Today, at Stake, we announced our $4 million seed round.
The round was led by Shadow Ventures with participation from Olive Tree Holdings, Bluefield Capital, Hometeam Ventures, Hampton VC, Gaingels, and Ellen Levy, managing director of Silicon Valley Connect. An incredible, diverse group, who believes renting should be financially rewarding, and who we are thrilled to have on our journey. Please feel free to read the exclusive in Commercial Observer here. This, though, isn't the whole story. When we started Stake, we knew renting was tough on renters. We also knew rental properties lost more revenue on marketing and incentives than any other industry. What we didn't know was where this hypothesis would take us. Here is the backstory.
The renter story
What two different renters are looking for in an apartment — kids, or no kids, near the dog park, or close to work — in the same location, can differ widely. This became abundantly clear in our early beta tests in New York City. Showing apartments in six story walk-ups, during the summer, has a way of focusing the mind: no two renters are the same.
Amenities are different everywhere, making it hard for the property to offer the right perk for the right renter. Meanwhile, services like food delivery are becoming increasingly ubiquitous and undifferentiated. Amazon and Doordash have it pretty well covered, and renters are basically happy to accept a freebie, but, according to our data, it is unlikely to affect their choice. What stood out, and the constant we heard from every renter was, "rent feels like throwing money out the window every month." With this insight, based on these early renter interviews and ethnographic research, we set a North Star to offer renters Return on Rent. We then began testing every possible option to give renters a return. What we landed on was the simple, proven, consumer offer many other industries call Cash Back.
- A Cash Back reward every month when you pay your rent.
- A Cash Back reward every month when you reach your savings goal.
The results were compelling across the renter journey: more response to listings and higher engagement with marketing. Connecting Cash Back to rent payments created a higher propensity to pay and connecting Cash Back to saving for the things you love resulted in a higher propensity to stay.
Cash Back is universal. Building savings is inspirational. Stake is now achieving both in over $150 million in Gross Lease Value across the United States. Combined, Cash Back and Savings deliver a constant Return on Rent to empower the renter, and, it turns out, a great way for the property to truly understand, build trust, and create loyalty with residents. But while we didn't know, in 2020, how important personalization was yet, we did know that Cash Back was a lot more effective than any other offer you could make to the renter—whether it was concessions, amenities, perks, points, or a "free toaster"—to incentivize an action or a change in behavior. We knew because we tested it (okay, maybe we didn't test the the free toaster.)
The owner story
Every owner wants a more efficient way to manage revenue in their rental communities. All marketing is an investment in behavior change: a change in awareness, a change in consideration, or a change in a decision. Renter "A" was going to move into apartment "A,” and now they have chosen your apartment instead because they saw your sign, ad, or listing. With Cash Back you take that same spend, but instead of investing in making big advertisers rich, you invest in your residents with stronger and more data driven results.
In April of 2020, Covid had hit New York City. Stuck in my small New York apartment, I started to call asset managers — the financial managers of rental properties — to test this hypothesis across the country. It all comes down to a comparison of return: how much Cash Back for what return on action.
At this time, Jimmy — our brilliant head of engineering and co-founder — joined Stake. He and I would work remotely across the country for a year before meeting in person. Together, with the knowledge he and I were gathering, we began proving that Cash Back created more effective revenue for rental communities in three ways.
A more efficient incentive. A standard concession is "one month free", that's 8.3% of the rent in a 12 month lease. What's more, we learned renters don't respond well to this "free" offer and much preferred cash in their wallets. Less churn at renewal. 54% is the average renewal rate across the United States. Stake increases that 7-15% with a Cash Back offer. Less churn on rent roll. Tying Cash Back to monthly rent payments reduces delinquencies up to 50%, preventing a loss for owners. It also means renters keep earning throughout their lease, creating better engagement and personalization.
We built these learnings into Loyalty Cloud, our dashboard for asset and property managers, to learn and set the right Cash Back offer for the best financial return to the property. Over eight months, and with more data coming in from each resident, Stake's Loyalty Cloud grew smarter at naming the right Cash Back offer, enabling residents to earn and save more, and properties to reduce cost and increase effective revenue.
Stake's FinTech Story
Stake is: Cash Back in Stake's Resident App, managed by Stake's Loyalty Cloud and seamless money movement that rewards the resident and manages effective revenue for the owner. Financial results for both resident and owner, centered around data, personalization, and resident membership. Stake is creating a financial technology platform for real estate with Cash Back.
Driven by our mission to make renting financially rewarding. We can't wait for what is next and to meet many of you who will help us in this movement.
But first, a massive thank you to our pre-seed investors at Real Company, every angel investor who believed in Stake, our outstanding group of advisors who gathered in New York at Advisorpalooza, and, of course, our incredible team that works across the country from El Paso, to Boston, to Seattle.
As we say at the end of each sprint meeting here at Stake, onwards!
Rowland + Stake team