In my last column, I asked seven leading proptech VCs to share their predictions for the sector in 2020 and beyond. Amongst other things, they expect a maturing market to produce more integrated solutions: we will see an increase in end-to-end offerings coming to market as the single-product, siloed solutions taper off.
Today Obie, a Chicago-based startup attempting to do just that for commercial real estate (CRE), announced the close of a $2.8 million seed round (backed amongst others by MetaProp, one of the interviewees in the article cited above) as well as the public launch of its platform which until now was invite-only. Brothers Ryan and Aaron Letzeiser – a Forbes 30 Under 30 alumn – set up the company with the goal of serving the “silent majority of commercial real estate owners and funds”, as Ryan Letzeiser calls organizations with portfolios under $1 billion, which tend to be underserved by technology.
Leitzeiser recognized this need during his years working in real estate private equity and recruited his serial entrepreneur brother Aaron to build on the vision. They went live with their product in the Midwest at the end of their stint at Y Combinator in September 2019, and Obie is currently available across the US, though its focus remains the Midwest and South East. Since going live, the founders claim to have achieved threefold revenue growth.
So, what makes Obie special?
Obie’s selling point is to give its management platform away for free and make money on the insurance products that are sold off the back of it. This may seem a long shot, but it actually makes a lot of sense. The customer is acquired thanks to the free tech they can use to better manage their portfolio, instead of the manual processes that were their previous standard. The platform provides clients with a consolidated view of all physical property information, files, media, tasks, rent rolls and financials, which can be used to monitor one’s portfolio performance on a macro level, or to zoom in on individual assets. Access to data can be curated and shared both internally and externally.
Once Obie has access to the client’s portfolio data through the free management platform, it uses this information to find them the most convenient insurance policy, at the click of a button. Aaron Letzieser shared that, “Statistically, an owner will renew 92% of the time no matter the quote that a broker presents. With how slow and archaic the insurance industry is, that broker is going to work hard for new clients … and will generally skimp on getting many quotes for a renewal.” This is where Obie steps in, providing an automated service that finds its clients the best option. The founders shared one client case as an example, claiming that they were able to achieve a $120 thousand saving on an insurance renewal for a value-add multifamily portfolio landlord in the South East, and got them the quote in 20 minutes.
Douglas Hirsh, president of Palomar Properties confirmed this, stating that, “I had been using the same insurance brokerage for years, but by managing my portfolio on Obie, I was able to easily request new quotes that saved me almost 15% over my existing premium – something my old brokerage wasn’t able to do. That kind of instant savings substantially increases IRR and cash on cash returns. Using Obie has been a no-brainer.”
Obie claims to save its clients an average of 18% on their premiums and to have achieved closings to date of over $2M in gross annual insurance premiums. The founders credit the platform’s growth to network effects, as property managers using the platform will work for multiple owners, as well as SaaS-type outreach methods. The company plans to use the funds raised in its seed round to grow its team, which is currently comprised of three engineers and one additional resource beside the founders, and to invest in product features, especially on the insurance side. The goal is to deliver quotes in real-time and expand the rest of the platform’s offering as well as its geographical reach.
The pool of investors including MetaProp, Y Combinator, FundersClub, and Opendoor’s JD Ross chose to bet on Obie due to its holistic approach to disruption, with MetaProp co-founder Zach Aarons sharing that, “Obie sits squarely at the intersection of Insurtech and PropTech, two of the fastest-growing sectors within the startup ecosystem right now. The additional layer of complexity associated with disrupting not one, but two dinosaur industries at once is part of what drew us to this fantastic Chicago-based team of entrepreneurs with deep domain expertise and a strong work ethic.”
The founders plan to grow Obie across the US and potentially internationally and have seen interest in their services from potential clients in the UK, Canada and Europe. However, whilst the portfolio management solution can be easily scaled with little friction, the insurance side of things requires regulatory compliance and relationships which insurers. This is the reason why the management platform is currently available US-wide, whilst Obie’s insurance products are only accessible in the states in which it is licensed to operate. This could be a problem for the business’ future scaleability, or it could become a valuable barrier to entry against the competition.