Franz Doerr is in reflective mood when DealMakerz interviewed him. The 31-year-old has just heard the news about the huge redundancies at Deutsche Bank, where he worked for several years as an Associate before setting up rental deposit firm Flatfair in January 2017.
The jobs bloodbath at the bank, which has seen 18,000 roles cut from its global workforce, has made the young German-born tech entrepreneur realise he made the right move to strike out into property.
But launching a proptech company into the lettings market is no less risky than trying to launch a career within the volatile banking sector.
Flatfair initially launched as an ‘alternative deposits’ provider alongside competitors Zero Deposit, Reposit, Canopy and others.
It’s a contentious sector. Renters contemplating a tenancy are offered the opportunity to pay either a regular or one-off payment that effectively ‘insures’ or ‘guarantees’ the landlord against the tenant defaulting on the rent, leaving the tenancy early or damaging the property.
But Doerr has ambitions greater than alternative deposits. He wants Flatfair to corner the market for pre-tenancy processes and his platform already offers tenant referencing and has recently inked a deal with MyDeposits to sign up tenants to its rental deposit protection service.
“We want to really focus on the things that are time consuming and complex and have a bit of a technology angle to them,” says Doerr.
“And we must concentrate on getting as much market share as possible and avoid getting too broad in our offering, too quickly.”
Doerr says Flatfair may eventually move into other pre-tenancy services such as inventories, but for the moment he wants to concentrate on streamlining the fragmented tenancy on-boarding process, which at the moment is complicated and time consuming for landlords, tenants and letting agents alike.
DealMakerz sat down with Doerr to put his ambitious plans under the microscope:
“The changes brought in that have capped the maximum deposit at five weeks’ rent has had a significant impact on landlords because they feel they don’t now have enough financial protection whereas with our they get 12 weeks’ worth of protection. The feedback from our industry partners is that the uptake among landlords has increased, consequently, which is very positive.
“We were worried initially that the deposit cap might persuade tenants not to use our service because they no longer have to provide such a large deposit or pay agency fees, which is great for them, but from a business perspective we were worried that demand would drop. But that hasn’t happened.
“We thought revenue share would be important to agents, but actually it’s all about local competition. Agents reach out to us when they see a local competitor beginning to offer the service. For example, we launched on the Isle of Wight with one agent and within two weeks we had 100% penetration in that market.”
“It’s a great idea on one level and I get it; help tenants make more seamless moves. But although it sounds great in theory, it does not work in practice. For example, would a landlord allow a tenant to move into a flat if the deposit was held up by the first landlord. And what happens if the rent is higher at the second property?”
“Until recently it was all about Flatfair and all our competitors in the deposits replacement space competing and trying to grab as much market share as possible, but I feel this has really changed.
“Even though deposit replacement is still our core product, we have more and more clients reaching out to us because it gives them access to a whole infrastructure solution including cash deposit protection and our instant referencing service which we have via a partnership with Homelet. It’s a service we’re already offering our key Build to Rent client, Greystar at its UK sites.”
“Absolutely. What we’re building, and how we differ from everyone else is that we are a payment solution. Our competitors are fixing ‘one little thing’ with their mostly insurance-based products which aren’t that tech heavy, but what we’re doing is offering a wider suite of services such as deposit registration and referencing, which is a much broader way of looking at it.”
“No, we are not. We just want to make their existing processes more streamlined through our technology.”
“They believe that with our product they can increase occupancy and also, as a landlord, get more protection with our deposit replacement product than they would with a cash deposit. We can also help them onboard a tenant into one of their developments within a day, and help them close the deal for a tenancy much quicker.