Renters accessing landlords’ apartments in a city like Lagos could prove really difficult due to inefficiencies that have marred Nigeria’s rental system for years, and is, in turn, affecting how landlords and renters transact. As renters struggle to find apartments coupled with uncharitable agents concerns, most landlords only collect rents for one or two years upfront, hence, to deal with this proptech SmallSmall is poised to step in with flexible living solutions.
In the meantime, it’s believed a good number of startups in this field are addressing such problems by offering better options to both stakeholders. In this event, a Lagos-based platform SmallSmall gives renters access to monthly rent payment options while paving way for landlords to vet tenants, increase their income and manage properties in shaping the system. The subject platform is announcing that it has raised $3 million ($2 million equity and $1 million debt) in seed funding, a fund it plans to use for expansion into other notable cities in the country, including Enugu, Port Harcourt, and Jos, before the year-end of Q1 2023.
Previously RentSmallSmall, which was co-founded by ‘Tunde Balogun’, ‘Pidah Tnadah’, and ‘Naomi Olaghere’ in 2018 after returning to Nigeria from the U.K. and finding it tough to get an apartment where he could pay monthly. A source familiar with the matter confirmed that the experience pushed him to research how to create solutions for the market and upon conversation with landlords.
“We started by understanding the pain points of landlords. Even though they collected rent one year upfront, the default rate of the yearly system is very high because when people’s finances take a hit, they might not be able to pay subsequent rent”. Adding that, “the legal process of evicting tenants where they’ll have to wait six to 12 months is also not supportive of the landlords”, he said.
As part of the startup’s benefits, the chief executive made clear that with proptech SmallSmall’s monthly model, landlords can speed up the legal process pending when they give notice. The product lets landlords access quality tenants and curb defaults by receiving monthly payments where they receive extra margins of about 10-15%, Balogun noted.
For tenants, it’s the comfort of managing their finances better by paying monthly rent, equally with the respite that comes with not transacting with housing agents that SmallSmall offers. The co-founder also noted that when clients pay their rent on time, they build their credit profiles on the subject platform, paving way for them to access financing should they sometimes default. There are also competitors competing alongside SmallSmall, and this includes Spleet, Kwaba, and Muster.
The CEO pointing out the potential monthly rentals in Nigeria said: “Our market is for young professionals with an average age of around 28 years. It’s a huge market”. Adding that, “We surveyed almost 3,000 people last year in Lagos, which showed that 80% of them wanted to pay their rent monthly. So that tells you how much adoption the monthly space would have if the markets eventually opened up”.
Looking at the protech space from the angle of demand and supply, it’s been noted that the real estate market in the country indicates a huge deficit, in the sense that demand dramatically outstrips supply; it also doesn’t help that house prices owing to the fact that inflation keeps rising simultaneously. Currently, proptech SmallSmall has had over 476,000 people registered on its platform since 2018. While 80,000 of that number are on its waiting list, the company has only served about 1,500 people. “That shows how huge demand is, relative to the supply, which is very slim”, Balogun added.
Prior to this development, SmallSmall participated in the Techstars Toronto Accelerator Program in 2021 and eventually became the first African proptech startup to gain access to the program, receiving $120,000 as part of its pre-seed round. However, in the event of the latest development, ‘Sunil Sharma’, the managing director of Techstars, speaking on the investment, made clear, “Techstars Toronto was proud to be an early investor in SmallSmall as we saw enormous inefficiencies in the experience that renters face when getting accommodation in Africa. With the early traction and multi-aspect business model, Techstars decided to make a follow-on investment and join the latest funding round”.
Having been able to generate more than $5 million in its first three years and turning a profit last year, the subject proptech startup plans to use the fresh investment to support its vision of “providing flexible, quality housing solutions and financing to intending home buyers”. Also, in addition, SmallSmall will continue building its technology and partnerships with landlords, property and asset managers, developers, and other key stakeholders.
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