In episode 49 of Wake Up to Wealth, Brandon Brittingham interviews Stella Han, founder of Fractional—the platform transforming how real estate operators raise capital. Stella shares her journey of overcoming fundraising challenges and how Fractional empowers operators to create investment clubs and raise funds with ease.
Tune in for an inspiring discussion on wealth-building strategies and the importance of community support in podcasting.
SOCIAL MEDIA LINKS
Brandon Brittingham
Instagram: https://www.instagram.com/mailboxmoneyb/
Facebook: https://www.facebook.com/brandon.brittingham.1/
Stella Han
Instagram:https://www.instagram.com/hellastellah/
LinkedIn: https://www.linkedin.com/in/hanstella/
YouTube: https://www.youtube.com/user/bernoff
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Brandon Brittingham: https://www.brandonsbrain.org/home
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This is Wake Up to Wealth, a podcast dedicated to helping you change the way you think about wealth. And now, here's your host, Brandon Brittingham.
Hey, this next segment is brought to you by my good friends at rocketleague.ai. That is rocketleague.ai. If you're in the real estate business, especially the investment side, and you need a platform that can run your real estate business and talk to leads through AI when you're not able to talk to them and can qualify and get to all the leads you can't get to, Plus, it has an amazing piece of technology with it called Lead Detector that helps get all the people that come to your site and not opt-in to opt-in to turn into a lead. These are my good friends at rocketlead.ai. I'm part of this company as well. I use it to run my real estate business, my real estate investment business. Go check them out. Again, rocketlead.ai. And thank you guys for sponsoring this segment. Hey, everybody. Thank you again for joining us. We are here with another episode of Wake Up to Wealth. And thank you guys so much because we are almost at 2 million downloads. The last few episodes, we have trended over 90,000 downloads. You guys, we are consistently beating shows like Dave Ramsey. For number one on investing, you guys are consistently making us in the top 20 to 25 on business. The growth of the show has been insane. And it's because you guys have consistently supported. You've been telling people about the show, more people have been subscribing, more people have been listening. The show was always about you guys. It was, we've never paid someone to come on here and speak. And we've kept sponsorship to a minimum. So the show was all about content. I cannot thank you guys, the listeners, enough for what you've done. It gives me the ability to get really cool people on the show, like our next guest, who I just happened to just meet. You guys know I don't believe in coincidences. I saw their product, got on the phone with her, and then she ends up in the room with me at Boardroom, which is pretty freaking cool. So today we've got Stella Han on the show. Thank you so much for joining us.
Thank you, Brandon. Excited to be here. I love the wake up to weld. I am so awake. We're wide awake to weld and we're going to go to the moon. Excited to chat more.
So, um, tell us about the product that you've built and I think to take a step back and tell us about the problem that you found that led to you building a product that you currently, you know, the fractional, I want you to talk about that, but I think talk about the problem behind it first and why you did it.
Yeah, definitely. So I created a fractional, which is a platform that helps operators raise capital from anyone, including unaccredited investors, without having to go through the traditional syndication or fund setup where you're creating a 90 page PPM and filing for 506 B or C and dealing with all the restrictions and limitations that come with that. And the reason why I ended up creating this company was just really through a lot of the personal pain points that I went through while I was raising money and trying to leverage other people money when it comes to scaling my personal real estate portfolio. You know, we go back a few years. I'm in a great spot with single-family homes. I'm trying to expand, you know, and now scale up to multifamily. I'm investing out in Georgia. I see this 20-unit apartment. The numbers check out. Everything is amazing. And I'm like, I want to really buy this thing. I look at my bank account. it's pretty freaking empty. And I'm like, okay, well, I'm not going to go buy this thing myself. That's not going to work. Well, everyone talks about other people money. I need to raise the capital. And everyone says the only way to go about it is doing a syndication or a fund. So I'm like, okay, we'll try that. So I go get a lawyer. They're freaking expensive. I pay them 30 grand just right off the top. And You know, now we're working on this document and just sitting around for three to four weeks for all these things to get processed and get filed. And I'm starting to get really nervous, right, because I already got this deal under contract. And that closing date is just inching closer and closer. And here I am just sitting around, like still even waiting for my syndication to get set up where I can't even actually properly raise money at this point because there's no actual set structure. So, you know, it really snowballs into something so terrifying where I still have PTSD just thinking about it, where, you know, I pretty much am, you know, a few days out from closing. I just got all my, you know, syndication set up. So I am kicking off the real capital raising process super late. a bunch of people that gave me soft commitments end up just flaking on me because they have no skin in the game. They told me, yeah, count me in. But, you know, if you don't got that wire, it's like the money isn't there yet. So, you know, I'm now losing 50 percent of the money that I thought that I had. And I go to my family, my friends, my coworkers, but none of them are accredited investors. And they were like, hey, we have 20K, 25K, but we just legally can't participate in your syndication. And all that money, if I could pull it together, it was a significant amount. It was easily $1 billion, but that I couldn't use. So that whole race ended up just being an absolute shit show. I ended up not getting the money in together, lost my deal, lost my EMD, and it was just so bad. And I come from the software engineering world before I went full time into real estate. And that's really when that builder in me was like, there's got to be a better way to go about this. And coming from San Francisco, the Bay Area, a lot of us here, we leverage this concept called an investment club, which some people actually even do when they're in college already, where You know, you basically have some sort of idea or criteria about what you want to invest in. And then you find other people, your friends, people in your network that believe in the same thing. And you just pull your money together. You don't you don't need to set up anything because an investment club is actually not a security. And then you would go invest in stocks, you would go invest in startups, whatever it is you want to do. And that's really when I connected the dots. And I was like, wait a second, like why is there no investment club when it comes to real estate? A lot of us are in all these really beautiful communities, like even the boardroom where, you know, just at this past weekend. And, you know, people have shared goals. They want to look for really high performing assets and go back those strategies together. And That's really where, you know, I have that huge light bulb moment where it's like, OK, if we could really create a technology empowered way for people to start investment clubs where there really is none of the red tape that comes from the traditional syndication or fund world. you're all of a sudden unlocking tens of millions of dollars from your network from everyday investors and just not having to deal with any of the chaos and the setbacks with traditional models. So that's really what led us to creating Fractional as a company to really open the doors and streamline that whole process for everyone.
Yeah, so you, you know, it's the cool thing about entrepreneurship. You had a pretty gut-wrenching loss that you turned into a huge win, right? You saw, which sucks, right? Like, it's like, you had this deal, you lost it, you lost your EMD, it didn't feel good, but instead of kind of letting that defeat you, you said, shit, this is a real problem I need to solve. So kind of give me an idea of like, all right, we had this idea, you know, from idea to like, all right, now this is a real thing. Like, what did that take? How long did that take you to put together?
Yeah, so I'm like, okay, problem equals opportunity, right? That's the entrepreneur mindset right there. And I am generally not a super risky person. So the way I thought about it was like, okay, I need to validate if this is just a me problem, or is this actually a problem for a lot of people and an opportunity for a lot of people? What we did was, so my co-founder, he actually is one of my teammates back at my previous company. I used to work as a software engineer at a firm. And my co-founder Carlos and I would, you know, always just be chatting about real estate whenever we were having lunch at the office. Like that was basically our shared hobby. So I told him what I was experiencing and he's really active in real estate too. We were like, okay, let's validate if this actually is a thing. So we pretty much build this fake website describing the pain points we were going through and what we were looking out to build. And there's also a flip side to it where it's like, you know, would investors really love and jump at the opportunity to go invest with other killer operators in their network for as little as 10 grand, right? Like there's there's kind of two components to it. So we blended those two concepts together into this fake website. And we ended up launching it on this app called Blind, where there's a lot of tech professionals just gossiping about their employers, really. But it was a target audience for us, because people there have money and disposable income that they want to invest, right? So we put it on there. And within a day, we get 2,000 people to join our wait list for this fake website, right? And we were like, holy shit.
Like, this is clearly- Growing something, yeah.
Exactly. It's like, we're not imagining this. There's a real problem and opportunity here. Let's go frickin do it.
That's amazing. So another thing is that needs to be said. There's a lot of people don't understand this when you raise money. There's a lot of people that don't just don't follow the rules and they just break the law. Um, so you guys, there's obviously this huge compliance thing that you had to figure out and you went and got somebody from the sec to help you figure this out, right?
Yes, exactly. That was a huge thing for us. We obviously don't want to go to jail. We don't want anyone setting up investment clubs, having user error, or not doing the compliance stuff correctly. So we were super lucky to got in, we got into Y Combinator, which is an accelerator that has created all these legendary companies like Airbnb and Stripe. So we got into that, which totally put us in, you know, the absolute best room possible. And then from there, got connected with the former senior counsel of the SEC, told him what we were building. And he's like, this is legit. Like, that is definitely a concept that's needed in real estate. I'm going to come in. I'm going to develop with you guys what the product should look like. What are all the compliance guidelines? What are all the legal docs you need to have? And how do you actually track active participation and make that as streamlined as possible from a tech perspective? have all the data and proof points where if the FCC ever came knocking at the door, you would be able to legitimately prove to them that we did everything and this is truly an investment club and really check the boxes from a compliance perspective. That was really huge for us to be able to keep growing and evolving with someone who knows all the rules and how to go about the process in the most kosher way possible.
Yeah. I, I mean, that's, that's awesome because that is, you know, that is the biggest fear, right? Of, and that's what any, excuse me, that's what any attorney will tell you to be scared of is being compliant in the money raising side. So you guys figured that out, uh, which is a big deal for anybody listening. Um, if you're actively raising money, obviously check their platform out, but like you go to jail, if you do this wrong,
Yes, that is 100% a thing. I meme about this slightly, but I feel like every time I'm on social media, I'm like, that is jail-worthy content right there.
Oh my God. Yeah, 100%. So, all right, you start, you got the idea, you start to vet it, and then you guys, do you go out and raise money first? Like, did you do a beta? Like, what's kind of the next iteration of it?
Yes. So we get into Y Combinator. They give you not a huge check, like a decent check where you can stay alive as a founder after quitting your W2 job. So we go into Y Combinator. That thing is just an absolute pressure cooker because you are in that accelerator for pretty much two months. And then at the end of it, they have this thing called Demo Day where they basically invite all the VCs out there you know, you go into a room, you pitch your company in like a two minute elevator pitch, and you just see how many eyeballs you can potentially catch, right? So we were basically in Y Combinator, trying to get our first few customers. So basically, after two months, We've built a fully fleshed out product at that point, basically our V1 of what this thing looks like. And then we had helped 10 operators go through the process of building an investment club and bringing in capital in their network. So that was a huge feat for us. Just coming out two months was actually something substantial to show. that went really well for us from a capital raising perspective for the company itself. So we ended up raising roughly $5 million for our seed round there from some really great people. CRV, they're the investors of DoorDash. We got Will Smith and Kevin Durant there too. They showed up to demo day and everything. So that's always a fun story to tell. And after that, you know, with the $5 million, it's like, okay, now we can actually grow a team. We can, you know, build faster. We can iterate more, start exploring marketing and things like that. And then not too long ago, we raised another $15 million for our Series A. Got it.
And did I see something, you guys got nominated for something for Inman? Didn't I see?
We did. We got nominated as one of the innovators of the year.
Oh, that's awesome. That's really, really cool. So go to present day now, right? Like, so you've got active investors, you're big in sub two, I see pace Morby's use you guys to raise for multiple deals, like kind of where you're at now today. Hey, this next segment is brought to you by my good friends, I Am A Comeback. We did an episode with Mark Jennison. Now listen, not something a lot of people like to talk about, but it's a real thing. If you're struggling with alcohol and you're a high performer, I Am A Comeback can help you. These guys are my friends. I've been to their events. I've been inside their community. I do a lot of business with a lot of people. Mark has transformed a ton of people's lives. If you're in a situation where you need help, reach out to my good friends at I am a comeback and that's I am a comeback dot com. Mention the show. Mention you're a friend of the show. These guys will take good care of you, and they do it for all the high performers that need this help. They've transferred a ton of lives. They're who I trust, and Mark is a good friend. So check them out at iamacomeback.com.
Yeah, right now we are definitely full growth mode. Everything has been very word of mouth, you know, up until this point. And I think that's very beautiful in itself because community is a huge part of our DNA as a business. You know, with investment class, people bring in their own network. So we've, you know, very strategically grown by being in a lot of the right rooms, working with really powerful people like Pace, and that has definitely just really elevated and accelerated the business. So now it's all about scalability. It's like, can you take that model and times it by 100, right? So that's pretty much what we're stepping our foot on the gas right now is really taking this model, scaling it up. And then another really cool thing is actually going into a different vertical. So we started this whole thing out just in real estate. And as, and, you know, a lot of real estate operators, they're very diversified as entrepreneurs too. And they're not just buying, you know, real estate. It started going from like single family homes to other asset classes, like self storage. And then all of a sudden, you know, these real estate investors, they're like, Hey, you know, I actually own some car washes on the side and some laundromats and whatnot. So it's like, okay, you know, why don't we do investment clubs for business acquisitions? So yeah. new thing we just started getting into actually, you know, within the last quarter, which has been super exciting. Even had a group go buy some candy stores together, which I never would have imagined.
I saw that on your social media, which was really cool.
Yeah, I am all for like all sorts of crazy things. I think that that is totally the magic of of a community.
So being a startup, I always like to tell not just the good but the bad. What are some challenges growing a new company? You guys are seeing massive growth, right? What are some challenges that you guys have experienced? What have you run into that you would just give somebody advice? I wish I would have done this different or just challenges that you face for our listeners that could help them?
Yeah, for sure. Lots of challenges. I would say we've iterated through so many versions of the platform, our messaging, our focus, our audience. Each iteration is definitely very painful as you're going through it. And I would say one of the biggest ones was actually you know, kind of letting go a little bit of the consumer side in terms of who we target. So when we just started out, it was, it was very kind of like dual facing where, you know, we wanted to speak to the operators, but at the same time, we were also trying to speak to the end investors that had the 10K, the 25K. So because of that, it's almost like you're trying to grow a marketplace, which is a much more complex thing compared to just, you know, targeting one thing, right? You got the chicken and egg problem. And then the messaging is also harder to grasp because you're talking to two completely separate types of people who are coming from totally different places. So, you know, we try like building, even taking the Y Combinator concept and saying, hey, you know, can we do an accelerator for the end consumer where we can educate them, put them in like a two month boot camp and try to match make them with other operators. That that was a concept that we were really excited about for a little bit over a year or two. And it didn't really work out because I think, you know, targeting the end consumer, it is a lot harder, especially also mixing in, you know, trying to speak to the operator too. And I think personally for me, because you know, this whole thing is our baby, right? Like sometimes you do get a little bit of like a personal connection, like an emotional attachment to it where I wish I would have been able to, you know, just kind of cut the losses or be able to pivot faster where it's, you know, you have the data in front of you, but then you're like, oh, you know, this is working. It's not like it's not working. You know, maybe if we just tried a little bit harder or maybe, you know, if we just give it a few more months and then the timing is right, it'll work better. And I think that's a huge learning lesson for me is, You know, sometimes you if you see the signs, you got to just pivot faster and, you know, just lean in on the things that didn't work out because, you know, changing shifting gears and changing direction could actually, you know, lead you to the actual right success much faster.
Yeah, it's that's the old sometimes you got to burn the good to get the great, which, you know, to your point, as an as entrepreneur, sometimes we get so emotionally attached and, you know, man, we really wanted this to work. But when actually burning it down and taking part of the idea and pivoting is actually where we can be more successful. That's a very, very great point because I think that's one thing that Many, many entrepreneurs struggle with of getting comfortable in the lane and not learning to pivot when they need to pivot. So that's great advice. Really great advice. So now, um, platform starting to grow. A lot of cool things are happening. You're getting in cool rooms. What do you see as kind of the evolution of, of where do you want to go next?
Yeah, I think the next iteration is. how do we truly build this to be a machine where it's almost a self-service way for operators with any sort of vision to just come in here and be able to just start their investment club? Like how do we run, you know, hundreds of thousands of investment clubs on the platform going in all at once. I think that's really the next cool thing to tackle because right now this is it's a it's a new concept for a lot of people. So, you know, we're in there where we're doing the education. We're explaining things. We want people to understand how this works and understand the compliance and all that. But the next on lock is like, you know, fractional is a no brainer and you get to understand how all these things work and you can just go in there almost like, you know, Kickstarter, right? Like anyone can go in there if they've got a great vision and just go at it and they have everything right there and then on the platform to help people succeed. Like we want to get to that level of scalability and self-service. I think that would be just super, super killer. And, you know, with all the talks about AI and all that, I think that is also Going to be extremely beautiful when it comes to elevating the business and from a customer experience perspective and and even taking that to the end user. At the end of the day, you know investing, it is, it is a complicated thing and. There are so many moving parts people are trying to understand all these different things and and then they're you know Experiencing a new platform for the very first time too. So we want to be able to help the operators who are starting the clubs be able to scale when all of a sudden, you know, they're they've got you know, maybe 20 clubs running in a year because they have a such great deal flow. They've got an amazing network of investors and they're growing that even more through word of mouth as their investment clubs are so successful. So to them, I think they will be dealing with a new level of scalability. two, because of all the clubs are running. So it's like, okay, well now all of a sudden, if you're dealing with, you know, 5,000 investors and all these different investment clubs, you're running on Fractional. How do you, you know, scale that and how can Fractional as a platform be able to really streamline all the communication, the end user investor experience, and really tie all of those in the most, you know, synergizing way possible.
Yeah. Um, one thing to give people context, um, I should have asked you this first, but we just dove right in. So explain to somebody that maybe they're like, I have no idea what the hell you guys are talking about. Investment club. This all sounds like above my pay grade. Like explain to somebody, how does it work? You got a deal. What is an investment club? How do they leverage your platform to raise money?
Great question. An investment club, it is a little bit similar to a fund. So the way you think about it is you're an operator, you probably have a buy box, right? Or whatever you're looking for when you're buying deals. That is not changing. I've never seen an operator say, you know, I'm looking for this thing. Oh, but my criteria is like different for this other house now. Right. It's like everybody has that buy box they're looking at. And you make that basically the criteria for your investment club. Like this is this is what we're looking for. And then you, instead of actually bringing in a deal and getting that under contract and then raising money for it, which I think is very backwards with a club, you start out with just your buy box or your criteria. You tell people in your network, this is what I'm looking for. If you guys are interested in that same criteria, let's pull our capital together. That way we have you know, all the money that we need ready to go, then we can be in a super competitive advantage as we're finding all these golden deals, because timing is a huge issue, right? So you get the you get the criteria, you pull all the money from your network. And then the main difference with an investment club versus a fund is that there is active participation. And that active participation makes this whole thing not a security, which is why you can raise money from anyone. You don't have to go file a PPM. You don't have to be restricted around how you do your marketing and how you talk about things and all that. And the way the active participation works is You've got your group of people, they're all here because of this criteria. So you, as the club leader, you're now going to find deals that fit the club criteria that you think is a great idea. You're going to bring it back to the club. And then everybody gets the opportunity to underwrite it together, do their own due diligence, and then they vote to approve. whether or not they think this deal fits the club criteria and if the club as a whole should deploy money for that deal. And in reality it's actually very streamlined if you're a great club leader because you really shouldn't be bringing in anything that doesn't fit right like If you said we're going to go buy RV parks, if you're bringing RV parks in, people here join the club because they know, like, and trust you. They want to learn and earn and figure out the process. Everyone's going to underwrite it together and, you know, they will likely approve. And that is super streamlined. You know, you give people a few hours, maybe a day at most, whatever is your urgency for you know, how quickly you need the group to come to a decision. People basically just vote directly on the app. You get that approval and it's like, boom, OK, we signed off on this. We're good to go. We're going to deploy our money for that RV park. But, you know, if you bring in a yacht, right, it's like that is clearly not. Don't do that because people are not right. That's how an investment club works. It's conceptually very similar to a fund where you start out with an idea but you have that active participation which makes the whole thing not a security and it just opens up so many doors for you.
Got it. So thank you for that explanation. Um, so two things, I'm going to ask you the question, ask every guest at the end, and then, um, I want you to share how people can find you and how they can find the app. So first question, I say this to everyone, ask everyone this. So the point of this was, You heard part of my story last week. I don't come from money. And what I found very early is that there's two economies in this world, the educated and the non-educated. And I don't mean educated by you got an MBA. It means you were not taught about money. And we, we call it the show wake up to wealth is because I want people to wake up to understand there's a ton of money out there. If you understand how to go after it and get it, but you have to learn how to speak the language of money, um, which is very different than what most people have been taught. They don't teach us this shit in school. Right? So one thing I always ask every guest is what is waking up to wealth mean to you? And it's whatever your version is. I'd love for you to share to our audience.
Yeah, I mean, for me, I think wealth definitely comes from the mind first. And I think it's exactly what we talked a lot about in the boardroom is you need to aspire for your future identity. And I think that is the best wealth that you can instill for yourself. What is the North Star version of you that you want to become? That is what I want to wake up to every day, is like, this is the North Star me. I'm going to just get better today to be one step closer to that North Star. you know, you celebrate your successes and you'll, you'll see the evolution of your North Star. Like I am totally a different person today, even compared to who I was, you know, a quarter ago, because I'm always, you know, striving for what the next version of excellence means for myself. So I think, you know, with that kind of mindset, you then build wealth and all the other ways that that comes with it, whether it's the actual financial dollars or, you know, your health or your career or your business, you know, whatever it is. I think it comes from the mind and the dedication and then everything will, will just flow naturally with it.
Great answer for everyone that's listening. How do they find fractional? How do they find you?
Fractional, we're on the web, we've got an app as well. Go to fractional.app, that's where you'll find us, where you'll find me. I am constantly lurking on Fractional myself, and then also pretty active on social media. My handle is Halestella, just to keep it California for everyone. And yeah, would love to talk to more operators, see how we can help you scale your business.
Well, I thank you so much. I appreciate you coming on the show. Thank you for being a fellow boardroom member. I think what you're doing is really, really cool. I think it's going to change a lot of people getting access to being able to get capital, get people on their network to be able to invest in deals with them and do it safely. So I thank you so much for what you're bringing to the real estate investment community. And thank you so much for your time today.
Absolute pleasure. Thank you, Brandon.
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