Problems that have plagued Nigeria’s rental system for years affect how landlords and tenants interact. Most landlords collect rent one to two years in advance, but tenants struggle to find an apartment when dealing with welfare agents.
Several proptech startups are solving such problems by providing better options for both stakeholders. One such platform is Lagos-based SmallSmall, which provides a way for tenants to receive monthly rental payments and for landlords to screen tenants, increase their income and manage their properties. Before the platform ends, it is announcing that it has raised $3 million ($2 million equity and $1 million debt) in seed funding for its plans to expand to other major cities in Nigeria, including Port Harcourt, Enugu and Jos. Q1 2023
Tunde Balogu co-founded the startup formerly RentSmallSmall in 2018 with Naomi Olager and Pidah Tanah after moving back to Nigeria from the UK and finding it difficult to find an apartment to pay for every month. CEO Balogan told TechCrunch in an interview that this experience pushed him to explore how to create solutions for the market, and he soon learned in conversations with landlords that it was a two-way street.
“We started by understanding the pain points of landlords. Even if you collect a year’s rent in advance, the default rate of the annual system is very high because when people’s finances are damaged, they cannot pay subsequent rents. “The legal process of evicting tenants for six to 12 months does not favor landlords either.”
The CEO argues that with Smallsmall’s monthly model, landlords can speed up the pending process when they give notice. But that’s just part of the package for them. SmallSmall also allows landlords to find quality tenants and limit defaults by receiving 10-15% more profit margins on monthly payments, Baloghi added.
For renters, it’s the relief that comes with paying monthly rent, better managing their finances and not having to deal with the real estate agents that SmallSmall offers. Balogi also says customers build their credit profiles on the platform when they pay their rent on time and sometimes get financing if they have to drop out of financing. Among SmallSmall’s competitors are Kwaba, Muster and Split, which announced its seed round this month.
“Our market is young professionals with an average age of around 28. It is a big market,” the CEO said on the potential of monthly rentals in Nigeria. Last year we conducted a survey of about 3,000 people in Lagos and it showed that 80% of them want to pay monthly rent. So it tells you how much adoption the monthly position will have if the markets finally open.
Demand and supply rarely converge in the Nigerian real estate protech market because of housing shortages when demand outstrips supply. It also doesn’t help that house prices and inflation are rising at the same time. For example, SmallSmall has more than 476,000 people registered on its platform as of 2018. Of the number, 80,000 are on the waiting list, and the company has served only 1,500 people. Baloghi added: “This shows how little demand there is compared to the supply.”
Micro Founders (L-R: Pidah Tanah, Tunde Balogan and Naomi Olager).
Smallsmall transitioned from RentSmallSmall in July to increase its supply pool and create options for customers. The latter is now one of three product lines, including BuySmallSmall and StaySmallSmall.
RentSmallSmall allows users to rent an apartment and pay monthly. BuySmallSmall identifies newly built properties by well-known developers that meet the company’s market needs – studio apartments, one-bedroom and two-bedroom apartments – and packages them as investment opportunities for young professionals looking to invest in real estate. When they buy, these owners turn to landlords and list their properties on RentSmallSmall so they can earn passive income when other users pay rent. StaySmallSmall, on the other hand, allows users to book furnished beds starting at $4 per night.
“Supply was somewhat constrained, and many properties were in poor condition, so we needed to be able to control quality. We also want to provide a channel through which customers can invest in real estate and work toward home ownership. “We are encouraging young people to own a home and invest in property by paying a 20% down payment and helping them finance the rest. This is one of the reasons we are promoting debt financing.”
SmallSmall participated in Techstars Toronto Accelerator Program In the year It was the first African proptech startup to enter the program in 2021 and received $120,000 in the pre-seed round. Commenting on the investment, Techstars Managing Director Sunil Sharma said, “Techstars Toronto is proud to be an early investor in SmallSmall as we have seen the tremendous efficiencies that renters face in finding accommodation in Africa. With early traction and a multifaceted business model, Techstars decided to make a series of investments and join the latest funding round.
The seed round welcomed participation from other investors such as Oyster VC, Asymmetry Ventures, Vivaz and Niche Capital. Meanwhile, individual angels such as Chartboost’s Sean Fannan, Universe’s Adam Megiji, Flutterwave’s Jimmy Koo, Issu’s Samir Goel and Wmimo Abey, Iroquois’ Jason Njoku and Vendase’s Tunde Kara have taken part.
SmallSmall has generated over 25,000 monthly visits in Lagos and Abuja, meaning that the typical SmallSmall user stays on the platform for an average of 17 months. PropTech claims it has had a rental default rate of less than 7%, saving property owners more than $1.5 million in damages and tenants more than $1.2 million in brokerage fees.
SmallSmall, which generated more than $5 million in its first three years and turned a profit last year, wants to use this new investment to support its vision of “providing flexible quality housing solutions and financial assistance to home buyers.” In addition, the startup will continue its technology and collaboration with owners, developers, property and asset managers and other key stakeholders.
“Looking at housing as a basic human need, it is not just about people getting a house but also about owning a house,” the CEO added, adding that Nigeria has one of the lowest home ownership rates globally. “Home ownership can improve the economic situation in one way or another because it gives people a fixed income to meet other needs. So we want to play our part in that and help young people in their journey from renting to investing to eventually buying real estate.”
