Owning a home is often seen as a major way to build wealth and reap other financial benefits. However, home equity is an illiquid asset. Home-owners often have to go into debt to actually tap into the value of the property they already own.
QuantmRE is one of five companies looking to change that. By offering Home Equity Agreements, QuantmRE helps home-owners access the value of their homes without any monthly payments or interest. They also plan to create a secondary market exchange which would give everyday investors the ability to create portfolios based on these agreements. We talked to founder Matthew Sullivan about his vision for expanding the home equity investor base and where QuantmRE is headed.
Can you give us a brief elevator pitch for your company?
QuantmRE’s mission is to change the way that home equity is financed and make it accessible, investible and tradable. Currently there is over $15 trillion of equity that is trapped in US homes, and for homeowners the only way to unlock this capital is to go to the bank and borrow more money. We believe this is deeply unsatisfactory. Our Home Equity Agreements enable homeowners to access cash from their home equity with no interest, no monthly payments and no added debt. Our real estate marketplace has been designed to enable all investors, including institutional and retail investors, to buy and sell fractionalized interests in these residential real estate investments with low minimum amounts and without the hassles associated with being a landlord.
What inspired you to take the leap and build this company?
I originally came across the concept of Home Equity Agreements and equity-based funding around five years ago. At that time I had just launched a real estate crowdfunding company and was in the process of establishing a real estate debt fund. I was immediately intrigued by the possibilities for this new asset class – it represented a completely novel approach to home financing and the size of the potential market was huge. As I looked into it further, it became clear that there would be challenges in raising capital as Home Equity Agreements are an illiquid and non cash-flowing investment. I knew there was a huge opportunity, we just needed a way to make it more attractive to investors. In the meantime, the market for Home Equity Agreements began to grow and become more established, with more companies emerging and more institutional investors becoming involved.
I had my ‘Eureka’ moment in September 2017 – a couple of years later. I was in a networking group in Beverly Hills where one of the speakers was talking about blockchain and initial coin offerings (ICOs). I remember grabbing my notebook and sketching out the design for an online marketplace for Home Equity Agreements. If we could create liquidity and tradability for these investments, it could solve many of the problems and make this new asset class attractive to a much wider potential investor base. The investment capital raised would provide the capital that we needed to be able to help homeowners access their home equity.
I could see that blockchain could be an ideal technology solution to enable us to build this exchange and launch the platform. So, the deal was done, and from that day onwards I became completely dedicated to building QuantmRE and the “Equity Freedom” movement, with the clear vision to change the way that homeowners can access their home equity and make home equity accessible, investable and tradable.
What past experiences prepared you to start, build, and lead your company?
I’m originally from the UK, and my early professional career was in stockbroking and corporate finance where I focused on companies driven by technology. During my time as a corporate financier, I had the privilege of working closely with Sir Richard Branson and his team at Virgin Management for a number of years. Virgin’s mantra of “first class service at a business class price” and “taking on the big boys and winning” has stayed with me ever since.
In the late 1990’s I left the corporate finance world and embarked on an entrepreneurial career. In 1997 I launched my first telecoms company. A couple of years later I founded one of the first internet infrastructure companies, backed by a London-based VC. This company, Copernicus Global Billing Solutions, was the first company in Europe to offer internet billing on a software-as-a-service basis. It was an amazingly exciting time – building cutting-edge software right at the beginning of the internet boom. Since then I have founded companies in telecoms, technology and finance and have worked in a number of countries – UK, Australia, India and the US.
In 2015 I founded Crowdventure.com, one of the first real estate crowdfunding companies in the US to take advantage of the JOBS Act legislation (which enabled crowdfunding to take place in the US). In 2017 I launched one of the first Regulation A+ real estate funds. At the same time that I came across Home Equity Agreements, I had already built a strong team of real estate, technology and marketing professionals. As we were offering securities, we were already operating in a regulated environment where compliance was key. All of these factors gave me the solid foundation and team that I needed to be able to quickly begin the development of QuantmRE.
What is your vision for the future of the industry you are operating in?
The entire real estate industry is entering a period of significant change where the existing layers of cost and inefficiency are likely to be disrupted. Most of these are caused by legacy systems that simply haven’t evolved in the same way that other industries have. Over the past couple of years we have seen the emergence of a number of fintech and proptech companies that are disrupting and reshaping much of the industry.
At the moment there are only five companies operating in this space, including ourselves. As the education, understanding and adoption of Home Equity Agreements increases, I believe that potentially dozens of new companies will enter this sector.
In the short to medium term, I believe the economic headwind caused by the COVID-19 pandemic will turn out to be a positive tailwind for our business. People need cash today for themselves and their families more so than ever. Our equity-based solutions offer an alternative for homeowners who want to unlock some of their equity without interest, monthly payments or added debt. As the banks continue to tighten their eligibility requirements, our alternative financing options will become more in demand.
We are also very excited about the potential that this asset class has for investors. Our platform has been designed to open the doors for small investors so they can build, model, manage and trade portfolios of a unique residential real estate asset class that, until now, has only been available to venture capital funds and large institutions.
Our vision is to solve a major problem for millions of homeowners and become the de facto marketplace for Home Equity Agreements from all of the market participants.
Who is on your team and how did you come together?
Our team is comprised of pioneers in the shared equity space who have helped hundreds of homeowners access millions of dollars of equity in their homes. Steve Hotovec and Mark Rogers have an enormous amount of experience in this sector and were responsible for most of the originations for Equity Key, one of the pioneers in this space. Dave Sterlitz, a co-founder and our compliance counsel, was the general counsel for Equity Key. Jeremiah Jacquet and Bojan Mise form our tech team (which is based in Los Angeles). Robb Barr is our finance director, with whom I have worked for over five years on a number of real estate funds. Sheila Burns and Heath Jackson Thomas drive the company’s design and social media impetus. We also have some highly experienced advisors, such as David Moss from Strongblock and Tim Sanders, previously chief solutions officer at Yahoo and an early stage team member at Mark Cuban’s Broadcast.com.
Do you have any competition, if so, how do you differentiate?
Including QuantmRE, there are still only five companies that operate in this space. As the market is still young, there is a spirit of collaboration and cooperation between all of the companies as there is still a real need for consumer education. Our view is that there will be huge growth in this sector and far more companies will be operating in this space over the next five years as more and more homeowners begin to understand what a Home Equity Agreement is and how it can work for them.
QuantmRE is aiming to build a collaborative platform in conjunction with the other market participants, as we believe at some point there will be demand from many of the market participants to fractionalize and trade Home Equity Agreements. This would follow a similar pattern to the residential mortgage industry, where the mortgage market became more competitive and attractive to customers when the mortgages could be packaged, securitized and sold.
Unlike the other companies in this sector that only focus on selling their own agreements, QuantmRE is able to offer its own products as well as brokering a range of Home Equity Agreements across multiple states from the other market participants. This factor will enable us to grow our customer base and origination capabilities quickly and in a cost-effective way.
- QuantmRE is not tied to specific capital sources – this enables us to offer a wider product range to a large number of homeowners in multiple locations.
- QuantmRE is the only platform designed to provide institutional and individual investors with access to fractionalized equity investments in owner-occupied residential real estate
- QuantmRE is the only platform that has been designed to provide a secondary market for fractionalized Home Equity Agreements
What does your business model look like?
We currently generate origination fees based on the amount of cash a homeowner unlocks when they complete a Home Equity Agreement. As demand for Home Equity Agreements increases, we anticipate being able to generate an additional ‘gain on sale’ for Agreements that we originate, in addition to the fees paid by the Homeowner. This may increase our overall potential earnings based on the cash value of each completed Home Equity Agreement.
Built on blockchain technologies, our secondary market platform (which is still in development), has been designed to operate as a marketplace for fractionalized interests in Home Equity Agreements. It will give investors a smarter way to invest in US residential homes and deliver revenue streams from the following potential activities:
- Annual membership fees
- Technology fees to buy, sell and trade units in fractionalized Home Equity Agreements
- Portfolio modelling fees
- Fees for the provision of real-time real estate transaction data
What brought you to equity crowdfunding and how do you intend to use the money you raise this round to scale the business?
Part of our vision is to create an “Equity Freedom” movement. Our alternative home equity financing solutions offer a potential lifeline to millions of homeowners who are unable or unwilling to take on more debt. Crowdfunding enables potentially thousands of investors to own a piece of our business and help us spread the word, so it’s a perfect way to build a large group of motivated ambassadors for our business.
The main areas where we plan to allocate the funds that we raise from this offering are:
- Significantly increase QuantmRE’s sales and marketing efforts to drive sales revenues from Home Equity Agreement originations, with the objective of becoming cash-flow positive as soon as possible. We already have a successful online marketing strategy in place, and the additional funds that we raise will enable us to quickly scale the number of new originations each month.
- Continue the development of our fractionalized Home Equity Agreement trading platform.
- Part of the funds we raise will be used for general working capital.
What do you want potential investors to know about you and/or your company?
Our management team is dedicated to helping hundreds of homeowners access millions of dollars of equity from their homes. You can bet on our team to innovate, execute and scale QuantmRE. We believe we can revolutionize home equity financing, which solves a major problem for homeowners and creates an entirely new real estate investment opportunity for investors. We would like to invite potential investors to take the opportunity to get in on the ground floor, as we build the first platform to make home equity accessible, investable and tradeable.
As you think about the business 5-10 years down the road, what do you see exit opportunities looking like? have you set any future goals for the company?
As I mentioned earlier, our longer-term vision is to solve a major problem for millions of homeowners and become the de facto marketplace for Home Equity Agreements from all of the market participants.
Our shorter-term objective is to be able to originate $100M of Home Equity Agreements a year, as this will provide significant revenues to the company each month from the fees that are generated. It will also make the company attractive to potential purchasers who want to establish a foothold in the equity finance sector. The capital that we raise from our crowdfunding campaign is very important as it could be instrumental in enabling us to reach this key number.
Home Equity Agreements are an emerging asset class that is attracting significant institutional investor demand. Currently there is a premium placed on companies that can originate $100+ million of Home Equity Agreements per annum. At this level of origination, QuantmRE could be an attractive acquisition target for the following types of company:
- Home Equity Agreement Product Companies looking to add origination capabilities
- Financial buyers and private equity investors looking for a proven sales team and Home Equity Agreement origination platform
- Consumer credit companies looking to enter to the growing Home Equity Agreement market
We at KingsCrowd look forward to seeing where Matthew and his team take the company. QuantmRE is currently raising on Republic.
About: Olivia strobl
Olivia comes to KingsCrowd with a background in venture capital and technology. She spent time at Glasswing Ventures, an AI-focused venture fund in Boston, before joining the KingsCrowd team. There she helped develop machine learning algorithms for the opportunity qualification of preseed and seed-stage startup companies. Prior to her time at Glasswing, Olivia worked in a lab studying the neural correlates of attention. She holds a degree in Neuroscience from Wellesley College.