Created by Ryan Schonfeld, who has spent his career building security programs for startups and Fortune 500 enterprises, and has been a consultant to the U.S. State Department since 2012, HiveWatch raised an undisclosed sum from CrossCut Ventures, with participation from Freestyle and SaaS Ventures.
The coming out has been long-planned and is not tied to current events, CEO and founder Schonfeld said.
"I don't want to say the timing is fortunate because crazy things happening in the world are never what we hope for," said Schonfeld. "But there's absolutely a tailwind that we're experiencing."
The rest of the leadership team has experience at Apple, Cisco, Bird, Disney and NORAD.
"We were attracted to the background of this founding team, and their history and experience in scaling corporate security systems for high-growth companies like Bird," Brian Garrett, co-founder and director at Crosscut said in a written statement. "Their approach will make corporate security programs more accessible for both high-growth startups and Fortune 500 enterprises as we enter a post-Covid, data-driven paradigm."
HiveWatch's platform pulls data from different sensors to offer a one-stop view of threats. The goal is to cut down on noise so help security operations centers can focus on genuine intrusions. For instance, Schonfeld says door sensors designed to monitor who's coming in and out mostly trigger false alarms, so it's hard to tell whether someone broke down the door or if the sensor is just malfunctioning. As a result, warnings go ignored.
"The main sensor that drives that entire intelligence loop in the system is about an $8 magnet that sits at the top of the door and they break and they're faulty all the time," Schonfeld said.
Ryan Schonfeld has spent his career building security programs for startups.
HiveWatch aims to complete the picture by providing guards more information. So if a door sensor is triggered, the system also gives a surveillance video of the door so guards can determine right away if something is amiss.
"The system can say, 'OK, we see that there's a door forced event, but the camera says that nobody went through that door'," Schonfeld said. "And so that's a different story for a security response than if there's a door forced event and a person actually comes through the door."
Schonfeld says he is excited about the chance to modernize the security industry, which has been very slow to evolve.
"I started my career in law enforcement, which was a passion of mine since I was a little kid," said Schonfeld. "It was one of the most rewarding things I've ever done in my life, but the constant frustration in law enforcement was just the decades-old, antiquated approaches that never seemed to evolve."
Schonfeld says there is already a waiting list for the company's product from tech, gaming and entertainment companies and he's seen especially high interest from the growing number of cannabis companies.
"Cannabis has far and away had the most number of sensors per square foot of almost any industry we've ever encountered," said Schonfeld. "They're going to be a really interesting one to leverage the platform with."
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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"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 Union Square Ventures (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."
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.
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:
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.
"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."
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 checklist he posted online assessing whether they are in financial trouble, have to lay off employees, and if they qualify.
"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.'"
Brian Garrett is co-founder and managing director of CrossCut Ventures.
Courtesy Crosscut Ventures
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.
"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.
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.
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 wrote in a letter to the Treasury Department urging new guidelines.
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.
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.
"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."
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.
"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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