San Francisco-based but Adelaide-founded startup HappyCo has completed a $US10.8 million ($14 million) Series A funding round led by Australian investors, as the proptech startup looks to bring its research and development efforts back to Adelaide.
HappyCo offers a Software-as-a-Service platform for any companies or individuals who manage residential real estate, helping them better manage things such as inspections, maintenance, and property monitoring. The startup currently helps manage more than 1.2 million properties controlled by companies such as Airbnb and Vicinity Centres.
“Any company that touches any sort of residential real estate, such as traditional property management companies or vacation rental managers, we provide them software to help with the operational side of running the property,” co-founder Jindou Lee told StartupSmart.
Lee says the global residential property industry is worth over $7 trillion, and while HappyCo isn’t the first to offer software solutions for property management, the startup does offer its platform on modern day technology such as smartphones and iPads, which is a way to “fill the gaps”, he says.
The startup went through Blackbird’s Startmate accelerator program in 2012, the year after it was founded, and then moved to the US to participate in the coveted 500 Startups program. HappyCo now has customers in more than 40 countries, with Lee saying the business model is easily scalable as properties are “run the same way no matter where you are”.
But after more than five years with a strong home base in San Francisco, part of HappyCo has come home to roost, with Lee saying the company made the decision to move its R&D division to Adelaide around 18 months ago.
Sydney and Melbourne were considered first, but Lee was put off by a number of high-profile startups already in dominant positions in the ecosystems of those two capitals, nominating the likes of Atlassian and Freelancer.
“They have dominant positions in those markets, and they have the capital to keep growing those markets as their focuses change,” Lee says.
“We thought long and hard about the decision, and the founders and I started this from Adelaide. As much as our customers today are focused in North America, a lot of the DNA of the company is Australian and we wanted to build a strong base in Adelaide.
“There’s not enough startup success stories that come out of South Australia. People there need to start dreaming bigger.”
Australian investors keen on property space
The $9.9 million funding round HappyCo closed in 2016 consisted largely of US and European investors, but this year’s raise was made up mostly of Aussie investors, led by Sydney-based Alium Capital Management, and joined by Tempus Partners, PieLab Venture Partners, Larsen Ventures and Sandalphon Capital.
Lee says the team felt it was time to raise again as the startup had put a lot of work into proving its business model and expanding its customer base, spending the last 12 months focused on building out its product offerings.
Setting out to seek investment from Australian funds rather than US funds was a decision driven by a perceived enthusiasm for property-focused startups in the Australian investor ecosystem, says Lee, something that can be seen by the string of successfully funded proptech startups over the last 12 months.
“We’ve had such a great property boom in the last 10-15 years, and we’re very tangible people in Australia so we see and understand the problems in real estate, and subsequently investors feel the same way because they own a bunch of properties,” Lee says.
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“The challenge is Australia is a very small market, so unless it’s a global solution it’s hard to build a big company.”
Lee also says this time around the capital raising process was easier; the traction the startup has had so far was a vote of confidence for local investors, who are naturally “risk averse”, he says.
However, having raised in both the US and Australian startup scenes, Lee does think there needs to be some “maturing” done by both local startups and investors.
“We were surprised by the amount of capital available, every second person seems to have or is starting a fund, which is great for the ecosystem,” he says.
“But a lot of startups think there’s difficulty accessing capital here, and investors think there’s not a lot of great startups to invest in, that’s why I think there’s some maturing to be done on both sides.”