DeFi for construction finance startup Rigor raises $3.5m to end housing’s affordability crisis
Digital Asset, Private Equity, and Prop Tech Investors embrace the digital asset future of the category
MIAMI and ORLANDO, Fla. and SAN FRANCISCO, June 16, 2022 /PRNewswire/ — Rigor, an innovative decentralized finance (DeFi) protocol for construction lending and payments, has secured $3.5m in institutional seed financing from an honor roll of venture funders–-Agya Ventures, Bain Capital Ventures, Digital Currency Group, Flow Ventures, Koji Capital, and Third Prime. Proceeds will be used to industrialize capabilities, open source the software for developers, introduce ownership incentives, grow the team, and scale the protocol globally.
Housing’s affordability crisis is actually a lending crisis. Rigor opens up the asset class to new sources of capital.
“We are immensely pleased by the confidence these prestigious investors have shown in the promise of our DeFi protocol to free homebuilders from cumbersome and restrictive financing practices that needlessly hold back the supply of new and desperately needed housing,” said Isaac Lidsky, co-founder and CEO of Rigor.
Globally 1.6 billion people will be denied access to affordable housing by the middle of this decade. In the U.S. alone, the National Association of Realtors estimates a shortage of more than 7 million homes, a gap that has been widening for decades.
Behind this epic market failure is a lending crisis featuring two inter-related problems:
Access to capital is severely limited. Today, builders seeking financing must appeal to a small number of “specialty” lenders, which limits loan volumes and holds back builders from meeting demand for new homes; and
Payments to the supply chain are profoundly delayed. Even when loans are secured, today’s construction lending practices slow payments to the small businesses (builders, contractors, subcontractors) responsible for construction work dramatically – they wait an average of 80 days to be paid for their work while their construction costs pile up.
The result is chronic underinvestment in vital infrastructure, burdensome administration for lenders, immense working capital burdens for the supply chain, and perennial inefficiencies. Globally, construction projects take 20% longer to complete while 80% are over-budget. Given these dynamics, it’s no surprise that only three percent of all real estate investment supports new construction. What should be an enterprise of mutual benefit is instead one of mistrust, vendor turnover, late and over-budget products, and a growing undersupply of homes.
“We have an affordability crisis in housing because we have a capital crisis in construction lending,” said Keith Hamlin, Managing Partner at Third Prime. “Rigor’s innovative use of blockchain technology shores up lending flows, creating confidence in the asset class so that new capital can help build more infrastructure.”
Rigor makes construction lending easy and secure, giving more lenders confidence in the asset class and opening up the category to new pools of capital so that we can build more homes. With Rigor, lenders find and finance building projects and gain transparency into the flow of their digital dollars, all governed by smart contracts and secured on a blockchain. As construction tasks are completed and verified, Rigor automates payments for those tasks, paying the small businesses responsible for the work immediately and directly. When the home is sold, the lender is repaid a fixed-yield rate, with interest.
By simplifying loan origination and administration, infusing capital flows with needed transparency, and assuring that payments arrive immediately in the hands of those responsible for work, Rigor aligns incentives across the supply chain, revitalizes the asset class, and invites more lenders to help meet growing demand for homes.
Rigor’s beta is live, with digital asset lenders and homebuilders building homes in Central Florida. The funding announced today will help to generalize the toolset beyond the home construction use case and into other construction products, to open source the software, to introduce token utility and incentives for scaled usage, and to invite scaled lending opportunities by digital asset lenders globally.
“You would never guess that demand for housing is at record levels when you consider the difficulties builders like us face securing and managing construction loans,” said DK Kim, homebuilder and operating partner of FL Pro Brokers in Orlando and Rigor beta homebuilder. “Rigor tools and technology allow us to engage with and grow lending partnerships and streamline our operations. The result is that we can build more homes with fewer headaches and deliver for more homebuyers.”
To engage and learn more, please visit: www.rigor.build and follow on Twitter: @Rigor_HQ
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