Rent is increasingly comprising a larger portion of the average person’s income. In major metropolis’ like New York, it’s not uncommon for the rent-to-income ratio exceeds 40%. Despite representing such a large expense, rent rarely yields any sort of rewards or benefits. Stake is a cash back platform and banking infrastructure that allows incentivizes rent payments with an average of 4% cash back. The company also provides no-fee banking services and a debit card that’s available to spend the accrued earnings anywhere Visa is accepted. Stake partners with property operators to offer the benefit to tenants and potential tenants. Operators are able to design incentive cash back structures using machine learning to analyze rental data in real-time to effect desired tenant behavior like signing/renewing leases, paying on time, bringing accounts current, and referrals. The platform is said to return 130% on every dollar spent by landlords.
AlleyWatch caught up with Stake Cofounder and CEO Rowland Hobbs to learn more about the business, the company’s strategic plans, latest round of funding, which brings the total funding raised to $16.9M, and much, much more…
Who were your investors and how much did you raise?
This is Stake’s Series A financing round. The round was led by RET Ventures, which selected Stake as one of the first investments for the new RET Ventures ESG Fund (the “Housing Impact Fund”). Participation also included: Enterprise Community Partners, which, since 1982, has helped create or preserve 873,000 homes; Hometeam Ventures; Operator Stack; and Second Century Ventures, the investment arm of the National Association of Realtors. Existing investors Blue Field Capital, Shadow Ventures, and Olive Tree Ventures, also participated in the round.
Tell us about the product or service that Stake offers.
Using behavioral science, Stake empowers renters by providing them with Cash Back on their rent as well as no-fee banking services with Cash Back to build savings. Stake also mitigates pain points for building owners, increasing lease-ups, reducing economic vacancy, improving maintenance, and increasing ancillary revenue.
Using Stake, owners spend $1 and make on average $2.11 in return. Renters earn an average of 4% Cash Back on their rent each month. Across the $385M in annual leases connected to the platform, 65% of renters have more money in their Stake account than any other banking account. In the past year, the number of residences that offer Cash Back with Stake has grown by 10x.
Previously, I was a consultant to the Fortune 500, and I worked with banks and brands to build customer loyalty programs. While there was a large audience, brands and banks wouldn’t cater to renters. Housing is the largest expense for renters – and there’s no return.
Four years ago, we began showing hundreds of apartments to understand what matters to renters. One August day, in a sixth-floor walkup in Brooklyn, a renter’s phrase hit home: “It’s the money, stupid.”
That statement led to Stake’s Cash Back for renters.
Then the challenge was to get owners and operators to fund Cash Back.
We’ve done so by finding inefficiencies in leasing, rent payments, and renewals, and developing an algorithm to show owners how to provide Cash Back to their renters in order to outperform.
In 2021, we launched Stake nationally with Stake’s Loyalty Cloud for owners, as well as the Stake app for renters.
How is Stake different?
Other payment platforms for renters are credit or debt-based.
Stake instead offers financial savings to renters with Cash Back. With a simple loyalty solution that promotes renter savings, Stake creates a win-win for owners and renters that doesn’t burden renters with loans, fees, and debt.
What market does Stake target and how big is it?
Today, more than 44 million American households pay rent every month, and from 1985 to 2020, median rent prices increased by nearly 150% despite income growing just 35%.
What’s your business model?
Stake finds savings for owners and then returns that money to renters. Stake uses machine learning to help identify the right amount of Cash Back to offer residents. For example, if the data shows a decrease in the number of on-time payments at a certain property, Stake may suggest an increase in the Cash Back being offered at that property.
What are your post-COVID office plans??
Stake is remote-first. Our headquarters are in New York City and Seattle, but our team is based all over the US. In fact, my cofounder, Jimmy Jacobson, joined Stake in March 2020, and we did not meet in person for an entire year.
What was the funding process like?
Stake is very focused on mission alignment. So finding RET, and their Housing Impact Fund, was the first step in building a coalition of social impact-focused investors like Enterprise Community Partners. I think founders should be more focused on who is funding, and less focused on the how much.
What are the biggest challenges that you faced while raising capital?
We were looking for mission alignment and not just capital. We are proud that our partners and investors include a coalition of mission, impact, real estate, and FinTech experts that are all focused on bringing Stake’s mission onto a larger stage, empowering 44+ million wealthier, happier renters and creating a better financial world for everyone.
What factors about your business led your investors to write the check?
Investors were attracted to Stake due to our mission alignment, our win-win offerings for renters and owners alike, and our banking services for renters.
What are the milestones you plan to achieve in the next six months?
We’re looking to expand our team, as well as create more savings for renters and owners. Here’s how:
- Smart promotions, and yield management: As Stake unlocks savings for owners, we can provide more Cash Back to renters.
- Money movement: further reduce the heavy cost of delinquencies, payments, and incentives.
- Renter insights: activating personalized incentives and targeted Cash Back.
- Renter Wallet with Banking Services: Stake will continue to innovate as the only banking service designed for renters.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Be true to your mission.
Where do you see the company going now over the near term?
We’re planning to go from $350 million in leases offering Stake to $1 Billion of leases offering Stake annually. This means a lot more Cash Back for more renters very soon.
What’s your favorite restaurant in the city?
Novita on 22nd and Park. It’s our corner Italian restaurant, and it always feels like home. During the pandemic, we sat outside in the freezing cold, with steaming bowls of pasta in the winter chill. Nothing ever tasted so good.