More Money Flows into ‘Neighborhood as a Service’ Startups

In June we wrote about Venn, an Israeli-American company founded in 2107 that has raised $100 million to date to built out a concept it calls ‘neighborhood-as-a-service”. The value prop Venn is pushing to investors is that community is a key driver in attracting and retaining tenants.

Here is a bit of what we wrote back in June.

Venn is based on the insight that these days it can be easier to meet people 1,000 miles away than in the apartment next door. And this lack of any sense of community among those we live near (no doubt worsened by the pandemic) is bad for business. Venn’s business case boils down to this. When real estate companies license the platform to encourage community in their residential developments, they are helping their bottom lines.

Venn’s platform addresses the challenge of promoting belonging. And breaks it down into a set of solutions designed to bring neighborliness back. This includes a social networking app so neighbors can connect and communicate. But the real value seems to be in curated events, which they call “Venn Gatherings” designed to foster community. The platform also has tools built in to encourage patronage of local businesses and to encourage volunteer activity.

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Not Apartments, ‘Interactive Communities’

Yesterday we read about a company called Sugar that launched in March 2020 and has raised a $2.5 million seed round to pursue a similar insight. According to TechCrunch, Sugar’s goal is to turn apartment complexes into “interactive communities”. The company was founded by Mali-born Stanford MBA Fatima Dicko. Her previous experience includes founding a wellness company and spending four years at Procter & Gamble.

According to TechCrunch, the seed investors include MetaProp, Agya Ventures, Concrete Rose, Debut Capital, The Community Fund, Consonance Capital, and Lightspeed Scout Fund. Also, Jason Calacanis’ LAUNCH syndicate chipped in on the round. Angel investors also participated, including SquareFoot CEO Jonathan Wasserstrum, Ben Zises, Diran Otegbade, Oleksiy Ignatyev, and Zillow board member Claire Cormier Thielke, who is also with the Sequoia Scout Fund.

A Pandemic Baby

Unlike Venn, Sugar was launched during the pandemic. Here is what its website says. “Sugar was designed to enhance the quarantine experience for people spending significantly more time at home. For apartment and residential communities, we saw the opportunity to make it easier for residents to engage with one another in a safe and efficient way.” Sugar worked with property companies to develop an app that fulfills this mission.

So how does Sugar work, exactly? Its website is a bit thin on details. Sugar customizes its pricing by property type. The company says it partners with “from multi-family units and large apartment communities to hotels and Airbnb properties.”

The TechCrunch article, quoting Dicko, reports that the company reached a six-figure ARR before closing the seed round.

The Sugar app apparently serves both the resident and apartment owner. For the resident, the app includes tools to interact with other residents. There isn’t much detail on how they do this.

Sugar also offers practical features in the app that include paying rent, submitting maintenance requests, and remote keyless entry to apartments. These features remind us a bit of another company we’ve written about called Home365.

Apartment owners also have access to a dashboard they can use to manage their tenant operations. Sugar claims it currently works with property companies that together manage more than 655 properties and 150,000 active doors in 22 states.

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Will it Work?

Sugar seems to be off to a good start. But we think it might face a few challenges.

First, can a pandemic-specific business survive beyond it? It seems to be on its way with an app that has some real utility, regardless of whether the world is open or shut down. However, paying rent and keyless entry seem like easily copied features. In the TechCruch article, Dicko does claim that its ability to integrate with keyless hardware companies is a differentiator.

Another possible headwind is that, at least in many communities, it’s a seller’s market for apartments. Will enough property owners feel the need to build a community when they have low vacancy rates and rents are rising? This is a cyclical concern right now. But it may make selling Sugar a bigger challenge than ideal. Again, the practical features may save the day here if Sugar can stave off the inevitable competition.

Clearly, some smart investors are betting that these headwinds are a mere breeze.

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