Usually, when we hear about start-ups, they're located in San Francisco. But here's one that's not. It's called Kocomo, it's located in Mexico City, and it just raised $50 million in debt and $6 million in equity funding. Kocomo markets to Americans and Canadians who want to buy vacation homes in Mexico -- and maybe other exotic locales in the future.
Kocomo is focused on American and Canadian investors who want to own fractional interests in luxury homes located in Mexico. The company plans to add the Caribbean, Costa Rica, and, eventually, Europe to its offerings. As many as eight people can jointly own a vacation home through Kocomo, and Kocomo acts as the administrator.
AIIVP and Vine Ventures co-led the equity-funding round. Other participants included Picus Capital, Fontes by QED, FJ Labs, Clocktower Technology Ventures, and JAWS. Architect Capital financed the debt portion.
With the investment money Kocomo received, it plans to add more sales, marketing, and engineering staff and invest in technology for its platform. The debt funding it received will go toward paying off the 20 properties the company purchased in the Mexican resort towns of Troncones, Tulum, Puerto Escondido, Todos Santos, Los Cabos, Sayulita, Nuevo Vallarta, and Huatulco.
Kocomo sounds like a timeshare. It's marketed to people who want to own a vacation home but think it's a waste of money or can't afford to buy and maintain an expensive house they're going to use, at best, several weeks out of the year. Place a check in the timeshare column.
Kocomo's CEO and co-founder Martin Schrimpff says the concept appeals to people who, because of the unreliability of the product and experience, don't want to rely on an Airbnb rental each time they want to get away. That's a classic timeshare spiel, so place a second check in the timeshare column.
With Kocomo, all owners pay a $150 monthly fee to Kocomo, in addition to a one-time payment of 12.5% of the share's value. Owners also split the costs of property taxes, insurance, cleaning, property management, maintenance, and repairs -- a big third checkmark for the timeshare column (only with more expenses).
According to CFO and co-founder Tom Baldwin, spending money to rent a vacation home is an expense, not an asset. This is true, but owners of vacation homes have ongoing expenses whether they use the product or not. That sounds a lot like a timeshare spiel, so this would be check number four for the timeshare column.
Technically not a timeshare
Kocomo technically isn't a timeshare. What makes Kocomo different from those timeshares that people can't even give away is that with Kocomo, you own part of the real estate, and with timeshares, you own only the use of the property for a certain time period. Real estate is an asset that can appreciate. So, in theory, Kocomo is better. But real estate can also depreciate, depending on location.
People who buy a share of a Kocomo vacation home can sell their share if they like, but they do so on the Kocomo marketplace. It's unknown at this time what type of demand there might be.
About Kocomo's property locations
Kocomo currently owns properties in Mexican resort communities, which tend to be safer than other areas of Mexico. But the latest travel advisory for Mexico is a level 3, meaning "reconsider travel." (Level 1 is "exercise normal precautions," level 2 is to "exercise increased caution," and level 4 is "do not travel.")
Company plans are to buy more properties, and the next locations on the list are Costa Rica and the Caribbean. Costa Rica currently has a level 4 travel advisory (do not travel), and numerous Caribbean countries are also on a level 4 travel advisory at this time.
The Millionacres bottom line
Investors have bet on Kocomo. But as the saying goes: "If it looks like a duck, swims like a duck, and quacks like a duck, then it's probably a duck." In this case, while Kocomo technically isn't a timeshare -- since investors buy the real estate, not just the time -- the similarities are great. And timeshares have not withstood the test of time well.