I have long been a proponent of going public because I believe it creates stronger, more disciplined companies that deliver greater shareholder value. It's great to see the pendulum in the founder and venture capital community swinging away from the "stay private longer" attitude that dominated tech over the last decade.
That said, the traditional IPO listing path has many shortcomings. I experienced this firsthand in 2011 when we took Zillow public. The cover price on the original S-1 was $12-$14 a share, but we upped it to $14-$16 due to strong demand on the IPO roadshow. We priced it at $20 a share, only to watch the first trade open at $60 that day. (Note: Zillow has since done a 3-for-1 stock split, so divide these numbers by three if you're trying to compare it with today's ~ $100 stock price.)
<p>So on what should have been a day of high-fives and champagne, I couldn't help but feel disappointment that we left a huge amount of money on the table by underpricing our IPO. 🤦 Facepalm. </p><p>Our employees and our venture capital owners were penalized by this broken system. And it's not just the Zillow IPO — this problem is systemic; the typical tech IPO trades up by 43% one day later. That's a massive amount of money to leave on the table for an issuer.</p><p>Direct listings provide a <a href="https://www.cnbc.com/2019/10/06/bill-gurleys-plan-to-move-from-tech-ipos-to-direct-listings.html" rel="noopener noreferrer" target="_blank">second path</a> to a public listing, and they typically avoid the underpricing issue of a traditional listing. But they have their own set of shortcomings, including the inability of the company to raise primary capital in the offering.</p><p>SPACs — Special Purpose Acquisition Companies — offer <a href="http://abovethecrowd.com/2020/08/23/going-public-circa-2020-door-3-the-spac/" rel="noopener noreferrer" target="_blank">a third way</a>, and remedy many of the problems with IPOs, while offering some new benefits, including the ability for a company to provide financial projections at the time of the SPAC IPO, when the private company merges with the public SPAC. In addition, the SPAC model offers a quicker, more certain path to going public. With the launch of <a href="https://www.supernovaspac.com/" rel="noopener noreferrer" target="_blank">Supernova Partners Acquisition Company</a> (yes, our acronym is "SPAC"), my partners and I are creating that path for a company in the broader tech sector. </p><p>But going public by merging with a SPAC is just an express route to basecamp. Being a fast-scaling, successful public company is the summit. I know this because I've been up that mountain. </p><p>From the point we went public at Zillow, we navigated 16 acquisitions — including that of another public company who was our biggest competitor. We grew our employee base 10-fold in six years. We pulled off a complex business pivot. And most critically, we protected our culture from the volatility of the stock market and kept our people focused on our mission. The internal name for the Zillow IPO in 2011 was "Project Step," because it was just a step along the way. I've seen firsthand that going public is the beginning, not the end. </p><p>The transition from being privately held to being publicly traded is like graduating from college and entering the real world and the job market. Welcome to the big time. And for a newly public company, it's a scary world out there, full of potential facepalm moments. The right mentors, directors, and advisors can make a huge difference during those first few years as a public company. And that is yet another benefit of going public through a SPAC: you get the benefit of the experience which the sponsor group provides. In Supernova's case, we have assembled a world-class team with diverse skills available to help whichever company we take public. We are player-coaches who have all excelled on the field before, and are now excited to help shepherd a company and help them avoid facepalm moments of their own.</p><p>There are many SPACs (and more every day), but not all are created equal. Some teams are Wall Street-heavy and exist only to take a company public, exploiting a private-to-public valuation arbitrage opportunity; some are led by Silicon Valley founders who will act as advisors for a longer period of time. Very few combine both. With Supernova, <a href="https://www.supernovaspac.com/corporate-governance/management-team" rel="noopener noreferrer" target="_blank">my partners and I</a>, along with our <a href="https://www.supernovaspac.com/corporate-governance/board-of-directors" rel="noopener noreferrer" target="_blank">board</a>, together create a Swiss Army knife of experience in company building, culture building, marketing, finance, deal-making, product design, tech, capital markets and operations. </p><p>We know the journey to IPO and beyond is filled with facepalm crevasses that can be avoided with an expert guide at your side. Our operations and managerial experience, combined with our mentoring and coaching of founders and executives over two decades, will help chart a path toward long-term value. Personally, this is the beginning of a very exciting journey in my career as it combines all of my passions — investing, mentoring and coaching — with my experience as a seasoned CEO, all together with an unparalleled team I'm proud to call partners.</p><p><em>Spencer Rascoff is the co-Chair of Supernova Partners Acquisition Company and the co-founder of dot.LA.</em></p>
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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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'It's a No-Brainer': NYC and SF Tech Workers Move to LA for Sun, Space and Cheaper Rent During the Pandemic
Oct 01 2020
Editor's note: This is the first of a two-part series. Read the second part here: The exodus from L.A. Tech workers who traded cramped one-bedroom apartments by the ocean for 4-bedroom houses in Las Vegas.
Roger DaSilva, who grew up in New Jersey and lived in New York for two decades, long dreamed about trading the honking horns and gridlock of Manhattan for the sand and ocean breezes of Manhattan Beach.
"When I would visit L.A., it just felt like a different country with the people, the easy going nature, and the genuine friendliness of the people," said DaSilva. "It's that laid back vibe, and I love the beach and the sun."
But there was one thing stopping the move. DaSilva is an outsourced chief financial officer so he can work from anywhere, but his wife works at an advertising agency, which required her to be in the New York office full-time. Then COVID-19 hit and the DaSilva's could work from anywhere. In June, they listed their Murray Hill three-bedroom home and rented a house in Venice Beach while they searched for something more permanent.
"If it weren't for COVID, we would still be in New York," DaSilva said.
<p>The DaSilvas are one of more than a dozen professionals interviewed by dot.LA who suddenly found themselves untethered to offices during the pandemic and decided to abandon their cramped apartments in emptied out New York and San Francisco to finally realize their dream of living by the beach. They cited a mix of personal and professional reasons for moving – a growing tech scene, relatively more affordable housing, and the ability to live a better lifestyle. </p><p>To be sure, <a href="https://www.redfin.com/blog/july-2020-housing-migration-trends/" target="_blank">more people are leaving Los Angeles than arriving during the pandemic,</a> accelerating a yearslong trend of migration to cheaper cities such as Las Vegas, Phoenix and Sacramento. But for those coming from New York or San Francisco who are wealthy enough to afford million dollar-plus mortgages, L.A. still offers a relative bargain. <a href="https://www.zillow.com/los-angeles-ca/home-values/" target="_blank">According to Zillow,</a> the median home value in San Francisco is $1,447,191 and the median rental price in San Francisco is $4,500 compared to $752,508 for homes in Los Angeles and $3,500 for rentals.</p><p>Nick Dowdle, growth product manager at the real estate startup ZeroDown, was shelling out $2,400 a month to rent a cramped room in a three bedroom townhouse in San Francisco's trendy Castro District until recently moving to Marina Del Rey. He is now spending $2,100 a month to rent his own one-bedroom in a luxury complex that includes a pool, hot tub and outdoor gym. </p><p>"It's a no-brainer," said Dowdle. "My productivity has gone up and I've been happier. If I have to work from home, I'd rather be somewhere warm and sunny."</p><p>Feverish demand, driven by the likes of Dowdle and DaSilva, has driven L.A. asking prices up by 17% from a year ago, twice the average increase nationwide. </p><p>"Prices are growing like never before," said Taylor Marr, lead economist at Redfin. "There is a massive price appreciation in what sellers can ask for."</p><p>Ferocious bidding wars have returned and realtors say they are getting so much interest from New Yorkers that they can hardly keep up, especially on the city's more prosperous Westside. </p><p>"It's as if as soon as COVID-19 hit everyone wanted to flee New York," said Nina Kubicek, a global luxury realtor at Coldwell Banker. "We couldn't believe how inundated we got this year with a flood of New Yorkers and East Coast clients that either want to lease or purchase here."</p><p>In typical years, Kubicek says she would receive calls from New Yorkers every few months, but now it is several a week and she is forced to turn down clients. "I have never been this busy in 16 years of doing this," she said, a far cry from the doomsday slowdown she and others in the real estate industry expected after the pandemic struck in March. "In May, I started getting slammed."</p><p>Even though New York now has a significantly lower number of COVID cases than Los Angeles, former New Yorkers say the virus had a much bigger impact on the quality of their day-to-day lives.</p><p>"It seems like the most cliché thing to say, but I feel like a more healthy person," said Ajay Mehta, a tech founder who moved from New York to Echo Park during the pandemic. "I've been running a ton outside and cooking more since I have a bigger kitchen."</p><p>"I had a tiny one-bedroom on the Lower East Side and being stuck in there would have been so depressing," continued Mehta. He lived in New York for a decade and dreaded the prospect of enduring another winter, especially during the pandemic. "I have a nice, airy apartment here. And it's much easier to be socially distant."</p><p>Los Angeles has long been criticized, especially by New Yorkers, for being too spread out and car dependent. But during COVID-19, instead of a liability, L.A.'s vastness has become an advantage while New York's density is a liability. </p><p>"With the lockdown there was so much closed in New York," said Joshua Coiro, an analytical lead at Google, who moved with his wife from Brooklyn to Santa Monica in August. "You don't have a car. You're relying on public transportation. It felt really dire."</p><p>Coiro plans to eventually return to New York, but he says he and his wife saw COVID-19 as the chance to try something new. "In this current environment it seemed like too good an opportunity to pass up," he said. "We're not even a month in but we're loving it. The people and the vibe is different from what you experience in the Northeast."</p><p>Continuing a trend from last year, L.A. was the most common destination for New Yorkers leaving the city from May to August, <a href="https://www.bloomberg.com/news/articles/2020-09-16/the-truth-about-american-migration-during-covid?srnd=premium&sref=4Kf8RwDw" target="_blank">according to data from United Van Lines.</a> Redfin estimates 4.6% of New Yorkers leaving the city went to L.A. during the second quarter of this year, up from 3.9% in the first quarter, according to Redfin data. That is hardly a dramatic shift, but Marr says it still means an influx of tens of thousands of residents.</p><p>"That can translate to a big impact," he said. "L.A. has consistently been the top spot for people leaving the Bay Area, battling with Seattle. What we have seen over time is a little bit of an acceleration of these trends."</p><h2>Moving for Career Reasons
</h2><p>Aside from the weather and the beach, some who have moved during the pandemic were drawn to L.A. for more than a lifestyle upgrade – they thought L.A. with its burgeoning tech scene would be a better place for their careers. COVID-19 made the decision easier. </p><p>"It used to be taboo to move from San Francisco to Los Angeles if you were in tech," said Dowdle.</p><p>Mehta lived for two years in San Francisco and says it would not have made sense to start his consumer-focused tech company, which sells customized astrological candles there.</p><p>"San Francisco is not a very culturally in-touch city." Mehta said. "Everyone is working on a SaaS [software as a service] company. They're not working on companies that are tapping into culture."</p><p>Elizabeth Skube, head of communications at Openpath Security Inc, relocated from San Francisco to Venice last month. She says she "fully hated San Francisco" but did not consider moving to L.A. until the pandemic because she worried it would hinder her career in tech. "I never thought of L.A. in that way," said Skube. "I thought I had to be in San Francisco."</p><p>But that mindset is changing. James Beshara, former director of product at Airbnb who's now an angel investor, had been eyeing moving from San Francisco to L.A. for some time after seeing more of his founder friends go south. "COVID just accelerated a move that I had been thinking about for a few years now," he said. </p><p>Beshara predicts there will continue to be a snowball effect from more founders and investors setting up shop in L.A. </p><p>"The lifestyle choice of living in a coastal city with amazing weather and it being such a creative hub is going to lead to even more creatives wanting to live here," he said, while adding that moving to L.A. still does carry a degree of stigma in the tech community. "As soon as I announced moving here, it was like I was plugged into so many private conversations of founders wanting to move down here that have been keeping it a secret."</p><p>It's always been a short flight to San Francisco, but Beshara says now that investors have gotten used to doing so much business that does not require face-to-face meetings, he worries even less about staying in contact with his Bay Area network, which is still the tech nexus after all. </p><p>"I interact with them daily via text, email, Facetime, Zoom and Twitter just as much as I did in San Francisco," Beshara said. "But now I get to do that from a sunny location with a beach across the street."</p>
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