Five months after launching, second-home startup Pacaso is a unicorn.
The company, started by Zillow co-founder Spencer Rascoff and other former Zillow executives, said it raised $75 million at a $1 billion valuation — becoming the fastest U.S. company to achieve unicorn status.
“Pacaso is lighting in a bottle,” said CEO Austin Allison. “Second homes have always been a dream for people.”
Greycroft and Global Founders Capital led the round, which brings Pacaso’s total funding to $90 million in equity, plus $1 billion in debt. Acrew’s Diversify Capital Fund, First American Financial and Shea Ventures also participated, along with former Amazon exec Jeff Wilke and other angel investors.
Based in San Francisco, Pacaso is reinventing the timeshare model with a marketplace that allows buyers to purchase a fraction of a second home. Its network of agents and tools help homeowners set up limited liability companies for joint ownership as well as manage the properties.
“There’s a big opportunity here,” said Allison, describing second home ownership as a $1 trillion market. He said Pacaso will use the cash to expand to new markets, particularly on the East Coast. If it manages to blanket the U.S., Pacaso will expand to Europe.
In conjunction with the funding, Pacaso said it hired CFO Nina Tran, who was the finance chief for Waypoint Homes when it merged with Starwood, and when the combined company was purchased by Invitation Homes.
Itching for a getaway
Demand for second homes has surged during the pandemic, fueled by work-from-anywhere policies.
In January, mortgage applications for second homes were up 84 percent year-over-year, according to Redfin. That was more than double the increase in applications for primary homes.
“The second-home market is really experiencing a moment that we’ve never seen before — whether it’s a mountain home in North Carolina or a house on the beach in Malibu or a Hamptons cottage,” said Pamela Liebman, CEO of the Corcoran Group, which began selling franchises last year in luxury markets and second-home destinations. Corcoran just launched its 11th affiliate in Nyack, New York. Last month, it planted a flag in the British Virgin Islands.
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“It’s primarily driven by the desire to have a real place to escape, and super low interest rates are making these kinds of purchases much more affordable than they were in the past,” Liebman said. (Of course, home prices have surged, offsetting savings from falling mortgage rates.)
Allison said the idea for Pacaso came from his own experience.
The founder of dotloop, which was acquired by Zillow, Allison lives in Napa Valley. In 2014, he and his wife bought a second home in Lake Tahoe in a short sale. “It was a stretch financially,” he said. “We had to rent the home out to pay the bills.”
But owning a getaway changed their lives immeasurably. They are now looking to buy another property in Scottsdale, Arizona.
Pacaso launched in October with a $17 million seed round led by Maveron, with participation from Crosscut and Global Founders Capital. Wilke invested in that round, too, with former Starbucks CEO Howard Schultz, real estate coach Tom Ferry and Greg Schwartz, former Zillow president of media and marketplace and founder of mortgage startup Tomo.
As a private company, Pacaso does not disclose revenue but Allison said growth has been “overwhelming.” The company, which claims it turned profitable during the first quarter of 2021, collects a 12 percent fee from buyers up front and charges $100 per month in management fees.
Since October, 500,000 people have visited its website, with 60,000 asking for additional information. So far Pacaso has helped 100 homeowners purchase a fraction of second homes ranging in price from $2 million to $6 million.
Funding environment
Although tech stocks have dropped in recent weeks, venture investors are still writing big checks.
Venture funding in January 2021 hit a record $39.9 billion, according to Crunchbase, which found 69 percent of deals went to late-stage companies.
Some 38 unicorns were minted in January, and 22 in February. New real estate unicorns included Plume Design, a smart-home startup, which raised $270 million at a $1.4 billion valuation, and Infra.market, a marketplace for construction materials, which raised $100 million at a $1 billion valuation.
Pacaso is surely benefiting from a favorable financing environment, but Sarra Zayani, a partner at Founders Capital, said the “massive potential” for the second-home market is largely untapped.
“Pacaso is basically empowering a new sphere of buyers. They’re creating a new category,” she said.
The company’s early profitability is unusual for fast-growing startups. “It’s a model that’s working and gives indication that capital down the line will be needed for new markets, but not just for pure growth,” Zayani said.
In a statement, Rascoff noted that as a founder and investor, he has witnessed tremendous growth before. “None compare to Pacaso,” he said.
Rascoff, who stepped down as CEO of Zillow in 2019, has emerged in recent months as one of proptech’s most prolific investors. In addition to launching dot.LA, a tech news site for Southern California, he has co-sponsored three blank-check firms formed with the intention of taking a fast-growing tech company public.
Last week, his Supernova Partners Acquisition Company struck a deal with instant home-buying startup Offerpad, a rival of Zillow and Opendoor. The deal values Offerpad at $3 billion.