Birch Hill, a New York startup developing onchain lending products, raised $4 million in a seed round led by Multicoin Capital on Wednesday. ParaFi, Castle Island Ventures and Nascent also invested, taking the company's total funding to $6.5 million.
Birch Hill eventually wants to use blockchain technology to bring loans backed by farms, energy projects and apartment buildings onchain. For now, it's starting with a more focused product.
On October 13, the company launched bhGROeco, a lending vault on Morpho that runs on Base. The vault accepts USDC deposits and lends them out against a single type of collateral called GRO, a token tied to shares in GromaREIT.
In a research post, Birch Hill said GromaREIT held 152 small apartment buildings containing 530 units across Greater Boston and Providence as of June 30. The REIT also had stakes in a 146-unit property in Lynn, Massachusetts. Its net asset value stood at $71.4 million, occupancy was 96.8%, and its look-through loan-to-value ratio was 37.3%.
Birch Hill's research post also puts time-weighted interest coverage at 1.20x. The company noted that one limitation is that it does not independently audit GromaREIT’s net asset value (NAV). Groma calculates that figure every quarter, and Chronicle publishes it onchain leaving a gap between valuations, because the NAV is only updated quarterly, it may not reflect a drop in property values straight away. If prices fall between updates, the loans could end up being backed by properties worth less than the recorded value.
Birch Hill has several roles in the vault itself. It selects how the vault operates, collects a performance fee and serves as the first liquidator if a loan needs to be liquidated. The company acknowledges the potential conflict in its own disclosures. The vault will initially be capped at $5 million, and raising that limit requires a seven-day wait after the change is proposed.
There is also the question of how regulators will treat products like this. On July 22, SEC Commissioner Hester Peirce published an essay titled “Headstands and Summervaults,” raising questions about whether operators that set lending rates and loan-to-value limits could fall under investment-contract rules. On August 4, Birch Hill CEO Bhavin Vaid thanked Peirce and the SEC's Crypto Task Force on X for meeting with the company the previous day. He said they had discussed how Birch Hill was approaching registration.
When Birch Hill announced the launch, Vaid described the company's goal as finding strong credit, assessing it properly and putting it to work. That's a straightforward pitch, but the real test will be whether the lending model holds up when conditions get less favourable.
The company previously raised $2.5 million in a pre-seed round structured as a SAFE, according to The Block. Ramin Kamfar, founder of Bluerock, was among the angel investors.
For now, bhGROeco lends against a single token tied to one real estate issuer. That makes the setup easy to monitor, but it also leaves the vault exposed to the risks of that one pool of collateral. What happens when GromaREIT reports its next quarterly valuation, particularly if property values have fallen, will tell investors more about the model than Birch Hill's latest fundraising round.