When $230M is Not Enough 🔥

How Rezi burnt all of their money leasing NY apartments.                                                                                                                                                                                                                                                                                                                                                                                                                 [Read Online]( When $230M is Not Enough How Rezi burnt all of their money leasing New York apartments. [Nicolás Cerdeira]( [fb]( [tw]( [in]( [email](mailto:?subject=Post%20from%20Failory&body=When%20%24230M%20is%20Not%20Enough%3A%20How%20Rezi%20burnt%20all%20of%20their%20money%20leasing%20New%20York%20apartments.%0A%0Ahttps%3A%2F%2Fnewsletter.failory.com%2Fp%2F230m-not-enough) Hey — It’s Nico. I’m back from three weeks in SF. If things go well, I’ll be back in the Bay in a few weeks or months. Here are a few pictures of my last days: Today’s newsletter is brought to you by [Ignite Digital](, a team of SEO experts with 13 years of experience. Here’s what I got today: - The failure story of Rezi, a rental platform that raised $30M 🔥 - An analysis of Hume’s new empathetic AI 📈 Presented by Ignite Digital The World is Online. Your Company Should Be Too. Use SEO to reach red-hot buyers before the competition with [Ignite Digital]( 🔥 There are 8.5 billion searches per day on Google. Are you showing up? If not, then you're losing sales. [Ignite Digital]( are the SEO experts with 13 years of experience. They'll design a custom strategy to help you drive website traffic and online sales. Wanna give them a test drive? Request a FREE competitive analysis, and Ignite Digital will respond on the same day with a sneak peek of your competitor's strategy & how you can defeat them. [Get a 100% FREE Competitive Analysis →]( This Week In Startups 🫡 ICYMI [How Wise used Programmatic SEO]( to obtain over 40.7M users/mo. 🔗 Resources [Why my first startup failed](, by beehiiiv’s founder. [6 things to keep in mind]( before you pivot your startup. The [state of startup shutdowns]( in 2024. Y Combinator on [what matters when starting a startup](. [How companies worsen their messaging]( over time. [10 biggest mistakes to avoid]( as a first-time founder. How [Stripe measures growth for Atlas](. How to make [$1M-$10M+ in Silicon Valley](. Kernal’s is [hosting a Shark Tank-like event]( on April 24. 📰 News [Tiger Global VC fund raises $2.2B](, 63% below its target. [Yahoo to buy Artifact](, the news startup by Instagram co-founders. Stripe [acquires open-source developer platform]( Supaglue. An internal audit shows [Fisker lost track of customer payments](, losing millions. SMB cybersecurity startup [Coro locks in $100M at a $750M valuation](. Advertising startup [The Brandtech Group raises $115M]( to build Gen AI capabilities. AI design startup [Vizcom raises a $20M Series A round]( to expand its software. Fail(St)ory Renting Made Easy Earlier this week, the AI-powered rental platform Rezi announced it was shutting down. [Rezi]( was founded in 2016 with the goal of streamlining the rental process for landlords and tenants. In 2017, they joined the [Winter batch of Y-Combinator](, and between the end of 2021 and the beginning of 2022, they secured two rounds of debt, [totaling $200M](. Unfortunately, Rezi could not survive the downturn in the prop-tech sector and failed to secure new funding, which forced them to shut down. What was Rezi? Rezi was different from other rental platforms. Instead of letting landlords list their apartments, Rezi paid the landlords upfront, then listed and rented the apartments themselves. Imagine you own an empty apartment in NY. Instead of dealing with the hassle of finding the right tenant, handling contracts, and ensuring monthly payments, you could simply receive a $30,000 upfront payment and allow Rezi to lease your apartment for a year. After that, you could forget about your apartment until the following year. Rezi would handle everything, from screening tenants to showing the apartment and collecting monthly rent. It's important to note that Rezi wasn't just simplifying the process; they were also taking on the risk from the landlord to themselves. Landlords wouldn't need to worry anymore about the cost of having the apartment empty or the possibility of tenants not paying their rent. Rezi absorbed all these risks. On the other hand, this also meant that landlords had no say in choosing their tenants. Instead, Rezi's algorithm decided based on the individual's rental history, credit, income, and employment status to determine if they would make a good tenant. This simplified process was also convenient from the tenant's perspective. Anyone seeking to rent could simply register in Rezi's app, browse through all available apartments, and schedule a showing at their convenience. Sean Mitchell, co-founder of Rezi, emphasized the importance of enhancing the tenant user experience. That's why they had a dedicated concierge team available to show their apartments at any time, allowing tenants to schedule showings whenever it suited them best. Once Rezi's algorithm determined that you were a suitable tenant, you could view as many apartments as you liked and select your preferred one. The entire process could be completed in as little as a couple of days. A Big Need for Funding Many startups, including Rezi, depend on venture capital funding or debt to sustain themselves during their initial years until they achieve profitability. However, unlike typical startups that utilize this funding for various purposes such as employee salaries, product development, and marketing, Rezi faced an additional financial burden: upfront payments to landlords. To succeed, Rezi required a large number of apartments so that tenants could have options to select from. However, to get these apartments, they had to pay large upfront payments to landlords, amplifying their reliance on continued VC funding. This forced Rezi to create a financial instrument that allowed third-party investors to pay the upfront payments to the landlords and receive a return on their investment. This strategy was ingenious as it enabled Rezi to allocate a larger portion of the VC funding to paying salaries and expanding their team. However, despite eight years of operation, Rezi failed to achieve profitability. Consequently, when funding ceased, they were forced to exit the market. Reasons for Failure - The Need for Capital: After the shutdown, Mitchell stated that “Rezi was working to try to grow and achieve some scale, but the capital required to do that was very significant.” As I mentioned, in order to make their platform more attractive for tenants, Rezi needed a large inventory of apartments, but to get them, they required a lot of funding. - An Unscalable Business Model: Rezi's inability to sustain its operations despite securing over $200M in debt speaks volumes about its business model. While offering upfront payments to landowners set Rezi apart from competitors, it also contributed to its downfall. Perhaps a more viable approach would have been to concentrate on assisting landowners in finding tenants without assuming full management of their apartments. - Proptech Downturn: Like many other sectors, the proptech industry experienced a surge in VC investment during 2021 and early 2022, followed by a [sharp decline in 2023](. This downturn explains why Rezi successfully secured $200M in 2022 but struggled to get additional funding last year. Go Deeper - This great [YC interview with the co-founder of Rezi](. - An article [analyzing Rezi’s shutdown](. - An analysis of the [Proptech downturn and its consequences](. Trend Radar Empathic Robots Two weeks ago, [GPT got a body](. This week, AI is getting feelings. [Hume.ai]( has released a demo showcasing EVI (Empathic Voice Interface), the first AI capable of understanding the users' emotions from their speech. EVI can detect whether you are anxious, surprised, or frustrated and respond accordingly. [tw profile: Hume] Hume @hume_ai [tw] Meet Hume’s Empathic Voice Interface (EVI), the first conversational AI with emotional intelligence. twitter.com/i/web/status/1… Mar 27, 2024 2.6K Likes 472 Retweets 153 Replies It is by far the closest AI has come to sounding human, but there is clearly a long way to go before AI can fool us and pass the Turing Test. There is a [demo in which you can talk to EVI](, and you should absolutely try it out. I have spent several hours talking to the AI, and although the answers resemble GPTs, engaging in real-time voice conversation is a profoundly different experience. It is very far from perfect. The answers come off as robotic, sounding like GPT reading aloud. The voice often shifts tone and intonation abruptly, creating a disjointed experience. Many times, it feels like the answer is a patchwork of sentences from different sources rather than a cohesive paragraph. And yet, I've never had this much fun chatting with an AI before. Pretending to be angry and seeing it try to calm me down is hilarious. If this is the future of customer support, then at least it will give us great memes. EVI at Work EVI API is already open to the public, so we will soon see new apps that use it in different ways. So, in what industries will EVI get a job? Nothing is sure yet, but a couple of sectors come to mind: - Customer Support: This is probably the first thing most people think when they see the EVI video. An AI capable of understanding user emotions and adjusting its responses and tone accordingly holds great potential for customer support roles. Nevertheless, I do not think using AI to handle angry customers is a great idea. It will probably be more useful as an AI that can answer questions and provide technical support. - AI Assistants: I wouldn't be surprised to see the technology showcased by EVI incorporated into other AI Assistants. This integration could enhance Siri and Alexa, making them feel more like true virtual assistants rather than just voice-controlled interfaces for Google searches. - Recruiting: To the dismay of many, companies have increasingly turned to automating the hiring process. Many are now using AI for screenings and interviews. It wouldn't be surprising if new AI interview services emerged utilizing Hume's technology. In my opinion, this technology is still in its infancy. If it undergoes the same exponential improvements that LLMs are experiencing, I can't imagine how advanced AI voices will be a year from now. Refer Failory, Get Rewards Share Failory Chances are you have some more friends who would enjoy Failory as much as you do. Share Failory with these friends and cash in on premium resources and swag. You currently have 0 referrals, only 1 away from receiving my Pitch Deck Airtable. [Share Failory →]( Or copy and paste this link to others: Help Me Improve Failory How Was Today's Newsletter? If this issue was a startup, how would you rate it? [🚀 Launches to the moon!]( [🤔 Room for a pivot]( [💀 Crashes and burns]( That's all of this edition. Cheers, Nico Update your email preferences or unsubscribe [here]( © 2024 Failory 1309 Coffeen Avenue Ste 1200, Sheridan, Wyoming 82801, United States of America [[beehiiv logo]Powered by beehiiv](