Halifax-based Fractional Finance has raised about $500,000 for its new, blockchain-driven platform that’s designed to change the way people invest in real estate.
The company’s first product is called the Frabric, which allows users to buy into real estate investments using tokens purchased on the platform. It aims to allow investors of limited means – who are shut out of many real estate investments because of high costs – to be able to invest in property, and to have some say in how the property is managed.
As well as backing from angel investors, the company has received a $25,000 investment from the Exploration Fund, a new fund launched by the Saint Mary’s University Entrepreneurship Centre, or SMUEC, to help businesses founded by SMU students.
“As someone new to Canada and a millennial, I have heard and experienced the frustration held by many who don’t see an opportunity to enter the real estate market or pursue investment opportunities,” says Maria Gonzalez, Fractional Finance’s Co-Founder and Operations and Growth Officer “The Frabric offers new investors, specifically young people, an opportunity to make investments as small as one dollar, become accustomed to investing, and see firsthand the management processes behind property management. We want to change the way people think of ownership.”
In an interview, she explained that she had difficulty finding accommodation when she came to Halifax from Mexico last year to take an MBA at SMU’s Sobey School of Business. The cost was not the problem so much as the fact she had a border collie and landlords didn’t want tenants with a pet. She found that young people lack control in any transaction involving real estate.
So she and James Sutton, who is now the company’s CEO, set up Fractional Finance to help young people to get into the property market, and have some control over their investments via the Frabric.
The Frabric lets people invest in real estate starting at a one-dollar investment through a tokenization process. The Frabric allows individuals to indirectly own and manage real estate with a voting system managed through the blockchain. It ensures there is no centralization of power as any stakeholder is restricted to voting power of no more than 10 percent.
Though she admitted the recent meltdown in crypto-currencies would affect the company, Gonzalez added that the Frabric's investments are backed by real estate, adding a level of stability to blockchain-driven investment vehicles.
Gonzalez said the company has already purchased its first property – a piece of land on the Minas Basin in Nova Scotia, which will be used as a recharging station for electric vehicles. The Fractional Finance team – which now numbers six full-time and several part-time employees– is looking for other opportunities in Mexico, the U.S. and France.
Gonzales said the company has raised $480,000 in equity investment and the remainder is in non-dilutive funding.
Fractional is the first investment for the Exploration Fund, which works with, but is separate from, Venture Grade, the VC fund managed by students at the Sobey School.
“We wanted the first investment for the Saint Mary’s University Entrepreneurship Centre Exploration Fund to be a disruptor,” said SMUEC Director Michael Sanderson in a statement. “We have found that in the Frabric by Fractional Finance. Fractional Finance is a disruptive company, co-led by a Saint Mary’s graduate student, looking to make investing affordable to an entirely new class of investors.”