Second Home Startup Pacaso Reaches Over $1 Billion Valuation
Photo by iSAW Company on Unsplash
Pacaso, the startup democratizing the ownership in a second home, has now achieved a valuation of over $1 billion. Founded in October 2020, Pacaso attained unicorn status in only 6 months. This makes it the fastest startup to reach the $1 billion mark in the United States.
In March 2021, Pacaso raised $75 million in equity financing in a fundraising round led by Greycroft Partners. The round also included investments from Global Founders Capital and Acrew Diversify Capital Fund. A number of prominent angel investors participated as well such as Jeff Wilke, the former CEO of Amazon Worldwide Consumer.
Including the $75 million of additional growth financing from the Greycroft-led round, the company has now raised a total of $90 million in equity financing to date. Additionally, the company has raised a total of over $1 billion in debt financing. Putting this into perspective, Pacaso debuted in October 2020 with just a $17 million Series A financing round.
Second Home Investment Profitable
Unlike may startups in their early years, Pacaso has already managed to demonstrate it has a path to maintaining long-term profitability. Pacaso’s first quarter financial results demonstrated sustained EBITDA profitability. EBITDA profitability refers to the amount of profit a company is making as a percentage of revenue. The company’s profits are measured before interest, taxes, depreciation, and amortization.
CEO of Pacaso, Austin Allison founded the company with the mission of democratizing vacation home ownership. “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 stated. “Pacaso is taking all of those hassles associated with the traditional do-it-yourself process, and all of those risks, and eliminating them.”
Zillow’s CEO Has Invested
Spencer Rascoff, the co-founder and CEO of Zillow, is an investor in Pacaso. Rascoff believes Pacaso’s vision harmonizes with Zillow’s business model in many regards. “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.” Zillow is one of the largest online real estate marketplaces in the United States that lists both sale and rental listings.
Rascoff explained: “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. It’s a win-win.”
Indeed, both Pacaso and Zillow were built upon the mission of democratizing access to home ownership. Aside from being beyond the financial reach of many, owning a second home can be expensive to maintain throughout the year when away from the property. Since its founding approximately six months, more than 500,000 people have visited Pacaso’s website to learn more about second home ownership.
“Second home ownership provides a canvas for life’s memories, and it shouldn’t only be accessible to the 1%,” Rascoff commented. “Through Pacaso’s innovative co-ownership model, second home ownership will be achievable by tens of millions more people, helping to democratize access to second home ownership.”
Reinventing Second Home Model
Pacaso is reinventing the traditional time share model, and the growth opportunities are huge. Pacaso’s business model is distinct is from that of a time share. Unlike a time share, where people can purchase a partial ownership stake in a resort property, Pacaso serves a different real estate asset class. In addition, Pacaso’s offerings are more expansive. Pacaso offers a range of services, including forming the LLC and aggregating the group of co-owners. They also manage ongoing maintenance services from coordinating repairmen to cleaning staff.
The company intends to used its newly raised funds to expand into new markets in the U.S., and possibly even Europe. COVID-19 has contributed to the uptick in demand for second homes. Demand for second home purchases doubled in October 2020 as compared to the previous year.
An analysis of mortgage data since the pandemic started also suggests that mortgage applications have increasingly been geared toward second homes. In January 2021, mortgage applications for second homes were up 84% year-over-year. This demand is also being driven by low interest rates that have made these purchases accessible to a wider demographic. However, home prices have also soared since the pandemic started, somewhat mitigating the impact of ultra-low interest rates.
“As the demand for second home ownership increases, gone are the days of these homes sitting empty for most of the year with little benefit to the owner. Pacaso is creating a new category that will dramatically change how people app