ENTREPRENEUR NEWS ROUNDUP: April 7, 2022
4 Startups Inviting Everyone to the House Party
As prices soar, entrepreneurs find now to be a great time to start a business in the housing industry
Few investments have outperformed housing over the last decade. In February, home prices in the United States were up 20% compared to February 2021. That’s great news for homeowners (and bad news for those who aren’t, but we’ll get to that later). With the already realized and anticipated future Federal Reserve interest rate hikes, CoreLogic expects its Home Price Index (HPI) to cool slightly over the next year, to around 5% per year, as shown below:
Whether by correlation or causation, the rise in housing prices has resulted in an increase in home improvement spending. From home renovations to energy efficiency upgrades to backyard living rooms, Americans are investing in their existing homes rather than moving to new ones, as shown in the following chart from Statista:
Today we take a look at 4 startups who are showing why now is a great time to launch a business in the housing industry.
Startups to Watch
Key
Saving the recommended 20% down payment is a significant barrier to entry that many would-be homebuyers struggle to overcome. Additionally, the time spent saving is time outside the market, during which they could be accumulating equity. Key is a Canadian company that helps people buy homes with a low down payment in order to start building equity sooner. The company is pioneering “House-Ownership-as-a-Service,” in which the resident pays as little as 2.5% of the property price to become a co-owner. When the resident decides to move, they receive back their equity position, including property appreciation. Key charges a monthly residency fee that includes maintenance, HOA, utilities, and property taxes. As a result, Key generates revenue in two ways: first as a property management company and second as a real estate asset management company (since it co-owns the property). Key recently closed a seed funding round of $8.5 million backed by Plazacorp, N49P Ventures, Red Jar Capital, TSV Capital, and Moderne Ventures.
Playhouse
I’m old enough to remember when the trend was startups promising to become the “Uber of” a particular industry. Well, fast-forward to 2022, and the hot trend appears to be the “TikTok of,” and real estate is no exception. Playhouse is a new mobile app that transforms the mundane property listing into an exciting scrolling video interface in an attempt to bring excitement back to home hunting. The startup just debuted a beta version that includes residences in the Bay Area, and it wants to rapidly expand into new locations. Playhouse recently raised $2.8 million in seed funding from Agya Ventures, Gaingels, Goodwater Capital, Nomo Ventures, PKO Investments, and Y Combinator.
Realthy
No one is more familiar with home services than real estate agents. In helping their clients who are either in the process of buying or selling, they work to build networks of contractors, technicians, movers, designers, and more. Now, thanks to Realthy, real estate professionals can turn their extensive networks into secondary income through affiliate marketing. With 800 registered users, the company has set a goal of attracting 200,000 realtors to the platform by 2024, estimating that each realtor will earn $4,000 to $5,000 per year simply by monetizing their recommendations. Realthy recently announced an increase to its seed funding round, bringing the total amount raised to $830,000. Investors in the platform, founded by Full Reach, Inc., included Launchpad Capital and Katalista Ventures.
Cottage
ADUs, or auxiliary dwelling units, are a popular way for homeowners to accumulate wealth. ADUs can be rented out, frequently through short-term rental platforms such as AirBnB and Vrbo, converting a yard into a revenue stream. I also believe that, with the rise of the work-from-home trend, ADUs will become a popular way for homeowners to add extra office space without sacrificing a room of their home (or, in our case, the kitchen!). But the ADU construction industry is currently restricted by red tape. While many municipalities are relaxing regulations and even incentivizing the construction of additional living spaces, homeowners face thousands of dollars in architectural, design, and plan review fees. Cottage is a new platform that is digitizing the process of building an ADU. Homeowners can select from pre-existing floor plans or design their own, and connect with ADU construction contractors, all in one end-to-end platform. The company even provides complete architectural sets and assists with the permitting process, saving the homeowner countless hours (and even more headaches). Cottage recently announced $15 million in Series A funding led by Fifth Wall, with participation from 1Sharpe Ventures, DivcoWest, Susa Ventures, and Base10 Partners.
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