It is widely accepted that Lagos has a severe real estate deficit problem. The housing problem stems from the population density of the state and its size. Lagos is the smallest state in Nigeria and, with a population of 15.4 million people, it is also the largest city in Africa by population.
In 2016, the Lagos state governor, Akinwunmi Ambode, said that Lagos receives 123,840 visitors daily, accounting for one of the highest internal migration rates in the world. This massive influx of people has led to a constant demand for houses and, coupled with the limited supply of houses available, has created a housing deficit of 2.5 million houses, according to Nigeria’s minister of interior, Rauf Aregbesola.
Nigerian proptech startup, Spleet, has since its inception in 2018, been providing solutions to the housing problem in Lagos. The startup initially started as a marketplace for intending tenants to meet landlords and pay rent monthly, but after realising that the model could not scale, it pivoted to an embedded finance solution. Now, Spleet allows tenants to rent properties and pay monthly rent while also providing the option for landlords to receive the rent yearly.
To scale its residential rent management and rent financing products, Spleet has raised a $2.6 million seed funding round led by MaC Venture Capital. This round 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 of Yuca, Maajed Chaaaraoui of insurami. Existing investors from Spleet’s pre-seed round, 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 rent financing model would leave the beta phase by the 4th quarter of this year or the 1st quarter of next year. He attributed the launch date to a lack of talent, which this seed round helped address, and a desire to gather data. “We wanted a beta to go live so that we had enough data to go out with a full product.”
Nigeria does not have a unified credit score system, which has led to high rates of non-performing loans (NPL). According to the Central Bank of Nigeria, the total non-performing loans in the banking sector hit N1.21 trillion as of the end of February 2022. Adesanmi said that to prevent a similar outcome with their rent financing model, Spleet had modelled an NPL rate of 6%-8% into the product during the beta phase.
He added that to achieve profitability, Spleet partnered with some financial institutions to help with loan recovery. “Going in beta for over nine months has given us the ability to slowly learn what default rates and non-performing loans would look like for this kind of product because this kind of product doesn’t necessarily exist in this market,” he said.
Adesanmi said that with this raise, Spleet would be building products for everyone in the residential rent ecosystem. He added that in the four years since Spleet launched, agents have considered Spleet to be their competition, but now Spleet would build products for the agents.
The startup plans to expand its product offerings to include a service that automatically receives rent payments on behalf of landlords; a tool that enables landlords and real estate agents to vet and carry out adequate background checks on tenants before offering lease agreements; and a no collateral, affordable-interest rate rental loan product.
Spleet wants to consolidate its presence in the Nigerian rental market in the next 12 to 18 months after housing over 1,000 in Lagos alone before considering expansion. Adesanmi added that Spleet was considering the East African market for expansion, with a focus on Kenya.
Spleet initially started as a product that sought to provide a solution to the accessibility and affordability issues in the rental market, but now, according to Adesanmi, Spleet can only provide an accessibility solution. “We look at ourselves as a conduit. We can’t on a macro scale solve affordability, what we can solve primarily today is accessibility”, he said. Adesanmi added that he believed that with more accessibility, affordability would get solved over time.
Rental units on Spleet’s marketplace go for almost $1,500 a month, a price that is out of reach for most Nigerians. Adesanmi attributed this to the demand for affordable rentals in the marketplace, which leaves only the more expensive rentals on the platform. “ What mostly happens on our marketplace is that what’s always left available to tenants are the more expensive ones. The affordable ones have already been taken,” he said. Adesanmi added that when affordable rental units pop on the marketplace, Spleet records a turnaround time of 48 hours.
According to Adesanmi, Spleet is currently doing more than $1 million in annual recurring revenue and, during the beta phase of its rent financing product, experienced an NPL rate of less than 2%. He also added that the average lifetime of each customer is about 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. The startups will get 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 that the Google program was timely for the startup. He said that the Google Cloud credit would help bring costs down when Spleet launches its new platform in a couple of weeks.
Speaking on the raise, Marlon Nichols, co-founder and managing general partner at MaC Venture Capital, said, “The housing crisis is an enormous problem that impacts us at a global scale, and Africa is no exception. In countries like Nigeria, the requirement for tenants to provide 12 to 24 months of rent payment in advance creates a barrier for large parts of the population in accessing the rental market and essentially renders them homeless. MaC is proud to partner with Spleet as it continues to bring forward a comprehensive solution that effectively serves both sides of the housing market and makes true deposits to combating homelessness.”
