Home Market Analysis A $52M Valuation Emerges For Stake Upon Its Close Of A $12M Series A

A $52M Valuation Emerges For Stake Upon Its Close Of A $12M Series A

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A $52M Valuation Emerges For Stake Upon Its Close Of A $12M Series A

Less than a year after closing a $4 million seed round, lessor cashback platform Stake announced the closing of its $12 million Series A at a valuation of $52 million, the valuation was only reported here. The round was led by RET Ventures, which made Stake one of the first investments in its new ESG fund. Existing investors Shadow Ventures and Olive Tree Ventures, as well as Enterprise Community Partners, Blue Field Capital, Hometeam Ventures, Operator Stack and Second Century Ventures (NAR’s investment arm) participated in the round. Has stakes in more than 12,000 homes in Georgia and 8,000 in Texas, as well as a smaller footprint planned to expand in other markets thanks to new financing.

Stake co-founder Rowland Hobbs’ previous work in the financial industry showed him how little attention is paid to the rental population, estimated to be around 45-48 million people or 36% of U.S. homes, and a sizeable population.

“In the first 18 months of Stake, we tested different solutions in New York. I showed hundreds of apartments as an agent, going up and down stairs in hot August weather,” Hobbs said. After showing potential tenants a different solution similar to the rewards points model, until a frustrated and angry tenant looked at Hobbs and said, “It’s money, dumbass.” This led Stake to switch to a cash-back model.

Tenants using the Stake platform have a Stake wallet similar to a regular checking account and debit card, which they can use to pay rent or most other expenses. For those who paid their rent on time, they received an average of 4% cash back in their wallets. If they keep at least 80% cashback in their wallet, they can get an extra 1% monthly rent as a bonus. These wallets can be associated with check deposits, Venmo, ACH payments, or other typical deposit mechanisms. While they don’t pay interest, Hobbs describes it as a “fair” bank account because they don’t charge anything even if the balance is zero, and more people are eligible even if their financial records are negative account as an option to keep additional funds in an escrow-like account. According to Hobbs, 25% of their tenants use the Stake wallet as their primary checking account.

The application of this end-to-end fintech platform used in the real estate environment is expected to be the next big trend in proptech. That is, starting from the ground up, rather than aiming to be an industry disruptor, which has been the model for most real estate-focused startups to date. Fintech has suffered, requiring new avenues to seek income to stay afloat, and housing has become more out of reach for more people, so much so that any cost-cutting measure would be seen as a welcome relief.

“Part of the upward mobility is interaction with the financial system,” said Priscilla Almodovar, president and CEO of Enterprise Community Partners, one of Stake’s investors. Enterprise Community Partners is a national non-profit organization focused on rental housing for low-income or other high-need populations, such as the elderly or disabled.

“Homeowners are nearly 40 times more wealthy than renters,” Almodovar said. “But we also believe we can’t let go of the idea that renters don’t have that kind of economic mobility. We’re about how [to] Create that path, not just own a home. That’s why this is exciting for us. This is a solution to test whether tenants can share the wealth of the rental properties they live in through this cashback. ”

For every $1 in cash returned, homeowners get an average of $2.11 in return, Hobbs said. This can be achieved by reducing tenant turnover, increasing on-time rent payments, reducing promotional costs, and reducing the overall overhead of managing rent.

“One of the things Enterprise does,” Almodovar said, “we try to change the capital markets. We try to show investors that they can invest in these systems and why having a more stable lease leads to a good return on investment.”

Stake also applies machine learning and data aggregation to its models to define “how much cash is needed to achieve an action,” as Hobbs describes it. They compared the behavior of tenants in studios with different number of bedrooms based on income level, seasonal trends and anonymous spending behavior.

“We connect to property management software,” Hobbs said. “We’re the only team that can really tell you what renters are doing in an anonymous and aggregated way and put that together into a model, and then also show if that pays off for you. For landlords, they want to see One step ahead of yourself.”

Their analysis also links to listing sites such as Apartments.com, and their data so far shows that ads with the word “Cash Back” get four times as many clicks as those without. “Not only does it lead to more clicks, but it also leads to more qualified leads,” Hobbs said. “When we add cash back incentives, people say, ‘Oh, if I pay on time, I’ll get cash back’. So there’s an increase in people with a higher willingness to pay.”

Given all the pressures in the housing market, improved rental stability and the return of cash to tenants (or accounts) may have universal appeal, but Almodovar says it’s on a more ambitious trajectory. As she concluded:

“It’s not that cash back will replace being a homeowner, or that’s what it’s all about. [But] We cannot accept the idea that renters cannot be part of the economic opportunity and cannot gain access to the kind of innovation that is happening. “

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