A San Francisco firm's IPO pays off for Chicago investors

As seen in Crains "A San Francisco firm's IPO pays off for Chicago investors"

Last week's IPO of San Francisco-based DocuSign created a big splash that rippled all the way back to Chicago.

One of the big winners in the $629 million deal was Second Century Ventures, a strategic venture fund run by the Chicago-based National Association of Realtors, which was the fourth-largest shareholder. It sold 1.6 million shares for $46.4 million at the $29 IPO price on April 26. Its remaining stake of about 4 million shares is worth about $165 million.

How did association get in so early? It did a small investment and an exclusive partnership with DocuSign to offer its software for digital signatures to member Realtors, according to securities filings. It's quite a home run for Constance Freedman, founder of Chicago venture fund Moderne Ventures. It was her first deal when she was running Second Century Ventures.

But she's not the only local winner in this deal. DocuSign acquired Cartavi, a Naperville-based software startup, five years ago. Investors Chicago Ventures and OCA Ventures each ended up with DocuSign stock that I'm told is worth several million dollars, producing returns in the range of 15 times their investments. Chicago Ventures and OCA declined to comment. Other investors included Pritzker Group Venture Capital, FireStarter Fund and Fieldglass founder Jai Shekhawat.

The deal also paid off for Glenn Shimkus, Cartavi co-founder and former CEO who recently joined legal software firm Relativity as head of product and user experience. "It's been a wonderful exit, not quite a Facebook-type explosion but an incredibly solid return," said Shimkus, who says he will be gathering with investors for a celebration in the coming weeks.

The deal paid off in other ways, too. DocuSign still has a growing office in the western suburbs with about 75 people.

LeaseLock Secures $10 Million Series A Financing Round

Press release as shared via PE Hub


LeaseLock Secures $10 Million Series A Financing Round Led By Wildcat Venture Partners, Liberty Mutual Strategic Ventures, and Moderne Ventures

Insurtech product for rental housing seeks to aggressively accelerate enterprise sales, technology integration, and execution of product roadmap

LOS ANGELES, CA – April 30th, 2018 – LeaseLock, a new insurance technology product for the rental housing market, announced it has completed a $10 million Series A round of financing. Wildcat Venture Partners led the investment round with participation from Liberty Mutual Strategic Ventures, American Family Ventures and Moderne Ventures. The investment brings LeaseLock’s total funding since launching its revolutionary zero security deposit solution to $12 million and will help the company aggressively expand its sales and marketing efforts as well as broaden and accelerate product development.

As the first nationwide A-rated (Excellent) lease insurance program, LeaseLock is using technology to replace security deposits with insurance. Renters pay a low monthly fee starting at $19 that insures the property for up to 6x rent and damages. Renters save thousands of dollars at move-in, while properties convert more leases with better protection. LeaseLock is growing rapidly counting over 1,000,000 apartment homes enrolled across leading multifamily portfolios including Lennar Multifamily Communities (LMC), Avenue5 Residential, United Apartment Group, and Bainbridge.

“LeaseLock is creating a new category by applying technology to improve the way renters and properties transact – making it faster, simpler, and more cost-effective for both parties,” said founder and Chief Executive Offer, Reichen Kuhl. “We intend to use the additional funds to fortify our category leadership position and propel LeaseLock into more communities and leasing systems across the country in an effort to eliminate security deposits everywhere and enable greater access to quality housing for everyone.”

“LeaseLock is in the trenches with multifamily executives carefully crafting a product optimized to the needs of enterprise operations, systems and the markets they serve – we appreciate this strategic advantage,” said Bryan Stolle, Founding Partner of Wildcat Venture Partners. Moderne Ventures participated as a strategic investor, bringing along a network of over 700 influential real estate executives and corporations. “LeaseLock delivers a best in class product to our real estate network with trillions of dollars in AUM and billions of square feet. Leaselock reduces vacancy rates and minimize losses resulting in significant value to our partners and their clients,” said Constance Freedman, Founder and Managing Partner of Moderne Ventures.

One million of the funding round came from Hivers & Strivers, an investment group that focuses on early stage investments to support start-up companies founded and run by graduates of U.S. Military Academies, of which founder and CEO Kuhl is, having served in the U.S. Air Force for nine years.

About LeaseLock
Our mission is to help the world find “home.” Powered by insurance and technology, we’re reinventing the way renters and properties transact. LeaseLock replaces security deposits with insurance. Renters pay a low monthly fee starting at $19 that insures the property for up to 6x rent and damages. Renters save thousands of dollars at move-in, while properties convert more leases with better protection. LeaseLock is the first nationwide A-rated (Excellent) lease insurance program, protecting over 1,000,000 apartment homes.

A Moderne View of Venture Capital and Real Estate Startups

We were recently asked a series of questions by Joanna Glasner of Crunchbase and it provoked some thoughts about millennials, diversity, and the future of housing. 

Introduction

Investing in "Real Estate Tech" certainly picked up in the last year, CB Insights reports that more than $2.5B going into RE tech investments in 2016 alone with predictions to increase. 

That said, we actually think of the space as even broader than that.  We particularly focus on companies that can span multiple markets of which one is real estate so, "real estate tech" in our mind encompasses a lot more then a new property management platform.  For example, TaskEasy, UrbanBound, HelloTech, and Contactually are all examples of companies that you would never call “RE Tech” yet have significant influence, and command significant $$s from the real estate space.

When you start to broaden the market to look at the industry as 1.5M independent contractors, 600,000 SMBs and thousands of enterprise clients, you start to realize that ‘tech’ generally can fit into a ‘RE Tech’ strategy and the opportunity is vast for technologies outside the industry to enable change within it.

Are you seeing an increasing level of investor and/or entrepreneur enthusiasm around real estate recently? If so, what are the drivers?
Yes, there have always been investors dabbling in the space but the interest has seemed to increase in the past couple years.  Main driver: a $3T+ market!  I'm surprised it took people this long to catch on. 

Real estate and its adjacent industries are broadly behind in technology adoption so many investors look at the space as low hanging fruit.  As someone who has been investing in the space for 10+ years, I can say that most investors do not understand many of the nuances in the space such as: what drives adoption, true market sizing, political under-hangings and other factors that are not innate to those that are not engrained in the industry.  This is why we exist!  We have an entire program (the Moderne Passport) dedicated to helping our companies figure out quickly what others bang their heads against the wall for years trying to figure out.

How do you see the maturing millennial generation changing the real estate business, particularly as consumers, as they increasingly enter the rental and homebuyer markets?
It has been an interesting time where most markets have seen some of the highest affordability rates yet lowest numbers of new homeownership rates in history. Most of this is due to the last recession: lending got so tight it was impossible to get loans unless you were the perfect middle aged consumer that checked the appropriate 500 or so boxes; Millennials were taking longer to find ‘real’ jobs out of college and more recently, pent-up demand for rental units have birthed amazing rental communities that have driven demand away from homeownership in favor of lifestyle and freedom as more favorable value choices for this particular population. These factors coupled with urban renewal, community and an acceptance of the ‘shared economy’ at large (people not used to owning anything) have influenced the trend of low homeownership for millennials.

All that said, there will be an interesting buy-vs-rent tension to watch in the next few years:

Tension to Buy

  • Millennials now have jobs, incomes and characteristics such that they too can check the 500+ boxes necessary to get a loan
  • Millennials are now starting to have kids.  Until inner city schools get fixed, suburbs will be an attractive option for those that cannot afford private schools
  • Undersupply in certain markets will drive prices higher and into more demand for h ome ownership

Tension to Rent

  • Multifamily owners and operators are increasingly creating digital, service-based amenities (Hello Alfred, Baroo, HelloTech to name a few) to give their renters back a commodity we have never needed more: time. Time to accommodate other challenges millennials face as they ‘grow up’
  • Lifestyle-minded choices and freedom (another key value) make renting more attractive
  • Lifestyle, sustainability, and community are key values of this generation and may drive market fo rces to fix some of inner-city challenges for family living

Other Trends to Watch

This decade will see more diversity (race, gender and heritage) in homeownership than ever before. Boomers will stick it out longer and move urban. As Boomers age, technology in home healthcare will keep them in their homes longer and senior “lifestyle” communities, unlike those grandma ever knew, will attract others away.

What areas of the real estate industry do you see as particularly ripe for startup disruption?

Three big areas of note:

  • Applications of blockchain technologies that drive down friction and transactional costs will create big wins.  
  • There are massive information barriers across all aspects of residential and, particularly in commercial real estate – there is a big opportunity to fix this!
  • Smart homes and smart buildings will become expected norms and they will all be controlled from a mobile device.

Moderne Ventures Says Hello Alfred

Moderne Ventures recently invested in the Series A round of Hello Alfred – a logistics focused company that combines smart tech and excellent service so property managers may offer multiple on-demand amenities to tenants in their Class A properties.

Hello Alfred for Multifamily Building Tenants

Just like Bruce Wayne’s trusted butler, an ‘Alfred’ is a dedicated home-life manager who proactively takes care of time consuming tasks such as grocery shopping, laundry/dry cleaning duties, packaging, and shipping. Tenants in an ‘Alfred Building’ typically receive this basic weekly services package, however, they may also coordinate with their Alfred for additional services such as deep in-home cleaning, gift shopping, washing your Batmobile, or whatever inconvenient tasks that need to be done (at market rate), all directly through the Hello Alfred app. They appreciate the efficiencies and experience that their Alfred delivers; helping to manage “life’s administrata” allows them to spend more time on the things they love. To date, Hello Alfred has made more than 700,000 home visits, saving tenants more than 380,000 hours of time.

Hello Alfred for Multifamily Building Property Managers

Hello Alfred’s tech enabled services have a clear impact on buildings and their property managers by:

  • Increasing revenue
  • Reducing lease-up time
  • Lowering resident churn
  • Reducing operational overhead

Hello Alfred and Moderne Ventures

Something that drew the MV team to Alfred is their ability to establish personal trust with tenants in an on-demand economy where the same provider is rarely used to deliver the same service. The result is that tenants trust their Alfred (a lot). Putting a face, name, and personality in a home, a place where a very limited number of people have access too is critical to the company’s success and the happiness of tenants, who see Alfred as a differentiator and factor in whether to renew a lease or live in an Alfred building. 

We also see Alfred taking advantage of several macro trends that align with the company’s longer-term success by positioning for win-wins on several fronts:

  • Multifamily construction deliveries will continue at a record pace into early 2018. Most expect supply to outstrip demand, which will place further emphasis on a building’s ability to differentiate itself. In order to compete for the growing number of consumers that value the superior amenities and the flexibility that renting brings.
  • Increasing (or maintaining) rental rates with an amenity that doesn’t take up space has a positive impact on NOI.
  • The ‘Amenity War’ is shifting tactically from traditional brick-and-mortar offerings, like the pool or a gym, to technology-based enablement.
  • Digital natives (tenants) expect to engage with their buildings and living spaces in a customized and seamless manner

We’re excited to be a part of the Alfred story, helping to change the way people live with a service that gives them back something we all need more of: time.