Sales cycles are getting harder because there's more and more demands on the time of the decision makers at the property management companies. There's more and more solutions to choose from. There's some fatigue from the operator side.Chief Business Officer of Flexible Rent at Best Egg
It's a highly fragmented industry, so the companies or the vendors out there with the real power are the ones that have already aggregated millions and millions of units. [Property management software companies] control a vast amount of the experience already for our customer, the renter. So we started to think about constraints aside, how would we architect the best experience for our customer?Chief Business Officer of Flexible Rent at Best Egg
I think that we will see consolidation. I think people have been predicting this for a couple years, but why I think it's going to start to happen this year [is that] venture's going to stay tight, which means there's going to need to be different ways to capitalize and scale your businesses.Chief Business Officer of Flexible Rent at Best Egg
The Evolving Future of Multifamily Tech Start-Ups
- Brady Nolan shares his journey to becoming the Chief Business Officer at Best Egg and his experience as a co-founder of Till, focusing on the challenges renters face with making rent payments.
The Catalyst for Starting Till and Its Original Business Model [02:43]
- Discuss the inspiration behind starting Till in 2018, aiming to address the increasing challenges renters face with rising rent costs, and how they began developing Flexible Rent solutions even though they had no FinTech experience.
Strategic Shifts and Operational Changes [04:28]
- Talks about strategic decisions at Best Egg, mainly focusing on scaling Flexible Rent and re-architecting their go-to-market strategy, emphasizing partnerships with major rent payment platforms.
Challenges in the Multifamily Tech Industry and Point Solutions [07:50]
- The conversation shifts to the challenges multifamily technology vendors face, particularly in a tightening venture market, and Nolan's thoughts on point solutions versus integrated platforms.
Advice For Point Solution Vendors [18:00]
- These are final words of wisdom for point solution vendors based on well-earned experience scaling Best Egg from the ground up, and they discuss big bets for the coming year.
Predictions for 2024 and the Future of Multifamily Technology [20:49]
- Nolan shares his predictions for the future, including the potential for industry consolidation and the focus on renter-focused, integrated solutions. He also talks about scaling Flexible Rent and its impact on the industry.
Brady Nolan is the Chief Business Officer of Flexible Rent for Best Egg, one of the largest consumers fintech lenders in the United States and a leader in providing limited savings consumers a path to financial confidence.
As the Chief Business Officer for the Best Egg Flexible Rent product, Brady oversees the go-to-market strategy for the Flexible Rent product, creating solid partnerships with major property management systems and rent payment portals. With these partnerships, Flexible Rent has become a payment option for over 10 million renters nationwide, reshaping the landscape of rental housing.
Prior to Best Egg, Brady was co-founder of Till, which was then acquired by Best Egg. Brady’s career spans 15 years as an institutional apartment investor/developer, holding executive positions at organizations like Urban Atlantic, Vecino Communities (which he founded), Dalian Development, and Bozzuto. This extensive experience across investment, development, and rental housing operations laid the foundation for his commitment to enhancing the rental experience.
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Today, we're getting Brady's hot take on the future of multifamily tech startups and why property management companies should take note. Brady, welcome to the show.
Oh, thank you so much for having me. I'm excited to be here today.
I'm excited to have you. To start off, can you tell us a little bit about you and your background in the multifamily industry?
Yeah, absolutely. Today I am the Chief Business Officer for the Flexible Rent business unit of Best Egg. Best Egg is one of the largest consumer FinTech lenders in the country. Millions of customers, billions of dollars of capital lent each year across a multi-product platform. I come to Best Egg as the co-founder of a company called Till. And At Till, we pioneered Flexible Rent payments, and Best Egg acquired Till at the end of last year.
Got it. You started Till in 2018, correct? So when you started Till, I'm curious if you could share a little bit with us about what was the catalyst there? What were you seeing in the industry that really paved the way for Till to emerge?
Sure. So my partner, David Sullivan, who was our CEO at Till and runs our business unit at Best Egg, he and I come from careers spent in the rental housing industry, executive level roles in investment and operations prior to founding Till. And really the catalyst was our experience working with renters who were facing challenges making their rent payments reliably. The theme behind that is rent continues to get more and more expensive both on a whole dollar basis and as a percentage of the renter's incomes.
And that created lots of challenges for both our renter customers and for the operations teams when those renters could not reliably make their payments. And so that was really the initial problem statement that we were focused on when we started Till. We had a number of product ideas that we wanted to go after to try to solve this problem. And ultimately, we threw a few things against the wall and we started to see what stuck. And then we really invested all of our time into the product that ultimately became Flexible Rent as our solution to that problem statement.
Interesting. And so when you think about Till's original business model, can you share a little bit about what that was a little bit more at least and share with us what were some of the big bets that you had made when crafting it?
Sure. So yeah, I mean, the big bet was we can use FinTech and a FinTech lending solution to solve this problem, which is ironic because neither of us were fin or tech people. I've made that joke a lot of times. I'm glad it's still got at least a chuckle out of you. We started this with like, hey, let's just lend folks some money at better terms that are facing challenges paying rent. But we didn't know how to lend and we didn't have any scaled solutions to do that. So we built the plane while it was flying.
And ultimately, the first product that we launched with was, in hindsight, not a great product, but we learned a lot about how renters wanted to use a FinTech lending solution on a recurring basis to solve these challenges. We were initially working with renters that were already behind, with the idea that late fees are really, really expensive and punitive and often make it harder for renters to get back on track. So we wanted to provide a solution to get them out of this delinquency situation in a much more flexible way to repay those arrears.
What we saw was the majority of our users who were successful were actually borrowing. We always pay the rent right to the property. So they were borrowing to pay rent on time, paying it back in the same month, and then going through an entirely new application process for another loan the next month. And that showed us the real problem here is like intra month cash timing. Rent is the biggest expense that most renters have, yet it's due on the first of the month entirely uncorrelated to how that renter actually gets paid.
And so the more that we can help them match cash flows, not only can we make their ability to pay rent reliably much, much better, much more successful, it actually helps relieve pressure across the entirety of their financial month, because rent drives so many of the choices they make about their other expenses. When do I pay my car? When do I pay my insurance bills based on when I get paid because I always have to manage that first of the month payment of rent? So yeah, that was the big bet. How do we use FinTech to help with this problem statement?
Absolutely. Well, 2018, let's call it 2024 now, let's fast-forward a couple years. And during an earlier chat we had, you brought up an interesting observation coming out of the OPTECH Conference this year. And I'd love to have you share it with our listeners and maybe touch on how you see it relating to this broader ongoing trend of industry consolidation.
Sure. I think that this is a really tight-knit industry, and I have a lot of friends at various operators and across a lot of the different tech companies, or I think the industry uses the term vendor out there. And this year at OPTECH, I think people saw that we'd been acquired. We've gone through this journey. And so a lot of people were talking to me about just the state of play. OPTECH this year was I think the highest percentage of vendor versus operator ever.
The floor was huge, and there's lots and lots of companies out there and friends of mine that have founded other companies or work at other companies at OPTECH and since have brought up this concept of, what is going to happen with all of these point solution companies that are out there? I think the venture market forever was just on fire until early last year. That enabled a lot of new companies to be started. And if you look across the categories, there's multiple players in each category and they're all really essentially point solutions.
And so this conversation was about what's going to happen in this space? I think there's sales cycles getting harder because there's more and more demands on the time of the decision makers at the property management companies. There's more and more solutions to choose from. There's some fatigue from the operator side. And so that was the initial conversation that we had, and I think it's an interesting thing to think about as we roll into 2024.
What's the future hold for this world of all these point solutions that all I think are valuable and serve a really good purpose and are designed to solve really real problems? What's the outcome going to be for this industry from that perspective?
Yeah, I think that's a really interesting observation. And just for the sake of our listeners, I'm curious, how would you define a point solution? Whether it's within the multifamily industry or software in general, how do you view point solutions versus kind of all in one?
Sure. I would personally define it as a company with one product that is narrowly designed to solve one pain point or one problem. For us at Till, prior to being acquired by Best Egg, we were a point solution. We built and were really good at delivering a Flexible Rent payment method. Whereas I would define the multi-suite platforms as either companies like a Zego, who offer an entire payment and resident experience suite of services, or the big property management systems, who might offer their accounting, ledgering, source of truth property management software, and then other tools built around that.
We were a point solution. I sat in the same shoes thinking about what was the right outcome for Till in this world of the ever expanding point solution company.
Awesome. Thank you for clarifying. And so I'm sure that these ongoing dynamics that you've been discussing have played out in some form in decisions that you have made or that you are going to be making shortly at Best Egg. And so I'm curious if you could share with us a little bit how, if at all, has this been the case?
Oh, absolutely. So it's been the case really in two key ways. One is how do we deliver our product? And two, how do we capitalize to scale our product? Initially, when we founded Till, our product is the customer is the renter, but we always go to market through a channel. And the channel for us for the first three, four years was the property management company. We would go to the PMCs. We had built integrations with the underlying general ledger software systems, and we would sell into those PMCs that use those softwares.
What we started to observe was a couple things. One, it's a highly fragmented industry, so the companies or the vendors out there with the real power are the ones that have already aggregated millions and millions of units. You got the property management software companies. They control a vast amount of the experience already for our customer, the renter. So we started to think about constraints aside, how would we architect the best experience for our customer? And we just kept coming back to Flexible Rent should be natively offered within those major rent payment experiences.
There's no other way to deliver a seamless experience for the renter. And two, most PMCs already have a scaled payment partner that offers a full suite of digital and sometimes offline payment tools for their renters. Why should they have to manage us outside of those relationships that they already have in place to manage their entire payment needs?
And so one, we re-architected our entire go-to-market strategy and now solely and exclusively partner with the major scaled rent payment platforms to offer our Flexible Rent products natively and in an embedded way within their experiences for their renters. That was one. We made that decision and that bet. Ultimately, I think it was the right bet. And then two was with that scale, these scaled systems offer payment experiences for millions and millions of renters.
We knew we would have to scale our capital access, our operational wherewithal, our tech resources, all of that exponentially to go and win and successfully scale and execute these partnerships. And so that really played into how we thought about capitalizing our business, and we made the decision that the best way to do that was within one of the major scale lending platforms out there and not try to do it on our own as a single product company. That decision was made early last year prior to a really tight capital markets environment, especially for early stage companies.
So we're really glad we made that decision because the environment out there for single product lending platforms is pretty challenging. And we are now part of a platform that has significantly profitable hundreds of millions of dollars of revenue, tens of billions of dollars. I think we've done 30 billion in lending in the past nine years. So we have all that infrastructure already built, and the Flexible Rent product from Till we got the plug right into that and use all the Best Egg resources to scale our product as we scale into these partnerships.
Interesting. And you touched on this a little bit so you may not have more to share. You talked a little bit about the strategic differences between building a solution for the landlord or the property management company versus building a solution for the renter. From an operational standpoint, are there any other differences that you guys have seen since you've made that strategic shift?
Well, I think for us, the renter's always been our customer. It was really the what are the different in terms of the requirements of the channel, and there are some real differences. Like instead of integrating directly with the general ledger, we've got to build pretty sophisticated APIs that work with our payment platform partnership. We've got to think about the education of the renter and the landlord differently, because we don't have a direct relationship with the landlord anymore.
But they are still a critical tool in terms of how do renters know about Flexible Rent. Not only do they know about it, but this is an entirely new category. How do we educate them the right way? How do we educate the landlord the right way to know that for them, one of our key design constraints was this has to work exactly the same as every other payment method. There's no change to operations for them. The money's still there. There's no risk of charge-offs or NSF's or anything like that.
We take the risk. There was some technical constraints, but also just we've changed who our relationship is with, which has really made us have to think really critically and strategically about how do we provide the knowledge, the education for the two key constituents, the renter and the PMC, through this channel.
Got it. So based on your experience with Best Egg, I'm curious, do you have any words of wisdom, advice for a point solution vendor who might be out there listening to this and thinking, okay, I get it, I agree, what do I do now? What do I do next?
I mean, I think this dynamic is probably going to continue. The venture market that fueled the creation of all of these companies has gotten really hard, and it's going to stay probably really hard into 2024. What worked for us is just to sit back and think about, without constraint, what is the optimal way for all the key constituents to interact with my product? Who's our end user? Is it the renter, or is it the PMC? Who's the customer? Who pays for the product? What are the existing workflows vis-a-vis how our product fits into them?
For example, like a maintenance solution. Is it something where the renter always interacts with it outside of the renter portal, or they only ever interact with that behavior inside of a renter portal? I think it all starts there. What is the optimal solution without constraint? And then what are the value props that you offer to the various constituents? There is just an equation out there. How do you create value? Who do you create value for and who uses you?
And when you go through that exercise, you will learn where should this product sit in terms of an integrated solution and not an independent point solution. Then it just comes down to, can you make that unconstrained optimal scenario, can you make that happen either via... Some companies will go our route and we'll partner in a really integrated way, and it took us months and months and months of building tech to make that true and make that work. Some companies will get acquired.
But I think it starts with that. What is the best way for your product to be used and what is the value you create for the various constituents? And I think that exercise will tell you the story and where you should focus your time.
That's helpful. So I started our conversation off with a question around big bets. I want to end our conversation with another question about big bets. We're about to transition into 2024, as crazy as that sounds. So I want to hear from you, what are any new big bets that you see or that you are making in this coming year as it pertains to multifamily or trends or predictions that you think are worth highlighting for the audience?
It is crazy we're almost at 2024. I think there's two questions in there. What big bets are we making and what are just some predictions, which I'm not sure how much value anybody listening is going to get out of my predictions? But big bet, our business unit is staying laser focus on scaling Flexible Rent. We have partnerships today that will enable Flexible Rent for upwards of 12 million renters, and we believe that will be upwards of 20 million plus by the end of 2024. So that's half of all renters in the United States will have the opportunity to pay flexibly through our Flexible Rent product.
There's a lot from a technical perspective, from an operational perspective, from a support perspective and capital perspective to make that happen. So we are making the big bet that we are going to continue to scale Flexible Rent and stay laser focused on doing so as well as we can. Predictions. I think that we will see consolidation. I think people have been predicting this for a couple years, but why I think it's going to start to happen this year is, again, venture markets are really, really tight and they're really focused on scalability, path to profitability, big markets, et cetera.
I think venture's going to stay tight, which means there's going to need to be different ways to capitalize and scale your businesses. So I think we're going to see consolidation finally. If you look across the ecosystem of who can be the acquirers, the consolidators, I think it is the scaled incumbents. I don't think there is any industry where the scaled incumbents, like you guys, like the big PMCs or property management system companies, have more power than in multifamily and rental housing.
And so I think the acquirers are going to have to be the scaled incumbents. And most, if not all of the major scaled incumbents and systems out there now have people in seat focused on strategy and on acquisitions. And I think that's going to be a really interesting thing to watch. The other one is the big systems, you guys are an anomaly because you've always been really focused on the renter, but the big systems are all now really focused on the resident experience, and that is going to lead to more integrated partnerships as well.
Whereas for most of time, they have been focused on their customer, which is the PMC. So more acquisitions, more integrated partnerships, and I think we're headed that direction of renter focused, integrated, scaled experiences.
I love that, and I'll be watching alongside with you to see how those come to fruition. Well, Brady, this has been such an interesting conversation, and I'm so thankful to have had you on and to be able to learn from you. Thank you so much again for joining us, and I'm excited for our listeners to hear your words.
Yolanda, thank you so much. This was great. Take care. Happy holidays.
You too. You too.