See the 26-page pitch deck Kasa Living used to raise $30 million while other short-term rental startups were folding

0
21

Roman Pedan, Kasa Founder and CEO Roman Pedan, Kasa Founder and CEO

  • The pandemic has caused major shakeouts in the short-term rental industry.
  • Major operators Lyric and Stay Alfred closed their doors, while Domio responded to a report that it was closing by reshuffling its business; most operators shed units. 
  • In this atmosphere, Kasa Living raised a $30 million round in August of this year.
  • Founder and CEO Roman Pedan told Business Insider that units under management have increased by 50% since the start of the pandemic and the company has actually grown, overall.
  • Pedan shared the company’s pitchdeck with Business Insider and explained how it helped him grow while his sector shrank. 
  • Visit Business Insider’s homepage for more stories.

Short-term rental startup Kasa Living announced a $30 million Series B fundraise in October of this year, just as other companies in the sector were seeing severe distress. 

The coronavirus has hit the short-term rental industry hard, as companies had to deal with a slew of cancellations in the early days of the pandemic, followed by widespread changes in travel patterns, causing some companies to reevaluate and adjust their business plans

A month after Kasa’s fundraise was announced, competitor Domio admitted that it was planning “financial re-engineering” and had installed an interim CEO after reports that it had shut down and was selling off its assets. Meanwhile, Airbnb-backed Lyric transferred its final location to Mint House. Earlier this year, competitor Stay Alfred had to fold, while others had to rapidly cut back on their footprint.

Kasa, though, has increased its total units under management by 50% since March, according to Roman Pedan, the CEO and founder. The company, which had just raised $20 million in December of 2019, was already on the hunt for more money to continue growing.

“Qualitatively and quantitatively, we accomplished what we thought would take two years to do, things we previously told investors we intended to do in two years,” Pedan told Business Insider. 

Kasa went back out for more funding, in a Series B round led by Ribbit Capital, which included investors such as RET Ventures, Zigg Capital, Allegion Ventures, and BoxGroup.

Read more: Lyric, a hospitality startup that raised $180 million, is offloading its final property to a competitor

Pedan attributed the company’s recent success to its focus on shared-revenue management partnerships instead of costly master leases, the company’s focus on lowering prices for its customers, and his own background.

From KKR investor and Airbnb host to founder

Before launching Kasa Living in 2016, Pedan was a real estate investor at the major private equity firm KKR. He joined KKR’s real-estate team in its early days, after a stint at private equity real estate firm Walton Capital, and saw it grow to almost $10 billion in assets under management before he left.

At the same time, he also started to host Airbnb guests in his own apartment. From experience as a real-estate investor in a broad range of asset classes and his personal experience with Airbnb, Kasa was born. 

Central to Pedan’s vision was finding a way to easily partner with the largest owners of the multifamily world, major investors with similar goals to his former employer KKR. That meant understanding their motivation for partnering with a short-term rental company — chiefly, bringing revenue into empty units in a multifamily building. 

So Kasa doesn’t have to pay for whole floors or buildings and can instead be flexible to the needs of its partners. On the low-impact side, it can take over vacant apartments and leave them once an owner secures a long-time lease. To the other extreme, Kasa can operate whole hotels.

The ‘Southwest Airlines of the sector’

Kasa has made management contracts a central part of its business. These contracts have been rapidly adopted by the short-term rental and flexible working industries in the early days of the pandemic because expensive master lease obligations severely burdened their balance sheets. Pedan said his goal was always to switch to these revenue-sharing agreements between landlord and operator, which make up the vast majority of hotel contracts. It helped that he was extremely familiar with from his time as investor. 

Pedan said Kasa began by signing master leases to prove itself to landlords but began to switch to management contracts last year, with the company transitioning almost all remaining leases to agreements during the coronavirus crisis. In a tumultuous 2020, these agreements, which require less capital and risk on the operator side, have also looked more attractive to landlords, who would prefer to receive a portion of revenue than receive none of a master lease. It also means that as the travel industry continues to recover, they will have a far greater upside than a traditional lease. 

The company’s cozy relationship with multifamily landlords is buoyed by its investor RET Ventures, which counts a range of multifamily operators as its own investors.

Read more: The short-term rental market is consolidating in big cities as demand surges in rural areas. Here’s how startups like Sonder are taking advantage of the shakeout.

Another key to Kasa’s recent success has been its brand, which is less expensive than other short-term rental operators. Pedan calls it the “Southwest Airlines of the sector,” which means its focus is on low prices and a range of locations beyond New York and San Francisco.

In the midst of a financial crisis, this strategy has seemed to pay off, with travel recovering better outside major metropolises, and with potential customers more cost-conscious than ever.

Read on to see the pitch deck that helped Kasa Living raise $30 million during the pandemic.

On the first slide, Kasa highlights its aesthetic, and in the background, a desk for remote workers. Kasa Deck slides to publish in media page 001

This slide highlights the company’s mission, making sure to include its “property partners” as crucial stakeholders. Kasa Deck slides to publish in media page 002

This slide highlights the challenges with traditional hotels that has helped to usher in short-term rentals. Kasa Deck slides to publish in media page 003

Of course, Airbnbs have their own challenges with consistency for both guests and owners. Kasa Deck slides to publish in media page 004

Kasa pitches itself to combine the best of both categories, while also promising a 20-50$ increase in net operating income for landlords. Kasa Deck slides to publish in media page 005

Once landlords sign on, Kasa does the rest, from design to marketing to verifying and vetting guests. Kasa Deck slides to publish in media page 006

This slide explains that Kasa can be a flexible partner for landlords, taking anywhere from a few apartments to a swath of buildings. Kasa Deck slides to publish in media page 007

The company has also focused on locations that have been neglected by some of the biggest short-term rental operators. Kasa Deck slides to publish in media page 008

While Pedan stressed that cost is a factor, the company still features fresh and modern designs. Kasa Deck slides to publish in media page 009

They also can offer amenities, like common areas and pools. Kasa Deck slides to publish in media page 010

Kasa provides both short-term and longer-term rentals. Pedan said that the company has seen rental length increase through the pandemic. Kasa Deck slides to publish in media page 011

The company focuses on business and family travelers, with long-term stays heading up the largest percentage of room nights booked. Kasa Deck slides to publish in media page 012

The company also included a pandemic update on their business. Kasa Deck slides to publish in media page 013

The company transformed and grew quickly during the pandemic, even signing full hotel contracts. Kasa Deck slides to publish in media page 014

The company also had many of its theses, like its broad geographic focus and contactless hospitality, proven out. Kasa Deck slides to publish in media page 015

According to Kasa, the company has also shown better occupancy than hotels have this year. Kasa Deck slides to publish in media page 016

The company now only signs service agreements, and can work on anything from new development to distressed hospitality assets. Kasa Deck slides to publish in media page 017

The company has added two new channels for new supply. Kasa Deck slides to publish in media page 018

Pedan said that this slide stood out for investors, as the team’s credentials showcase their ability to both investors and potential landlord partners. Kasa Deck slides to publish in media page 019

Similarly, the company has advisors from major companies like Invitation Homes, Okta, Uber, and major hotel operator Chartres Lodging Group. Kasa Deck slides to publish in media page 020

The company has shown lots of funding momentum, raising a series B just nine months after its Series A. Kasa Deck slides to publish in media page 021

The company has also adapted its health and safety guidelines to meet the pandemic. Kasa Deck slides to publish in media page 022

The company, ever-focused on operators, also conducts background checks on guests and includes smoke and noise sensors in rooms to prevent smoking and parties. Kasa Deck slides to publish in media page 023

The company’s check-in is entirely online and requires no in-person concierge. Kasa Deck slides to publish in media page 024

This final slide summarizes the value proposition to both guests and potential landlord partners. Kasa Deck slides to publish in media page 025

Kasa Deck slides to publish in media page 026

A Global Asset Management Seoul Korea Magazine

This post was originally published on this site