Rental brokerage company FastFox.com on Thursday announced raising Rs 30 crore from Lightspeed India Partners, Blume Ventures, CyberAgent Ventures, and others as part of its Series A financing.
According to the founders, the company plans to invest the funds in improving its technology solution, perfecting its service delivery model, and expanding the team across engineering, sales, and operations. GrowX ventures and IMJ Investment Partners also participated in the current round of funding.
Started by Pallav Pandey and Mukul Bhati in November 2014, FastFox.com is an online-to-offline (O2O) brokerage firm that works in partnership with other brokers to list residential properties online for rental purposes. Co-founders Anshul Gupta and Siddharth Prakash Singh joined the business later.
In July 2015, BroEx, (which is a part of FastFox.com) had raised Rs 6 crore as a part of its seed round, also led by Lightspeed India Partners.
Speaking to YourStory on the recent investment, Anshul said,
“The new round of funding allows us to work a lot on process improvement and fine-tune our backend algorithms to improve the matchmaking process. It is an evolution, requiring trial and error, and we will be investing significantly in technology and engineering.”
Dev Khare, Partner at Lightspeed India Partners Advisors, said,
“Pallav and his team have shown us that there is a large market in rentals that suffers from India-specific problems such as information scarcity, information asymmetry, trust deficits, and small local networks, all of which can be solved through the power of the internet and a tech-enabled approach.”
So how are they different?
Anshul explains that the major differentiator for the platform is that it is not a marketplace, unlike popular platforms like 99Acres, MagicBricks, and QuikrHomes, among others.
Other companies are essentially a marketplace of brokers and potential customers (or tenants). The fundamental for us is that each of the listings belongs to us, and we have sourced all the properties through a network of brokers and list it from them.
According to the company, real estate portals have a common problem involving lack of authentic information — more than 90 percent of the listings are paid for by real estate brokers whose primary objective is to get customers' attention and contact details.
Broker listings typically constitute more than 50 percent of the revenues of these platforms, as believed by the founders, and verifying the properties could cost typically as high as 3x of the money the platform actually makes.
Further, according to the founders, sharing leads is a very common phenomenon in the brokerage business, which is considered very collaborative. Leads are shared by one broker to the other. This was the basis of their other product, BroEx, which is an app helping connect one broker to the next, creating a mega network for brokerage.
Moreover, brokers don’t have any exclusivity, with their biggest problem being curtailed demand.
By exploiting the pan-India network of 1,00,000 brokers on BroEx, FastFox.com brings demand to the table. However, Anshul claims that the rental platform works only with a super set of 200 brokers, with operations only in Gurgaon.
The platform has approximately 40 third-party associates who show potential customers the properties they have shortlisted.
About revenues and metrics
For the firm, brokerage is the only source of income.
Our revenues come only through plain brokerage, which is split equally between the platform and the broker. And, we think that to get the value, people are actually okay paying brokerage. Our payment collection percentage is 97 percent, which seconds the thesis.
So, let’s say if a tenant pays Rs 20,000 (or first month’s rent) as brokerage, the amount is split between FastFox.com and the broker who offered the lead on the platform.
Speaking about the metrics, the platform endorses 2,500 listings. When asked, the founders reveal that approximately 30 percent of properties on any platform could be untranslatable.
On a monthly basis, the platform closes 100 transactions and sees an average ticket size of Rs 25,000. Further, the platform doesn’t transact on houses with a rent below Rs 15,000.
By the end of this year, the firm plans to expand operations to three more cities and should be closing 1,000 transactions on a monthly basis. The founders confirm that they do not plan to enter the PG or other business streams.
Although not commenting on how much traffic the website receives, the firm says it doesn’t see any dearth in queries, owing to the nature of the business. They believe that unlike buying and selling of real estate, which seems to be in a tough spot, the rental market sees demand throughout the year.
Quoting census figures, the firm claims that Gurgaon sees an average of 8,000 houses rented every month. At a national level, 27 percent of India’s urban population still lives on rent.
Also, the team has expanded from six members in late 2014 to more than 160 at present.
The fault in our rentals
In the past, we have not seen too many rental startups with disruptive models. Currently in the market is online listing platform NoBroker (raised $13 million in two rounds of equity funding) and property management startup NestAway (raised $30 million in April last year from Tiger Global, Yuri Milner, and IDG Ventures India) which have been experimenting with their business models in this space.
The founders of FastFox.com believe that brokerage businesses can scale on the back of availability of a large quantity of authentic property listings.
Apart from inaccurate information, rental inventory has a half-life of less than nine days and keeping that information refreshed is a huge task, which eventually becomes an obstruction to scaling.
However, there is still hope with models like that of Lianjia.com, an O2O real estate brokerage company for rental and resale property, commanding a market share of more than 40 percent in China.
Tarush is driven towards delivering unbiased and accurate reportage while engaging with as many mediums as possible to narrate a fresh perspective. Working for the past few years in the digital space with YourStory, he has covered the Indian technology ecosystem extensively, focusing on new age Fintech companies, while building strong connects within the industry.