Happy Friday Founders & Friends!
This week we sat down with the founders of Residesk, one of our most recent Bloom Capital Investments. Arjun, Sam, and Alex unloaded an absolute wealth of knowledge around PropTech and company building that really help bring you behind the curtain of what they are building. Check out why we are so excited to welcome them into the Bloom family!
Let’s dive in 🚀
Founder Interview :: Residesk
What was the “earned insight” that led to Residesk
High-Level Insight: There is a massive, untapped opportunity to identify and mitigate controllable capital risk in the multifamily property sector.
What do we mean by controllable capital risk? When specific events or systemic issues in property operations threaten the proforma projections for a multi-family property. These are often undetected execution problems that can fester for years before profoundly impacting budgets and asset value. This diminishes resale/refi value.
Risk Mitigation is very valuable
Most prop-tech startups tell the story of how they drive asset value by making tenants and communities happier. This is untrue. What makes tenants happier are new kitchens, bathrooms, and amenities. Not apps.
We think there's a massive opportunity to help operators defense (minimizing liability and risk to the portfolio) so they can focus on playing offense (renovations, new amenities, improved processes, better storytelling for prospects).
Prop-tech doesn't seem to get real estate
Why do we see a new venture-backed SaaS repair platform every year? Because every year someone is tantalized by attacking the multi-trillion dollar real estate market.
There's one problem: Most prop-tech SaaS companies don't impact this market. Most impact the $30 billion, low margin property management fee market.
There's a simple test: who's paying for the software? If the owners are paying for the software, then you are attacking the multi-trillion dollar industry. If they aren't, then venture returns are going to be very, very hard to come by.
What is PropTech missing about real estate?
Most properties lose millions of dollars a year by not focusing on communication
Kingsley Associates :: Tenant satisfaction matters. Satisfied tenants are **3.5x** more likely to renew their leases
Zillow :: 70% of turnover comes from poor customer service
PWC :: 80% of customer service is speed and convenience
Kingsley Associates :: Better response times and communication directly improve retention
Every dollar retained is worth more than a dollar converted. You save rental losses, marketing costs, leasing costs, and manpower.
Why are companies okay with this?
It's hard to identify *which* tenants are at risk and prioritize them. Surveys, Google reviews, and measuring the number of maintenance requests don't give you the full picture.
It's impossible to improve response times 10x with current systems. Email inboxes and current portfolio management systems have 24-hour (or longer) average response times.
It's expensive to improve service by adding staff**
The best way to 10x customer satisfaction is with technology. The biggest companies in the world have been investing in customer service and benchmarking retention for the last decade. We're bringing that playbook to real estate.
This is where ResiDesk comes in. We help identify and de-risk tenant turnover.
Our Insights tools help you identify units with high turnover risk, and our communication tools help you de-risk them with no additional work.
Our clients' - and their tenants' - responsiveness is 60x faster than the industry avg. (25 minutes vs 25 hours)
This leads to satisfaction 10% above industry avg. in the first month
With our tools, you increase LTV and decrease rental losses - in addition to supercharging your teams.
Let’s put that into $$$
If your average rent is $2500/mo, you make your money back on ResiDesk as soon as you save even one unit from turning over.
Using ResiDesk can impact as much 70% of your turnover - which would make your money back 700x.
If you achieve even a 0.1% impact on your rental loss budget (less than 10 units), you make your money back 10x.
How do communication insights unlock the “secret” plan?
The 'secret plan' is very simple.
Problem: There are no leading indicators of risk to asset value in residential real estate. Owners cannot proactively manage asset value and risk.
Thesis: Communication data is an untapped source of insights to manage risk.
Plan: Own communication in residential real estate. Build the communication hub for operators. Use communication data to build the first leading indicator of portfolio risk.
Communication insights are the thesis - pulling out indicators of risk from the communication data (what people are saying, and when and how often communication happens) then we can tell you where your risks are and how to mitigate them.
What are some lessons you learned the hard way?
Work with incumbent platforms, not against them :: Switching costs in this space are impossibly high. Most people pick a portfolio management system and stick with it for decades. Prop tech graveyards are littered with companies that tried to take on incumbent portfolio management platforms and came up against resistance to change. Working with incumbent platforms - even if it's painstaking - is the key to survival.
You have to reach end users where they are :: This isn't rocket science, but community managers and leasing associates cannot handle more friction. There is a very real multi-screen problem ("I don't want to use another app") so you have to embed yourselves into their daily workflow (i.e. live inside their mail client, their browser, and their phone) and be invisible to them, otherwise they're not going to use your solution.
You have to reach tenants where they are :: Tenants cannot handle more friction. Most software in this space tries and uses tenant portals or apps to capture communication. Nobody's downloading an app and nobody's using it even if they download it. It's a step function drop in efficiency. That's why we focus heavily on text and email - we want to be invisible to tenants.
Sell to people with skin in the game :: Selling systems to prop tech asset managers is like selling a CRM to SVPs of Revenue in SaaS - they need the reporting and insights, but their staff couldn't care less what platform they use. However, unlike in a sales org where there's an upside incentive in the form of commission, there are no upside incentives in real estate. People get fired for doing a bad job, and rarely rewarded for doing a good job. So you have to sell to the people with equity in the business, the people whose income is on the line - owners and asset managers.
Final words of wisdom with your fellow founders?
Despite the "stay in it for 10 years" rhetoric, putting an expiry date on the idea is a great motivator. Founder are in this for the long game. And what that means to us in practice is knowing that ideas can fail is probably what gives you the ability to think about them critically, so that they have a chance of succeeding.
Put your vision down on paper :: We wrote an investor memo for ourselves to clarify our thoughts and practices. It was helpful to show investors [ your first call turns into your second call if they've already read it, and there's no dog-and-pony show ], but more importantly, it helped us create our framework for the point of view that informs every one of our investments in product and revenue.
Find a framework that helps you stay adaptable :: For us, thinking less about 'strategy' and more about 'key inflection points in the business' helps us keep our feet on the ground. At the early stage, being adaptable can be the difference between life and death, and over-defining the strategy can give us the illusion of control. Instead, we think about the macro markers that we need to get to to be successful (for us that's the inflection points on distribution/GTM into the market) without being tied to a specific order of operations.
Most of the job is prioritization :: We've found that framing difficult choices with the “even over” framework has been invaluable.
SaaS Podcast Coming Soon 👀
The team is putting the final touches on our SaaS podcast, “The Full Bloom,” featuring the best CEOs, Thinkers, VCs, and PE investors in SaaS.
So far we’ve hosted interviewed with speakers such as Chris Herd (CEO, Firstbase), Andrew Gazdecki (Founder, MicroAcquire), KP (Program Director, OnDeck), Justin Mitchell (CEO, Yac), and a few others who have several lifetimes of knowledge and scar tissue in the space.
P.S. Interested in sponsoring the "the full bloom"? Reply to this email and enquire about our launch promo.
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