In recent years, the U.S. has seen more renters than at any point since at least 1965, according to a Pew Research Center analysis of Census Bureau housing data.
Competition for renters is fierce and property managers are turning to technology to get a leg up.
To meet that demand, Seattle-based Knock – one startup that has developed tools to give property management companies a competitive edge – has raised $20 million in a growth funding round led by Fifth Wall Ventures.
Existing backers Madrona Venture Group, Lead Edge Capital, Second Avenue Partners and Seven Peaks Ventures also participated in the financing, which brings the company’s total capital raised to $47 million.
Demetri Themelis and Tom Petry co-founded Knock in 2014 after renting “in super competitive markets” such as New York City, San Francisco and Seattle.
“After meeting with property management companies, it was eye-opening to learn about the total gap across their tech stacks,” Themelis recalled.
Knock’s goal is to provide CRM tools to modernize front office operations for these companies so they can do things like offer virtual tours and communicate with renters via text, email or social media from “a single conversation screen.” For renters, it offers an easier way to communicate and engage with landlords.
“Apartment buildings, like almost every customer-driven business, compete with each other by attracting, converting and retaining customers,” Themelis said. “For property management companies, these customers are renters.”
The startup — which operates as a SaaS business — has seen an uptick in growth, quadrupling its revenue over the past two years. Its software is used by hundreds of the largest property management companies across the United States and Canada and has more than 1.5 million apartment units using the platform. Starwood Capital Group, ZRS, FPI and Cushman & Wakefield (formerly Pinnacle) are among its users.
As Petry explains it, Knock serves as the sales inbox (chat, SMS, phone, email), sales calendar and CRM systems, all in one.
“We also automate certain sales tasks like outreach and appointment scheduling, while also surfacing which sales opportunities need the most attention at any given time, for both new leases as well as renewals,” he said.
The company, Themelis said, was well-prepared for the impact of the COVID-19 pandemic.
“Our software supports property management companies, which operate high-density apartment buildings that people live and work in,” he told TC. “You can’t just ‘shut them down,’ which has made multifamily resilient and even grow in comparison to retail and industrial real estate.”
For example, when lockdowns went into effect, in-person property tours declined by an estimated 80% in a matter of weeks.
Knock did things like help property managers transition to a centralized and remote leasing model so remote agents could work across a large portfolio of properties rather than in a single on-site leasing office, noted Petry.
It also helped them adopt self-guided, virtual and live video-based leasing tools, so prospective renters could tour properties in person on their own or virtually.
“This transformation and modernization became a huge tailwind for our business in 2020,” Petry said. “Not only did we have a record year in terms of new customers, revenue growth and revenue retention, but our customers outperformed market averages for occupancy and rent growth as well.”
Looking ahead, the company says it will be using its new capital to (naturally!) hire across product, engineering, sales, marketing, customer success, finance and human resources divisions. It expects to grow headcount by 40% to 50% before year-end. It also plans to expand its product portfolio to include AI communications, fraud prevention, applicant screening and leasing, and intelligent forecasting.
Fifth Wall partner Vik Chawla, who is joining Knock’s board of directors, pointed out that the macroeconomic environment is driving institutional capital into multifamily real estate at an accelerated pace. This makes Knock’s offering even more timely in its importance, in the firm’s view.
The startup, he believes, outshines its competitors in terms of quality of product, technical prowess and functionality.
“The Knock team has accomplished so much in just a short period of time by attracting very high quality product design and engineering talent to ameliorate a nuanced pain point in the tenant acquisition process,” Chawla told TC.
In terms of fitting with its investment thesis, Chawla said companies like Knock can both benefit from Fifth Wall’s global corporate strategic partners “and simultaneously serve as a key offering which we can share with real estate industry leaders in different countries as a potential solution for their local markets.”