A new Orlando-based startup has set its sights on disrupting and democratizing the way single-family home construction is financed.
Home Construction Collective launched April 24 and concurrently went live with its first investment opportunities.
The startup is envisioned as a platform to allow accredited and non-U.S. investors to directly pool equity capital for construction projects to build single-family homes and then to earn returns once those homes are sold or rented.
Projects available for financing on the platform could be as small as one home, or much larger, with an overarching goal of lowering barriers to entry in the sector both for investors looking for returns and project sponsors looking to get into the development space.
Similarly, sponsors could range from small, private groups to institutional homebuilders.
The company is the brainchild of Orlando construction executive Isaac Lidsky, who previously was CEO of ODC Construction, and partners Julia Wasserman and Erich Wasserman, whose past experience includes Google and MediaMath, respectively, among others.
"The short version of the story is us seeing if we couldn't use the latest and greatest in technology ... to solve a lot of problems that I had seen in the construction industry for decades, including, most notably, how hard it is to finance these projects and how inefficient and wasteful the traditional lender financing controls can be," Lidsky told Orlando Inno.
The new platform is powered by Rigor Technologies LLC, an Orlando-based startup the group launched in 2021 as a lending and payments platform for construction.
Rigor has raised $4.8 million in seed capital via Crunchbase and has investors including Bain Capital Ventures, Agya Ventures, Koji Capital, Digital Currency Group and Third Prime.
Lidsky explained that after starting with Rigor, Home Construction Collective functions as a next step toward addressing housing shortages — especially in Central Florida, where the first wave of projects available to invest in will be concentrated. Rigor will continue as its own platform, used to manage payment flows in a secure and transparent manner, he said.
"Our thesis is that in America, there's a delta of about 7 million between the supply of homes and the demand for new homes," Lidsky said.
The way the Home Construction Collective platform works is that project sponsors — those who are going to manage construction projects, similar to a developer for a commercial project — can post project details to its investment opportunities page.
There, investors will find information to consider, including details and renderings of the homes to be built; where they'll be built and comparable home sales in that submarket; projected vertical construction and closing costs; lot value; minimum investment value and a timeline for anticipated returns.
Projects currently on the platform include homes to be built in Ocala and Palm Bay, with minimum investments of $15,000 and estimated returns of between 11%-18%, with anticipated investment terms of between 12-18 months.
There are also features for investors to familiarize themselves with the project sponsors.
Lidsky said project sponsors will have to "have some skin in the game" by purchasing the lots and contributing capital to the projects, themselves — and he and his partners will be involved in that aspect, as well, in the early stages.
"We've launched Home Construction Collective with a handful of projects where we, the founders, have gone out and purchased lots, we've found our general contractor and we've picked exactly what model homes we want to build."
He further explained that project sponsors will collect a construction fee for running the project, but beyond that, profits will be split pro rata among all investors.
Investors can invest in fiat currency, namely U.S. dollars, and the platform enables investors to use USD Coin, or USDC, a digital stablecoin pegged to the U.S. dollar and backed by Circle Internet Financial LLC.
Meanwhile, the startup may be well-timed, as The Business Journals reports it's widely expected that lending for new home construction will take a hit because of the recent stress in the banking sector, especially for regional banks that builders tend to rely on for financing.
Sean Snaith, an economist and director of the University of Central Florida's Institute for Economic Forecasting, expressed a similar sentiment to Orlando Business Journal, saying regional banks are getting "shrapnel from failed banks" such as Silicon Valley Bank, Signature Bank and First Republic Bank.
In light of such challenges, Lidsky said the startup is mission-driven, with the hopes of bypassing some of the waste and frustration he encountered from his years in the construction sector.
"We think we can bring down the price of homes while making the [homebuilding] endeavor more profitable for all the constituents."
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