This past week, I wrote about the launch of Fractional, a startup that wants to make it easier for friends (and strangers) to co-own real estate together. The co-founders, Stella Han and Carlos Treviño, bonded over their shared background of growing up in real estate families while working at Affirm, the buy now, pay later giant. However, the mission of “pay at your own pace” at Affirm clashed with the duo’s firsthand experience of the taxing time commitment and high costs that come with owning real estate; a contrast that eventually seeded the idea for Fractional.
I get more into the specifics of Fractional’s product and its recent fundraise in my story, but today I want to focus on a bit of my interview with Han, the co-founder, that has stuck with me. During our phone call, we chatted about how the future of alternative investing is built on on-ramping folks into a long-exclusionary asset class; we’re seeing it with private equity, art ownership and, now, real estate. While lowering the check size for entry matters — it’s one of Fractional’s hooks — so does the social aspect. Can you meaningfully educate a cohort of people to understand the value that they’re going to get from putting money into a home versus an index fund? Can you “disrupt” hesitation to get into business with friends? Can you plan for the unplanned twists and turns of life and someone in your investment group wanting liquidation sooner rather than later? These questions are all far more interesting, and thorny, than the logistical argument of making home ownership accessible. Fractional, I hope, will make it collaborative as well.
The way that Fractional has been preparing for the unexpected, so far, looks like some classic curation. Han explained that they’re building investment communities around specific properties, with the goal of putting together like-minded folks. “It doesn’t make sense for someone who’s thinking about flipping a property in a year versus someone who wants to hold for like five years,” she said. By eliminating major core differences upfront, and then getting lawyers involved, the startup is beginning to pacify early concerns. Still, the startup’s heaviest lift — like any business promising to bring access to a new asset — will be governance and transparently establishing expectations.
Fractions aren’t enough of an answer when trying to resolve divisions, and that’s a lesson for both startups and the pumpkin pie lovers among us. In the rest of this newsletter, we’ll tease some gift guides, and, um, estate management. As always, you can follow me on Twitter @nmasc_ or on Instagram @natashathereporter.
|