00:00:00 · Sebastian Johnson, Ilia Drozdov
[00:00:00] S0: Hello and welcome back to Scaling Europe show presented by DEAL. I'm Sib Jotson. I'm joined today by Dan and Ilya, two of co founders of Dwelly, which is a very interesting, very exciting AI roll up consolidation business acquiring traditional independent lettings and real estate agencies across The UK and integrating them in a big unified AI enabled tech stack. Thank you both for joining me. How are you doing? [00:00:20] S1: You, Seb. Thank you for inviting us. Doing quite well and I hope to share exciting news today. [00:00:26] S0: Take it away. What's the news? What's going on? [00:00:28] S1: Yeah. I think we are entering the kind of the heart of The UK London market, which is effectively 40% of the GMV in our industry. And we know that the market is specific and works kind of slightly differently from the regional players. So for us, it is very, very important to see the applicability of our model and tap into pretty much almost half of the market size basically in The UK, city. Super. [00:00:54] S0: How are you doing this? Like, know, your model is acquiring. Who are you acquiring and why? [00:00:58] S1: We're acquiring leading kind of local agents, usually kind of aiming to buy agency that manages at least 500 properties. In London, probably the threshold was slightly lower, but it's gonna be kind of local within the neighborhood kind of in the central of London agency that it has very established brand and super strong reputation with its customers.
00:00:58 · Ilia Drozdov, Sebastian Johnson
[00:00:58] S1: We're acquiring leading kind of local agents, usually kind of aiming to buy agency that manages at least 500 properties. In London, probably the threshold was slightly lower, but it's gonna be kind of local within the neighborhood kind of in the central of London agency that it has very established brand and super strong reputation with its customers. [00:01:20] S0: And why London now? Like, as you mentioned, it's, you know, what 40% of The UK market more broadly. Why is now the right time to be entering into London? [00:01:28] S1: I think for us, we first kind of believe that entering the capital requires kind of a little bit more preparation. We have to be confident in how we operate. This is the first thing. And you also have to have enough dry powder to actually start scaling within a city. Let's say a couple years ago, okay, we can make one acquisition and that's it basically. Right? But right now, this is just the first acquisition and we have very ambitious plans to to continue scaling within London. For that, you needed capital and we have capital now. [00:02:01] S0: And you just raised or recently raised, I think it just under 100,000,000 almost of both equity and debt. Was part of that money that you raised always gonna be about tapping into London? Was that like the strategic reason behind the the raise?
00:02:01 · Sebastian Johnson, Dan Lifshits
[00:02:01] S0: And you just raised or recently raised, I think it just under 100,000,000 almost of both equity and debt. Was part of that money that you raised always gonna be about tapping into London? Was that like the strategic reason behind the the raise? [00:02:15] S2: Actually, think talking about the raise, I wouldn't say that there was any specific milestones that we wanted to achieve in terms of CD entrance or something like that. In general, the roll up business model is a very capital efficient business model. So reality is we have burned very limited money throughout the business was found because we're buying the profitable businesses and they become even more profitable kind of pretty soon. So meaning that they overcome our kind of central costs that are going into developing the platform and product and acquiring those businesses and integrating them very, very fast. That's why what we've always been focused on is rather buying great established outstanding businesses across The UK. And I think what is more important for us is rather the customer base and the strength of the underlying portfolio and the underlying business that we acquire. And this strategy was always the case and continues being the case. It's just that, obviously, with entering London, you need to make sure that you have more capital because, like, it's not that helpful to kind of to buy one, two of the small agencies in London with lack of opportunity to expand further. And now that we're confident that we can do that, this is a good time to...
00:02:15 · Dan Lifshits, Sebastian Johnson
[00:02:15] S2: Actually, think talking about the raise, I wouldn't say that there was any specific milestones that we wanted to achieve in terms of CD entrance or something like that. In general, the roll up business model is a very capital efficient business model. So reality is we have burned very limited money throughout the business was found because we're buying the profitable businesses and they become even more profitable kind of pretty soon. So meaning that they overcome our kind of central costs that are going into developing the platform and product and acquiring those businesses and integrating them very, very fast. That's why what we've always been focused on is rather buying great established outstanding businesses across The UK. And I think what is more important for us is rather the customer base and the strength of the underlying portfolio and the underlying business that we acquire. And this strategy was always the case and continues being the case. It's just that, obviously, with entering London, you need to make sure that you have more capital because, like, it's not that helpful to kind of to buy one, two of the small agencies in London with lack of opportunity to expand further. And now that we're confident that we can do that, this is a good time to... [00:03:23] S0: And you're you're managing, I think, thousands of properties now. What was it like making that very first acquisition?
00:03:23 · Sebastian Johnson, Ilia Drozdov
[00:03:23] S0: And you're you're managing, I think, thousands of properties now. What was it like making that very first acquisition? [00:03:30] S1: It is. Yeah. It was very exciting. I think additional context is that we are kind of both immigrants and we didn't have much context about, obviously, British culture and local operations of the kind of lettings agencies. We obviously kind of got ourselves slightly educated, but buying the first business and thinking that you are actually kind of running the business are two different things. And that's why we actually made a very strong commitment. We moved with our families up north to Howe, the city where we acquired the first agency, and spent there fifteen months. That's what it means, actually, to run the first agency.
00:04:07 · Dan Lifshits
[00:04:07] S2: You just have to move there. I think there are even some fun stories associated with that. I remember when we had the first dinner with the agency owner that sold the first business, actually, absolutely amazing professional. His name is Sam Humphreys, and he is with us now running all our m and a activities effectively. I remember that when we had a lunch and after... I was asking Elia because Elia, in general, maybe not the most talkative person in the world. But I was asking him, you've been even more silent than usual. I mean, why is that? And he's like, mate, I mean, because honestly, I probably was understanding only kind of 25% of what Sam was saying. Kind of you are in The UK, have lived already longer, and I used to study here in London School of Economics. So it was a bit easier for me. But Ilya was trying to triangulate, think, what Sam was saying by the fact of what I was answering and some kind of just emotions. Right? And he was like, oh, well, if, like, I understand only forest, how are gonna run business with with... What's up? So, yes, that... That's how it was buying the first business. I was very anxious at first, but I think at the same time, incredibly exciting because clearly was the moment of time when it was obvious for us that we're onto something huge because it was obvious that you can really reinforce. And I think that, obviously, transform existing businesses with the AI pretty significantly. I think it was a bit ahead of time when I think no one of the investors, and still even to this day, so I think limited amount didn't stand the thesis. So it was pretty obvious that we're doing something highly contrarian and super non obvious where we, once it becomes a big thing, we'll have hopefully a first mover advantage and hopefully now we do.