Pacaso, a real estate startup that aims to create co-ownership opportunities for second homes, revealed Wednesday it has raised $75 million in equity funding and an additional $1 billion in debt funding.
“It really all ties back to the work that we’re doing and why we exist, our mission, which is really about democratizing access to second home ownership and enriching people’s lives by making this dream possible for the top 20 percent instead of the top 1 percent who have access today,” Allison, Pacaso’s CEO and co-founder said, in a statement.
“What we’re seeing in the business results and the momentum is a function of a really big problem at the right time with a really fantastic team that’s executing well against the idea,” Allison added.
Pacaso allows individuals to purchase a co-ownership stake in a second home. The company handles all the management and design aspects of the home — what the aesthetic looks like, what appliances outfit the home, etc.
Allison explained that the two biggest things that stand in the way of second homeownership are cost and justification — most second homes sit vacant for the majority of the time — and that Pacaso aims to address both of those concerns.
The desire to own a second home existed well before the COVID-19 pandemic, but the pandemic has accelerated the company’s growth, according to Allison.
Home prices have exploded in the past year and the rise is even steeper in the second home market, according to Allison.
“The pandemic has caused that desire for second homeownership to be more pronounced and more intense than pre-pandemic and the reason why is flexibility,” Allison said. “You have more families that can work from home, more families that can work partially from home and even for the families that are going to go back into the office when this all settles down, we’ve entered a new world where there’s a new culture that promotes flexibility.”
“That has enabled us to accomplish what otherwise might have taken us a couple years, we were able to accomplish in six months,” Allison added.
One of those accomplishments is, by the company’s own internal analysis of data from Crunchbase and PitchBook, that it’s the fastest U.S. company to reach unicorn valuation.
The company launched in October and has said it has achieved sustained EBITDA (earnings before interest, taxes, depreciation, and amortization) profitability in the first quarter of 2021, with a “path to sustained long-term profitability.”
To cover the management costs, and generate revenue, Pacaso charges a fee that equals 1 percent of the total transaction and marks up the sales price of each home 10 percent.
As a private company, the financials of Pacaso are not readily available.
The funding round was led by Dana Settle of Greycroft and Sarra Zayani of Global Founders Capital, with participation from Sukhinder Singh Cassidy and Theresia Gouw of the Acrew Diversify Capital Fund. Additional participants in the round included First American Financial; Shea Ventures; Jeff Wilke, former CEO of Amazon Worldwide Consumer, and other angel investors.
The company plans to use the funding to expand to new markets and expand its service to a broader range of price points. Right now, Pacaso is mostly on the West Coast, but it will expand east in 2021.
“By the end of the year, expect Pacaso to be in most of the top second home destinations across the U.S.,” Allison said.
That also means potentially more opportunities for real estate agents. Pacaso has partner agents representing all sides of the transaction, which Allison explained is purely additive to an agent’s existing business.
“We don’t these sell these Pacaso homes,” Allison said. “Real estate agents do.”
There are three ways consumers can buy a portion of home on Pacaso: They can choose from existing listings on the website; they can bring an existing listing from another portal to Pacaso to have the company divide up for co-ownership; or alternatively, a seller can sell portions of a second home on Pacaso.
That turns one transaction into multiple.
Pacaso is also one of several business ventures launched in the past year by Rascoff, who also co-founded Zillow, Hotwire, dot.LA and three different special purpose acquisition companies, one of which recently announced it was taking Offerpad public through a merger.
“Throughout my career as a founder and tech investor, I have experienced tremendous growth and innovation among startups, but none compare to Pacaso,” Rascoff said in a statement. “The opportunity in front of Pacaso is massive and I’m excited to help the company achieve its full potential.”
As part of the company’s new funding round, Pacaso also announced it hired Nina Tran as chief financial officer. Tran previously took Waypoint Homes public through a merger with Starwood Waypoint and served as its chief financial officer through its sale to Invitation Homes.