Proptech startup Key has received $11 million CAD in seed funding to unlock future growth for its digital, on-demand home-ownership program.
Key claims its co-ownership model makes homeownership accessible without needing to qualify for a mortgage or save for the typical 20 percent down payment. Instead, the startup lets occupants move into homes with a small down payment of 2.5 percent of the home’s value without having to take out a mortgage.
Key describes its model as a hybrid between renting and owning where monthly payments are comparable to market rent and a portion of the payments serve to increase home equity over time. The investment can grow from day one based on how the real estate appreciates. Every time more is invested, the lower the resident’s monthly rent-equivalent payments will be.
“Key has created a first-of-its-kind digital real estate platform that provides an accessible and future-forward solution to a massive market need.”
The startup’s digital platform enables users to browse available suites, apply for co-ownership, make payments, and manage equity in their co-owned space.
Luge Capital led the round with participation from Idea Fund Partners, The Social Entrepreneurs’ Fund, the US National Association of Realtors, Plazacorp, N49P Ventures, Red Jar Capital, TSV Capital, Moderne Ventures, and other undisclosed investors. The round closed in February.
Key will use the fresh funds to run pilot projects of its model in a number of Canadian and US cities. As well, Key plans to pilot different home models, including single-family, townhouses, as well as highrise and mid-rise condominiums.
Following the raise, Christopher Langford, a partner from Idea Fund Partners, joined Key’s board. Rob Richards, Key’s co-founder and CEO, said after one meeting Langford had already brought Key “great stuff.” Richards called Idea Fund a very connected firm with senior partners “who know everybody in tech,” and arrives with good advice on how to scale.
For his part, Langford offered: “The rising costs of homeownership are being felt across North America, Key has created a first-of-its-kind digital real estate platform that provides an accessible and future-forward solution to a massive market need. Idea Fund Partners is looking forward to growing with Key in making this model accessible to many Americans.”
Key said it currently has some 60 condos in Toronto on its platform, and claims a waitlist of nearly 5,000 people in the Ontario city. “Demand is off the charts,” Richards said.
An example of the kinds of condos Key has made available for co-ownership is suite number 212 at 15 Stafford Street near King Street West. It’s described on Key’s platform as a “functional one-bedroom suite with a spacious living room and balcony.”
An individual wanting that suite would make a $17,475 initial investment, and then pay $2,195.21 a month initially. The suite is valued at $699,000. Key refers to people who participate in their program as “owner-residents.”
Richards said Key’s platform allows a property investment owner of five or 50 homes to easily attach their real estate to the platform, and then enables a prospective owner to become the occupant and co-owner through Key’s contractual structure and through its FinTech mechanisms.
“Our patented technology has an ownership management system, a computer network, and a contractual obligation engine that calculates the value of the home to relative ownership positions, and who owes what to whom on a monthly basis,” Richards said.
“Then we automate all the financial transactions, and for the owners of this real estate, we’re improving their asset management. When you look at what owners care about, it’s risk and stable cash flow, and having good tenants,” Richards added.
He likens Key to a SaaS company where the startup charges a recurring monthly fee for owners of real estate to attach their properties to the platform.
There’s no question Key is a timely venture. A 2021 report from the PropTech Collective noted COVID-19 accelerated the adoption of technology in both the real estate and construction industries, meaning proptech startups are playing a key role in the future of physical space.
As well, proptechs may be able to alleviate some of the pain of purchasing homes at a time when house prices have climbed sharply, and when younger people believe they may never be able to afford a first home.
The proptech report also said out of 300 startups surveyed, approximately 60 percent are in the early stages of their growth. Sixty-seven percent of proptech startups in Canada were founded after 2014, and of the startups studied, 59 percent are at the pre-seed, angel, or seed stage of their growth.
Key falls squarely in the latter category. Richards, along with co-founder Daniel Dubois, formulated the idea for Key from 2018 to 2019. Richards recalled that he and Dubois, for some months, met every Sunday for a couple of hours over coffee, planning through the model for Key. Through 2019 into 2020, they built the platform, filed their patents, and began to hire their staff. “It took a couple of years to get from idea to functional product,” Richards said.
Currently, Key has about 20 employees. Up until this current seed round, the startup was bootstrapped.
Richards previously co-founded the VC firm, Plaza Ventures, which invested in Key as part of this round. While there, he said he was working with a firm within the real estate development industry, and had just observed the 2008 mortgage meltdown, and how investors moved into real estate, making it difficult for young people to become homeowners.
Currently, Key has over 30 occupants in 22 homes that are officially co-owned, although not yet sold. “That’s the whole point of Key, is they start by buying two and a half percent or three or five percent and then every month they contribute more as they can,” Richards said. “Fifty dollars a month of monthly payment is what we call an equity boost that is automatically going to your equity account, so they’re building their wealth position and their ownership position on a month-to-month basis incrementally.”
He noted the majority of Key’s residents are first-time homeowners. “They didn’t know how they were going to own,” Richards noted. “They had really given up hope. They were despondent about their savings keeping up with prices. We’re helping so many people achieve that dream.”
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