DURHAM – A Durham-headquartered startup, Plum, led by a Triangle-based serial entrepreneur, seeks to simplify the process of buying a second home for groups of people. Today, the company announced it is raising a pre-seed round of $1.5 million in funding, and the round will include an investment from the Triangle Tweener Fund.
WRAL TechWire spoke exclusively with Scot Wingo, the general partner of the Triangle Tweener Fund, and also a serial entrepreneur with roots in the Triangle’s startup economy, and with Plum’s founder, Matt Williamson, about the company, the business model, and the people they aim to assist.
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The deal that fell apart
When Franzi and Keith Rokoske began their search for a mountain house to use as a vacation getaway, they didn’t want to go at it alone. They asked friends, and more friends, and others, and identified only one other potential co-owner that could enable the acquisition of a property.
“We thought that things would progress rapidly, but finding other partners was much more challenging,” said the Rokoske’s in an email interview with WRAL TechWire yesterday. “There were plenty of interested parties, but in our discussions there always seemed to be more questions brought up than we could answer. We had some meetings with potential co-owners, but really couldn’t get a firm commitment from anyone.”
The deal fell apart, before they even began to search for the right property.
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“Necessity is the mother of invention.”
Across town, Matt Williamson, a former vice president of Bronto Software who would go on to found Windsor Circle and lead the startup to a first-place finish at Google Demo Day and an acquisition of the company by OSG, had a bit of a pain point.
“My family and I are fortunate to have several groups of friends and family that we travel with, and we constantly hear ‘we should buy a home down here together’ or ‘why do we pay so much to rent this place… let’s just buy one!’,” said Williamson in an interview with WRAL TechWire.
Sure, said Williamson, that may happen after that next glass of wine, but inevitably, someone would bring a phone or tablet out and start scrolling, and a conversation would ensue about preferences.
“The next morning, the idea just vanishes, because no one knows how to get started. How do we organize ourselves? What happens if someone needs to get out? Are we going to rent unused nights? Dogs or no dogs? So, I just decided to fix it,” said Williamson.
He set out to build a platform to make it easier for people to form acquisition groups, make acquisitions together, and maintain their vacation home, gracefully.
“Necessity is the mother of invention,” said Williamson.
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Betting on second-timers
“In my experience, second-time founders are a great investment,” said Scot Wingo, the cofounder of Get Spiffy and cofounder of ChannelAdvisor, as well as the general partner and founder of the Triangle Tweener Fund. “You learn so much in your first shot, but you’re like a crazy awkward teenager kind of flailing around. In your second company, all that is gone, you see the path, you see the sequence of things, you see around corners and have the confidence to push through obstacles because you know you can do it.”
Wingo is among Williamson’s first backers—and there was a prior relationship, as Wingo served on the board of directors of Windsor Circle, which was cofounded and led by Williamson. But the relationship goes back even further, as Wingo and Williamson formed a relationship while Williamson was working at Bronto Software.
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There’s opportunity in co-ownership
It’s not just an investment in Williamson, though, noted Wingo. The concept is simple, and the opportunity is large.
“The idea is to help people enjoy the benefits, tangible and intangible, of owning a vacation home,” said Wingo. “Before the concept of Plum and co-ownership, you would have to wait until you could afford to buy a house outright and with most vacation homes, by definition, you don’t use them 100% of the time.”
That’s a mismatch. You own 100% but you use the property for far less than 100% of the time.
“Co-ownership solves that,” said Wingo. “But as you can imagine, it gets complicated.”
Williamson told WRAL TechWire that some 60 million Americans wish to own a second home or vacation home. And the pace of purchases of vacation homes has accelerated recently. Yet there are only an estimated 8 million such properties in the nation.
So, the total addressable market, or TAM, is high, said Wingo. What would it look like in the marketplace if vacation home ownership costs went from $500,000 to $100,000?
“I think Plum is one of those kind of ‘big ideas’ that could really change the TAM here and people’s lives,” said Wingo.
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The Alpha Tester
“We needed a more structured way to engage potential co-owners in conversations,” the Rokoskes said. They’d heard that Williamson was working on a new business concept, and a conversation emerged.
“We quickly agreed to be Matt’s alpha clients–offering feedback on the features, facilitation approaches, and tools he was developing,” they said. “We loved his idea of having a “one-pager” that summarized for potential other co-owners what we were looking for, where, and at what price point.”
The end-goal was securing a group of owners who together, would be “REALTOR ready.” Then, they’d be able to begin the search, with the structure, financing, and systems already in place.
“Plum helped us get granular about what we were looking for in a property, in co-owners, in how we would set up our co-ownership, and the process we would go through to get to that […] state,” they said.
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After “scores” of interviews—at one point, Williamson told WRAL TechWire he sought more than 100 conversations—it was clear that among a group of potential co-owners, a champion would emerge.
That’s the person that initiates the process, or is ready to take action, said Williamson. They’re the person who rallies others together, and builds the team, and pushes the process forward, Williamson said.
“We work with this champion to build a Plum,” said Williamson. “They describe the size of the house, the budget they are exploring, the number of co-owners they are comfortable with, etc.”
That champion can then set ground rules, like what happens when someone wants to bring a dog, or what happens when someone wishes to rent an unused night. The champion, once the Plum has been structured, can share the concept with friends and family or can post anonymously to the company’s marketplace to see whether others may share their interests and accept their terms and conditions.
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How Plum works
When a group does form, the company provides what it calls “our Consensus process” resulting in decisions that all members can support.
Plum then crafts an operating agreement for an LLC, which guides the legal ownership of the house, and a friendship agreement, which protects the relationships, said Williamson.
“People are routinely shocked by how affordable it is,” said Williamson. “What’s amazing about this is that I thought that this would primarily be families and friends buying homes together, but our first customer found that 10 of the 13 people who expressed interest in buying a share of the mountain home were people they didn’t know.”
The company charges 1% on the transaction, when a property is acquired by the newly formed LLC. Any real estate agent assisting the group would also be entitled to compensation, negotiated at the time an agency agreement would be signed.
As about half of all second home transactions are cash transactions, said Williamson, the remainder of homes are financed, typically using secured debt like a mortgage.
“For now, we are working with customers to identify the best financing options available to them, and helping facilitate the process,” said Williamson. “In the future, we plan to offer a Plum Loan that is specific to our co-ownership model in partnership with a national lender.”
Once a group is formed, and a purchase is made, the company also helps the group navigate the quiet enjoyment of that property, for a monthly fee of $99, said Williamson.
The company provides services and products that help owners navigate their new property, including an organized “vacation binder” and other tools that Plum developed after speaking with customers and potential customers.
And that’s just the start, according to Williamson.
The company plans to launch a “Plum Certified” program that allows interested real estate agents to differentiate themselves by learning about co-ownership and being prepared to serve the groups that are formed.
“For our Plum Customers who agree to rent their unused weeks, local property managers will be an important part of the partner ecosystem for us,” said Williamson.
The company disclosed in an SEC filing that it had closed an initial $50,000 from one investor, and Williamson told WRAL TechWire that the company is nearing the completion of the $1.5 million pre-seed fundraising round. Wingo’s Triangle Tweener Fund will participate, and Studio VC will lead the round, according to Williamson.