Property Partner may only be two years old, but it’s already closed four funding rounds and gained some impressive investors. Emily Spaven speaks to the company’s CEO and founder.
Daniel Gandesha’s company has raised $22.5m in its mere two-year existence, but the 33-year-old is very modest about his achievements.
“There is very little value in an idea. I don’t spend any time patting myself on the back for coming up with the idea behind Property Partner. That’s in the past, so now it’s about execution,” he said.
Gandesha moved to London in 2008 and was frustrated as he could clearly see the suburb of Balham was set to become something special, but didn’t have the capital to invest in property there.
“So I missed out, and I had that feeling over and over again for many many years and it came to a head in the summer of 2013. I was walking down this road in Putney and there was a big house for sale and I imagined a stock ticker on the side of that house and I thought ‘why can’t it be that easy?’.”
He decided investing in property should be as simple as investing in a listed company – you don’t need to buy the whole thing, you can just buy a piece of it, and when you want to sell, you can do so on a platform at a price that reflects the underlying value of the asset.
Gandesha used this idea to found Property Partner in early 2014, but didn’t launch to the public until 2015. He spent that year building his team and network of advisors, plus raising funding and gaining approval from the Financial Conduct Authority.
Building the team
The former KPMG chartered accountant said the hardest thing about building a tech company from scratch was that he didn’t come from a techie background. He spent a good deal of time speaking with various potential CTOs before he found someone he believed could build exactly what he was looking for.
“For non-technical founders, it’s really important to make sure you build an engineering team internally. It is not something you should outsource – a restaurant wouldn’t outsource its cooking and a tech company shouldn’t outsource its tech,” he said.
Gandesha’s company now employs 31 people and he’s very proud of his team. “It has a huge amount of expertise,” he boasted. For example, the firm’s director of property, Robert Weaver, formerly worked as a global director of residential property at RBS and he ran a £500m residential fund at Invista Real Estate before that.
The property team has experience working across many of the large residential property operators in the UK, and they use this to assess every single deal before it makes it onto the Property Partner platform.
“The ultimate litmus test is ‘would we be willing to put our own money into these assets?’ If the answer is no, then it doesn’t go on our platform,” Gandesha explained.
When the team finds a suitable property, it pays a 10% deposit from Property Partners’ own balance sheet, agrees a completion date and adds the property to the platform. Customers can invest upwards of £50, having passed an onboarding questionnaire, and Property Partner underwrites the capital raise. The firm retains sufficient cash on its balance sheet so that if there is a shortfall, Property Partner can invest its own money to make up the difference.
“It’s not necessarily something we’ll do forever. As we get enough of a track record in the market, we can show vendors we consistently fund properties ahead of completion and we will slowly move towards a more efficient working capital structure where we don’t underwrite,” said Gandesha.
Investors using the platform pay a one-off 2% fee when they initially make their investment, and Property Partner states investors can currently earn an estimated return of 10% per year, after fees. They can then offer their investment for sale at any time, or exit at market value after five years.
Back in March, Property Partner raised a £15.9m Series B round, led by Octopus Ventures. This followed a £5.2m Series A, led by Index Ventures a year previously; a £1.25m Seed round in September 2014, also led by Octopus Ventures; and an earlier £150,000 Seed in January 2014.
Gandesha said the challenges presented during the fundraising process for each of these different stages of funding varied wildly.
“When you’re raising your Seed round, you have such little evidence on which to justify the investment you’re asking for, so you need to be incredibly effective at communicating your vision. You need to explain your plans for the future year, two years of the business,” he said.
Securing later funding rounds is an entirely different challenge. Investors’ requirements evolve to involve your entire team, Gandesha explained.
“When you move onto your Series A and Series B, VCs involve all of your management team in their interviews, so you need to make sure your team is aligned and all understand the vision,” he added.
The company publishes a monthly blog post called Open House, which details its user figures and investment performance. The post relating to August 2016 put the number of people who have invested through Property Partner so far at over 8,112, with £35.6m being invested. The previous August, these figures stood at 3,500 investors and £7.55m invested.
The most recent figures show 28% of the platform’s investors had a portfolio size of up to £100, with 25% having a portfolio of between £100 and £500. Some 6% of investors have a portfolio with Property Partner of over £15,000.
“Our public launch was only January 2015. So we’re about a year and a half in and to reach the stage we’re at is great for us,” said Gandesha.
He went on to say this year has been particularly “interesting”, with the referendum and the UK’s decision to exit the EU. It’s been a trying time for those in the FinTech and property spaces, but he claims his company “weathered that test just fine”.
“But it’s been a period of rapid growth with real tests to our model that we proved we could survive. It’s been a great time to have founded the company, so we could experience all of those things in a short amount of time,” Gandesha added.
There are other companies innovating in the property investment space, but it’s not those Gandesha deems as his competitors.
“Ultimately, what we are is an alternative to direct investment, so that’s our competitor,” he said.
The UK residential investment market is dominated by the cottage industry of buy-to-let. Estimates vary, but many predict around £20bn a year is invested in the sector.
While he believes everyone should be able to have a slice of the buy-to-let pie, not just those with piles of capital, he stops short of encouraging people to invest all their life savings in property through Property Partner. In fact, his company actively filters those people out via its onboarding questionnaires. Instead he thinks Property Partner fits well as part of a diverse, modern investment portfolio, with investors also placing capital in the likes of Nutmeg for their equities and Funding Circle for their SME loans.
“All of those, in my humble opinion, are complementary to what we’re doing. As we see this trend of people taking greater control over their investment decisions, we will see them choosing more and more of these alternatives,” Gandesha explained.
Plans for the future
The father of one, whose wife has another baby on the way, said his plan for the next 12 months is to continue building the number of properties on the platform, ensuring all of the company’s processes are scalable. In the long term, Gandesha has his sights set on foreign property markets.
“Our vision is to build a global stock exchange for property investment. With millions of investors all over the world, investing billions annually. We know that will be very hard to achieve. But that’s what we’re setting out to do,” he explained.
Gandesha is keen to express that he doesn’t want to appear arrogant by suggesting global domination, but said with his expert team by his side, impressive tech and business veterans on his board and world-renowned investors backing him, he’s confident Property Partner can achieve its ambitious goals.