1Mby1M Virtual Accelerator Investor Forum: With Zain Jaffer, Partner at Blue Field Capital (Part 3)

Sramana Mitra: As you are looking at this space, what is the scope and scale of the number of startups operating in North America?

Zain Jaffer: I saw 500 startups last year. That’s just what I tracked in my CRM. The number is mind-boggling. With any industry, only a few will make it. I don’t know what the actual number is, but PropTech is becoming a big segment. It’s a niche segment that’s an intersection of FinTech and marketplaces.

PropTech is standing out as its own niche. Most of the venture dollars that have been deployed over the last few years have gone into FinTech. PropTech now needs to be broken out of FinTech and needs a specialist perspective. Even within PropTech, you have specialist funds that are dealing with these different segments.

Sramana Mitra: We’ve seen a couple of PropTech startups in our portfolio. One is in augmented reality and the other in marketplaces. Let’s do a couple of case studies of companies that you have invested in PropTech. As you’re talking about them, I want to understand how they came to you and in what shape they came to you. What drew your attention to them?

Zain Jaffer: We partner a lot with early-stage accelerators and incubators. There still seems to be a gap in the pre-seed and seed stages. We came across a startup called Stake.Rent that was founded by Rowland Hobbs. He ran a few startups that we liked. He is very UX and design-focused. He had designed loyalty programs for some of the largest brands.

He felt that renters are not treated with much respect. There’s no such thing as a loyalty program for renters. You have loyalty programs for guests, but why don’t you have loyalty programs for the long-term renter. That was a very unique concept.

I went to the demo day. I tuned in. It was a five to 10-minute pitch. Stake was really interesting. I like the founder’s passion. I talked to the founder and he tells me, “You should reward renters who are paying rent on time. If they pay rent on time, you’re not going to have delinquencies.”

Sometimes when you run a property, you give a concession like “Move in now and get one month’s free rent.” Instead of doing that, say to the renter, “If you sign up now, we’ll give you $200 in your pocket.” I call up some of the property managers who manage our real estate. I told them about Rowland’s ideas and asked them to meet him.

One of my property managers came back and said, “This is the coolest thing we’ve seen. We’re rolling this out.” When you’re a strategic VC, you’re looking for strategic synergy. If your product is going to be used in my portfolio, I have no choice but to invest. Logic goes out the window. I’m hooked now. My property managers are using this. We are actually producing traction for this.

That has now been executed at a lightning pace. In the space of one year, they’ve grown their revenues 30x. We didn’t expect that. They launched debit cards for renters. They’ve suddenly become a platform that is not just providing FinTech products for the underbanked segment. Renters aren’t people you can bank easily. About 8% of their users have never had a bank before.

Sramana Mitra: These are low-income housing?

Zain Jaffer: Yes. A lot of what they do is lower-income affordable housing. I just found out from them that there’s a multi-hundred million fund that’s being set up to buy real estate and to offer Stake rewards to users. ESG is a buzzword that means environment, social, and governance. Stake is becoming the social part in that. I’ve gone to some of my properties and I’m hearing that they’re able to charge higher rents just because we offer Stake. That’s just one case study.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Zain Jaffer, Partner at Blue Field Capital
1 2 3 4