Adding on to the list of acquisitions this year, Noida-based home rental startup LifePad has announced that it has been acquired by Fella Homes in an all-cash-deal. No further details of the deal were disclosed.
The deal was closed earlier this month and post-acquisition, the 10-member team of LifePad has joined Fella Homes, except for the co-founders. The startup will merge its operations with Fella Homes and rebrand under it.
LifePad, founded in September 2015 by IIM alumni and former BCG consultants Piyush Bhartiya and Rachit Agrawal, was an early-stage startup in the rental segment, which has already been witnessing a number of upcoming players in the market.
After a 9 month long strenuous journey, the co-founders now plan to take a short break and launch their next venture by September. Piyush Bhartiya says that they are brainstorming over a couple of ideas, but are not sure yet. He adds that though real estate will remain their area of interest, the education sector is also something they are keenly looking at.
The startup had received seed funding in March 2016 and aimed to solve the pain point of the rental process for young professionals who prefer furnished houses.
On the acquisition, Piyush commented, “To survive in this market, one needs strong technology as well as operations. Only after having a strong hold on both of these will the players achieve scalability and win the space, otherwise losing is inevitable. With strong backing and investments, Fella Homes was performing much better. They have been talking to us all these months and the acquisition worked for both of us.”
He further added, “Fella Homes is currently looking to expand and hence, this was a perfect fit.”
Fella Homes, founded by IIT Roorkee and Stanford alumni Virender Pratap Singh, Yadwinder Paul Singh, Digendra Singh Rathore, Kunal Singh and Amit Gupta in October 2015, had raised seed funding amounting to $2million in early 2016 from undisclosed investors.
“The acquisition has helped us in understanding the Noida market and also strengthens our team. We launched our operations in Noida last week and plan to foray into Bengaluru, Pune and Hyderabad by the end of this year,” said Digendra Singh Rathore.
He further added that the firm also plans to hire across all verticals and grow its team size from 60 to 150 members.
The startup currently has more than 100 properties in the Delhi-NCR region and plans to add more than 250 properties by the end of this year. The startup claims to have served more than 400 working professionals in finding share-rented apartments and targets a ten-fold increase by the end of the financial year.
The startup worked on a revenue sharing model. Fella Homes is also working on the same business model. Based on this model, the platform brings the house owners and tenants together. After the furnished house is rented out, a share of the rent is taken by the startup every month and the relationship between the tenant and the operations team continues, which is a win-win situation for both the parties.
In the entire process, no other third party is involved, which helps the startup ensure and retain quality.
“The residential rental market which is said to be worth $20-30 billion, has a huge gap, which is still unmet. Though there are numerous players in India, only 8-10 percent of the market has been explored. The sector, which is operations-intensive, has a large pool of potential for business but the major challenge that will drive its growth is transactions, where the major players are failing. Fella Homes is succeeding on that part of it, which clearly shows it’s a step ahead in the market and can soon be the leader in this space,“ said Piyush to Yourstory on a call.
The only significant competitor with a similar revenue model is Bengaluru-based NestAway, which recently raised $30 million in funding in a Series C round led by Tiger Global, Russian billionaire Yuri Milner and IDG Ventures India. The startup is also backed by Ratan Tata.
“There has been a dire need for such platforms. Even if the market witnesses five more entrants, the demand will not be met. Gurgaon alone has roughly 2-3 lakh working professionals who are seeking houses. This itself is a huge opportunity and hence needs more players,” said Digendra to Yourstory.
He also adds that to live on a sharing basis, one needs a strong infrastructure, which is lacking in the Indian market. Also, any player in the rental segment will only scale with a strong foot in technology and immense knowledge about the real estate market.
The segment, which has already been tapped by major players like Housing and Quickr, still has a lot of reach into regions which have not been tapped. With the mobility boom, demand for furnished homes has largely increased which has unveiled more scope for the players, says Piyush.
The sector surely has considerable untapped potential, and with new entrants bringing in sustainable business models, such platforms have strong capabilities and scalability potential. With many players failing to eliminate the broker-process, the number of takers for such platforms is huge. But clearly, the major hurdle is to understand the market and the consumers right and render the right product so as to achieve sustainability and win the space.