Second Closet has raised $13.2 million in its latest round of funding, as the startup looks to expand its self-storage offering within Canada.
The Series A funding round comes almost a year and a half after the Toronto-based company raised $2.04 million to support its geographic expansion to Vancouver. Second Closet’s total funding to date comes to almost $16 million, including a small seed funding round in 2017.
“The self-storage space is a few billion dollar sleepy industry.”
– Mark Ang, CEO, Second Closet
Launched that same year, Second Closet’s digital platform allows people to order and schedule the pickup and storage of their belongings, and only pay for the space they use. The company provides boxes for people to store their items in, and picks them up to be stored at a warehouse. Many of Second Closet’s customers are seasonal users living in apartments and looking to free up space.
Since raising its last round, Second Closet has successfully expanded into Vancouver, making its solution available in two of Canada’s largest cities. The $13.2 million is meant to help “pour accelerant” on Second Closet’s growth: the startup plans to use the financing to launch in other Canadian markets in the first quarter of 2020.
CEO and co-founder Mark Ang told BetaKit that the startup is keeping the locations confidential due to interest from competitor self-storage brands.
This year has seen self-storage startups like US-based MakeSpace enter the Toronto market, which is also home to business-focused storage startup ShuffleSpace. While this may be the case, Ang noted that Second Closet is the largest self-storage startup in Canada, claiming that it also has the most sophisticated technology.
Used by thousands of customers across its two locations, Second Closet claims to have seen triple digital revenue growth over the past year. It has also doubled its office team just in the past month, to more than 75 employees, with plans to hire more.
An untapped market
Second Closet is operating in what is expected to be a billion-dollar market that has yet to see significant technological disruption.
The self-storage industry is one of the fastest-growing sectors in commercial real estate in Canada, according to a report from industry market researcher IBISWorld. With a total revenue of $4 billion in 2019, the industry has benefited from dense urban cities – like Toronto and Vancouver – which increasingly see people living in smaller homes with limited storage space.
“We are looking to change the game from a customer experience perspective and a usability perspective.”
“The self-storage space is a few billion dollar sleepy industry where ‘you build it and they come’ – that’s the model,” said Ang. “Our model is more aligned with what consumers today expect.”
In an era where consumers are used to “immediate gratification” from rideshare and food delivery apps, for example, Second Closet is operating in a way that fills that gap for the self-storage industry.
“We are looking to change the game from a customer experience perspective, and a usability perspective. And I think what we’re seeing with our clients is that that’s very much the case,” said Ang.
Steve Lau, partner at Whitecap Venture Partners, which led Second Closet’s Series A round, noted that the self-storage industry has not seen innovation in decades. In Lau’s estimation, Second Closet has the potential to be one of the Canadian biggest tech exits, given its team and the market it is addressing.
Investing in real estate
Second Closet is backed by a contingent comprised of a number of Canada’s biggest real estate players.
Real estate moguls Mike and Mark Cowie have invested in Second Closet since its seed round and participated in this latest round through their firm, Cowie Capital Partners. The Cowie brothers are also executive vice presidents at Canada-based global commercial real estate firm Colliers International, and have a long history of working in the real estate space. One of Cowie Capital Partners’ four investment focus areas is self-storage, where it operates 500,000 feet of gross leasable land throughout Southern Ontario, through storage company Self Stor.
Ang noted that Second Closet likes to be surrounded by real estate players since the startup plays at the intersection of technology and real estate. He called the support of its investors a huge benefit.
“To have industry titans like the Cowies behind you … it’s been super helpful.”
“As a small company, having to negotiate leases and hundreds of thousands of square feet, you don’t have that much credibility,” he said. “So to have industry titans like the Cowies behind you, where they’re work can move mountains, it’s been super helpful.”
“[Having our investors] just helps open doors, it’s up to us to walk through them, but they can certainly help to unlock it,” Ang added.
Second Closet has also been supported since its seed round by Dream Maker Ventures, the venture arm of Dream Maker Corp., a Toronto-based asset management firm that operates in real estate, development, and property management. The firm has opened doors for Second Closet by giving the startup access to its multiple real estate properties, and by promoting Second Closets to its residential property tenants.
Isaac Olowolafe, partner and founder of Dream Maker, told BetaKit that Second Closet has considered moving into the B2B storage market and owning its warehouse properties instead of leasing.
Ang told BetaKit that, for the moment, Second Closet prefers to lease its warehouses to be agile, and is focused on the B2C space for the time being, as it is “swamped with demand.”
The Series A round also saw participation from existing investors MIG Group, which led Second Closet’s previous round, and BlueCat founder Michael Hyatt, who has been with the startup since its early days.
“It’s rare I come across such a young rockstar entrepreneur like Mark,” Hyatt told BetaKit. “He’s smart, coachable, and super hard working. I think Second Closet brings a higher level of simplified logistics for both people and businesses when it comes to storage and deliveries. He’s a fucking star.”
Along with its expansion into new Canadian markets, Second Closet also plans to use its lastest financing to further develop its technology platform and continue to grow its team over the coming months.
Images courtesy Second Closet