Synthetic digital assets are decentralized finance’s version of financial derivatives where the value of the synthetic asset is determined by some underlying asset without the owner having to own the underlying. Synthetic digital assets gaining popularity in the decentralized world as they open up new investment opportunities by providing both increased access and liquidity. For real-world assets that have a high cost of entry, like real estate, synthetics are able to provide the same benefits of actual ownership but without the massive capital outlays required. Parcl has built a synthetic asset protocol that allows investors to buy and sell digital real estate based on geography, both broadly or at a granular (neighborhood) level. The company’s protocol offers a digital representation of property values, categorized by neighborhood as “Parcls”, for various cities that dynamically mimics the real-world conditions in these markets through the creation of price indexes. Parcl investors can speculate on appreciation and depreciation without the burden of physical property ownership and transact inexpensively without any investment minimums. The protocol is built on Solana, which is well suited to handle a large number of transactions with minimal transaction costs while providing the added benefit of instant liquidity, unlike actual real estate. At a time when homeownership is at multi-decade lows and the cost of housing is surging, Parcl also represents an opportunity for investors to hedge ownership of real assets and as the protocol builds synthetic assets, solutions can be devised to meet more sophisticated needs.
AlleyWatch caught up with Parcl CEO Trevor Bacon to learn more about the business, the company’s strategic plans, latest round of funding, which brings the total equity funding raised to $11.5M, and much, much more…
Who were your investors and how much did you raise?
Our new investors include Fifth Wall, JAWS (Barry Sternlicht), Hack VC, IA Capital & Eberg Capital, Big Brain Holdings, and new angel Santiago Santos. Existing investors made up the majority of the round, including Archetype, Dragonfly, Not Boring, Solana Ventures, and FJ LABS. We raised $7.5M total for a strategic funding round following our Seed round closed in late 2021.
Tell us about the product or service that Parcl offers.
Parcl is a digital real estate protocol built on Solana, a blockchain specifically designed to host decentralized and scalable applications. The Parcl Protocol allows users to invest in and trade-specific geographical real estate markets, enabling directional investment and hedging strategies in this traditionally opaque and walled-off asset class. An individual Parcl is a digital representation of the price per square foot/meter in each real-world geographic area, collateralized by crypto assets.
What inspired the start of Parcl?
Real estate is the cornerstone of the ‘American Dream’ yet there has always been structural inequity in the housing market and current market conditions are accelerating this inequity. There is rampant housing inflation, a supply crisis, and heightened levels of institutional participation.
Taken together, buying a home has become much more difficult or even impossible for many first-time buyers. In fact, a recent survey from the NY Fed showed record-low confidence that renters will ever be able to afford a home, period.
We’re the generation that’s been told we will never be able to own a home and it’s manifesting right in front of us. But, we participate and contribute to society and culture perhaps more than any generation before – should we not have a chance to participate in the American Dream? We’re also the generation that doesn’t take no for an answer.
That’s why we created Parcl, on behalf of everyone, so that everyone can participate in real estate (renters, first-time buyers, enthusiasts). We are making real estate investing possible for our generation through the most advanced, bleeding-edge technologies to create the democratized future that we want to see. Our mission is to deliver real estate to everyone – and it starts with education and accessibility for our users.
Parcl requires no minimum investment, is highly liquid, and carries low transaction fees so investors can now trade their favorite neighborhoods just like they trade Bitcoin, Ethereum, or other crypto assets.
How is Parcl different?
Parcl is a synthetic asset protocol, built on and backed by Solana, that is on a mission to deliver real estate to everyone. The Parcl protocol allows users to invest in a digital square foot of real estate in neighborhoods worldwide. It does so by allowing for the creation of synthetic “Parcls”. Parcls are tied to a proprietary valuation index (Parcl Price Feed or PPF), representing the median price per square foot/meter within each real-world neighborhood boundary. The PPF continuously tracks the underlying price movements of the real estate assets represented by each Parcl geo-boundary, and real-time price updates flow into the smart contracts via an oracle.
With Parcl’s blockchain-based trading system, users can benefit from broad (or highly granular) exposure to the world’s most desirable real estate markets. Parcl requires no minimum investment, is highly liquid, and carries low transaction fees, enabling investors to trade their favorite neighborhoods just like they trade Bitcoin, Ethereum, or other crypto assets.
What market does Parcl target and how big is it?
Our target audience includes crypto enthusiasts, curious investors, and ambitious individuals, but most importantly, Parcl is for anyone looking to invest in real estate.
Real estate has long been a cornerstone of the “American Dream,” yet participation demands large amounts of capital as well as exceptional credit. Additionally, the recent housing shortages, partially led by banks and private investment firms gobbling up inventory, have put homeownership further out of reach. The homeownership rate in the US is approximately 65%, near 20-year lows, and appears to be continuing to decline.
At Parcl, we want to be recognized for the potential impact we can make on the real estate market. Parcl is the smartest way to invest in real estate. There has never been a way to invest in real estate that utilizes emerging technologies to give people the opportunity to gain exposure to the most sought-after investment class, across multiple cities on a global scale.
What’s your business model?
Parcls are created when a market participant referred to as a market maker (MM) or liquidity provider (LP) deposits collateral (i.e. USD stablecoin) into a Parcl smart contract specific to a particular neighborhood or region (this is called ‘minting’). Minting validates the price offered by the relevant Parcl Price Feed (PPF) and establishes the derivative instrument. The third-party MM/LP may, if economically rational, then pool (provide liquidity to) this instrument with Parcl’s Automated Market Maker (AMM). The third-party MM/LP is incentivized to do so because they are eligible to earn a substantial portion of the fee pool (0.3% per transaction) produced by the AMM for the market they have collateralized. The Parcl Protocol retains the remainder of the fee pool. Once liquidity is provided within the Protocol, users are able to purchase Parcls, thereby gaining exposure to the underlying price movement continuously fed into the Protocol via the PPF.
Parcls are created when a market participant referred to as a market maker (MM) or liquidity provider (LP) deposits collateral (i.e. USD stablecoin) into a Parcl smart contract specific to a particular neighborhood or region (this is called ‘minting’). Minting validates the price offered by the relevant Parcl Price Feed (PPF) and establishes the derivative instrument. The third-party MM/LP may, if economically rational, then pool (provide liquidity to) this instrument with Parcl’s Automated Market Maker (AMM). The third-party MM/LP is incentivized to do so because they are eligible to earn a substantial portion of the fee pool (0.3% per transaction) produced by the AMM for the market they have collateralized. The Parcl Protocol retains the remainder of the fee pool. Once liquidity is provided within the Protocol, users are able to purchase Parcls, thereby gaining exposure to the underlying price movement continuously fed into the Protocol via the PPF.
Parcl Inc. controls all data and licenses this data & various software IP to the Parcl protocol. Over time, Parcl Inc. could license data feeds to various third-party customers.
What are your post-COVID office plans??
We were founded as a fully-remote company. Our reasoning was to allow us to have access to the best talent possible, rather than being limited to those in a specific geographic location. Additionally, as a modern technology company, we needed to stay fluid with the modern working world. A remote-first workplace provides our team with the flexibility to manage their work-life balance and optimize time, efficiency, and productivity. We do value in-person meetings and have frequent offsites, events, and opportunities to collaborate IRL. We will continue to innovate here as we think it’s incredibly important to optimize for free-flowing collaboration often found in the office with the flexibility and productivity that WFH offers.
What was the funding process like?
Parcl has held ongoing conversations with both existing and new investors basically from the close of our Seed round until present. We raised a bit less capital in our Seed round than we had expected and as a result, we had more optionality to open up a ‘bridge’, especially after executing on key milestones.
We held several discussions with strategic, value add investors across real estate (Fifth Wall, JAWS), data (IA Capital/Eberg Capital), and blockchain (Dragonfly, Archetype) that we concluded it was in the best interest of Parcl in both the near and long term to open up a strategic financing round. The round was fairly seamless – a SAFE with warrants for potential future token rights.
What are the biggest challenges that you faced while raising capital?
The cold start problem is what we’ve noticed is the biggest hurdle; both in fundraising and in so many other vectors of the business. Once you get a few commitments at or near the terms desired, the round can take shape quite quickly.
What factors about your business led your investors to write the check?
The incredible progress we have made thus far (team, product, marketing, legal/regs) and the massive opportunity ahead of us as we bring market-specific real estate prices on-chain in a completely novel way. Our longer-term goal is to become the global source of truth for residential real estate pricing. If we execute on that goal, we will have substantial market opportunity. This particularly resonates with more traditional albeit quite tech-forward real estate investors such as Fifth Wall and Jaws as well as seasoned & highly regarded data infrastructure investors such as Roger Ehrenberg and his family at Eberg Capital. Of course, our Web3 native investors believe in all of this and they understand exactly why this is a product best suited for Solana’s blockchain.
The incredible progress we have made thus far (team, product, marketing, legal/regs) and the massive opportunity ahead of us as we bring market-specific real estate prices on-chain in a completely novel way. Our longer-term goal is to become the global source of truth for residential real estate pricing. If we execute on that goal, we will have substantial market opportunity. This particularly resonates with more traditional albeit quite tech-forward real estate investors such as Fifth Wall and Jaws as well as seasoned & highly regarded data infrastructure investors such as Roger Ehrenberg and his family at Eberg Capital. Of course, our Web3 native investors believe in all of this and they understand exactly why this is a product best suited for Solana’s blockchain.
What are the milestones you plan to achieve in the next six months?
We launched our Parcl Protocol dApp testnet in March 2022, which allowed anyone looking to participate in the future of real estate investing to become an early part of the Parcl protocol and community. We are planning to launch our second testnet on May 23rd, ahead of our mainnet launch in late 2Q.
We also have some exciting partnerships and collaborations with great organizations. Later this month, we are launching the Parcl Homeowners Association Giveaway in partnership with the Suh Family Foundation, a non-profit founded by Super Bowl champion Ndamukong Suh and his wife Katya. Parcl and the Suh Family Foundation have partnered with each other to provide one lucky winner with a down payment on a home worth up to $100,000, including a full year’s worth of mortgage and tax payments.
We’ll be launching a rent giveaway next month as well, with more details to come.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Continue to execute, be nimble, be efficient (with both resources and energy), and get in front of as many people (investors, users, advisors) as possible. Raise awareness for your business & products at every turn. Tell the best story you can and then execute on it.
Where do you see the company going now over the near term?
With our upcoming mainnet launch, we see the company growing exponentially over the next few months. Earlier this year, we held our first testnet (over 70,000 unique visitors and over 300,000 on-chain transactions on Solana’s devnet) and launched the Homeowners Association (HOA) NFT, a collection of 7,777 unique NFTs inspired by four cities where we are launching some of our first Parcl markets – Miami, Phoenix, Los Angeles, & New York. The HOA NFT sold out within just 30 minutes of going live.
When the Parcl Protocol launches, eligible NFT holders will have first access to the protocol, and we expect to see continued momentum and excitement as this new way of investing in real estate takes off.
What’s your favorite outdoor dining restaurant in NYC?
Oceans on Park and 19th.
