Vancouver-based FinTech startup Fraction Technologies has raised $20 million CAD in a Series A funding round led by QED Investors.
The financing also saw participation from returning investors, such as Impression Ventures, Primetime Partners, Panache Ventures, and Global Founders Capital. Notable angel investors included founders of Brex, a FinTech company based in San Francisco, California, as well as the founding team of Bitso, a cryptocurrency exchange based in Mexico.
Launched in February by co-founders Hayden James, Josh Baker, and Rayan Rafay, Fraction offers a digital platform to provide “socially conscious financial solutions” for homeowners. Its flagship product, the Fraction Appreciation Mortgage, enables its users to convert up to 40 percent of their home equity into tax-free cash.
Clients can use the equity in their homes to increase their monthly income, buy a second home, trade an existing mortgage for one without monthly payments, and more. The company currently offers its clients a 40 percent loan to value (LTV) on a five-year term and will soon be increasing this to a 50 percent LTV with the option of a 10-year term offer.
According to the startup, the fresh financing is earmarked to fuel Fraction’s expansion into the United States and to continue the development of its product offerings to “provide even more transparency and flexibility for homeowners to manage their home equity.”
Since its inception, the startup claims that its clients have received an average of $350,000 from their home equity. Fraction called this home equity loan an “improvement” to the existing mortgage and home equity landscape, claiming their product offers no required monthly payments, and the interest rate is based on the appreciation of the client’s property.
“In addition to expanding to the U.S., we are also building out an entirely new Loan Origination System to be able to fundamentally improve upon the customer experience,” said James, who is also Fraction’s CEO.
The new capital is in addition to its $289 million CAD raise in February, a combination of equity and debt financing, where a source familiar with the particulars told BetaKit a big portion of the $289 million consisted of debt. A portion of that debt is a facility that allows Fraction to fund mortgages.