Startups

Fractional lands $5.5 million to let friends (and strangers) invest in real estate together

Comment

Image Credits: Fractional

As teammates at buy now, pay later fintech Affirm, Stella Han and Carlos Treviño bonded over their shared background of growing up in real estate families. The mission of “pay at your own pace” at Affirm clashed with their firsthand experience of the taxing time commitment and high costs that comes with owning real estate; a contrast that eventually seeded the idea for Fractional.

Fractional, a San Francisco-based startup, wants to make real estate ownership more accessible. The platform, which participated in Y Combinator’s Winter 2021 batch, helps people co-own investment properties with friends and strangers. It takes out some of the logistical challenges of finding property, and also removes financial barriers by allowing people to put smaller checks into a collective that will then invest into a property.

The vision has brought over 400 users to its beta, who have gone on to co-invest across 95 properties. It’s also brought millions in early funding to the team: Fractional announced today that it has raised $5.5 million in total funding at a $30 million valuation. Fractional’s seed round is led by CRV, but includes Y Combinator, Will Smith, Kevin Durant, Goodwater Capital, Unusual Ventures, Global Founders Capital, On Deck, Contrary Capital and Soma Capital.

Fractional divides the home ownership process into three main parts. First, the startup either matches together co-owners or onboards a friend group to kickstart the underwriting process, which blends well with the co-founder’s experience at Affirm. Then, it helps facilitate the purchase through legal and financial software services. Finally, it partners with property management companies and other services to make sure the co-owned homes stay in good shape (without the time commitment from its new co-owners).

https://techcrunch.com/2021/10/08/community-is-the-new-ai/

While Fractional certainly alleviates some of the financial hurdles of real estate ownership, friends may stray away from getting into business with each other due to the sheer pressure it can put on a relationship. What if life circumstances cause one person to want to sell before others? Or another refuses to upgrade the kitchen?

Despite their backgrounds, the co-founders know that scaling access as a service within real estate is uniquely complex. So, Han and Treviño pooled together cash and bought a plot of land in Mexico to more closely understand the process. Treviño’s family owns a construction business in Mexico, so the duo was able to find an off-market deal for a good price and eventually build a retail storefront on the property. But, as Han recalls, “the process wasn’t super smooth” and they had to pay a lawyer about $750 an hour to understand the mechanics of the process.

“We had to hire a lawyer because I just wanted to make sure we had a good model between the two of us on how we make decisions, how we resolve conflicts.”

Fractional co-founders Stella Han and Carlos Treviño. Image Credits: Fractional

CRV general partner Saar Gur thinks that the social networking layer of Fractional, “where new and experienced investors participate in a symbiotic environment,” is one of its distinguishing factors, according to a statement. “This also lets Fractional drive constant engagement on the platform beyond raw transactions and fuel their growth through organic word of mouth instead of aggressive paid marketing,” he said.

The rise of alternative investing, from NFT ownership to private equity funds, may trigger more adoption. Consumers are getting comfortable with the idea of diversifying their portfolios away from traditional public equities, and Fractional is a platform that capitalizes on one of the better-known asset classes out there — real estate.

Not Boring Capital’s Packy McCormick, who is an angel investor in Fractional, thinks the startup brings a highly scalable, high-margin business to a typically hard-to-scale, low-margin business.

“What’s been most impressive to me,” the investor and writer told TechCrunch, “is that in an industry that’s been very asset heavy — you need to buy a house and do construction and then sell it, or buy an asset and then let people invest — they’ve taken a pure software approach that doesn’t compromise the ease of the process and still gives people the hands-on feel of owning a house.”

More TechCrunch

Venture capital has been hit hard by souring macroeconomic conditions over the past few years and it’s not yet clear how the market downturn affected VC fund performance. But recent…

VC fund performance is down sharply — but it may have already hit its lowest point

The person who claims to have 49 million Dell customer records — Menelik — told TechCrunch that he brute-forced an online company portal and scraped customer data, including physical addresses,…

Threat actor says he scraped 49M Dell customer addresses before the company found out

The social network has announced an updated version of its app that lets you offer feedback about its algorithmic feed so you can better customize it.

Bluesky now lets you personalize main Discover feed using new controls

Microsoft will launch its own mobile game store in July, the company announced at the Bloomberg Technology Summit on Thursday. Xbox president Sarah Bond shared that the company plans to…

Microsoft is launching its mobile game store in July

Smart ring maker Oura is launching two new features focused on heart health, the company announced on Friday. The first claims to help users get an idea of their cardiovascular…

Oura launches two new heart health features

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI considers allowing AI porn

Garena is quietly developing new India-themed games even though Free Fire, its biggest title, has still not made a comeback to the country.

Garena is quietly making India-themed games even as Free Fire’s relaunch remains doubtful

The U.S.’ NHTSA has opened a fourth investigation into the Fisker Ocean SUV, spurred by multiple claims of “inadvertent Automatic Emergency Braking.”

Fisker Ocean faces fourth federal safety probe

CoreWeave has formally opened an office in London that will serve as its European headquarters and home to two new data centers.

CoreWeave, a $19B AI compute provider, opens European HQ in London with plans for 2 UK data centers

The Series C funding, which brings its total raise to around $95 million, will go toward mass production of the startup’s inaugural products

AI chip startup DEEPX secures $80M Series C at a $529M valuation 

A dust-up between Evolve Bank & Trust, Mercury and Synapse has led TabaPay to abandon its acquisition plans of troubled banking-as-a-service startup Synapse.

Infighting among fintech players has caused TabaPay to ‘pull out’ from buying bankrupt Synapse

The problem is not the media, but the message.

Apple’s ‘Crush’ ad is disgusting

The Twitter for Android client was “a demo app that Google had created and gave to us,” says Particle co-founder and ex-Twitter employee Sara Beykpour.

Google built some of the first social apps for Android, including Twitter and others

WhatsApp is updating its mobile apps for a fresh and more streamlined look, while also introducing a new “darker dark mode,” the company announced on Thursday. The messaging app says…

WhatsApp’s latest update streamlines navigation and adds a ‘darker dark mode’

Plinky lets you solve the problem of saving and organizing links from anywhere with a focus on simplicity and customization.

Plinky is an app for you to collect and organize links easily

The keynote kicks off at 10 a.m. PT on Tuesday and will offer glimpses into the latest versions of Android, Wear OS and Android TV.

Google I/O 2024: How to watch

For cancer patients, medicines administered in clinical trials can help save or extend lives. But despite thousands of trials in the United States each year, only 3% to 5% of…

Triomics raises $15M Series A to automate cancer clinical trials matching

Welcome back to TechCrunch Mobility — your central hub for news and insights on the future of transportation. Sign up here for free — just click TechCrunch Mobility! Tap, tap.…

Tesla drives Luminar lidar sales and Motional pauses robotaxi plans

The newly announced “Public Content Policy” will now join Reddit’s existing privacy policy and content policy to guide how Reddit’s data is being accessed and used by commercial entities and…

Reddit locks down its public data in new content policy, says use now requires a contract

Eva Ho plans to step away from her position as general partner at Fika Ventures, the Los Angeles-based seed firm she co-founded in 2016. Fika told LPs of Ho’s intention…

Fika Ventures co-founder Eva Ho will step back from the firm after its current fund is deployed

In a post on Werner Vogels’ personal blog, he details Distill, an open-source app he built to transcribe and summarize conference calls.

Amazon’s CTO built a meeting-summarizing app for some reason

Paris-based Mistral AI, a startup working on open source large language models — the building block for generative AI services — has been raising money at a $6 billion valuation,…

Sources: Mistral AI raising at a $6B valuation, SoftBank ‘not in’ but DST is

You can expect plenty of AI, but probably not a lot of hardware.

Google I/O 2024: What to expect

Dating apps and other social friend-finders are being put on notice: Dating app giant Bumble is looking to make more acquisitions.

Bumble says it’s looking to M&A to drive growth

When Class founder Michael Chasen was in college, he and a buddy came up with the idea for Blackboard, an online classroom organizational tool. His original company was acquired for…

Blackboard founder transforms Zoom add-on designed for teachers into business tool

Groww, an Indian investment app, has become one of the first startups from the country to shift its domicile back home.

Groww joins the first wave of Indian startups moving domiciles back home from US

Technology giant Dell notified customers on Thursday that it experienced a data breach involving customers’ names and physical addresses. In an email seen by TechCrunch and shared by several people…

Dell discloses data breach of customers’ physical addresses

Featured Article

Fairgen ‘boosts’ survey results using synthetic data and AI-generated responses

The Israeli startup has raised $5.5M for its platform that uses “statistical AI” to generate synthetic data that it says is as good as the real thing.

1 day ago
Fairgen ‘boosts’ survey results using synthetic data and AI-generated responses

Hydrow, the at-home rowing machine maker, announced Thursday that it has acquired a majority stake in Speede Fitness, the company behind the AI-enabled strength training machine. The rowing startup also…

Rowing startup Hydrow acquires a majority stake in Speede Fitness as their CEO steps down

Call centers are embracing automation. There’s debate as to whether that’s a good thing, but it’s happening — and quite possibly accelerating. According to research firm TechSci Research, the global…

Retell AI lets companies build ‘voice agents’ to answer phone calls