RentRedi Revenue & Funding (2024)

hey folks my guest today is ryan brown he's the brain behind rent ready's software he's the company ceo and co-founder before launching rat ready he worked at goldman sachs and price waterhouse cooper he enjoyed speaking about entrepreneurship and why he built rent ready to improve the renting experience again property management software for landlords ryan you ready to take us to the top absolutely all right you're way cooler now that you're doing your own thing versus an accountant at pwc right you're cool factoring through the roof trying to work on it every day a little bit you know just all right fair enough so what's rent ready how are you helping property owners so the the real issue that we saw was a lot of people um are working you know nine to five jobs and they happen to own some property on the side the majority of landlords are like that they're not these massive property management companies um and right now they're kind of pegged with two difficult and not so great decisions either higher property manager where they have all the time in the world but they lose you know eight to ten percent of their profit or manage it all themselves and they pull their hairs out at night and so we kind of sit in the middle of that where they get to manage it themselves but at the same time um they don't have to uh they don't have to pull their hair out trying to do that so we provide them with software that really goes end to end in the process and helps them manage their properties themselves without any of the pain and what will they be paying you on average per month to use the technology believe it or not they only pay nine dollars a month on average and that's 12 per unit um so uh it's it's a pretty unusual a business model that we've set up uh but it has worked really nicely for a lot of landlords uh that do want to manage their property have a bit of a premium service but not necessarily pay premium price of um you know feel like they're being taxed on their growth yeah that's great i want to get the back story and the story behind your first customer but where are you today i want to bury the lead how many customers are you working with so you know we don't uh show the the customer number itself but i can i can share with landlords actively managing in all 50 states um and we've three x to that number actually this year just in the la the uh year to date so far so can you give me a sort of range are we talking like five or like 500 or like 5 000 um above the third option i'll go i'll go to there okay got it so you have about five you have about five thousand landlords already on the platform yes okay take me back to the back story here when did you launch um so really back in 2016 and uh as you mentioned i was i was going to school in new york city at pace i had gotten that my first internship at goldman actually which is right across the street from pace and it really all started when i went to try to get my first apartment myself not as a landlord but as a tenant and realized that it was incredibly difficult to rent an apartment um actually going through the application process was quite difficult and i just gone through an application process as a student which was not that difficult which was the the common app process i filled out an application once i applied everywhere i wanted it was pretty nice and easy it struck me as shocking that the uh rental industry wasn't the same way and so initially version one was just building an app myself for myself and friends and i had done our initial development um so you had real estate personally that you wanted to use your app to manage exactly so i was really just building it from the tenant perspective and it wasn't until i started bringing that to landlords that they said hey wait a minute you know our side's just as bad if not worse and in fact yeah sorry just to just be clear you didn't you didn't have real estate that you want to use your tool to manage with you or you are coming from the other side and then built into landlords exactly yeah okay interesting so so first was the first customer then your landlord you know it actually wasn't um the first customer uh in the early days were actually landlords that were uh trying to collect applications on apartments and so in the very early days it was really just by um going to different association meetings meeting with some of these landlords and getting them to adopt the platform uh when you build the software it's yourself it takes you longer than you would hope in the early days so there was quite a while of um you know building up the software in the early days before so ryan are you sole founder or do you have a co-founder i do have a co-founder got it yes you guys just decided early on i mean obviously the equity split at the beginning is a challenge everybody goes did you guys just say screw it we'll do 50 50. so the way we did well the easy thing for us is we're actually father and son um and the really nice thing was his skill set i mean perfectly compliments um i assume you're the son you're the same yes no it's not me and like a seven-year-old running around yeah absolutely so i mean his whole background sales and marketing minus uh really more so focused on the technology side and customer support side of things and so um it just works perfectly that well so what did you do 5050 or does that own more oh i mean we we don't share the equity split but i mean we we do um we do have a pretty uh pretty even split on it well no i mean i want to know more here because this is a debate every founder goes through so are you saying dad listen engineering here is more important than sales therefore i deserve more or is he saying listen son i have more experience sales and marketing is critical you could build a beautiful thing but nobody knows about it i i deserve more i mean i think it depends on your situation but i mean in a lot of cases i do lean more towards the side of saying it's easier to just split it with your founders unless you have someone that's coming in later or something like that but um i tend to lean more towards the side of saying it's um it's easier to not argue about and honestly i feel the same way about uh the investment side of things i mean when companies go to raise that money later on um i think there's there's arguments over there are big market movers where it does matter to to um to talk about how it will impact your business in in five years or ten years or in in the case of funding rounds three rounds down down the line but um i think the same applies with founders especially if you're going to be in a venture business you're going to dilute yourself as you raise future rounds um you do want everyone to be invested uh it's not good if you don't have a founder feel so ryan did you guys have you guys bootstrap this or if you raise capital so we actually bootstrapped for the first two years of it um in the very early days it was just me doing all of our development uh and mainly doing our sales and then the two of us honestly handling all of the chats that would come in um we were anytime you messaged it on red reading those first couple years it was literally us on our phone or computer messaging back um in 2019 we raised our first venture round and that was really when we brought on the the core team to rent ready we grew to about eight as a team and then uh we raised a venture round uh earlier this year so we've raised about five million dollars to date what was the precede in 2019 how much uh we raised 1.4 million one four okay interesting and then so what so you raised three three six this year right looking back i mean obviously you guys took dilution to do that most people are selling 10 to 20 of their business in these sort of early rounds do you regret that at all no not at all i mean especially from the perspective of we've looked at it uh not just from the capital perspective but what also do those investors bring in each round so um for example ti ventures um was was the lead for that very first round one of the things that we have been focused on since day one has been how do we take customer feedback and convert that very quickly into action that we can change in our business and a lot of their model and even doing their diligence on us but what it went beyond that and doing was saying uh how do you learn from those customers and that was something that we've been able to implement with them post rates um like they've helped talking to our own sales reps or talking to our own marketing team or uh support team and understanding how do we actually synthesize that feedback turn it into action create a better product and in the end result so i mean from one side of things rent ready would certainly not be what it is today without that funding but also beyond just the capital itself um there's a lot of knowledge that that comes along with those investors hopefully if you do it right which i which i feel like we've been very lucky but lucky to have so far and then ryan obviously the market's a big one you're north of 5000 customers today do you think you can break ten thousand by the end of this year is that going to take into 2022 uh i mean we are on track to hit all the goals that we we want to by the start of q1 or end of q1 we actually plan on raising our a in just a few months in q1 um so the the nice thing is we're right on track for where we want to be well no i don't know what your goals are so my question specifically is just around the market size and how fast you can add customers can you break 10 000 landlords in next year or can you do it this year you think uh i mean i'd i'd rather not speak directly to the the customer amount itself um it's just not really a number that we share uh publicly but um in terms of the the growth or understanding that side of things i can't say i mean we grow this this year alone we've grown uh 10 month over month um so i certainly in terms of how fast we can grow uh i've talked to a number of even founders in the the prop tech space and the space itself is is really exploding um but even within the space from what i've been hearing from founders uh we've had a healthy growth rate even above the the average in the prop tech space got it sorry what i'm trying to understand is how big you think the market is right so i i'm actually a little confused why i don't want to talk about like do you think you can break 10 000 this year or next but like i mean in terms of how large the landlord market itself is just about 20 million landlords in the u.s about 16 million of those are our segment they're the smaller landlord segment um the appfolios and the artists of the world have primarily focused on massive property management companies and they've done it well um so small landlord managed by what number of square footage managed number of beds managed number of units what is defined small so in our case i normally say one to a hundred units we have some people that break that and say i don't care if i'm over what you've designed it for on more than 100 units um but in our case it can be as little as one single family home that you own to around 100 units um and a lot of it comes down to i would say more so the mindset of the person so there's a a very large difference between someone says i'm running a property management business where i've hired a number of employees they are working under me and someone that says i have my my my day job that i'm working on i have this real estate business that it allows me the freedom to either put a kid through college or retire earlier go on a couple extra vacations and i'm trying to figure out a way that i can manage this myself simply and easily without necessarily needing to hand it over to one of those management companies or uh go gray trying to do it all got it how are you adding new customers each month what's sort of your go to market strategy so for us it really has been um again totally opposite from the enterprise side which is uh normally booking uh demos and doing a demo with that person and helping them on board ours has been totally product-led growth in terms of uh going out and yes marketing it so that landlords find out about run ready but how that's what that's what i'm asking how do they find out about you so a lot of it is through paid marketing so we'll we'll do ads on different channels um they'll find rent ready and they actually from that point will self onboard onto the platform and uh set up their property certainly they have us anytime they need we have live chat on the site um but they don't have to uh interact with a person unless they want to so do you i mean it sounds like you probably have a good understanding i see you've probably advertised on bigger pockets than some of these sites that a lot of my listeners listen to as well um what does it cost you or maybe what are you willing to pay to get a new nine dollar a month landlord oh uh i mean i think it depends on the channel i think in the early days when you're when you're testing out different channels um going back to the beginning of last year uh we were you know spending upwards of a thousand dollars a customer to to add um to get it to get a nine dollar a month customer yep and as that year went on i mean we were able to drop that customer acquisition cost to you know 80 of that what are some of the changes you made like you run a first out on bigger pockets and it's way too expensive it won't work at scale but you make some tweaks and drop it down and you save 80 on the thousand like what were some of the tweaks you made to optimize a channel once you enter it um countless so i mean not just uh not just tweaks about uh like the messaging you're using uh or even the part of the product that you're talking about when you're talking about an end-to-end suite with rent ready it's it does matter when you say okay are we going to talk about payments are we going to talk about maintenance coordination accounting listings screenings um so there is yes those choices but really some of the surprising things too um come from even things as simple as like does it matter if you have a person in the photo or not does it matter if you have a house in the photo or not it doesn't matter what type of colors you use um so all of those we actually went through about 1200 different ad creatives over the course of last year how did you do that did you use a firm or some tool to do that we did it both ways so we actually tried with the firm uh uh early on and then um uh you know it's actually escaping me at the moment what tool did you use instead to try so we actually did it all in house so uh kelly who's our head of growth um has run at operations at a number of companies um that have actually exited to aol and apple 1200 ads herself yes so we we actually did launch we launched a number of those ads with that company in the early days we launched a good portion of those ads on our own yes so like she's putting together 1200 images 1200 headlines 1200 descriptions 1200 like everything or or she's putting together five units of each of those and multiplying them all together in a bunch of different combinations more so the second one you're talking about it's it's understanding what categories of those and that's really how i mean when you look at it from the perspective of um testing uh what actually matters if you have six or seven different elements uh that are different in the same photo you really don't understand what is actually the the negative impact or the positive impact related to that ad you kind of need one small change in that ad and then test if that works ryan last question before we wrap up here you found it in 2016. you've been cranking on this for a couple years now do you remember the first year you guys passed a hundred thousand bucks in revenue and what you and your dad sort of felt like um you know i i actually don't know that i would equate it to a year but i do remember uh when we passed that hundredth customer and that one is a very fond memory to me what year was that was that the first year or second year or further uh it's actually further so we spent probably the first year and a half just in development um we had i mean a small number of landlords on the platform um but i i remember we had passed our uh our 100th customer back in 20 early 2019 um and uh he and i actually happen to be together a lot of the time we aren't necessarily in the same place we happen to be together that day which was pretty exciting to kind of be next to each other cheersing to that it's it's funny to say um to look back at that now i think we're as excited as we were about 100 as you know the scale changes you have to uh readjust what you uh how you feel for each hundred but um it really was a super super um you know personal exciting moment for us to 100 landlords back there and you know early 2019 at nine bucks a pop there you know a thousand bucks a month in revenue is that the traction that you're able to take into that precede around to attract the 1.4 million yeah i mean that was a huge part of it but to be honest even more so than the scale was the reviews of the customers that were on the platform and i think that is um certainly the number side of things is is phenomenal to me i'm i majored in math i love the number side of things the the part that i think was really the difference maker for that round was once investors started to talk to some of our landlords and hear not just i like this but if you removed this from me i would be really pissed off at you i think there's a huge difference between just i enjoy having this in my life and this would be incredibly detrimental if this disappeared um and that was really the big difference maker was um how emphatic they were about the product they were using and then look uh you're north of 5000 customers say at a nine dollar price point so we can say more than forty five thousand dollars in mrr but like what will it take to get up you up to like five million in ar or ten million in ar like are you too cheap no not at all um i i mean we have when you look at our market of 16 million landlords um 5 million or 10 million is only a drop in the bucket compared to what you talk about when you look at the tam or the total addressable market um related to our landlords and in addition to that the way that rent ready generates revenue isn't only from that landlord subscription um so we do offer a number of services that landlords have the option to add on and we generate revenue from them you take a percent of fees do you take like two three percent on rents paid through the platform no no we don't um so what are some of those other models so like on the payment processing side of things we do allow tenants and landlords the ability to um process payments through the platform if a landlord wants to incur that so the tenant has no charge at all they can but if they'd like the tenant to essentially when the tenant pays a dollar for ach we make some of that off of that dollar and that's the same thing we've been able to apply to a lot of other things on the platform as well where we've been able to go to large companies transunion included and say hey discount our landlords for tenant screenings they'd maybe pay 40 coming to you they'll pay 35 on rent ready but give us a larger discount on that and we will make money on the spread because you're treating the thousands and thousands and thousands of landlords and tenants on rent ready as one massive portfolio instead of just an individual landlord that has to bargain on their own behalf and so we've been able to apply that to payments tenant screening maintenance coordination even automating accounting um reporting tenants rent to credit bureaus so they can boost their credit and even renters insurance so in all of those categories we've been able to take that mindset that collective bargaining power all of the landlords on the platform and basically get better deals for them or their tenants uh for each of those situations what's team size today how many folks sorry how many team on the team today we're about 20 on the team today which is wild you know about 24 months ago is uh two of us so um it's been it's been a great ride and then wrap us up here you said your thing about a series a how much do you think you'll go try and raise and why do you need the capital so we're looking to raise about 15 million um uh there's there have been some pushes to to raise a little more but i i think honestly that's about all we need um and really the the purpose of that will be just scaling up what we have already and integrating some services that will uh further help landlords for example the accounting side of things was one that they had asked for a lot we actually added that in q3 um where we've completely automated the landlord accounting side if things are very much automated that side of things so that that's just streamlined but it goes far beyond even just the maintenance coordination and accounting um taking it truly to the um as far as we possibly can in terms of uh integrating additional services that ultimately solve pain points that tenants and landlords have bring to us and to pull in 15 million without you and your dad getting extremely deluded and any employees that you gave early equity to i mean you need to go figure out how to tell a story where it's you know a 95 million hundred million dollar sort of pre-money valuation when i look at you know 20 people on the team size today and you assume average revenue per employee of 120 grand so maybe like a two or three million run rate today i mean you basically have to go tell a story of like a 25 to 35 x multiple what do you think gets you there what do you think enables you to tell that story uh i i mean a huge portion of it is the fact that we do serve as a beachhead into a lot of other industries and so in the early days it was us going to someone likes transunion and saying hey discount us off we're bringing you this massive group of landlords that is probably even larger than we're assuming it is today um but um now at this point we've gotten to a size where other people in our space in the prop tech space and uh even in the fintech space are starting to say we've raised capital in order to try to get in front of these landlords and tenants and they're incredibly hard to find and get in front of are you having what do you mean though you just said all your growth is coming from paid ads why can't someone else just outbid you what do you mean they're hard to get in front of um it's very hard uh not just in terms of getting in front of but also a product that actually serves them properly um i give a lot of credit to the landlords in our industry but uh they they don't settle for a product that doesn't work incredibly well so it's it's not very easy to just throw a bunch of money into marketing and say we'll have a decent product and that'll be good enough it really does have to be um solid end to end and um i mean we're constantly improving uh but it takes a lot a lot to get it there fair enough let's wrap up ryan famous five quick answers here number one favorite book uh zero to one number two is there a ceo you're following or studying mark cuban number three what's your favorite online tool for building rent ready uh intercom chat number four how many hours of sleep to get every night uh six and situation married single kids uh not married but not single dating no i have a girlfriend for about four years no kids and how old are you uh 27 27 last question something you wish you when you were 20. um you're gonna get a lot of stuff wrong and that's okay and just start sooner start as soon as you can guys he started in 2016 solving his own problem with rentready.com they broke a hundred landlords on the platform a couple years ago now over five thousand they pay over nine dollars per month to manage the property that's not their only revenue stream they've gotten really creative with renters insurance maintenance coordination payment processing where they take a cut up uh call it tenant payment payments they've raised uh caught about five million to date seed most recently team of 20 targeting a 15 million series and q122 we'll see what happens ryan thanks for taking us to the top thanks for having me one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central additionally remember these recorded founder 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