It is generally acknowledged that Lagos has a serious housing shortage issue. The state’s large size and high population density are the root causes of the housing shortage.
With a population of 15.4 million, Lagos, the smallest state in Nigeria, is also the most populous metropolis in Africa.
Lagos receives 123,840 visitors each day, making it one of the cities with the greatest rates of internal migration in the world, according to Akinwunmi Ambode, the governor of Lagos state, who made this claim in 2016. According to Rauf Aregbesola, the interior minister of Nigeria, this enormous influx of people has caused a persistent need for homes, which when combined with the scarce quantity of homes available, has resulted in a housing shortfall of 2.5 million homes.
Since its founding in 2018, the Nigerian business Spleet has been offering solutions to the housing crisis in Lagos. The firm originally began as a marketplace where prospective renters could meet landlords and pay rent on a monthly basis, but it changed its focus to an embedded financial solution when it realized that the model could not grow. Currently, Spleet gives tenants the option to rent properties and pay rent monthly while simultaneously giving landlords the choice to get the rent annually.
Spleet has raised $2.6 million in a seed funding round, which was supervised by MaC Venture Capital, to expand its residential rent management and rent finance offerings.
Numerous other investors joined this round, including Proptech operators Eduardo Campos and Paulo Buchicher of Yuca and Maajed Chaaaraoui of Insurami, as well as Noemis Ventures, Plug and Play Ventures, Assembly Fund, Ajim Capital, Francis Fund, and Daba Finance. This round also included existing investors from Spleet’s pre-seed round as well as Metaprop VC and HoaQ Fund.
Akintola Adesanmi, co-founder and CEO of Spleet, stated on a conference call with TechCabal that the company’s rent financing model would exit beta by the fourth or first quarter of this year. He cited a dearth of skill, which this seed investment helped to rectify, and a desire to gather data as the reasons for the delayed debut. “We wanted a beta to go live so that we had enough data to go out with a full product.”
Because Nigeria lacks a standard credit scoring system, there are many non-performing loans (NPL). The overall amount of non-performing loans in the banking industry reached N1.21 trillion as of the end of February 2022, according to the Central Bank of Nigeria. Adesanmi said that Spleet had incorporated an NPL rate of 6%–8% into the product during the beta phase to avoid a similar occurrence with their rent financing approach.
He continued by saying that Spleet collaborated with several financial institutions to aid in loan recovery in order to become profitable. Since this kind of product isn’t necessarily available in this market, being in beta for more than nine months has allowed us to gradually understand what default rates and non-performing loans would entail.
With this rise, according to Adesanmi, Spleet will create products for everyone involved in the residential rental industry. In the four years since Spleet’s founding, he continued, agents had viewed the company as a rival, but now Spleet would create products for the agents.
The startup intends to broaden the range of products it offers, adding a service that automatically collects rent payments on behalf of landlords, a tool that helps landlords and real estate agents thoroughly screen potential tenants before offering them lease agreements, and a no-collateral, low-interest rental loan product.
Before considering expansion, Spleet intends to consolidate its position in the Nigerian rental market over the next 12 to 18 months after lodging more than 1,000 people in Lagos alone. Spleet was eyeing the East African market for growth, with a concentration on Kenya, Adesanmi continued.
Adesanmi asserts that Spleet can only offer an accessibility solution at this time. Spleet originally attempted to address the accessibility and affordability challenges in the rental market. “We consider ourselves to be a conduit. We can’t handle affordability on a large scale, but accessibility is something we can deal with right now, he said. Adesanmi continued by saying that he thought that over time, affordability will be addressed with more accessibility.
Most Nigerians cannot afford the over $1,500 monthly rent that is listed on Spleet’s marketplace. This, according to Adesanmi, is caused by a lack of reasonably priced rentals in the market, which leaves only the more expensive rents available. The more expensive properties are typically what are left accessible to tenants on our marketplace. The reasonably priced ones are already gone, he remarked. Adesanmi noted that Spleet records a turnaround time of 48 hours when reasonably priced rental properties go on the market.
Adesanmi claims that Spleet currently generates more than $1 million in recurring annual revenue and had an NPL rate of less than 2% during the beta testing of their rent finance product.
He also mentioned that each customer’s typical lifetime is roughly 25 to 26 months, translating to $1,750 in revenue per customer in dollars.
Google revealed last month that it had chosen 60 startups from Africa for the second cohort of its Google for Startups Black Founders Fund. The firms will receive up to $200,000 in credit for Google Cloud in addition to equity-free capital ranging from $50,000 to $100,000. One of the chosen firms was Spleet, and according to Adesanmi, the Google program came at the right time for the company. When Spleet introduces its new platform in a few weeks, he claimed that the Google Cloud credit would assist down prices.
Marlon Nichols, co-founder and managing general partner at MaC Venture Capital, commented on the funding round, saying, “The housing crisis is a significant issue that affects us on a worldwide level, and Africa is no exception. Large segments of the population in nations like Nigeria are prevented from accessing the rental market by the demand that tenants pay 12 to 24 months of rent in advance, thus making them homeless. MaC is honored to work with Spleet as it advances a holistic solution that benefits all sides of the housing market and truly contributes to the fight against homelessness.