It is widely believed that Lagos has a serious property deficit problem. The housing problem stems from the state’s population density and its size. Lagos is Nigeria’s smallest state and, with a population of 15.4 million, it is also Africa’s largest city in terms of population.
In 2016, Lagos State Governor Akinwunmi Ambode said Lagos receives 123,840 visitors per day, which is one of the highest internal migration rates in the world. This massive influx of people has resulted in a steady demand for houses and, coupled with the limited supply of available houses, has created a housing deficit of 2.5 million houses, according to Nigerian Home Minister Rauf Aregbesola.
Nigerian proptech startup, Spleet, since its inception in 2018, has been providing solutions to the housing problem in Lagos. The startup first started out as a marketplace for prospective tenants to meet landlords and pay rent monthly, but after realizing the model couldn’t scale, it turned to an integrated financing solution. Now, Spleet allows tenants to rent properties and pay monthly rent while offering landlords the option to receive rent annually.
To scale its residential rent management and rental finance products, Spleet raised $2.6 million in seed funding led by MaC Venture Capital. This round has welcomed several other investors including Noemis Ventures, Plug and Play Ventures, Assembly Fund, Ajim Capital, Francis Fund, Daba Finance and other angel investors including Proptech operators; Eduardo Campos and Paulo Buchicher from Yuca, Maajed Chaaaraoui from insurami. Existing Spleet pre-seed round investors Metaprop VC and HoaQ Fund also participated in this round.
On a call with TechCabal, Akintola Adesanmi, co-founder and CEO of Spleet, said that Spleet’s rental financing model will leave the beta phase by the 4th quarter of this year or the 1st quarter of the next year. He attributed the launch date to a lack of talent, which this funding round helped to address, and a desire to collect data. “We wanted a beta to go live so we had enough data to come out with a full product.”
Nigeria does not have a unified credit scoring system, which has resulted in high rates of non-performing loans (NPLs). According to the Central Bank of Nigeria, total non-performing loans in the banking sector reached N1.21 trillion at the end of February 2022. Adesanmi said that to avoid a similar outcome with its rent financing model, Spleet had modeled an NPL. 6% to 8% in product during beta phase.
He added that to achieve profitability, Spleet had partnered with some financial institutions to help with loan recovery. “Going into beta for over nine months allowed us to slowly learn what default rates and non-performing loans would look like for this type of product, because this type of product doesn’t necessarily exist in this market,” did he declare.
Adesanmi said that with this increase, Spleet will build products for everyone in the residential rental ecosystem. He added that in the four years since Spleet launched, agents have viewed Spleet as their competitor, but now Spleet would build products for agents.
The startup plans to expand its product offering to include a service that automatically receives rent payments on behalf of landlords; a tool that allows landlords and real estate agents to verify and perform proper background checks on tenants before offering rental agreements; and an unsecured rental loan product with an affordable interest rate.
Spleet wants to consolidate its presence in the Nigerian rental market over the next 12 to 18 months after housing more than 1,000 people in Lagos alone before considering expansion. Adesanmi added that Spleet plans to develop the East African market, with a focus on Kenya.
Spleet initially started as a product that sought to provide a solution to accessibility and affordability issues in the rental market, but now, according to Adesanmi, Spleet can only provide an accessibility solution. “We see ourselves as an intermediary. We cannot solve affordability on a large scale, what we can mainly solve today is accessibility,” he said. Adesanmi added that he believes that with greater accessibility, affordability will be resolved over time.
Rental units in the Spleet market cost nearly $1,500 per month, a price out of reach for most Nigerians. Adesanmi attributed this to the demand for affordable rentals in the market, which leaves only the most expensive rentals on the platform. “What happens most often in our market is that what is always available to tenants are the most expensive ones. The most affordable ones have already been taken,” he said. Adesanmi added that when affordable rental units come on the market, Spleet sees a 48-hour turnaround.
According to Adesanmi, Spleet currently earns over $1 million in annual recurring revenue and during the beta phase of its lease finance product experienced an NPL rate of less than 2%. He also added that the average lifespan of each customer is around 25 to 26 months, and in dollars, that translates to revenue per customer of $1,750.
Last month, Google announced that it had selected 60 African startups for the second cohort of its Google for Startups Black Founders Fund. Startups will receive equity-free funding between $50,000 and $100,000, and up to $200,000 in Google Cloud credit. Spleet was one of the selected startups, and Adesanmi said the Google program was timely for the startup. He said Google Cloud Credit will help keep costs down when Spleet launches its new platform in a few weeks.
Speaking on the raise, Marlon Nichols, Co-Founder and Managing Partner of MaC Venture Capital, said: “The housing crisis is a huge issue that affects us globally, and Africa is no no exception. In countries like Nigeria, the requirement for tenants to pay 12 to 24 months rent in advance creates a barrier for much of the population in accessing the rental market and renders them essentially homeless. MaC is proud to partner with Spleet as it continues to deliver a comprehensive solution that effectively serves both sides of the housing market and makes real contributions to the fight against homelessness.