Rentberry is raising funds through sale of common equity at a pre-money valuation of $25 million. This valuation is a major increase over the $9 million valuation provided for the company’s previous crowdfunding campaign just a year ago. Presumably, the increase is a result of more than $13 million in previous investments, a high number of users, and the targeted real estate market. However, Rentberry’s 2020 revenue was quite low, down to just under $31,000 from 2019’s total revenue of $4.3 million. Taking the most recent revenue amount, this round’s valuation represents a revenue multiple of around 809 times. That’s extremely high, even for a company that sits at the intersection of real estate and software. While the company holds significant assets and a proprietary platform with significant traction, its valuation is not particularly attractive.

The real estate software market includes tools for tracking expenses, managing customer relations, and lead generation. The global market is forecast to reach $20.6 billion by 2026, growing at an annual rate of 5.7% until then. Some reports estimate higher growth rates, with one estimating around 9% annually from 2021 to 2024. Growing middle-class populations in developing countries, as well as cost optimization, are driving development in the market. Rentberry’s Happy Seniors and Flexible Living programs are intended to reach 77 million US baby boomers and 82 million US millennials, not to mention global consumers.

Rentberry estimates a market opportunity of around $7 billion for itself. This doesn’t appear to take into account the global market, which Rentberry is targeting. That said, real estate software isn’t an emerging market. Huge players like Zillow and Opendoor are already present and take up a lot of this space. The real estate software market is healthy but somewhat crowded. Rentberry may struggle to carve a significant niche for itself as it faces well-established competitors.

Founder and CEO Oleksiy Lubinsky has a bachelor’s degree in economics and business from UCLA Berkeley. Lubinsky got his start as a business analyst for Cisco and took on other analytics roles for the next two years. He served as an associate director for Raiffeisen Investment for almost three years, establishing relationships with private equity firms. He then became director of mergers and acquisitions as well as equity capital markets for BIC securities, advising and supervising companies on acquisition. In 2012, Lubinsky stepped into the startup game, founding CityHour. The technology was an application to facilitate business networking in cities. He built up the application over two years with the support of a development team in Kiev, Ukraine, winning an innovation award for the platform. CityHour eventually sold to a group of angel investors. Lubinsky’s international experiences are certainly reflected in Rentberry’s target global market and its Flexible Living initiative. However, Lubinsky has no experience in real estate specifically.

The Rentberry team also includes 30 dedicated people. CTO Denis Golubovskiy has a master’s degree in information security management from National Aviation University in Kiev. He is an experienced software engineer who has spent more than a decade developing technology solutions — including some in the real-estate business. He served for three years as a web developer for Hostels-Ukraine.com. He has been with Rentberry almost since the beginning. 

Head of Design Aleksandr Kotovskov has been with Rentberry almost as long. He also holds a master’s degree in information systems management from the National Academy of Culture and Arts Management in Kiev. After working freelance for several years, he worked in application design and product management. In addition to his current role with Rentberry, he is the product designer for Floorly, another real estate leasing platform in development.

CEO Alex (Oleksii) Humeniuk holds a master’s degree in computer science from National Technical University of Ukraine. He has specialized in search engine optimization for more than seven years across a series of online startups. He came on with Rentberry as a SEO specialist in 2016 before moving to a chief marketing role in 2018. 

CPO Lily Ostapchuk is Lubinsky’s wife and business partner. She also worked with him on CityHour. She holds a master’s degree in international information and relations from the Taras Shevchenko National University of Kiev. After working in marketing for a Ukrainian news agency and a property management firm, she served as CityHour’s CPO. Following the app’s successful sale, she then moved with Lubinsky to Rentberry. Her experience building up CityHour is useful, and her experience in property management is ideal for working on Rentberry.

Rentberry’s team provides a wide array of skills and experience. While Lubinsky lacks real estate experience, the expansive team covers some of those gaps. Overall, this is a strong team.

Rentberry claims to be the first “closed-loop” home rental platform, but it is not the first of its kind in this space. Competitors like Zillow, Trulia (a Zillow subsidiary), move.com, Auction.com, and CoStar are all websites providing similar services. Even social media giant Facebook offers a marketplace for real-estate management. That said, Rentberry is not a mere marketplace. It manages the comprehensive rental experience, managing paperwork, rent, and screening. The platform is a cheaper alternative to a traditional broker, but its price is comparable to using competing digital services for rentals. While some platforms do allow renters to pay online, they are not as comprehensive as Rentberry.

The platform is patent-protected, with 46 trademarks filed. Duplication is likely to be difficult, if not impossible. It offers contactless services and expansive coverage as well as unique programs for seniors and renters with nontraditional, flexible living preferences. These distinctions do work to set Rentberry apart from the many competitors it faces.

Thus far, Rentberry’s early traction is not reflected by its revenue. Most recently, Rentberry took in $30,878 in revenue and spent $2.07 million in costs and expenses. Its strength is better measured in its growing traction. In 2018, Rentberry had processed less than a million rental properties. Now, it has processed 18 million. Monthly users have increased tenfold in the same amount of time, from 72,000 to 707,000. Rentberry has also established partnerships with European real estate platforms to reach global markets. Its own platform is primarily based in US cities.

Building up the platform has been a massive enterprise. To finance its work, Rentberry has raised $13 million in investments from funds like AIM, JadeValue, and 808 Ventures as well as private investors. The business has managed to avoid any long-term debt in the process but has given out $4,961,820 in stockholders’ equity. Even so, Rentberry holds $2.35 million in cash and equivalents, so it is not without resources.

While Rentberry has already generated huge traction and fundraising, its operation holds substantial risks. Real estate is a highly-regulated market. Contract management, renters’ rights, and provision of services come with different requirements across countries. Rentberry will need to stay up-to-date on the latest rules and regulations, a task which will be complicated by its global presence. Furthermore, Rentberry is late to the table. The market is already full of competing platforms for rental listings.

Finally, the Rentberry platform itself faces the challenge of presenting a two-sided marketplace. The platform will need to attract both landlords and renters in ample numbers for either side to find the service useful. That means double the development and marketing needs.Two-sided marketplaces — while potentially very lucrative — come with complications and risks that other business models do not face.

Despite its rapid growth, Rentberry faces significant market challenges. Existing presences in the real estate software market are gargantuan and benefit from huge name recognition and media coverage. Zillow, for example, has been around for 15 years and garners constant media mentions. Rentberry’s two-sided marketplace represents an additional challenge on top of simply renting properties out. Its auction method of determining rental prices may not be eligible for rent-controlled properties. It’s certainly not common practice. Rentberry’s huge $115,000 monthly burn rate has left it in a financial situation where it needs to continue massive fundraising, despite having taken in millions already.

While purchasing properties for the purpose of Rentberry’s Flexible Living program should result in more revenue over time, it adds financial strain to an already burdened startup. It also adds potential legal risk to the business, as renters can hold Rentberry directly responsible for substandard conditions or contract violations. Finally, while the CEO holds experience in building and bringing startups to an exit, this is his first venture into real estate. All of these factors indicate an uncertain future for Rentberry and its investors.

While Rentberry has had to invest massive capital upfront to build up its platform, that in itself indicates a huge advantage. Managing real estate has massive barriers to entry, and Rentberry is surpassing them. It has built up a patent-protected platform and defended it with a shield of trademarks. The platform offers extensive advantages to landlords and renters alike and offers options across many geographical regions. To expand its range, Rentberry has laid the groundwork of partnering with a number of European entities.

While paying these huge upfront costs, Rentberry has managed to limit financial woes. Through venture backing, it has refrained from picking up any long-term debt. Finally, CEO Oleksiy Lubinsky and CPO Lily Ostapchuk have successfully navigated their previous startup to an exit. Rentberry is a much larger ship to steer than CityHour was, but the team is growing and product differentiation appears significant. If Rentberry succeeds, it could see really huge success.

Rentberry is providing a comprehensive, global platform for rental listings and management. It is a two-sided marketplace, which provides easier pricing and tenant screening for landlords and transparency and digital payments for tenants. The process is automated, removing in-person interactions and enabling virtual tours before rental. The platform is patent-protected and has been in development for years. It sees more than 700,000 active monthly users and has processed 18 million properties across 87,000 cities. CEO Oleksiy Lubinsky is new to real estate but has led his previous startup to an exit.

While the platform could provide huge benefits for tenants and landlords alike, the market is already dominated by huge competitors with name-brand recognition. In addition, getting to this point has required massive cash expenditures, and revenue is practically nonexistent so far. Still, Rentberry has avoided long-term debt, and its Flexible Living and Happy Seniors platforms have real potential. In addition, it has crossed huge hurdles to reach this point, likely fencing out most new competitors. Therefore, Rentberry is a Neutral Deal.

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Analysis written by Benjamin Potts.