By Glenneis Kriel, Article Originally Published on Finweek, June 4th, 2018.
As a young adult, Ben Shaw often struggled to find appropriate rental accommodation. He also had recollections of friends’ frustrations in finding credible tenants.
“HouseME fills gaps in the market; it creates a solution to a very real problem,” says Shaw, CEO and co-founder of HouseME.
Since its launch in the Western Cape towards the end of 2016, this property platform has secured over 400 listed properties, 7 000 registered users and branched out to the rest of the country.
“We are experiencing high-volume growth with about a thousand new users [currently] registering on the platform each month.
Since the company was launched, our staff component has also grown from six to 14 full-time employees,” says Shaw.
Shaw dabbled in a few other business start-ups before starting HouseME.
Previous ventures included platforms to convert LPs to CDs, and student blogsites, which he says “were merely fun services”.
He also launched a few side-projects while studying finance and accounting at the University of Cape Town.
“I have since realised that you need to live, eat and breathe a start-up, if you want it to work.”
With a background in mergers and acquisitions, Shaw’s initial plan was to create a bidding platform that would “solve price discovery problems by allowing prospective tenants to submit offers for a property”.
“Our services grew as we became aware of more holes in the industry: admin-intensive processes that take weeks to complete, high agency costs that erode yield, and poorly priced properties resulting in an ever-increasing vacancy rate for residential property landlords,” says Shaw.
“Add to this the suspicion that tenants have of landlords mismanaging their deposit or unfair discrimination, and we see why the market is so fragmented and devoid of trust.”
HouseME uses technology to overcome these issues. Landlords or rental agencies list their property on the platform, which becomes visible to prospective tenants across the country.
The property may be leased above, below or at the set price, as tenants may make use of the platform to establish fair value. Offers start at a reserve price set by the landlord.
Tenants are vetted and credit checked before any offer on the property is accepted, using the platform’s PlaceME tool.
“In 2017, landlords on average experienced a 9% increase in rental prices thanks to this PlaceME tool. They pay 2.5% commission for using our technology and share with us any upside generated during the offers process,” he says.
Basic services include online property marketing, tenant communication, viewing coordination, tenant screening and credit vetting, lease documentation, deposit management, payment collection, reporting and tech support.
At an additional one-off fee, HouseME takes photos of the property, hosts viewings, hands over keys and does ingoing and outgoing inspections around Cape Town and Johannesburg.
They also do emergency call-outs, tenant query management, maintenance and payments of variable property-related bills at a once-off fee.
The app is free of charge to tenants. Tenants do however have to pay a month’s deposit, which is kept and invested by HouseME.
Properties are also listed on mainstream domains, such as Gumtree.
When enquiries are made, prospective tenants are redirected to the HouseME site, where they register to get more information about the property, its location, reserve price and viewing details.
Tenants can provide feedback on their landlords and maintenance of the property.
Shaw co-founded the company with Kyle Bradley.
“We were introduced by a mutual friend and have turned out to be a good match, since Kyle has a lot of experience from programme development roles and we share the same ethical values.
Decisions are sometimes hard fought over, but then fully supported by us both once chosen,” Shaw says.
They bootstrapped the company for close to a year before approaching a small number of angel investors to expand the product.
They entered into an accelerator programme in September 2016 through which they raised capital in January 2017 on the back of a strong product-market fit.
“Although funding is available as we scale up, the pressure to perform is enormous. It keeps us humble and certainly up some nights,” Shaw says.
Starting a technology company in South Africa is tough, says Shaw.
Investors typically don’t ascribe value to a product’s intellectual property and care only about market fit, which is hard to prove from day one.
“Our biggest early challenge was to validate our assumptions about the market: that it would embrace online letting, be comfortable with a digital lease, accept a competitive pricing mechanism, and subscribe to a new payment methodology.
Now, 18 months on, HouseME’s challenges are no longer about whether the business can work, but about how quickly we can grow it.
Scaling technology is far easier than scaling relationships with our clients, and we want to be excellent at both.”
Shaw’s plans for the future are to expand HouseME’s product offering, and to continue expansions across the country.
“We have been approached a number of times to expand internationally. Although tempting, we want to absolutely bed down our local market before taking on a new geography. We’re serious about the opportunity though and are already making hires to accommodate the next steps for growth.”