Esusu, a startup at the intersection of fintech and proptech, raised $130m in Series B funding from SoftBank and others at a $1bn valuation.
The New York-based company, one of the few black-owned startups to achieve unicorn status, aims to help tenants get recognized by credit bureaus for making timely rent payments, a perk which mortgage payers have long enjoyed.
Esusu says the pathway he creates for renters to improve their credit scores can mitigate “financial exclusion” based on race and background; renters are more likely than owners to be people of color.
Rent is the largest monthly expense for many individuals, but something credit bureaus have historically not considered in scoring. According to the Federal Reserve Bank of Boston, more than 60 million American households are excluded from the traditional credit system because they have no credit history.
The 2013 Congress signaled a desire to reduce that number, but achieved little, according to Esusu leaders. A bill that would qualify rent payments in credit scores, the bipartisan Credit Access and Inclusion Act of 2021, was reintroduced in July.
Esusu hopes to further the cause by partnering with business owners and reporting payment data to major credit bureaus. The software can be integrated with mainstream property management software platforms including Yardi, RealPage and Entrata.
Getting big landowners on board hasn’t been easy, said co-founder Samir Goel. Neither he nor co-founder Abbey Wemimo, an immigrant from Nigeria, had experience in real estate before founding Esusu in 2018.
“We’ve had to really cut our teeth in this industry to create a win-win-win situation, so landlords, tenants and society as a whole win,” he said. “Every property owner and operator is overworked and understaffed, so we had to make sure we weren’t contributing additional operational overhead.”
According to Goel, landlords benefit in several ways by reporting rent payments, starting with better fundraising. Data from TransUnion, one of the three major credit bureaus, shows renters are more likely to pay on time if they can build up credit by doing so. Landlords can also sell the service as a kind of “financial health equipment” to attract and retain tenants, he said.
Additionally, Esusu facilitates low- or zero-interest micro-loans for tenants, paid directly to the landlord, when they fall behind on rents, making landlords’ cash flow more reliable. The loans are made by “philanthropic organizations, institutions and funds that are truly passionate about solving homelessness issues,” such as the Michael and Susan Dell Foundation and retailer Target, Goel said.
Esusu’s service is available to tenants in 2.5 million homes through partnerships with 35% of the National Multifamily Housing Council’s largest landlords, including Morgan Properties, Related Companies and Camden Property Trust. The company charges owners a deployment fee of $3,500, then $2 per unit each month.
The Series B, announced Thursday, comes less than six months after the company’s $10 million Series A. This latest round was led by SoftBank’s Vision Fund 2, with participation from Jones Feliciano Family Office, Lauder Zinterhofer Family Office, Motley Fool Ventures, Schusterman Foundation, SoftBank Opportunity Fund, related companies and Wilshire Lane Capital. The company raised $144 million.
Goel previously worked in sales strategy at LinkedIn. Wemimo was a consultant in mergers and acquisitions at PwC. Both cited their own families’ struggles to get credit and access financial resources as inspiration for the concept.
Aided by its latest cash injection, Esusu plans to triple its number of employees in the coming months.