Abodo, the Madison, WI-based apartment rental website, has closed a $1.25 million Series A investment that’s significant not only for the company, but also because of the investors involved.
The round was led by Madison-based American Family Ventures, the $50 million VC arm of American Family Insurance. The fund was formed in 2010 but only came out of stealth mode in June. It has more than a dozen companies in its portfolio.
Also participating in the round were Madison-based 4490 Ventures and Chicago-based Lakewest Venture Partners.
4490 is the new $30 million early-stage information technology fund backed by the State of Wisconsin Investment Board and the Wisconsin Alumni Research Foundation. The fund lured Silicon Valley VC Greg Robinson to Madison to run 4490. Abodo marks its first announced investment.
“Abodo is a great example of a Midwest company that understands its markets and customers as well as, if not better than, its Bay Area counterparts,” Robinson said in a press release. “As a Midwest venture fund with Silicon Valley roots, we found Abodo to be a great fit for our portfolio, and we’re looking forward to helping the company grow.” (It’s also worth noting that American Family Ventures and 4490 work in the same downtown Madison office.)
Abodo has now raised more than $1.5 million to date. Its other investors include Wisconsin-based startup accelerator Gener8tor and Rent.com co-founder Michael Taus, an early advisor who has joined Abodo as its vice president of marketing.
Abodo was founded by three University of Wisconsin-Madison graduates in 2012 in order to make the apartment rental process easier and to amass a near-comprehensive inventory of local listings, something they felt was lacking on existing websites. The company is competing with the likes of Apartments.com and Craigslist, but it focuses more on small and mid-sized cities that often have a large college student population—areas Abodo thinks are being ignored by its larger competitors.
“We’ve found that there’s a massively underserved market outside of the New Yorks, the Chicagos, and the L.A.s of the world,” Abodo co-founder and CEO Alec Slocum told Xconomy. “And the problem is really large there.”
Abodo said it will use the new money to grow in its initial six markets—Madison, Milwaukee, and the Raleigh-Durham region in North Carolina among them—and expand to another 25 cities over the next year. Abodo’s website currently has listings in 16 cities, from Atlanta to Portland, OR, and says it intends to have listings in 100 U.S. cities by the end of 2016.
One way Abodo strives to build a critical mass of apartment listings in each market is by letting smaller properties—houses and apartment complexes with fewer than 15 units—advertise on the site for free.
For the most part, Abodo generates revenue in the industry’s traditional way, by charging large apartment complexes to list on its site. But the free listing option gives property managers an incentive to list smaller properties for which they typically didn’t want to shell out advertising dollars, Slocum has said.
Abodo is also beefing up its inventory of listings by partnering with larger property managers that have thousands of apartment units spread throughout multiple cities, Slocum said.
“Most of the cities that we’ve entered since Madison have actually grown faster than Madison originally did,” Slocum (pictured left) said. “That tells us that the problem exists elsewhere and we’re getting better at helping to solve it.”
Abodo now has hundreds of thousands of apartment listings nationwide, and more than 500,000 people have used the site since its inception, Slocum said.
The company has 10 employees and will grow to around 15 staff members in the next few months, Slocum said.
Taus is a key hire for Abodo. He lives in Bend, OR, but will travel frequently to the Midwest, Slocum said. Taus has deep industry contacts and experience running startups in this market. Rent.com was acquired by eBay in 2005 for about $415 million.
“This is our first company,” Slocum said. “A big part of what we do now is try to find people who have been there before, are experienced with building great companies. There’s obviously that huge upside with Mike.”
Abodo has an iOS app and plans to introduce an Android version in the next couple of months, Slocum said.
“We’re going to be focused on building new types of features that incumbents in our space have been afraid of building,” Slocum said. “They will help the whole process feel more local.”
