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Overmoon, a company in the increasingly popular vacation rental market, is off to a stellar start in 2024, having secured $80 million in debt and equity funding to launch their tech-enabled solution for owners of vacation rentals, or those who inspire to be.
The company said in a Jan. 11 press release that the backing came from a number of sources, among them NFX, Khosla Ventures, Camber Creek, 1Sharpe and Sunsar Capital. The funding is separated by $10 million in venture money to scale its technology development, $30 million in real estate equity for down payments on homes, and $40 million in debt financing, the company said.
“After countless disappointing stays in short-term rentals, we launched Overmoon to give people the convenience of a rental home with the reliability of a great hotel,” said Joe Fraiman, founder and CEO of Overmoon, in the press release. “After spending years perfecting our formula, we’re thrilled to expand our platform to owners looking to free themselves of the time and expense of property ownership, while diversifying their investment, deferring taxes, and still having access to their vacation property.”
Overmoon owns its vacation homes and thus implements a uniform check-in-check-out system across its inventory. Those wanting to sell their home to Overmoon can choose instead to do a 721 Exchange, which allows a property owner to conduct a tax-deferred exchange for shares in a REIT, or real estate investment trust. Overmoon partners with a 721 specialist, Flock, to facilitate its exchanges.
“Leveraging Flock’s software, Overmoon uses its extensive experience running a tech-enabled vacation rental platform to manage and keep the properties rented out, generating income for the Overmoon 721 Fund,” the company said.
The company isn’t hiding the fact it wants to take on Airbnb, as a central message on its website states, “No chores,” a hit on the growing frustration consumers have with Airbnb hosts making guests responsible for an increasing number of check-out tasks, such as linen laundering, room cleaning and taking garbage to the street. However, it also appeals to those who may want to leave the Airbnb platform by promising to remove the headaches of renting to different people all the time or taking on the hassles of local ordinances against STRs.
Whereas Airbnb largely hinges its consumer brand on the idea of adventure travel and seeing new places, Overmoon’s approach is to appeal directly to owners of STRs, needling them to leave behind the booking headaches, bad reviews and ordinance headaches.
As of this funding announcement, the company’s portfolio consists of 21 homes in the southeast, namely Florida and eastern Tennessee’s Blue Ridge mountains.
The vacation home investment market is taking on many forms and includes solution providers such as Summer, Ember, Arrived, Pacaso and others.
Skift reported in July of 2023 that the market has been taking some hits, and spoke with Summer’s founder Paul Kromidas.
“In the last couple of years you do see an over saturation in some markets and one needs to do more research because there is so much variance in the market,” Kromidas said. “People want to commodify these assets, they want to try to fit it into a box. There are opportunities in this market, but it now needs to more thought and you cannot wake up and decide to do it.”
The Smoky Mountain area of eastern Tennessee and western North Carolina was noted as a particularly over-saturated vacation home market.
That fact isn’t top-of-mind for Trulia founder Pete Flint, whose NFX led the $80 million backing.
“This is a unique opportunity for owners to efficiently manage their estates while maintaining passive income and real estate appreciation potential,” Flint said in a statement.
Venture capital for proptechs was down for the second year in 2023, with the Center for Real Estate Technology and Innovation reporting a total of $11.38 billion invested in proptech last year, a “42.38 percent dip from the $19.75 billion invested in 2022 and a significant 64.44 percent decrease from 2021’s investment high of $32.0 billion.”
However, Overmoon hangs somewhere between proptech and fintech, so how its round will contribute to 2024’s VC success is uncertain.
“In 2024, proptech investment will be driven by critical infrastructure investment,” said Troy Harvey, CEO of PassiveLogic, a digital twinning platform for autonomous buildings, in a December Yahoo Finance report. “SaaS companies selling non-business-critical solutions will struggle to invite investment as they will compete with other high interest rate vehicles. The focus will shift to higher-gain, long-term durable goods with intrinsic value. Proptech products that address critical infrastructure and building needs will see increased interest and investment.”
