Blog post
July 1, 2024

Investing in NestEgg

July 2, 2024
Investing in NestEgg

A significant portion of innovation in the built environment is driven by digital technology and ESG (Environmental, Social, and Governance) regulations, which are reshaping the industry. Much of this innovation focuses on integrating AI, IoT, and other digital solutions into areas previously untouched by technology. Our enthusiasm for investing in these innovations is unwavering, driven by factors such as lean product development, reduced time to market, and the capital required to reach profitability. Yet, we believe that technology can go further, especially when rethinking the underlying value of the products we invest in. Today, we are thrilled to announce our investment in NestEgg, an Amsterdam-based FinTech platform on a mission to bring fairness to the broken market of home equity release.

“Planning your retirement? Don’t bet on your house.”

The issue is not new. As David Crook of the Wall Street Journal noted in 2007, “your home isn’t the investment you think.” Why? Because as you approach retirement, a growing portion of your personal wealth becomes tied up in the home you live in. This is why 80% of Europe’s population over 65 years old—about 100 million people—are "house rich and cash poor." This includes people like the Grimbergens, a retired truck driver and his wife, who are NestEgg's first customers. NestEgg lets people like the Grimbergens fractionally sell a participation right in the future sales price of their home, getting cash today to fund their golden years without the worry of expensive debt or ongoing payment obligations. This is made possible through the NestEgg platform, which builds a transparent and trustworthy bridge between homeowners like the Grimmbergens and private real-estate investors.

Discussing home equity release models often raises concerns, and for good reason: hidden costs, limited flexibility, and unfair pricing are common issues. Currently, Europe’s elderly are underserved, often left with poor options:

  • Mortgages become increasingly difficult to qualify for due to age, health, and retirement status, leading to higher rates and lower credit limits. At a certain age, banking regulations make borrowing nearly impossible.
  • Unfair sale/leaseback arrangements typically offer only 20-60% of a home's fair value in cash while also imposing ongoing costs. These solutions often come with the risk of foreclosure, creating fear among retirees of losing their homes if they can’t meet payment obligations.

In some European countries with high home ownership rates, like Portugal or Italy, reverse mortgages and personal home equity lines of credit (HELOCs) are virtually unknown, leaving the elderly without viable options. NestEgg is tackling this challenge with a personal motivation. When several of Edgar Kooter’s family members in the Netherlands were planning their retirements, they faced these inadequate options for tapping the increased equity value of their homes. Edgar, a seasoned investment professional who built trading platforms for Bloomberg and Morgan Stanley over the past twenty years, believed he could create a better solution. This led to the founding of NestEgg. He partnered with Ben Myers, who had recently moved to Europe after 12 years in Brazil as co-founder of several tech startups backed by funds like Redpoint, Headline, and Index Ventures. Ben, a Stanford graduate and early Google employee, complements the team as a seasoned COO and CFO. We believe Ben and Edgar are addressing an underserved market and solving a growing societal problem without exploiting elderly people in need.

“Fairness, Flexibility, and Transparency for Homeowners”

NestEgg allows homeowners to receive debt-free cash, as needed, in exchange for shares of their home’s future value – all without taking out a loan or having to sell their home, and without any monthly payments or interest over the life of the investment. Specifically, homeowners sell a share of the future sales price of their home, not the home itself. They keep living in the home and retain all the rights as homeowner until the sale. This is not a reverse or “lifetime” mortgage, a home equity line of credit, a sale-leaseback, or a partial sale Instead, it is a simple approach based on equity trading: (1) Through NestEgg’s platform, real estate investors pay homeowners today to buy a participation right (%) in a home’s future value; (2) Homeowners can sell more (%s) later, or buy back what they have already sold; (3) Liquidity for investors comes at home sales and, before then, via trading of home %s (including buy-backs). Additional flexibility and fairness are ensured, as homeowners or their heirs can redeem the shares sold at the current market value at any time.

“Unlocking the Asset Class of Owner-Occupied Residential Real Estate for Investors”

On the other side of the equation are investors, who seek to make a social impact while investing in a new and attractive asset class. The rationale behind investing in owner-occupied residential real estate is straightforward: diversification and above-average price appreciation. While traditional real estate investment trusts (REITs) offer diversification, they often struggle to outperform the market due to costs like property management, refurbishment, or vacancies. Yielding above-market returns is more feasible with a property occupied by its owners, as these homes are typically self-managed, well-maintained, and cared for (and do not have tenant/vacancy risk). NestEgg’s platform amplifies this advantage by allowing investors to invest in and trade equity in a portfolio of such homes, which otherwise would not be on the market (as the owners want to stay in them and are not looking to sell). This provides capital protection and above-average asset appreciation, from which the company takes a small share when realized.

In Europe alone, €900 billion of home equity is expected to be released by the elderly over the next ten years. By making home equity a tradable asset class, NestEgg opens up an investment opportunity that was previously inaccessible. Using technology, Ben and Edgar are rethinking the underlying principles of homeownership, enabling the elderly to leverage their homes for retirement without accruing debt, and in a flexible and transparent manner. Offering the elderly something entirely different than traditional unfair and expensive solutions, NestEgg creates real equity for both sides of the platform: homeowners and investors.

Almost a decade after Andreessen Horowitz invested in the US home equity platform Point, we are excited to be part of NestEgg’s journey to solve the European home equity problem. In the foreseeable future, we look forward to seeing home equity become a liquid and tradable asset class, potentially even traded on the Amsterdam Stock Exchange. The road ahead is long, and we are thrilled to play a part in it.

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