Lagos is known to have a severe real estate deficiency issue. The state’s population density and size contribute to the housing shortage. Nigeria’s minister of interior, Rauf Aregbesola, says that because of this huge influx of people, there is a constant need for homes and a limited supply. This has led to a housing shortage of 2.5 million homes.
Nigeria’s minister of interior, Rauf Aregbesola, says there is a housing shortage of 2.5 million homes because of this massive influx of people and the limited number of homes that can be built to accommodate them. Since its start in 2018, Spleet, a Nigerian prop-tech startup, has been helping solve Lagos’s housing problem.
The startup started as a place for people who wanted to rent to meet landlords and pay rent every month. When the company realized that this model couldn’t grow, it switched to a solution for embedded finance. Now, Spleet lets people rent properties and pay rent every month. Landlords can also choose to get their rent once a year.
Spleet has completed a seed funding round of $2.6 million, headed by Mac Venture Capital, to scale its residential rent management and rent finance products. Several other investors, like Noemis Ventures, Plug and Play Ventures, Assembly Fund, Ajim Capital, Francis Fund, Daba Finance, and angel investors like Eduardo Campos and Paulo Buchicher of Yuca and Maajed Chaaaraoui of insurance, also joined this round.
Akintola Adesanmi, co-founder and CEO of Spleet, stated in a call with TechCabal that the company’s rent financing model would exit the beta phase by the end of the fourth quarter of this year or the beginning of the first quarter of next year. He said that the launch date was because they didn’t have enough talent, which this seed round helped fix, and they wanted to gather more information first. “We intended to launch a beta so that we could gather enough information to produce a full product.”
Nigeria doesn’t have a single system for credit scores, which has led to many loans that aren’t being paid back (NPL). The Central Bank of Nigeria says that as of February 2022, the total amount of bad loans in the banking sector had reached N1.21 trillion.
According to Adesanmi, Spleet had modeled an NPL rate of 6%-8% into the product while it was in the beta phase to prevent a similar scenario from occurring with its rent financing strategy. He went on to say that for Spleet to become profitable; the company had teamed with several financial institutions to assist in loan recovery.
“Being in beta for over 9 months has provided us with the opportunity to understand the default rates and the percentage of loans that are considered non-performing for this type of product, which does not always exist in this market.
Adesanmi said Spleet would make products for everyone in the residential rental ecosystem with this money. He also said that since Spleet started four years ago, agents have considered it their competition. But now, Spleet will build products for the agents.
The startup wants to add a service that automatically collects rent payments on behalf of landlords to its list of products; a tool that lets landlords and real estate agents vet tenants and do background checks before they sign leases and a rental loan product that doesn’t require collateral and has low-interest rates.
Spleet wants to strengthen its position in the Nigerian rental market over the next 12 to 18 months after it has already found homes for over 1,000 people in Lagos before it thinks about expanding.
Adesanmi also said that Spleet was considering expanding into the East African market, with Kenya in mind. Spleet started as a product that tried to solve both accessibility and affordability problems in the rental market. However, Adesanmi says that Spleet can now only solve the accessibility problem.
We see ourselves as a conduit. We can’t fix affordability on a large basis, but we can tackle accessibility,” he remarked. Adesanmi continued by saying that, in his opinion, the affordability issue would be resolved in due course if there was increased accessibility.
On Spleet’s marketplace, rental units cost almost $1,500 a month, which is too much for most Nigerians to pay. Adesanmi said that this was because people wanted cheap rentals in the marketplace, so only the more expensive rentals were left.
Most of the time, the most expensive rentals are the ones that are still available on our market.” All the cheap ones have been taken,” he said. Adesanmi also said that Spleet records a turnaround time of 48 hours when cheap rental units come on the market.
Adesanmi says that Spleet makes more than $1 million in recurring revenue yearly and that the NPL rate for its rent financing product was less than 2% during the beta phase. He also said that each customer stays with the company for an average of 25 to 26 months, which means each customer brings in about $1,750.
Google said last month that 60 African startups had been chosen for the second group of its Google for Startups Black Founders Fund. The startups will get between $50,000 and $100,000 in equity-free funding and up to $200,000 in Google Cloud credit.
One of the startups chosen was Spleet, and Adesanmi said that the Google program came at the right time for Spleen. He said that when Spleet launches its new platform in a couple of weeks, the Google Cloud credit will help keep costs down.
Marlon Nichols, co-founder and managing general partner at MaC Venture Capital, said about the raise, “The housing crisis is a big problem that affects people everywhere, including Africa. In places like Nigeria, where renters have to pay 12 to 24 months in advance, it is difficult for many people to rent, leaving them without a place to live.
Mac is proud to work with Spleet as it keeps coming up with a complete solution that works well for both sides of the housing market and makes real progress in fighting homelessness.