Doorstead, a property management startup that offers “guaranteed” rent payments to homeowners, has raised $21.5 million in a Series B funding round.
Ryan Waliany and Jennifer Bronzo started Doorstead in 2019 and initially tested the pricing model for rental properties on Craigslist. Over time, the company has developed a pricing model through data science and machine learning that, the pair say, helps it better predict how much rent a particular property might fetch.
That’s not to say it’s risk-free. The duo acknowledge that it is indeed a risky business to guarantee rent to landlords considering Transfer must cough up the difference if it cannot get the promised amount.
However, they claim that their forecasting model works so well that it still comes out ahead. Doorstead makes its money strictly by charging an 8% management fee, so there is no incentive to list properties at rents that may be higher than is realistic or reasonable. So if the company can get a higher rent than guaranteed, the difference will not be pocketed. Instead, that extra money goes to the owner of the property.
“Other companies might take that on their head, but we believe the incentives aren’t properly aligned,” CEO Waliany told australiabusinessblog.com. “What we offer is a risk-adjusted guarantee based on the market.”
To request a guaranteed offer, property owners enter basic information about their property on Doorstead’s website. If the property qualifies, the company tells the owner the minimum amount they will receive each month and when they will receive their payments.
COO Bronzo: “We cover the difference if we rent out the house for less [than the minimum] or if it takes longer to find a tenant. So the owner still gets the rent and we pay the difference out of our own pocket, or it saves us 8%.”
Doorstead aims to “go above base price 75% of the time,” according to Waliany.
“ …It suits us very well financially and we help to eliminate unnecessary vacancies. Without a guarantee, property managers sometimes drag their feet,” he said.
The model seems to be working, as the startup says it saw 270% real estate growth in 2022 and sales “outpaced” real estate growth with “healthy unity economics.” Doorstead says it has served “thousands” of owners over the years, generated more than 30,000 guaranteed rental offers and currently has more than $1 billion in real estate under management. The startup operates in seven markets in California, Washington and Massachusetts and has plans to double or triple its footprint this year.
Doorstead only works with individual landlords of single-family, apartment or townhomes, not institutional landlords.
Waliany previously worked in product at Uber and Bronzo has experience in property management. The pair believe their combined background has given them a good perspective on running a technology-enabled, “full-service” property management company and then some.
“When we started, we thought: we’re just going to make a technical property management company. We’re going to build like Uber Eats for property management.” But when we started talking to customers, we realized we were wrong,” Waliany told australiabusinessblog.com. “We realized there was a bigger problem that wasn’t being addressed in the market, and that was property owners high rents. Their properties could sit empty for three or six months and in some cases it cost them their homes. So we thought, ‘what if we can give them an upfront guarantee before we find a tenant?’”
Avanta Ventures led the round, which included entries from MetaProp, M13 and Madrona. Avanta is the venture arm of CSAA Insurance Group, an AAA insurer (AAA is also known as Triple A or the American Automobile Association). Eric Wu and Tom Willerer (former CEO/CPO of Opendoor, respectively) are also contributors. Doorstead has raised $37 million since its inception.
Currently, the San Francisco-based startup has about 150 full-time distributed employees, with about 80 of them based in the United States. In addition to geographic expansion, Doorstead wants to focus on capital efficiency and “improving the economics of the unit” for profitability.
“We’re aiming for growth, but profitable growth,” said Waliany.
Steve Bernardez, a partner at Avanta Ventures, told australiabusinessblog.com via email that he was drawn to support Doorstead in part because he believes “the rental property management space is a large and growing market that has historically been underserved by legacy providers.”
“Despite a huge market opportunity, rental housing management suffers from poor solutions that misalign incentives, fail to address financial risk and can be painfully inefficient for all parties involved,” he continued. “…Using data-driven analytics trained on continually updated local real estate data, Doorstead’s guarantee provides property owners with confidence that they will receive a minimum rental income stream on a guaranteed start date, despite all the volatile market conditions. Doorstead then helps the property owner prepare the property for sale, secures a tenant, and manages ongoing repairs and maintenance, all within an efficient user interface that today’s property owners expect.
In conjunction with the raise, Doorstead also announced it has acquired the Boston assets of another venture capital-focused startup, Knox Financial, which closed operations late last year.
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