There is a story of evolution to be told about liquidity in the context of cash, markets, and companies. Liquidity was a term close to nonexistent in macroeconomics literature, and absent from everyday financial discussion up to the pivotal point of 2008.
The image below is the Table of Contents from the famous 1989 publication “Lectures on Macroeconomics” by Olivier Blanchard and Stanley Fischer; the snap was taken by Daniel Tsiddon, our GP at Viola Fintech and Professor of Economics, in an attempt to demonstrate that liquidity is indeed “missing”.
Liquidity absent from the “Lectures on Macroeconomics” by Olivier Blanchard and Stanley Fischer
A cornerstone of Viola FinTech’s thesis since its inception has been increasing liquidity in illiquid asset classes by leveraging technology (read more about how Viola FinTech views proptech here). The intersection between Fintech and Real Estate is the perfect environment to test our thesis.
Real Estate- The Ultimate Illiquid Asset
Real estate requires more capital to buy than other assets, like securities or precious metals. It also takes longer to sell – both to find a buyer and complete the transaction. Property assets are also limited to their current location (immobile) and affected by changes in the local market.
One such prominent area is the financing of private homeownership or RRE (Residential Real Estate). Home ownership is a big and growing part of the wealth of the middle class. However, real estate transactions remain highly manual with a lot of friction and multiple parties involved, making such assets highly illiquid. Moreover, 2 driving factors will worsen this pain over time:
- As population, income per capita, and urbanization grow, the share of income devoted to housing grows as well.
- Changes in the nature of work increase income volatility, and as a corollary, labor migration increases as well.
These trends put the old way of home ownership in mismatch with market needs.
In Search of a Liquidity-Driven Investment
We have researched and reviewed dozens of business models trying to crack the different segments of the Proptech value chain, including Home Equity Lines of Credit (HELOCs) to Reverse Mortgages, Mortgage Financing, Deposit Financing, Equity Sharing, iBuyers, and more.
Throughout this process, we kept fine-tuning our thesis and discussing what liquidity is in its most simplified form and how it’s expressed in practice. We searched for a company that captured the essence of its “enabling characteristics”- flexibility, control, options, and freedom.
The approach and infrastructure had to be durable, with the ability to control exposure in the real estate markets as well as macroeconomic shocks, and a leadership that possesses both operational excellence and technological acumen to execute on their vision. EasyKnock is all that and more.
The World of EasyKnock
EasyKnock is helping consumers access the $6 trillion of trapped equity in the US housing market by providing a tool set of tech-based products that hold all solutions necessary to unlock liquidity in one’s home.
Say you’re a homeowner and you’re in immediate need of cash. Before EasyKnock, there were two options: you could either own or sell – there was nothing in between. But with EasyKnock’s innovative approach, they’ll buy your property and lease it back to you. That way you can get the money you need while staying in the home you love.
EasyKnock’s financing programs provide you, as a homeowner, with ways to extract the value out of your home when you need it, while allowing you to maintain control. You can choose whether you wish to repurchase your home at any time at market value, rent in perpetuity, or move out when you are ready.
Plus, you can enjoy 100% of the appreciation in the value of the property once you make a decision to sell – YOU DECIDE.
EasyKnock has a product construct with an ability to assemble solutions that create a balance around the value proposition, avoiding a bias in favor of the debt funding source at the expense of the consumer, or vice versa.
The Founding Team
The exceptional founding team is ideal for the job – Jarred and Ben are capital markets experts in the space of real estate with strong technological capabilities and executive experience. Their backgrounds in finance are reflected in the depth of understanding the operational risk model in different market situations, how scalable different capital sources are, and the risks these capital sources present.
Jarred and Ben wanted to create a business in a market that is lagging 20 years behind other financial services. They understood that for most people, their home is the biggest asset they will ever own, and they should be equipped to plan their own financial stability.
Going back to our thesis, Easyknock provides the essence of liquidity, executed by a duo who gets it done. We’re thrilled to join Easyknock in their B round, and excited to support them in bringing a new paradigm to home ownership as we know it.
Here’s to the liquid future ahead!
A message from the author:
My name is Maayan Levy, I’m a Principal at Viola FinTech. Prior to joining Viola, I was based in Hong Kong for seven years working as an Investment Banker – check out my full bio here. I am on the lookout for unique entrepreneurs in the global fintech space. Feel free to send me an email.