Rental management is ripe for disruption, and Cozy has $5 million more in funding to make it happen
A Q&A with Cozy co-founder and CEO Gino Zahnd. The San Francisco– and Portland, Oregon-based startup, which is a platform for landlords and renters that includes features like rent collection, tenant screening, and online rental profiles, completed a $5 million Series A funding round earlier this month. Investors include General Catalyst Partners and The Social+Capital Partnership. It was founded in 2012 by Zahnd and John Bragg, and raised $1.5 million in Seed funding last fall.
SUB: Please describe Cozy and your primary innovation.
Zahnd: Cozy makes the rental process much easier for both landlords and renters. For landlords, we make collecting rent payments, tenant screening, and accepting online rental applications simple. For renters, even with roommates, paying rent is a breeze. With Cozy’s Renter Profile, renters can create a beautiful, secure, and verified application they can use to apply anywhere.
We’re changing the entire rental real estate experience with a focus on beautiful, fast products, transparency, privacy, and total control of one’s information.
SUB: Who are your target markets and users?
Zahnd: We have two customers: landlords and renters.
Our landlord customers tend to be people who own or run somewhere between one-and-25 units. There are over 40 million rental units in the U.S., and 75 percent of those are in buildings of 20 units or fewer. That’s a lot of landlords!
Everyone is a renter at some point in their life, so all renters have the potential to be a Cozy customer.
SUB: Who do you consider to be your competition, and what differentiates Cozy from the competition?
Zahnd: At this point, no companies are taking our approach. I expect that to change, but right now we have no direct competitors.
SUB: You just announced that you’ve raised $5 million in Series A funding. Why was this a particularly good time to raise more funding?
Zahnd: Since launching in June, 2013, Cozy is already being used in over 500 cities in the U.S. That’s every urban area, every suburb, many college towns and small towns. We’ve proven that it’s working everywhere, and that people are willing to pay for our service. Now it’s time to pour gas on the fire.
SUB: How do you plan to use the funds?
Zahnd: We’ll be doing a lot of experimentation with marketing. We’ll also build out the business side of Cozy, in addition to hiring a number of engineers, designers, and support folks.
SUB: What was the inspiration behind the idea for Cozy? Was there an ‘aha’ moment, or was the idea more gradual in developing?
Zahnd: The idea for Cozy grew over the course of a few years. Cozy was officially born in March, 2012, with the goal of fundamentally changing the way people deal with rental real estate, and creating the highest-quality experience for everyone involved. I say it was officially born then, but the story actually started a couple of years earlier when John and I were establishing Seabright, our previous company.
John was moving the 40 miles from Mountain View to San Francisco to be near our new studio, and his move process took eight months. He filled out around ten applications, and paid ten application fees. He came across several scams—people who wouldn’t get back in touch, and we discovered first-hand that the process was generally miserable at every step of the way.
It was during this time that the conversation about building a new product to deal with these problems began. We kept asking each other why the rental experience was so bad, so paper-based, and so unsecure. Over two years, the conversation kept going, and questions kept coming: Why do renters have to give their most sensitive information like SSN and bank info. to complete strangers on a piece of paper? Why do the vast majority of renters still pay with a paper check? Why do landlords deal with late, bounced, paper checks? Why do applications take 30 minutes to complete when landlords are really looking for three key pieces of information? It should take five! And on-and-on.
Shortly after John moved to San Francisco, I sold a house, and while looking for a rental between houses, a potential landlord accidentally ran my credit score six times in three hours. It was at this moment that we decided to focus on changing the rental real estate industry for the better. And so, Cozy was born.
We’re now in business to make the entire process trustworthy, simple, secure, available anywhere, and we want to create better landlords and better tenants along the way. Together, we can make it awesome.
SUB: What were the first steps you took in establishing the company?
Zahnd: John and I were running a successful UX consulting company called Seabright Studios. Cozy was an idea we’d been talking about for two years while running Seabright. Before we decided to pursue it full-time, we went out and did a lot of research with landlords in 40 different markets. We wanted to understand what tools people used—there were none—and if there were markets that didn’t work like others, where they were.
We whittled that initial group of 40 people down to about a dozen, and those folks became our alpha customers. We used the alpha to raise our Seed round, and the rest is history.
SUB: How did you come up with the name? What is the story or meaning behind it?
Zahnd: We ultimately view ourselves as a financial service. Everything we do comes back to moving money, credit privacy and payments. We didn’t want to have a name with literal meaning because that’s just not creative. We wanted it to be an English word. Everyone has a place in their home that they consider Cozy—it might be a bedroom, a fireplace, the couch, etc. It’s just a state of being.
We also are aware that the landlord-tenant relationship is often anything but cozy. It’s a bit of a jab at that, and it’s also aspirational for us. We want to fundamentally change this relationship with great design, great software and great support.
SUB: Do you have plans to seek additional outside funding in the near future?
Zahnd: Not in the near future.
SUB: What have the most significant challenges been so far to building the company?
Zahnd: Anyone can be a landlord, and that makes marketing and getting the word in front of the right people a challenge. Many of the marketing strategies we are beginning to employ are very unorthodox, but represent a ton of thinking that we’ve done around the entire rental lifecycle.
Finding, vetting and hiring an awesome team is a constant challenge. I feel like I have the best team in the world surrounding me at this point—we just have to continue this pattern. We’re incredibly picky about who we hire.
SUB: How do you generate revenue or plan to generate revenue?
Zahnd: Cozy is $9 per month, per unit for landlords. We’ll be launching products later this year that will create new revenue streams, so stay tuned @CozyCo on Twitter, or via our blog at www.cozy.co/blog for the latest news.
SUB: What are your goals for Cozy over the next year or so?
Zahnd: We want to continue establishing a stronghold in our market, and become the de facto way renting happens. We’ve proven that Cozy works in every market in the U.S., from dense urban areas to rural single family homes—it’s now time to pour gas on the fire.
Aside from growth, we have a crystal-clear path of our upcoming product offerings, which will include completely new ways to deal with credit reporting, leases, maintenance, and more. We’ll soon be addressing the mobile space as well.
Cozy – www.cozy.co