Fraction Technologies announces $289 million CAD in debt, equity financing as it looks to disrupt reverse mortgages

Vancouver-based startup Fraction Technologies on Wednesday announced $289 million CAD in a mix of equity and debt financing.

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

With the announcement of its funding, Fraction is coming out of “stealth mode” with the launch of its initial product, the Fraction Appreciation Mortgage, which allows customers to convert up to 40 percent of their home equity into tax-free cash.

“The Fraction team impressed us with their breadth and depth of experience in lending.”
– Christian Lassonde,
Impression Ventures

Fraction refused to disclose the breakdown of the equity to debt financing. However, a source familiar with the particulars told BetaKit a big portion of the $289 million consisted of debt. A statement to BetaKit from Fraction co-founder and CEO Hayden James, noted the debt financing includes both capital to grow the business and to fund mortgages. The debt was provided by an undisclosed “major global bank.”
 

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

Founded in 2018, Fraction touts itself as an innovative digital platform that enables homeowners to manage and diversify their home equity “in a way that was not previously possible.” The startup’s overall mission is to “empower homeowners with socially conscious financial solutions” and disrupt the reverse mortgage industry.

Customers are able to use the capital Fraction lends to pay for home renovations, cover retirement expenses or make other investments, such as buy a second home.

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

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Fraction currently offers its services in Ontario and British Columbia. The startup noted its funding will 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 prior to launching, with over $20 million in demand from interested homeowners.

“The Fraction team impressed us with their breadth and depth of experience in lending. Driven by a strong sense of purpose that aligns with ours, Fraction makes accessing home equity easy regardless of income, age or profession, in a fair and transparent manner, strengthening an individual’s financial position,” said Christian Lassonde, managing partner at Impression Ventures, who is joining Fraction’s board as part of the deal. “Homeowners can now better situate themselves in retirement, or use the funds to support their next generation, without having to leave their home or put it at risk.”

Fraction is optimizing on a growing trend in the Proptech and FinTech space, which includes the likes of Opendoor and Noah. In Canada, Toronto-based Proptech startup Properly launched last year, allowing users to buy a new home using their current home’s equity, before having to list it. In the fall, Properly secured $100 million CAD in debt financing to help support its capital heavy expense of purchasing homes.

Image source Pixabay

Meagan Simpson

Meagan Simpson

Meagan is the Associate Editor for BetaKit. A tech writer that is super proud to showcase the Canadian tech scene. Background in almost every type of journalism from sports to politics. Podcast and Harry Potter nerd, photographer and crazy cat lady.