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Stake acquires Bilt and looks to expand its tenant cashback rewards program – londonbusinessblog.com

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Seeking to compete with Bilt in the burgeoning real estate tenant rewards market, Effort, a startup that provides cashback and banking services to tenants, announced today that it has raised $12 million in a Series A round led by RET Ventures’ new RET Ventures ESG Fund. Enterprise Community Partners, Hometeam Ventures, Operator Stack, Shadow Ventures, Olive Tree Ventures and Second Century Ventures, the investment arm of the National Association of Realtors, also participated, bringing total revenue from Stake to $17.9 million.

Co-founder and CEO Rowland Hobbs says the new capital will be put into expanding the platform and increasing Stake’s headcount from 17 to 23 employees by the end of the year.

“During the pandemic lockdown, we saw tenants really struggle and owners were unable to collect the rent. The pandemic has changed real estate forever,” Hobbs told londonbusinessblog.com in an email interview. “Today, rental affordability is central to every aspect of our current economic environment. Inflation and rising rents are crushing tenants – and rising mortgage rates are turning even more people into tenants. On the other side of the coin, rising labor costs and arrears are hurting rentals.”

Before starting Stake, Hobbs co-founded a communications and integrated marketing company, Post + Beam, and co-launched Linea, a photo-sharing mobile app organized around a scrolling filmstrip of photos. Through Post + Beam, Hobbs consulted with banks and brands to set up customer loyalty programs, and through this work he said he had the inspiration for Stake.

Image Credits: Effort

“Despite the general public, brands would not target renters. Banks were certainly not aimed at tenants. Nevertheless, housing is the largest cost item for consumers. It is painful. Huge expenses, with no return,” Hobbs said. “In 2018, we started showing hundreds of apartments to learn what really matters to tenants. On a hot August day, in a small sixth-floor hallway, a tenant’s expression came through: “It’s the money, stupid.” This insight led to the [Stake’s] cash back rewards for renters.”

Stake uses a “behavioural science” algorithm to suggest real estate owners how much they’ll have to pay back in cash to tenants who pay rent on time or sign a lease renewal early. By integrating with property management software like Yardi and Entrata, landlords can use Stake to activate “personalized incentives” and targeted offers, Hobbs said, with the goal of reducing late payments.

Tenants earn an average of 4% cash back on their rent with Stake. At a time when almost three quarters of renters who have seen their rent rise consider moving, it could make the difference between finding a new tenant and keeping an old tenant, Hobbs said.

“Stake uses machine learning to determine the right amount of cash back that residents can offer. For example, if the data shows a decrease in the number of lease applications submitted for a particular property, Stake often suggests an increase in the cashback being offered for that property,” Hobbs said. “Stake retains anonymized user data for the duration of their relationship with Stake and for as long as necessary to meet our legal and customer obligations.”

The fact that Stake stores personal data, albeit anonymized, might make a few renters uncomfortable. Data retention aside, it’s unclear to what extent Stake has examined its cash-back calculation algorithm for bias. As reporting has revealed that many of the algorithms financial institutions use to make credit decisions are biased against minority applicants, in part because they reward traditional credit and fail to consider timely payments for things like utilities and cell phone bills.

Hobbs claims that Stake advocates for tenants, in fact by offering loyalty solutions that promote savings. Unlike financial products that sell debt to tenants, Stake does not burden tenants with loans and fees. That’s the key, he claims, at a time when real estate costs are soaring file – even in rent-stabilized units that in the past changed slowly from year to year.

Effort

Image Credits: Effort

“Stake finds savings for owners and then gives that money back to tenants so they can spend on the things they want today and save for the life they want tomorrow,” Hobbs said. “Every major industry, from hospitality and travel to credit cards and finance, has used loyalty to lower marketing costs and increase customer lifetime value. Stake brings the same transformation to real estate. But transformation takes time and real estate decisions are often lengthy. Our challenge is to continue to deliver better data to help owners and operators make the transformation to a loyalty mindset.”

In line with this mission, Stake recently began offering a range of banking services to tenants, including checking accounts with payroll and direct deposit features and a debit card with cash back rewards. Hobbs says that for many renters, Stake’s is their first checking account.

While Stake competes with the aforementioned Bilt, who raised $60 million last year for its real estate tenant loyalty program, Hobbs claims that Stake is growing at a robust pace. He estimates that Stake is now reaching about 20,000 multi-family, single-family and student housing units in the U.S.

“We’ve made savings easy and intuitive for tenants, and we reward it. The stock has grown 10x in the past year, growing 30% each month since it closed a seed round in September 2021 and its annual recurring revenue has exceeded $2 million,” said Hobbs. “With this new funding — in Combined with booked sales, strategic real estate investors and low acquisition costs – we have significant growth and a runway to empower tenants, lower costs for owners and build the next generation of rental financial infrastructure.”

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