Proptech

Keyway emerges from stealth with $15M for commercial real estate

Commercial real estate proptech Keyway emerged from stealth on Friday alongside a $15 million seed financing round led by Canvas Ventures with participation from Montage Ventures, FJ Labs and Crosscut.

As part of the funding deal, Canvas Ventures General Partner, Rebecca Lynn, will join Keyway’s board.

The latest capital injection will allow Keyway to expand its current product offerings, in particular, its lease-back solution for small and medium-sized business owners looking for liquidity. The flagship product gives SMB owners access to capital that is currently tied up in their real estate while remaining in the same location with a long-term lease, removing the costs and revenue losses generated by moving.

The solution uses machine learning to source and underwrite real estate and aims for a closing in just four weeks. The proptech then leases it back to the SMBs allowing them to access capital quicker and with less restrictions.

By filling out foundational information – address, industry, clientele served, etc. – Keyway customer specialists then run through more critical information and then submit an offer the SMB can review. That offer is based on comparables in the same market, on the price of the actual property, plus health of their business. Brokers can connect to the Keyway portal and monitor the transaction status, expected closing times and if additional information is needed.

According to a news release, the company has completed deals in Texas, Illinois and Georgia in tandem with multiple lenders and equity partners, and has over $250 million in its pipeline for nationwide transactions.

“The current sale-leaseback process is painful for business operators,” CEO and co-founder Matais Recchia told FinLedger. “It takes around 13 months to complete a transaction, over 10% in closing costs, and more than 20% of deals fall through due to unsecured capital resulting in a lot of uncertainty for business owners. Keyway uses technology to simplify this transaction by providing business owners with a data-backed, all-cash offer, a four-week closing and 50% lower fees.”

Prior to co-founding Keyway, Recchia established and headed IguanaFix, an online marketplace for home improvement and car repair services in Latin America. Recchia witnessed larger companies breeze through expansion and financing plans for commercial residencies; however, he noticed smaller businesses struggle with closing contracts alongside less fiscal opportunities.

“There has to be more flexibility and more optionality for these complex small and medium business owners,” Recchia said. “A large player like Starbucks has a variety of means for sourcing locations, but a very successful mom-and-pop coffee shop on the corner doesn’t have the same alternatives. So we want to be the group for them.”

“When you see an independent dentist or veterinarian in the community, you want them to thrive and real estate plays such a huge role in that success,” Recchia added.

As of right now, Keyway is focused on commercial real estate particularly in the medical sector and deals that fall below $10 million. Keyway is targeting this sub $10 million group because most other institutional investors need to deploy capital at scale, meaning it is more efficient to target larger deals at an average size of $50 million, pushing many SMBs to the wayside.

These smaller deals are generally acquired by retail investors interested in buying one or two properties over their lifetime. By nature of this low volume, they have higher transaction costs, cost of capital and operate without the tools of institutional investors, Recchia explained.

The proptech currently hosts a team of 15 people, although Recchia said they expect to double that in the next six months. The newest funding will also allow Keyway to develop additional products including an expansion solution for operators looking to lease a new location, and a rent-to-own solution. Keyway will also continue to invest in technology and data science as it build out its engineering and product teams.

“It’s been super exciting to see a ton of institutional investor appetite for these type of assets, these smaller deals, as they just don’t have the bandwidth to go and acquire one small asset at a time,” Recchia said. “So we see ourselves as kind of like the aggregator of smaller deals to then be able to provide institutional investors access to this asset class on a more programmatic way.”

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