How RentRedi Passed 5,000 Landlords on a $9 Per Unit Per Month Model (Interview with Co-Founder Ryan Barone)

Introduction and Background

Nathan Latka

00:00Hey, folks. My guest today is Ryan Brone. He's the brain behind rentredi's software as the company's CEO and co founder. Before launching rentredi, he worked at Goldman Sachs and PricewaterhouseCoopers. He enjoys speaking about entrepreneurship and why he built rentredi to improve the renting experience. Again, property management software for landlords. Ryan, you ready to take us to the top? Absolutely. Alright. You're way cooler now that you're doing your own thing versus an accountant at PwC. Right? You're

00:24cool factoring through the roof.

Ryan Barone

00:26>> Trying to work on it every day, little bit, you know, just a little Alright.

What RentRedi Does for Landlords

Nathan Latka

00:30Fair enough. So what's rentredi? How are you helping property owners?

Ryan Barone

00:34>> So the the real issue that we saw was a lot of people are working, 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. And right now, they're kind of pegged with two difficult and not so great decisions. Either hire a property manager, where they have all the time in the world, but they lose 8% to 10% of their

00:56>> 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, they don't have to 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.

Nathan Latka

01:18And what will they be paying you on average per month to use the technology?

Pricing Model: $9 Per Month Per Unit

Ryan Barone

01:22>> Believe it or not, they only pay $9 a month on average, and that's total per unit. So it's a pretty unusual business model that we've set up, but it has worked really nicely for a lot of landlords that do want to manage their property, have a bit of a premium service, but not necessarily pay premium price of, know, feel like they're being taxed on their growth.

Customer Count: Over 5,000 Landlords

Nathan Latka

01:46Yeah, that's great. Wanna get the backstory and the story behind your first customer, but where are you today? Don't wanna bury the lead. How many customers are you working with?

Ryan Barone

01:52>> So we don't share the customer number itself, but I can share. We have landlords actively managing in all 50 states. And we've three x that number actually this year, just in the year to date so far. So Can you

Nathan Latka

02:07give me a sort of range? Are we talking like five or, like, 500 or, like, 5,000?

Ryan Barone

02:13>> Above the third option. I'll go I'll go to there.

Nathan Latka

02:16Okay. Got it. So you have above five you have above 5,000 landlords already on the platform?

Ryan Barone

02:20>> Yes.

Founding Story: From Tenant Pain to Landlord Platform

Nathan Latka

02:21Okay, take me back to the backstory here. When did you launch?

Ryan Barone

02:24>> So really back in 2016. And as you mentioned, I was going to school in New York City at Pace. I had gotten 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. Actually going through the application process was quite

02:48>> difficult. And I had just gone through an application process as a student, which was not that difficult, which was 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 rental industry wasn't the same way. And so initially, version one was just building an app myself for myself and friends, and I I had done our initial development.

Nathan Latka

03:11So you had real estate personally that you wanted to use your app to manage?

Ryan Barone

03:14>> Exactly.

03:15>> So I 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

Nathan Latka

03:26Yeah. Just to just be clear, you didn't you didn't have real estate that you wanna use your tool to manage with. You were you were coming from the other side and then built into landlords?

Ryan Barone

03:35>> Exactly.

Nathan Latka

03:36>> Yeah.

03:36Okay. Interesting. So so first, was the first customer then your landlord?

Ryan Barone

03:41>> It actually wasn't. The first customer in the early days were actually landlords that were trying to collect applications on apartments. So in the very early days, it was really just by going to different association meetings, meeting with some of these landlords and getting them to adopt the platform. When you build the software yourself, it takes you longer than you would hope in the early days. So there was quite a while of building up the software in

04:10>> the early days before it is.

Nathan Latka

04:11So Ryan, are you sole founder or do you have a co founder?

Ryan Barone

04:14>> I do have a co founder. Got it.

Nathan Latka

04:17Did you guys just decide early on? I mean, obviously, the equity split at the beginning is a challenge. Everybody goes through. Did you guys just say, screw it, we'll do fifty fifty?

Ryan Barone

04:24>> So the way we did well, the easy thing for us is we're actually father and son. And the really nice thing was his skill set, I mean, perfectly complements to my the son.

Nathan Latka

04:35You're the son.

Ryan Barone

04:36>> Son. Yes. No. It's not me and like a seven year old running.

04:40>> Absolutely. So I mean, his whole background sales and marketing minus really more so focused on the technology side and customer support side of things. And so it just works perfectly that

Nathan Latka

04:51we Well, what did you do? Fifty fifty or does dad own more?

Ryan Barone

04:54>> Oh, I I mean, we we we don't show the equity split, but I mean, we we do we do have a pretty pretty even split on it.

Nathan Latka

05:01Well, I mean, I wanna 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.

Ryan Barone

05:15>> 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 I tend to lean more towards the side of saying it's easier to not argue about. And honestly, I feel the same way about the investment side of things. I mean, when

05:38>> companies go to raise that money later on, think there's arguments over. There are big market movers where it does matter to talk about how it will impact your business in five years or ten years or in the case of funding rounds, three rounds down the line. But 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. You do want everyone

06:05>> to be invested. It's not good if you don't have a founder

Bootstrapping and the 2019 Seed Round

Nathan Latka

06:08feeling like So Ryan, did you guys have you guys bootstrapped this or have you raised capital?

Ryan Barone

06:12>> So we actually bootstrapped for the first two years of it. In the very early days, it was just me doing all of our development and mainly doing our sales, and and the two of us honestly handling all of the chats that would come in. We were anytime you messaged in on RentRedi in those first couple of years, it was literally us on our phone or computer messaging back. In 2019, we raised our first venture round,

06:34>> and that was really when we brought on the the core team to rentredi. We grew to about eight as a team, and then we raised a a venture round earlier this year. So we've raised about $5,000,000 to date.

Nathan Latka

06:46And What was the pre seed in 2019? How much?

Ryan Barone

06:50>> We raised $1,400,000.

Nathan Latka

06:52Okay. Interesting. And then so what? So you raised $33.06 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?

Ryan Barone

07:05>> No, not at all. I mean, especially from the perspective of we've looked at it not just from the capital perspective, but what also do those investors bring in each round. So for example, TI Ventures 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

07:29>> a lot of their model, in even doing their diligence on us, but what it went beyond that in doing, was saying, how do you learn from those customers? And that was something that we've been able to implement with them post raise. Like they've helped talking to our own sales reps or talking to our own marketing team or support team and understanding how do we actually synthesize that feedback, turn it into action, create a better product in

07:51>> the end result. So, I mean, from one side of things, rentredi would certainly not be what it is today without that funding. But also beyond just the capital itself, 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 well, lucky to have so far.

Nathan Latka

08:07And then, Ryan, obviously, the market's a big one. You're north of 5,000 customers today. Do you think you can break 10,000 by the end of this year? Is that gonna take into 2022?

Ryan Barone

08:16>> I mean, we are on track to hit all the goals that we we want to by the start of q one or or end of q one. We we actually plan on raising our our a in just a few months in in q one. So the the nice thing is we're we're right on track for where we wanna be.

Nathan Latka

08:32Well, no. I don't know what your goals are. So my 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?

Ryan Barone

08:41>> I mean, I'd rather not speak directly to the customer amount itself. It's just not really a number that we share publicly. But in terms of the growth or understanding that side of things, can say, I mean, we grow, this year alone, we've grown 10% month over month. So certainly in terms of how fast we can grow, I've talked to a number of even founders in the prop tech space and the space itself is really exploding. But

09:10>> even within the space from what I've been hearing from founders, we've had a healthy growth rate even above the average in the prop tech space.

Nathan Latka

09:18Got it. Sorry. What I'm trying to understand is how big you think the market is. Right? So I I actually, I'm a little confused why I don't wanna talk about, like, do you think you can break 10,000 this year or next? But, like

Ryan Barone

09:27>> I mean, in in terms of how large the the landlord market itself is, there's about 20,000,000 landlords in US. About 16,000,000 of those are our segment. They're the smaller landlord segment. The AppFolios and Yardis of the world have primarily focused on massive property management companies, and they've done it well.

Nathan Latka

09:44So small landlord managed by what? Number of square footage managed, number of beds managed, number of units. What is defined small?

Ryan Barone

09:50>> So in our case, I normally say one to a 100 units. We have some people that break that and say, I don't care if I'm over what you've designed it for. I'm more than a 100 units. But in our case, it can be as little as one single family home that you own to around 100 units. And a lot of it comes down to, I would say, more so the mindset of the person. So there's a

10:10>> very large difference between someone that 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 day job that I'm working on, I have this real estate business that 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

10:32>> and easily without necessarily needing to hand it over to one of those management companies or go gray trying to do it all. Got it.

Go-to-Market: Product-Led Growth and Paid Ads

Nathan Latka

10:39How are you adding new customers each month? What's sort of your go to market strategy?

Ryan Barone

10:43>> So for us, it really has been, again, totally opposite from the enterprise side, which is normally booking demos and doing a demo with that person and helping them onboard. Ours has been totally product led growth in terms of going out and, yes, marketing it so that landlords find out about RentRedi.

Nathan Latka

11:02But how? That's what I'm asking. How do they find out about you?

Ryan Barone

11:05>> So a lot of it is through paid marketing. So we'll do ads on different channels. They'll find RentRedi, and they actually, from that point, will self onboard onto the platform and and, set up their property. Certainly, they have us anytime they need. We have live chat on-site, but they don't have to, interact with the person unless they want to.

Nathan Latka

11:23So do you I mean, it sounds like you probably have a good understanding. I see you've probably advertised on bigger pockets in some of these sites that a lot of my listeners listen to as well. What does it cost you? Maybe what are you willing to pay to get a new $9 a month landlord?

Customer Acquisition Cost and Paid Marketing

Ryan Barone

11:36>> Oh, I mean, I think it depends on the channel. I think in the early days when testing out different channels, going back to the beginning of last year, we're spending upwards of a thousand dollars a customer to add.

Nathan Latka

11:50To get it to get a $9 a month customer?

Ryan Barone

11:52>> Yep. And as that year went on, I mean, we were able to drop that customer acquisition cost to, you know, 80% of that.

Nathan Latka

11:59What are some of the changes you made? Like, you run a first ad on BiggerPockets 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?

Ryan Barone

12:11>> Countless. So, I mean, not just not just tweaks about, like, the messaging you're using or even the part of the product that you're talking about. When you're talking about an end to end suite with rentredi, it does matter when you say, okay, are we going to talk about payments? Are we going to talk about maintenance coordination, accounting, listing, screenings? So there is, yes, those choices. But really, some of the surprising things too come from even things

1,200 Ad Creatives and Growth Optimization

Ryan Barone

12:33>> 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? Does it matter what type of colors you use? So all of those, we actually went through about 1,200 different ad creatives over the course of last year.

Nathan Latka

12:46How did you do that? Did you use a firm or some tool to do that?

Ryan Barone

12:49>> We did it both ways. So we actually tried with a firm early on and then we actually Which firm?

Nathan Latka

12:53Did

Ryan Barone

12:57>> It's actually escaping me at the moment.

Nathan Latka

13:00I've Okay. What tool did you use instead to try?

Ryan Barone

13:03>> So we actually did it all in house. So Kelly, who's our our head of growth, has run ad operations at a a number of companies that have actually exited to AOL and and Apple.

Nathan Latka

13:13You launched 1,200 ads herself?

Ryan Barone

13:16>> Yes. So we we actually did launch a we launched a number of those ads with that company in the early days. We launched a a good portion of those ads on our own. Yes.

Nathan Latka

13:25So it's like she's putting together 1,200 images, 1,200 headlines, 1,200 descriptions, 1,200 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.

Ryan Barone

13:35>> More so the second one you're talking about. It's understanding what categories of those. And that's really how, I mean, we look at it from the perspective of testing what actually matters. If you have six or seven different elements that are different in the same photo, you really don't understand what is actually 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

14:00>> works or not.

Nathan Latka

14:01Ryan, last question before we wrap up here. You founded in 2016, you've been cranking on this for a couple years now. Do you remember the first year you guys passed a $100,000 in revenue and what you and your dad sort of felt like?

Ryan Barone

14:13>> You know, I I actually don't know that I would equate it to a year, but I do remember when we passed that hundredth customer, and that one is a very fond memory to me.

Milestone: 100th Customer in Early 2019

Nathan Latka

14:22What year was that? Was that the first year or second year or or further?

Ryan Barone

14:26>> It's actually further. We spent probably the first year and a half just in development. We had, I mean, a small number of landlords on the platform. But I remember we had passed our one hundredth customer back in early twenty nineteen. And he and I actually happened to be together. A lot of the time, we aren't necessarily in the same place. We happened to be together that day, which was pretty exciting to kind of be next to

Nathan Latka

14:52each other, cheers into that.

Ryan Barone

14:53>> It's funny to say to look back at that now and think we're as excited as we were about 100 as the scale changes. You have to readjust what you how you feel for each 100. But it really was a super, super,

15:09>> you know, personal exciting moment for us to to

Nathan Latka

15:12A 100 landlords back there on, you know, early twenty nineteen at $9 a pop there, you know, a thousand bucks a month in revenue. Is that the traction that you're able to take into that pre seed around to attract the 1,400,000?

Ryan Barone

15:23>> 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 certainly, the number side of things is phenomenal. And to me, I

15:38>> majored in math. I love the number side of things. 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.

16:00>> And that was really the big difference maker was how emphatic they were about the product they were using.

Nathan Latka

16:06And then look, you're north of 5,000 customers, say, at a $9 price point. So we can say more than 45,000 in MRR. But like, what will it take to get you up to like 5,000,000 in ARR or 10,000,000 in ARR? Like, are you too cheap?

Revenue Streams Beyond Subscription

Ryan Barone

16:19>> No, not at all. Mean, when you look at our market of 16,000,000 landlords, 5,000,000 or 10,000,000 is only a drop in the bucket compared to what you talk about when you look at the TAM or the total addressable market related to our landlords. And in addition to that, the way that rentredi generates revenue isn't only from that landlord subscription. So we do offer a number of services that landlords have the option to add on, and we

16:44>> generate revenue from, like,

Nathan Latka

16:46those Do you take a percent of fees? Do you take, like, 3% on rents paid through the platform?

Ryan Barone

16:50>> No. No. We don't.

Nathan Latka

16:52Okay. So What are some of those other models?

Ryan Barone

16:54>> So, like, on the payment processing side of things, we do allow tenants and landlords the ability to 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 $1 for ACH, we make some of that off of that $1 And that's the same thing we've been able to apply to a lot of other things

17:14>> 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 rentredi. 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 rentredi as one massive portfolio instead of just an individual landlord that has

17:39>> to bargain on their own behalf. And so we've been able to apply that to payments, tenant screening, maintenance coordination, even automating accounting, reporting tenants' rent to credit bureaus so that 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 for each of those situations.

Nathan Latka

18:02What's teams size today? How many folks? Sorry? How many team on the team today?

Team Growth: 2 to 20 People

Ryan Barone

18:07>> We're about 20 on the team today, which is wild. You know, about twenty four months ago is two of us. So it's been a it's been a great ride.

Nathan Latka

18:16And then wrap us up here. You said you're thinking about a series a. How much do you think you'll go try and raise and why do you need the capital?

Series A Plans and Growth Story

Ryan Barone

18:22>> So we're looking to raise about 15,000,000. There have been some pushes to raise a little more, but I think honestly, it's about all we need. And really, the purpose of that will be just scaling up what we have already and integrating some services that will 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, where we've completely automated the landlord accounting side

18:48>> of things or 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, taking it truly to the

19:01>> as far as we possibly can in terms of integrating additional services that ultimately solve pain points that tenants and landlords have to bring to us.

Nathan Latka

19:09And deploying 15,000,000 without you and your dad getting extremely diluted and any employees that he gave early equity to. I mean, you need to go figure out how to tell a story where it's a $95 to $100 million 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 $120,000, so maybe like a 2 or 3,000,000 run rate today. I mean, you

19:27basically have to go tell a story of like a 25 to 35 x multiple. What do you think gets you there? What do think enables you to tell that story?

Ryan Barone

19:34>> 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 like TransUnion and saying, hey, discount us for bringing you this massive group of landlords that is probably even larger than we're assuming it is today. But now at this point, we've gotten to a size where other people in our space, in the

19:56>> prop tech space, and 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. You have a What lot do mean, though?

Nathan Latka

20:08You just said all your growth is coming from paid ads. Why can't someone else just outbid you? What what do you mean they're hard to get in front of?

Ryan Barone

20:15>> It's it's very hard, not just in terms of getting in front of, but also a product that actually serves them properly. I give a lot of credit to the landlords in our industry, but they don't settle for a product that doesn't work incredibly well. So it's not very easy to just throw a bunch of money into ad marketing and say, we'll have a decent product, and that'll be good enough. It really does have to be solid

20:37>> end to end. And, I mean, we're constantly improving, but it takes a lot to get it there.

Famous Five Rapid Fire

Nathan Latka

20:44Fair enough. Let's wrap up, Ryan. Famous Five quick answers here. Number one, favorite book?

Ryan Barone

20:49>> Zero to one.

Nathan Latka

20:50Number two, is there a CEO you're following or studying?

Ryan Barone

20:53>> Mark Cuban.

Nathan Latka

20:54Number three, what's your favorite online tool for building rentredi?

Ryan Barone

20:58>> Intercom, the live chat.

Nathan Latka

21:00Number four, how many hours of sleep do get every night?

Ryan Barone

21:04>> Six.

Nathan Latka

21:05And situation, married, single, kids?

Ryan Barone

21:07>> Not married, but not single. Dating.

Nathan Latka

21:08Not married?

Ryan Barone

21:09>> I have a girlfriend for about four years.

Nathan Latka

21:11No kids. And then how old are you?

Ryan Barone

21:14>> 27.

21:15>> 27. Last question.

Nathan Latka

21:16Something you wish you knew when you were 20.

Ryan Barone

21:18>> You're gonna get a lot of get a lot of stuff wrong, and that's okay, and just start sooner. Start as soon as you can.

Nathan Latka

21:26Guys, he started in 2016 solving his own problem with rentredi.com. They broke a 100 landlords on the platform a couple years ago. Now over 5,000, they pay over $9 per month to manage the property. That's not their only revenue stream, and they've gotten really creative with renters insurance, maintenance coordination, payment processing where they take a cut up, call it tenant payment payments. They've raised call it, about 5,000,000 to date, seed most recently, team of 20 targeting

21:50a 15,000,000 series a in q one twenty two. We'll see what happens. Ryan, thanks for taking us to the top.

Ryan Barone

21:55>> Thanks for having me, Nathan.

Nathan Latka

21:58One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. 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 1PM

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