI1NX0.AuFnvN2nWp1dHII-U2Dcj217XjLmqmX9flqh7IuLgr4/image.jpg?width=980" id="55952" class="rm-shortcode" data-rm-shortcode-id="95663d6f367f78ad787fedd082722299" data-rm-shortcode-name="rebelmouse-image" />
</p><p>Pacaso (pronounced like "Picasso") wants to increase utilization of these properties — and build its own business in the process.<br/></p><p>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.<br/></p><p>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.</p><p>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.</p><p>Pacaso will also purchase part of a home from current second home owners, then sell the rest to vetted buyers.</p>
<img lazy-loadable="true" src="https://dot.la/media-library/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDQ1MzI2OC9vcmlnaW4ucG5nIiwiZXhwaXJlc19hdCI6MTYzOTIxMjUzNH0.DJq9Bp_GR4eezPyiKK7ce0ZkbcWf9M0IYwcNWLVk9ok/image.png?width=980" id="6f8d9" class="rm-shortcode" data-rm-shortcode-id="2111b1f15dbd49491c23361ece052ec3" data-rm-shortcode-name="rebelmouse-image" />
<p>"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."<br></p><p>"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.</p><p>Rascoff is the chairman of dot.LA, <a href="https://dot.la/st/about" target="_blank">which he co-founded in 2019</a>.</p><p>Prior to that, he helped start Zillow in 2005 after selling Hotwire.com to Expedia. He was CEO for nearly 10 years before <a href="https://www.geekwire.com/2019/zillow-group-ceo-spencer-rascoff-steps-co-founder-rich-barton-takes-online-real-estate-giant/" target="_blank">stepping down</a> in early 2019. Rascoff <a href="https://www.geekwire.com/2020/spencer-rascoff-departs-zillow-group-board-1-year-stepping-ceo/" target="_blank" rel="noopener noreferrer">resigned</a> from the company's board in April.</p><p>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.</p><p>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 <a href="https://www.geekwire.com/2020/zillow-restarts-home-buying-business-showing-confidence-real-estate-amid-ongoing-pandemic/" target="_blank" rel="noopener noreferrer">its home-buying and selling arm</a>.<br></p><p>"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."<br></p>
<p>Pacaso is the latest in a number of new entrepreneurial ventures from Rascoff, <a href="https://therealdeal.com/2020/09/29/zillow-co-founder-spencer-rascoff-to-start-blank-check-company/" target="_blank">who is co-charing a new "blank check" company</a>, or SPAC, with Alexander Klabin, a hedge fund manager who is set to be executive chairman of Sotheby's Financial Services.<br/></p><p>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.</p><p>"It just does not make a lot of sense to own something you don't use," Allison said.</p><p>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.</p><p>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.</p><p>"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.</p><p>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.</p><p>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 <a href="https://www.linkedin.com/in/whitneycurry" target="_blank">Whitney Curry</a>, a former director of brand management at Zillow; CRO <a href="https://www.linkedin.com/in/andreasmadsen/" target="_blank">Andreas Madsen</a>, an ex-Zillow sales leader; and CTO <a href="https://www.linkedin.com/in/daivakshah" rel="noopener noreferrer" target="_blank">Daivak Shah</a>, Zillow's former vice president of engineering. <a href="https://www.linkedin.com/in/douglaseanderson" rel="noopener noreferrer" target="_blank">Doug Anderson</a>, chief product officer at Pacaso, previously held leadership roles at Hotwire and SAP Concur.</p><p>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 <a href="https://www.geekwire.com/geekwire-200/" rel="noopener noreferrer" target="_blank">GeekWire 200</a>, 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."</p><p><a href="https://www.geekwire.com/2020/ex-zillow-leaders-including-spencer-rascoff-launch-startup-change-people-buy-second-homes/" target="_blank"><em>This story first appeared on GeekWire.</em></a></p>Related Articles Around the Web
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There is still considerable confusion about whether venture-backed startups are eligible to apply for the $349 billion in forgivable loans being furiously doled out by the Small Business Administration. But there's also another more complicated ethical question being debated on social media and within the startup community: Should they apply?
"VC backed companies already have so many advantages over bootstrapped [small businesses]...they don't need another one paid for by taxpayers," tweeted David Jackson, founder and CEO of FullStack Labs, a Sacramento-based software consultancy. "VC's own these companies...time for them to put their money into their companies."
As one might imagine, Jackson's company is not venture funded. But it's not just those on the outside that are posing the question.
<p>"There is a money grab going on right now by some venture-backed startups that this program absolutely should exclude," wrote Albert Wenger, a partner at <a href="https://t.umblr.com/redirect?z=http%3A%2F%2Fwww.usv.com%2F&t=NzcxY2RiNDNhZGI2MzhjMzcwYzQxMmVlZTJkNjIyZWM2NjU3NzVhMSxUbU4zdWpESg%3D%3D&p=&m=0" target="_blank">Union Square Ventures</a> (USV), a New York-based early stage VC firm focused on investing in disruptive networks. "I urge everyone who is running a venture backed company with a lot of money in the bank and limited COVID-19 impact to think twice about applying for PPP. In the end this is obviously a difficult decision but we are in a crisis where true leadership means thinking beyond one's own concerns."</p><p><span></span>On the one hand, many VC's and startups argue that businesses are businesses and it should not matter how a company is funded. And even if startups get more capital from VC's, companies may very well not use that money to retain employees, which is a requirement for taking the stimulus money.</p><p>Those opposed to venture-backed startups getting aid argue that the government is only giving out finite amount of money, so it's unfair for companies with much easier access to capital be taking funds that could go to struggling mom-and-pop businesses. They also argue that since VC's are in the business of funding risky enterprises and reap a big reward when a company does succeed, it is unfair to expect a taxpayer-funded loan with things go south. Some have mocked what they see as startups trying to contort themselves to be eligible for help:</p><div class="rm-embed embed-media"><blockquote class="twitter-tweet">Startup Founders be like....<br/><br/>Beginning of time to 2020: <br/>We are not a small business. We're a VC backed startup. We're changing the world.<br/><br/>2020 w PPP:<br/>We're a lowly unprofitable cash strapped small business. Please sir. Can I have some more.<br/>— TK Kader (@Tawheed) <a href="https://twitter.com/Tawheed/status/1246595185557090304?ref_src=twsrc%5Etfw">April 5, 2020</a></blockquote> <script async="" charset="utf-8" src="https://platform.twitter.com/widgets.js"></script></div><p>Mark Suster, the most prominent VC in Los Angeles in his capacity as managing partner of Upfront Ventures, has been urging startups to use discretion when applying.<br/></p><p>
"The PPP is meant for companies under duress," tweeted Suster. "If you're early stage, doing remote development and not really impacted - it's NOT intended for you. Just taking a hand-out of 'public money' intended for people who need it is wrong."
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Asked whether he was advising Upfront companies to apply, Suster texted: "I am not advising anybody to apply" and he said he was urging companies to go through <a href="https://bothsidesofthetable.com/how-to-make-sense-of-the-ppp-loan-program-for-vc-backed-startups-e53a2955bffa" target="_blank">a checklist he posted online</a> assessing whether they are in financial trouble, have to lay off employees, and if they qualify.
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"It's not 'free money' and should only be taken if truly needed and if you truly qualify," Suster said. "But if you believe it to be the case then apply quickly because it's 'first come, first served.'"
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<img lazy-loadable="true" src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMjc4NTY1OS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYzMjYwOTY5NX0.qphgIyk8MKJ5jRIV1D2RZkSVsR1a4d_61bLucyrHe1k/img.jpg?width=980" id="76dc7" class="rm-shortcode" data-rm-shortcode-id="62a8792b7b43e324d8dc8a7989e36f67" data-rm-shortcode-name="rebelmouse-image" />
Brian Garrett is co-founder and managing director of CrossCut Ventures.
Courtesy Crosscut Ventures
<p>Brian Garrett, co-founder and managing director of the early-stage fund, CrossCut Ventures, said he is still working through the qualification criteria with his bankers and lawyers but he anticipates most of his portfolio will seek aid.</p><p>"We expect that a very large percentage of our companies, and all startups, will apply for PPP loans to protect their teams and their businesses," he said.</p><p>The original wording of the Payroll Protection Program, which was part of the $2 trillion stimulus package designed to keep the economy afloat during the coronavirus, included an "affiliation rule" that would require startups to count all the employees of other startups that their VC investor has backed, likely putting many startups over the 500-employee threshold, even if the companies are completely separate.</p>
<p>The National Venture Capital Association, an industry trade group, has lobbied vigorously for a change to the rules. "Startups are as vulnerable as other small businesses to this economic crisis," NVCA President and CEO Bobby Franklin <a href="https://nvca.org/wp-content/uploads/2020/04/NVCA-letter-re-PPP-application-and-affilition-guidance.pdf" target="_blank">wrote in a letter</a> to the Treasury Department urging new guidelines.</p><p>But Jackson, the CEO who opposes venture-backed startups from applying, says the requirements are not an oversight and that if Congress intended to include venture-backed startups, it would have done so. "The intent of the law is clear," he said.<br/></p><p>
Jackson said when he thinks about companies that should qualify it is the idled cleaning service or window washers with only a few employees that would normally be servicing his offices.</p><p>
"The cleaning company doesn't have access to investors," said Jackson. "They don't have any other options. In my view, those are companies that this bill is meant to protect."
</p><p>
He has not decided yet whether his company, which is bootstrapped, will apply for aid. But he's concerned by what he sees as venture-backed companies trying to circumvent the affiliate requirements by rewriting their charters.
</p><p>
"It feels a little funny to me," he said. "There are people who deserve the money and people who don't."
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COVID-19 created a new normal that has upended work, life and finances and the reality is that everyone is just going to have reshuffle how we live, recalibrating employee expectations and creating more space for family.
That's the takeaway from dot.LA's strategy session on Tuesday with clinical psychologist Crystal Clements, Advekit chief executive and cofounder Alison LaSov and venture capital firm Crosscut Venture's managing director Brian Garrett. The panelists admitted they have all suffered from some anxiety due to the economic downturn and have found themselves reprioritizing their lives and looking for comfort in routines.
<p>
They have all found hope in connecting remotely with friends, family and in the generosity of others — whether that's founders taking pay cuts, or merely realizing that everyone is in this together in Italy, England, New York or Los Angeles.<br/>
</p><p>
"Accepting this is half the battle, this is our new normal," LaSov said. "I know a lot of founders I speak to are really hard on themselves because they can't quite figure out how to make the adjustments quick enough. But I think the more that we can remind ourselves that we're doing the best that we can. This is unprecedented for all of us, this global anxiety that we're all experiencing, so just having some self compassion and acceptance during this time it's really important."<br/>
</p><p>
Clements said that because the crisis is still new, many of her clients are in triage mode figuring out what to do about money, their kids who are at home, and their own businesses as everyone is forced to stay home to avert the spread of the deadly disease. But, Clements said as the new reality sets she would advise people to find peace in their spirituality and look inward for direction during a very uncertain time.
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"This period might last a few months. It might last — who knows, but there will be an end," she said. "You want to figure out who you want to be during this time, what are your values, what are you standing for, and strengthen them."
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Garrett, whose Santa Monica-based firm is in the process of deploying $125 million in its fourth fund, said he isn't pushing as hard to raise funds now and is instead working with his portfolio companies and founders to weather the storm.
</p><p>
"My philosophy has been 'go with the flow and get as much done as I can but also realize right now'," he said. "Nothing else matters in my business world, in more than just taking care of my portfolio companies, taking care of those founders and trying to support them in any way I can."
</p><p>
Garrett could be an exception. Some managers react just the opposite, micromanaging their remote employees, fearing their productivity has dropped. Meanwhile employees are nervous they are going to lose their job, as <a href="https://dot.la/california-unemployment-numbers-surge-2645550864.html" target="_self">unemployment skyrockets</a> <a href="https://dot.la/coronavirus-recession-ucla-prediction-2645502115.html" target="_self">in the midst of the recession</a>.
</p><p>
"It's been very stressful for some people," Clements said. Mangers and their employees should be talking about what they need and in the meantime, she said, be a bit more forgiving.
</p><p>
"It's natural for an entrepreneur to potentially micromanage the situation or believe that they need to stay more on top of things (but) at the end of the day I don't think that's what employees want," Garrett said. "I think they want to believe that their bosses trust that they're contributing to the best they can to the success of the business."
</p><p>
While working from home can be a dream come true for some, it has also lengthened the work day for some.
</p><p>
According to NordVPN, a personal virtual private network service provider, U.S. workers have seen their average workday grow by 40%, adding an extra three hours to their days, or the largest jump worldwide. Meanwhile, the UK, France, Canada and Spain have seen a two hour increase in the length of their workdays.
</p><p>
Garrett said that it's key right now to for employers to be leaders and "facilitate a culture of trust" and empower their workers — "know that they're busting their butts" trying to do the best in this brand new world so that business can continue. He also recommended leaders be more empathetic to the fear and anxiety employees are facing and, as a leader, communicate what efforts are ongoing to extend runway and talk with investors.
</p><p>
"I've seen over the last week or so executive teams making a decision to take pay cuts across the board with a spirit of, 'we're all in this together so let's suffer slightly through our current income to get by, but not have to cut jobs, not have to give up X percent of our headcount,'" Garrett said. "And so we'll all suffer together to still try to achieve the goals."
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<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="36f5c94c650ac9673854d2f50ac81de4"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/pvYAchRSQts?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span>
<small class="image-media media-caption" placeholder="Add Photo Caption...">Strategy Session: Coping During Quarantine</small>
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<a href="https://www.youtube.com/watch?v=pvYAchRSQts&feature=youtu.be" target="_blank">www.youtube.com</a>
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<em>__</em><br/>
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<em><em>Do you have a story that needs to be told? My DMs are open on Twitter </em><a href="https://twitter.com/latams" target="_blank"><u><em>@latams</em></u></a><em>. You can also email me at tami(at)dot.la, or ask for my Signal. Follow Rachel Uranga on Twitter <a href="https://twitter.com/racheluranga" target="_blank">@racheluranga</a>.</em>Check back. We'll upload the video from this even shortly.</em>
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During the discussion, Brian Garrett, managing director of Crosscut Ventures,
<a href="https://docs.google.com/spreadsheets/d/17CRGY8IRTAq525_Hl_WEwO7_xpXL4Ch19ZCK2yyha08/edit?pli=1#gid=0" target="_blank">shared a spreadsheet of free mental wellness offerings</a> that individuals and companies can take advantage of.
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