Vancouver’s Fraction Technologies raises $289m in bid to shake up home loans

B.C. fintech eyes North American expansion

Fraction Technologies chief technology officer Josh Baker, left, and CEO Hayden James | submitted

A Vancouver firm aiming to revamp the lending landscape in North America has some fresh capital of its own to dip into.

Fraction Technologies Inc. revealed Wednesday (Febraury 10) it’s raised $289 million in a mix of equity and debt financing from Panache Ventures Inc. and Impression Ventures, among others.

The company has developed a platform whereby customers take out loans with interest rates tied to the appreciation of their home’s value.

The $289 million raised by Fraction is supporting those loans. 

“For us it's really about how can we make a difference in homeowners’ lives. We put the homeowner first, not the banks,” CEO and co-founder Hayden James told BIV.

Instead of monthly rates, the interest rate is payable upon the sale of the home.

If, for instance, a home appreciates an average of 5% over a five-year-term, that then becomes the effective rate.

If a home depreciates in value, Fraction charges a minimum rate of 3.49%.

For homes that appreciate significantly — a trend Vancouverites can attest to — Fraction charges a maximum rate of 7.99%.

The genesis of the company emerged from time James and co-founder Josh Baker spent working on a separate technology product for a real estate brokerage.

“We had seen our friends and family had to sell their homes in order to access their home equity. And then on the other side we got to see a lot of investors that were looking to buy property but then not rent it out, which is kind of the classic Vancouver story,” James said.

The pair briefly explored the idea of whether they could bridge that gap and find a way for people to sell shares in their homes.

“We came to the conclusion pretty quickly it was a pretty bad idea,” James recalled, explaining why the company shifted its focus.

The company has grown from three to 10 employees since December and James hopes to expand that headcount to 30 employees by the end of the year.

Most of Fraction’s employees are based in Vancouver, however, the company maintains an office in northern California where co-founder Rayan Rafay is based.

While Rafay is originally from Vancouver, travel restrictions brought on by the pandemic means James and Baker haven’t met their co-founder or investors.

And since the company embarked on the capital raise in June 2020, James said all meetings have been conducted over Zoom.

Fraction’s platform is currently available to homeowners in B.C. and Ontario, while the CEO said he hopes to make it available in Washington state by the second half of the year.

“The U.S. has different federal laws that we have to look at which are really important,” he said, referring to redlining legislation meant to prohibit lending discrimination.