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January 2021

Why We Invested in Darwin Homes: Superpowering the Single-Family Residential Market

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This week, Darwin Homes announced that Canvas Ventures is leading its Series A. I couldn’t be more excited to join the company’s board and cheer them on during their journey.

Darwin Homes is a tech-enabled property management company headquartered in Austin focused on one of the best performing asset classes in existence — single-family home rentals. Founded in 2018 and built by Ryan Broderick and Zach Kinloch, who were part of the very early team at DoorDash, the Darwin team has created powerful software to automate many of the operationally-intense property management flows such as maintenance and repair, rent collection, and tenant showing and screening. Ryan led DoorDash’s first expansion team, and Zach oversaw tens of millions of marketing budget through leadership roles in product and growth. We are really impressed by Ryan and Zach, and we think they are uniquely positioned to address this market. All of their teammates and former DoorDash colleagues we spoke to agreed.

I’ve been building and investing in marketplaces and marketplace enablers for over 10 years, including as an executive at Yelp, the CEO of Eat24, and an investor in CloudKitchens, Cambly, and Faire. I was excited to find this amazing marketplace team working on a new concept in a very large and growing market.

Here’s what gave us at Canvas Ventures the conviction to invest:

1. Single-family homes are one of the largest asset classes within real estate investing, and ownership is highly fragmented across individual investors.

Single-family residential (SFR) units are the largest segment of the rental market. There are approximately 23M SFRs in the United States, representing 53% of the total rental market.

Despite the size of this vertical, the vast majority of owners of SFR rentals are individual investors. By some estimates, these individual investors own between ~75% and 88% of rental properties.

2. Single-family rental home property management is broken. Investing in single-family residential homes is challenging for most retail investors. We know this firsthand from our investment in Roofstock, the leading marketplace for SFR home purchasing. One of the biggest roadblocks today for investors looking to enter this asset class is actually managing that asset. From finding qualified and reliable tenants to fixing that pesky oven light, many investors shy away from investing in single-family rentals because of the challenges that come with being a landlord.

One common solution is for investors to live within driving distance of their investment properties. However, for many investors, this isn’t feasible, and they wind up relying on a property management company.

Today, most property managers are a loose collection of locally-run mom and pop businesses. There are over 280K property management companies in the US alone, with the average business employing just 3 people.

With this fragmentation also comes a negative customer experience: the average NPS of a property management business is 7. Most SFR investors point to issues like poor response times, high expenses, and a lack of transparency as the things they dislike most about their existing options. The more we dug in, the more we believed that software and centralized operations were the key to building a better property management experience.

3. The Darwin Homes team is uniquely qualified to build the software, manage the local operations, and automate the operationally intense processes needed to scale this business.

Marrying operational excellence with software is in the DNA of the Darwin Homes co-founders, Ryan and Zach. Both are alumni of DoorDash, which is fast emerging as an excellent and talented entrepreneurial pool.

Ryan and Zach led expansion teams at DoorDash and cut their teeth solving the hardest of operational and logistics problems: food delivery. They know firsthand how to expand to new markets, grow local teams, and manage growth profitably. Zach oversaw tens of millions of dollars of growth marketing acquisition as well as growth product. Ryan led Merchant Acquisition, selling into both mom and pop merchants as well as large multi location chains.

Ryan, Zach and the rest of the Darwin Homes team are the kind of visionary leaders building transformative early-stage companies we live to champion and devote ourselves to at Canvas.

If you’re interested in joining the Darwin Homes team, they’re hiring! Check out their jobs page here.

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