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Podcast Notes

This week on the show, Aakash and Xand discuss Latchel [latchel.com]. Latchel's product focuses providing landlords and property managers a a 24/7 maintenance service that takes requests from tenants and deploys the right professional to fix the things that need fixing. Latchel offers services in several multi-billion dollar industries. Property management is a $72B industry in the US; contractor services are worth hundreds of billions. Both of these industries are underserved by technology and suffer from low market penetration and extreme fragmentation.

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Contact: Email: allschemesconsidered@aakash.io

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Music credits: Syn Cole - Gizmo [NCS Release] provided by NoCopyrightSounds.

Autogenerated Transcript

 Aakash Shah: [00:00:00] Hello, hello. Today, we're talking about Latchel. Latchel has raised a total of $3.4 million since launching in December, 2016. And their last round was 2.3 million raised in June, 2019. 

Latchel helps property managers with maintenance and work orders, improving their experience with vendors and tenants through existing accounting software. 

Okay. Not quite sure what that means Xand, because I don't own any property and I know that you have recently become a property owner.

Xand Lourenco: [00:00:35] You can make it sound like I'm sort of like some sort of like land Baron.  Yes, I did recently buy a house for me to live in.  which I suppose qualifies as property owner.  but I think actually, This would be more relevant to your situation, right? Like I wouldn't be using Latchel to find contractors for me. I would be using Latchel, if I was your landlord or maybe your landlord is using lateral, someone who would. Be in charge of managing the tenant [00:01:00] experience, so to speak.

Aakash Shah: [00:01:00] Right. So the product specifically is: latchel effectively acts as the intermediary between your tenants and,  a variety of handyman or handy women,  vendors. So if your tenant has complaints about any sort of maintenance request, Latchel says that, you know, they'll just resolve that for you without having any interaction from  the property manager themselves.

 You know, you've been working with contractors recently examined, with your new house that you purchased. Do you think the experience working with contractors is frustrating enough to requisite an intermediary?

Xand Lourenco: [00:01:37] Oh, yeah. So my situation's a bit different   We bought a house right as a pandemic hit. So the moment we need to contractors, there was a lot of uncertainty over whether, rou know, they could work on the house if they could even work, what kind of construction that can do these kinds of things. And so while that's opening up. There's still a lot of backlog. So I don't know if it's typical for this kind of general unavailability to [00:02:00] be the norm. You know, I don't know if it does always take three weeks or four weeks or five weeks to get contractors, but I have heard from people even pre pandemic that is difficult to find and hire contractors who are honest, fairly priced and are available. If you find a contractor who is honest and fairly priced, chances are, they're not going to have too much availability. So I think there's absolutely room for a service that's properly priced that kind of gets rid of this headache. You know,  a way  to solve the problem of finding a good vetted contractor on short notice.

Aakash Shah: [00:02:31] Right. And if we think of it in terms of scale, you know, if you own a house or if you own your own apartment, maybe you have one problem every three months. So you have a maintenance request every three months. What that means is if you have 90 apartments or 90 homes or 90 condos, whatever they may be. That could mean that you're getting a maintenance request every day. there's a question of scale.  the pain point becomes more acute. The more properties you have.  because you ended up spending more and more [00:03:00] time on. The maintenance requests and keeping your tenants happy.

Xand Lourenco: [00:03:03] Right. Exactly. And I think something. Some of that's crucial to point out, like you said, it's not just that you're getting maintenance requests because I think a lot of landlords. Wouldn't mind handling these on their own terms. I think where you get the pain point is the fact that. Maintenance requests are sometimes emergencies. If the kitchen is flooded, they have to call you at 3:00 AM. If this happens seven or eight times a year across your 90 properties, that means every night you go to bed with. added stress of, "I might get woken up for some catastrophic failure". Whereas, if you have a property management service like Latchel, then that's taken care of for you, right? The tenant calls, the Latchel hotline at 3:00 AM. They send out a contractor. You may not even wake up. You know, like you may wake up at 9:00 AM and the problem is sorted. Probably not because there's. It would be after effects if someone turned your kitchen into a swimming pool. By and large, the added stress of being on call and having to find a contractor at 4:00 AM of working it out. It's taken care of, [00:04:00] you know,

Aakash Shah: [00:04:00] So I think we've definitely identified that this is a pain point.  let's dig into the product itself. Let's dig into the, like the product's promise. Is this something that's technically feasible?  Is this something that is feasible with existing technology? And I think, yes.  It's almost like Uber for maintenance requests, I guess would be a good way to say it.

 The difficulty for Latchel is finding the vendors,  to fulfill these requests. But that's just part of Latchel's promise that they'll find those vendors and they'll handle it.  And, you know, if Latchel really wants to make life easier for its clients. The property managers, lateral could even promise certain rates and say, look, we'll handle 500 plumber requests at $50 a request. And then actually it's in Latchel's incentive to find some sort of arbitrage in that situation. 

 I kind of went off the rails there, but it is feasible with current technology to build this sort of.  Emergency triage system and to find enough vendors to fulfill [00:05:00] requests.

Xand Lourenco: [00:05:00] Yeah. Yeah. But so as you bring that up, something that I was considering. What property management services exist already? Right? What is it about this one? That merits so much VC investment? 

Aakash Shah: [00:05:13] I think you're absolutely right. if this is such an interesting space, what are property managers doing now? So let's dig into that a little bit. Cause there's obviously a pain point as we just discussed. So if I own a property or if I own 15, 20 properties, And I don't want to be woken up in the middle of the night. I hire someone else. And they're the point person that gets woken up in the middle of the night. 

 and then this person now is in charge of handling any maintenance request. At any time and finding someone to fulfill those maintenance requests, this person has to create a Rolodex of. Sorry for, for you gen Z out there a Rolodex actually. I'm. I don't actually know what a Rolodex is.

Xand Lourenco: [00:05:54] Oh, man, you don't know what a Rolodex is?

Aakash Shah: [00:05:56] I've just heard the phrase that you have a Rolodex. So that's what I view.

[00:06:00] Xand Lourenco: [00:05:59] It was just like a little thing of like of index cards that you kept on your, on your desk. And you can like quickly flip through them to find what you needed.

Aakash Shah: [00:06:06] Well, I've exposed myself.  So this, person that you've hired has to have that Rolodex and has to interface with all these various vendors to respond and   Get the problem solved because their job is to solve these maintenance requests. There's a cost associated with hiring the sort of person. If you're large enough, if you have enough properties and enough scale. Then hiring this person makes sense. If you're not large enough, you might hire someone and have that person have maintenance requests be part of their job while the other parts of their job would be finding you tenants and managing collections.  

And then, you know, at the very simplest is as a property owner. You yourself are doing this.

So I think, you know, I think this actually ties back to our.  hypothesis of saas-sourcing, where you take a job role and you replace it with software that fulfills it. For hopefully cheaper. Or [00:07:00] hopefully more efficiently. Instead of hiring someone at a full time cost, or even at a part time cost to manage this maintenance requests that are incoming. You subscribe to Latchel and they do it for you. And that lets the property owner, the property manager, focus on revenue, generating opportunities like new tenants and collections, instead of focusing on the reactive work of dealing with maintenance requests.

Xand Lourenco: [00:07:26] Yeah, that's totally right. it's good that you bring up SaaS-sourcing, which is, if it isn't a thing we should claim credit for it.  

Aakash Shah: [00:07:32] God, we got to fix our own SEO.

Xand Lourenco: [00:07:34] I know, don't worry. I'll bring up SEO later in the podcast. 

But I think. We've seen a trend towards this kind of sass sourcing. Right. You're seeing. Companies that are trying to solve a small pain point. That would be solved in a larger organization. But there's a gap between the small organizations that have this problem and how they're currently solving it. And the larger organizations which have a team or some sort of process already for solving it. And thus don't need the SaaS product.

[00:08:00] Aakash Shah: [00:07:59] Absolutely. Absolutely.  Which I think is why we actually see Latchel going towards. Independent. Property owners. 

Xand Lourenco: [00:08:07] That's exactly

Aakash Shah: [00:08:08] So people like my college landlady who owned 15 homes, but did it all herself and. 

she was a lovely lady, but she didn't want to spend her time interfacing with the a hundred college students that lived in her properties. 

 if I'm being completely honest, I wouldn't want to interface with a hundred college students that lived in my property.

Xand Lourenco: [00:08:29] Totally fair.

Aakash Shah: [00:08:29] You raise a good point about the size of the landlord's operations. If you are a apartment building in New York City with 3000 units. 

You have so much scale. That it makes sense too. have labor and have humans do this sort of work for you. 

Where does that stop being the case? When does it stop making sense for you to have humans do the work and instead, do you do go to someone like Latchel.

Xand Lourenco: [00:08:56] I think it depends. It depends on. [00:09:00] How much, so Latchel has to arbitrage. The service they're providing and the labor and. Software. costs Right. So what Latchel is saying is like, Hey. "Where were giving you a product for this price? It costs us less to do this because we're benefiting from that same scale on our end." The only time it becomes more feasible to do that is when you say, "Hey, I can actually build this team in house. And it'll cost me less than paying for Latchel." Ideally what Latchel would prefer and what many SaaS companies. What kind of their value prop is, is that it will never be more profitable for you in the long run to build a team, to build this in house. That's kind of the ultimate value prop of any SaaS product. It's like, Hey, we have 35 people just doing this. If you were to pay 35 people to do this, it would be a hundred or 200 times more expensive. But we're amortizing this cost across every single company that uses our product.

Aakash Shah: [00:09:54] so effectively, what you're saying is after a certain. Number after a certain scale, [00:10:00] Latchel becomes less interesting of a proposition, but underneath a certain scale, Latchel is a very interesting proposition. 

For me what we're getting at here is what sort of landlord is Latchel trying to go after?  Are they trying to go after enterprise accounts of 5,000? Units are they trying to go after mid size accounts of 500 units? Are they trying to go after small accounts of five units? What is Latchel's ideal customer.

Xand Lourenco: [00:10:25] Based on their. Marketing and website that I can see. They're going after the small to midsize landlords, because that's the easiest sell for them. I think it's possible for them to make a case to an enterprise buyer that there'll be cheaper in the long run over maintaining a hiring and cultivating an internal team. But it's harder to make that sell to someone who already has that team. It's much easier to make a sell to the beleaguered. Landlord who has maybe five, 10 to 50 properties in that range who's having a hard time managing them all making maintenance requests, taking calls,    promise. There is not cost, right. the [00:11:00] sell for a landlord like that is peace of mind. It's like, "Hey. , you're running into these scaling issues. No problem. We'll do it for you. We'll take care of it." So that's more, that's more of the sell, I think for a small. Landlord. And it's an easier sell than pure price. Is my opinion.

Aakash Shah: [00:11:16] I agree. I think Latchel, is trying to create scale by bundling these smaller landlords together. And they're offering a service that these smaller landlords might acutely feel a need for. I also agree that it's a sale around. We're going to give you your time back. We're going to give you your life back. I think one thing that Latchel will have to be careful about, however, is a lot of times small business owners are very focused on costs because small business owners understand that they might not be able to grow their company that much. So if they know that their revenue is going to remain relatively static, the only way you increase your profit is by reducing your costs. [00:12:00] Sometimes it can be a very difficult sale to a small business. 

sale to a small business can be very difficult because they don't necessarily think like larger enterprise companies think. in terms of being revenue driven versus being cost driven.

Xand Lourenco: [00:12:13] Sure. But I think that's okay. I think you're always going to have small time landlords who are obsessing over costs. That's not really the easy sell here. Right? Like I think that the vast there's a vast pool. Of landlords who are willing. To give up a little bit of their cost for peace of mind, especially because if you own, if you own one property, maybe you're focused on reducing costs because you're not in a position to. Flip that income into a new property. If you own five or six properties. You're definitely at a growth stage You're growing enough where you're willing to kind of give away this trade off. You might not want to be on call 24/7 for those five properties. And you're willing to give away a couple hundred bucks a month or whatever it is that Latchel costs. I agree with you. There's a segment that. What we'll dismiss this out of hand that wants to maximize every dollar return. [00:13:00] But I think that the segment of people who do want peace of mind that are willing to trade. A little bit of money for it is large enough for that to work.

Aakash Shah: [00:13:06] okay. So how does Latchel find these smaller landlords. 

How do they get in front of these landlords that owned between five and 50 units.

Xand Lourenco: [00:13:17] That's a great question. I think you can grow by outbounds. And I think you can find these outbounds in small communities of people who do this. There's there tend to be support groups for DIY or ad hoc. businesses like this on Facebook or Reddit or these social networks. Just a quick Google shows that this is a common issue. That is a pain point here. Hey, 24 seven property management. So you could definitely harvest those groups  Like, Hey. I'm a 24 seven property management service. I'd love to help you ease this pain point.

Aakash Shah: [00:13:46] So it's almost like. joining and interacting with the community and probably direct outreach into that community.

Xand Lourenco: [00:13:54] Yeah, I think too, there is definitely a play for some sort of. Inbound, because this is for [00:14:00] pain points like this for DIY pain-points people, Google it there. First approach to it is Google and then find like minded people or, or vice versa. But Googling is often a step in the process.

Aakash Shah: [00:14:09] I like that. But the inbound could come from the communities instead of through Google.

Xand Lourenco: [00:14:13] Yes exactly. That's exactly right.

Aakash Shah: [00:14:15] Yeah. I like that, that makes a lot of sense. And this way you can create content. That's more. More relevant to your users and your customers, than just kind of the generic SEO, prospect driven content.  

Makes sense. I like that. 

Can they, can they find enough people? Right because. I mean, I don't know, Latchel's pricing. An article from February, 2019. So is that they charge $25 for an account and then 80 cents per unit per month.

Xand Lourenco: [00:14:46] That's nothing.

Aakash Shah: [00:14:47] That just seems ridiculously cheap.

Xand Lourenco: [00:14:50] I mean, you would get anybody at that price, 80 cents.

Aakash Shah: [00:14:53] Yeah, it just seems ridiculously cheap. and that same article from February, they said that they had 30,000 units. Oh [00:15:00] man. 

Xand Lourenco: [00:15:00] Yeah, that that seems cheap. even if they do have to move to a percentage based model or raise that price of it, that's still cheap enough. Even if. If you come to someone and say, Hey, for 2.5% of the value of your property a month. No headaches. They probably take you up on that.

Aakash Shah: [00:15:13] So it's possible that they're keeping their public pricing kind of low,  just as like a way to get people onboarded and find that initial customer traction.

Xand Lourenco: [00:15:22] if someone passes them over at 80 cents a unit, then they were never going to buy something like this. Anyway.

Aakash Shah: [00:15:26] I'm trying to think of constraints on their growth, right? Because it's obviously not the price based on what we just discussed. Maybe. It's a function of service area.

Xand Lourenco: [00:15:35] Yep. That's definitely what it is.

Aakash Shah: [00:15:37] Hmm.

Xand Lourenco: [00:15:38] Even that though. Even if you operate only in major Metro areas, that's 80% of the U S you know, A population rather.

Aakash Shah: [00:15:44] They do say that they're in 50 cities, probably in more, more Metro areas. So yeah, maybe they cover like,  if they're helping property management companies, they just need to be in places where there are more properties to manage. 

It's fine that they're only in densely populated [00:16:00] areas because that's where the need is. 

 right. So, you know, they have a market they're serving like where their market is.  their pricing is affordable for their market. Can Latchel fulfill its valuation and be a small win for its venture capitalist investors. 

So they've raised 3.4 million. 

 So our rule of thumb here at all schemes considered is that your annual recurring revenue. You're a R R should be as much as you've raises. And that will be a good exit. 

Can't they get to 3 million, 3.5 million in annual recurring revenue.

So let's say, let's say each account makes them $100 in revenue just to make it a little easier. 3.4 million over 100 is 34,000 accounts. Are there 34,000 landlords? 

Xand Lourenco: [00:16:49] Yeah, I think so. 

Aakash Shah: [00:16:51] We have no idea. We're going to ask the internet. How many landlords in America? 

Xand Lourenco: [00:16:57] There's gotta be. 

There's 

at least 24 million [00:17:00] independent landlords. 

Aakash Shah: [00:17:00] Well, 

That's a lot. 

I did not realize how big the United States was. 

So, yeah. 

Well, now I'm pretty bullish. I feel like even before I understood exactly how many landlords there were, I guess the question is, you know, it's not just landlords, it's landlords that have at least five units. If they can find a way to service the landlord, that only has two units. 

 Then I think they'll do very well because they can really open up the market and at their price point, it's very much a sell of like, look, we're just making your life easier.  

Xand Lourenco: [00:17:32] Right. Yeah. 

Aakash Shah: [00:17:33] And then eventually you're absolutely right. Xand. They'll go for that enterprise sale. So, yeah, they can definitely, you know, there's a lot of money and property management. They haven't raised that much money off, honestly, for the size of the problem that they're solving. I think they can definitely capture a piece of that pie and. 

Make their investors happy. 

Xand Lourenco: [00:17:53] Yeah, 100%. 

Aakash Shah: [00:17:55] Awesome. Well, that's it for this week. We'll see you all next week. 

Xand Lourenco: [00:17:58] Have a good one.