PropTech startup Willow debuted its real estate investing platform, January 31, offering Canadians the chance to buy and sell fractions of property much like shares on the stock market. The startup calls its business model PropSharing.
Willow came out of stealth mode after three years, and claims it is the first and only real estate investing startup to have received Ontario Securities Commission (OSC) approval to operate as an exempt market dealer.
According to the OSC, the exempt market is a section of Canada’s capital markets where securities may be sold without the protections associated with a prospectus. The general rule under Ontario securities law is that any security offered to the public must be offered under a prospectus.
However, prospectus exemptions save companies the time and expense of preparing a prospectus.
“We believe property investment should be inclusive to all. PropSharing will offer all Canadians a unique opportunity to invest in the real estate market.”
A national registration search on the Canadian Securities Administrators’ website in fact shows that Willow Ret Financial Services Inc. has registered as an exempt market dealer in every province and territory.
Willow’s platform will include what the startup claims are handpicked, stable, rent-generating properties from across the country. These commercial and industrial properties, along with multiplexes, are split into 100,000 units of “ownership,” which are available for purchase through the platform.
Willow says it takes care of the property management and the administrative work associated with its real estate.
“With real estate prices continuing to skyrocket across the country, investing in property is becoming further out of reach for most Canadians,” said Logan Yergens, CEO and co-founder of Willow. “We believe property investment should be inclusive to all. PropSharing will offer all Canadians a unique opportunity to invest in the real estate market.”
The startup claims it has a pre-launch waitlist of 10,000 people.
Willow invests in the properties as well as manages them, something it claims makes it different from other platforms in the market. Willow said it will continue to expand its property portfolio over time.
According to Yergens the startup has gone through three rounds of funding, with a fourth on the verge of closing, raising a total of $5 million. Yergens said investors in the rounds have included Montreal’s Harden family, who run a real estate development company, Starlight Investments, and “other real estate and financial services heavyweights.”
Willow currently has two properties.
Yergens said they “prefund the acquisition of those properties.” He said Willow signs a purchase and sale agreement and “tie it up is the term, so we have 75, 90, 120 days, whatever it is, where that property is agreed to be sold to us.”
In order to purchase further properties, the startup will have to wait until people begin investing in their concept. Once they’ve raised enough money, Willow plans to close on what it describes as a “backlog” of properties.
“As we onboard users and have that demand there, then we can very quickly scale up,” Yergens said.
In order to invest, customers go to Willow’s website, and create a financial profile on which Willow makes a recommendation as to how much they can invest. Customers answer a lot of questions on such things as their investment experience and “risk appetite,” and they must provide a breakdown of their assets and liabilities. The most any investor can own in an individual property is 10 percent.
The FinTech startup Flinks is used in the back end to connect customers’ bank accounts to Willow. Willow purchases the service from Flinks.
Willow has three co-founders. Yergens has worked as a director of investor relations and corporate development for the blockchain startup, Aion Networks, and in equity research and portfolio management.
Willow’s platform will include what the startup claims are handpicked, stable, rent-generating properties from across the country.
Yergens said he wanted to get an idea of where the technology was going, which is why he worked at Aion. “There, the idea of fractionalized everything, whether it’s art, collectable cards, sports memorabilia – the idea of real estate I thought was pretty interesting,” noted. “There are some inherent flaws in real estate, such a large ticket size, that makes it exclusive to only the top one percent of Canadians in the case of commercial real estate, which is what we’re investing in.
Mike Hibberd, the startup’s co-founder, chief compliance officer and COO, previously worked as a COO for a Toronto fashion brand, while co-founder and CTO Ray Johannsson has worked in software development and system design for early stage startups as well as for Dell and IBM.
Including the founders, Willow has a staff of 12.
Willow joins an already burgeoning PropTech space in Canada. According to a 2021 report, out of 300 startups surveyed, approximately 60 percent are in the early stages of their growth. Sixty-seven percent of proptech startups in Canada were founded after 2014, and of the startups studied, 59 percent are at the pre-seed, angel, or seed stage of their growth.
Nor are they the only PropTech startup offering fractional shares in real estate. FinTech startup BuyProperly also deals in fractional real estate.
But the competition doesn’t phase Yergens. “We’re pioneering what we’re offering,” he said. “We don’t worry about the competition.”
In the long term, Willow hopes to be able to offer fractional investments in other types of properties including solar wind farms, heritage properties, and affordable housing developments.
Photo courtesy of Willow