Fraction Technologies Announces Cdn $ 289 Million Debt and Equity Financing As It Seeks To Disrupt Reverse Mortgages

Vancouver-based startup Fraction Technologies announced C $ 289 million in equity and debt financing on Wednesday.

Fraction is a startup at the intersection of FinTech and Proptech, focused on delivering what it calls “socially responsible financial solutions”.

With the announcement of its financing, Fraction exits “stealth mode” with the launch of its initial product, the Fraction Appreciation Mortgage, which allows clients to convert up to 40% of their home equity into tax-free cash. .

“The Fraction team impressed us with the breadth and depth of their lending experience. “
– Christian Lassonde,
Printing companies

Fraction declined to disclose the allocation of equity to debt financing. However, a source familiar with the details told BetaKit that much of the $ 289 million is debt. A statement to BetaKit from Fraction co-founder and CEO Hayden James noted that debt financing includes both capital to grow the business and to finance mortgages. The debt was provided by an undisclosed “big world bank”.

The equity portion of the financing, which represents the company’s seed capital, closed in November. Venture capitalists included Impression Ventures, Primetime Partners, Global Founders Capital and Panache Ventures.

Founded in 2018, Fraction promotes itself as an innovative digital platform that enables homeowners to manage and diversify their home equity “in ways that were not possible before”. The startup’s overall mission is to “empower homeowners with socially responsible financial solutions” and disrupt the reverse mortgage industry.

Customers can use the capital loaned by Fraction to pay for home renovations, cover retirement expenses, or make other investments, such as buying a second home.

“Refinancing a low rate mortgage does not help homeowners with immediate cash flow needs for retirement income or major unforeseen expenses,” said Rayan Rafay, co-founder and COO and CFO of Fraction. “Reverse mortgages can provide that upfront money, but they don’t adequately protect the homeowner and come with higher interest rates and restrictions. “

RELATED: Report Provides Snapshot of Canadian Information Technology Sector as Real Estate Undergoes Digital Transformation

Fraction currently provides services in Ontario and British Columbia. The startup said its funding would be used to launch in Canada, expand its team and technology platform, as well as prepare for its launch in the United States.

According to the company, it saw “exceptional” interest in its offering ahead of launch, with a request of more than $ 20 million from interested owners.

“The Fraction team impressed us with the breadth and depth of their lending experience. Driven by a keen sense of purpose that matches our own, Fraction makes it easy to access home equity, regardless of income, age or occupation, in a fair and transparent manner, thereby strengthening an individual’s financial situation, ”said Christian Lassonde, Managing Partner at Impression Ventures, who is joining Fraction’s board of directors as part of the deal. “Homeowners can now be better off in retirement or use the funds to support their next generation without having to leave or put their homes in jeopardy. “

Fraction is optimizing on a growing trend in the Proptech and FinTech space, which includes Opendoor and Noah. In Canada, Properly, a Toronto-based startup, was launched last year, allowing users to buy a new home using the equity in their current home, before needing to list it. In the fall, Properly secured C $ 100 million in debt financing to help with its heavy capital outlays for the purchase of homes.

Image source Pixabay

Carol M. Barragan