Pacaso, a proptech startup that rocketed to unicorn status on a platform based on co-ownership of vacation homes, has laid off 100 workers over concerns about a global recession.
The San Francisco-based firm founded by former Zillow executives Austin Allison and Spencer Rascoff announced it would cut staff by 30 percent, Inman reported.
Laid-off workers will be given a severance, health care coverage and career help, Allison told employees during an all-hands conference call.
“Like any business in this environment, Pacaso must make proactive changes to ensure that our expenses align with revenue,” Allison said. “A big part of my job as CEO is to make tough decisions based on what is best for Pacaso, and to be transparent with you about why we’re making them.”
He cited declining prices for luxury second homes and an unstable economy in which a “global recession now seems likely” as reasons for the move.
The Sept. 21 mortgage rate hike combined with the high cost of housing led to the decision, which “will put us back to January 2022 headcount levels of just above 200 employees,” Brian McGuigan, Pacaso’s director of communications, told Inman.
Prior to the announcement, Pacaso had 300 employees. The layoffs will impact the company across the board, with no single department bearing the brunt of the cuts.
A third-quarter regulatory filing by the company showed that luxury second home mortgage rate locks declined 28 percent from the previous quarter, although they were still 152 percent above the third quarter in 2019, prior to the pandemic.
“It’s just a completely different environment now,” McGuigan said.
In a company blog post on the matter, Allison reiterated McGuigan’s comments, also sharing the executive’s belief that a global economic downturn was imminent.
Early this year, capital markets from venture capital firms to public market investors were enthusiastically funding growth stage companies, he said.
“Our business expansion and headcount were designed for this hyper-growth environment, which was appropriate for the market conditions at the time. Fast forward 10 months and we now must prepare for a recession.”
The company said no services to current Pacaso owners will be altered, nor will the commissions paid to real estate agents who sell shares to buyers and list their properties. Pacaso pays 3 percent to buyer agents and offers 500 restricted stock units.
The company said it will focus on growing existing markets instead of additional second-home destinations.
Pacaso’s 14-month rise from a concept for buying and selling fractions of vacation homes to a $1.5 billion valuation last December made it among proptech’s most successful startups.
It s detractors said its co-ownership business model comes at the expense of communities by removing precious housing stock from already tight real estate markets while dramatically overpaying to achieve its foothold, driving up property values and shutting out average buyers.
— Dana Bartholomew
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