Dwelly is buying independent UK letting agencies because organic growth is slow, since landlords rarely switch agents and customer retention runs around 95%.
Dan Lifshits says Dwelly fell between venture and private equity investors, forcing it to raise from flexible-minded investors, venture firms and family offices for close to 70m pounds.
Dwelly keeps acquired brands and teams but replaces their CRM and ERP systems with one operating process and product, and it targets agencies with about 400 or 500 managed properties per location.
Dwelly buys UK letting agencies and automates them with AI
Dwelly is building an AI-enabled roll-up of UK letting agencies. Lettings customers rarely leave and organic growth is slow, so buying agencies is the faster way to scale. Dwelly then moves them onto one product and process to automate work. The model sat awkwardly between venture and private equity, which made fundraising hard.
Takeaways
Acquisition solves lettings' slow organic growth. Landlords rarely switch agents and are found one by one, so winning customers organically is slow. New landlords enter the market at no more than about 1% a year. Buying agencies with existing managed contracts is the faster route.
Letting customer bases are highly retentive. Retention runs around 95% or more, with subscription-style monthly revenue. Tenancies average two and a half to three years and idle time between them is about two weeks. Where leakage is 10 to 20%, an AI-native service could win leavers, but buying fits better.
Dwelly replaces acquired systems with one product. It keeps the local brand, reputation and some people, but drops the agency's CRM and ERP. Customers move onto a single operating process and product, while staff change roles or are reskilled. Service runs 24/7 rather than office hours.
AI roll-ups fell between venture and private equity. Venture investors asked where the upside was in a roll-up, while private equity could underwrite roll-ups but not heavy technology spending. Dwelly raised close to 70m pounds from flexible venture investors and family offices. About 100 investors passed early.
Technology spending makes roll-up risks heavier. Integration, culture and headquarters costs are familiar roll-up risks. In an AI roll-up they are heavier because of headquarters, technology and product team costs. Dan describes the category as new and still being defined.
Dwelly targets recurring lettings revenue at local density. Sellers are often retiring owners seeking succession. Dwelly prefers lettings over sales revenue, strong management, and about 400 or 500 managed properties per location, with smaller tuck-ins possible where it already has infrastructure.
Landlords see little change but faster results. Most landlords are in their 40s to 60s, so day-to-day change is small. They gain portals, automated communication and visibility. Dwelly claims eight to 10 applications per property and lets within days, against two to three weeks typically.
Dwelly's origin
Dan was a general manager at Gett, and his co-founders were general managers at Uber.
After the Uber founders left around 2018 or 2019, the group searched for operational, fragmented two-sided marketplaces.
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They settled on residential lettings, having built a similar business in Eastern Europe.
They sold that business in late 2021.
It taught them lettings is people-centric and can be made more customer-focused by automating admin, and that organic growth is slow.