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Building a Leader in Property Management SaaS

Buildium Case Study

Sumeru Equity helps Buildium drive explosive growth and earn $580 million valuation through founder-friendly investment strategy and teamwork

“To be founder friendly, first and foremost, is to recognize the central role founders play in animating the soul of a company.”

– John Brennan, Managing Director at Sumeru Equity Partners

Company Background

Residential property managers have a lot on their plates when it comes to managing their portfolios, including managing general operations, accounting and leases. Recognizing this pain point, Boston-based Buildium sought to simplify residential property management — and make it more profitable — by bringing the various functions of the process together in a single, fully integrated, cloud-based SaaS offering.

Buildium was growing, but its founders faced challenges in determining the best path forward for the company. Our team at Sumeru investigated, performing extensive thematic research in the market for real estate technology. We boldy saw the potential in Buildium and acquired a majority stake.

Sumeru Managing Director John Brennan explained what initially stood out about Buildium:

“[Buildium has] a really committed founding team who brings energy, integrity, and intelligence to what they do on a day-to-day basis. They reached that scale where the traditional ‘startup’ way of doing things needed to give way to a more industrial-strength approach.”

Managing Director at Sumeru Jason Babcoke noted that Buildium also had a strong product and were positioned well in the market.

“Along with a product-focused founder who established a great culture, Buildium also had a very strong product in a growing market. There were clear and tangible opportunities to change operational performance for an already successful company.”

When Sumeru entered the picture, Buildium had a strong product reputation with its customers. But they were experiencing slowing growth, poor KPIs and increasing cash burn. They had a strong product team, but were inexperienced in operations.

Over the next three years, Sumeru helped Buildium double the company’s size through aggressive organic growth and a strong focus on enhancing customer experience. This was supported by a new infrastructure that was more experienced in operations and could help drive new efficiencies as a team.

Sumeru helped increase growth from 25 points to 40 while improving EBITDA from (15) to break-even. We also cut churn by 50% in 18 months and doubled the size of Buildium’s average customer.

Reducing Churn by 50%

A key driver for the success of this project is the strong relationship that was formed with the Buildium team. We collaborated and communicated well and were able to strike a valuable balance between honest and constructive feedback, as well as trust in the founders’ intuition and opinions.
One example of how these collaborative strategies resulted in success was by reducing churn by 50%. Buildium had high churn across customer sizes. Through detailed customer behavior analysis, we identified clear opportunities to reduce churn through a combination of improving the product, self-service onboarding and customer success. Within 18 months we cut churn by 50%.

Brennan expanded on this concept:

“To be founder friendly, first and foremost, is to recognize the central role founders play in animating the soul of a company and having an intuition about how the business is doing.

“It’s not that we praise them all the time and we don’t disagree with them, and they get to make every single decision. But I think it’s about honoring that role, and honoring their critical role in that process.”

Value Creation

Early on, Sumeru developed a creative and flexible strategy and provided the capital to help Buildium expand its product offerings while growing its business rapidly and efficiently.

The plan to move up-market involved enhancing product offerings, adding new support capabilities, and hiring a dedicated sales team. This resulted in a significant increase in average revenue per customer. The company also cut churn in half by creating a customer success team and streamlining the onboarding process.

When a company grows at a rapid pace, it will sometimes need to bring in new leadership or a new CMO. This can strain relationships among key players, and members of the team need to have a strong bond to overcome any challenges. Sumeru and Buildium worked together to recruit a talented C-Suite team that could help scale the company and improve its efficiency.

According to Brennan:

“When companies go from $15 million to $50 million to $100 million, the cast of characters changes. Founders have often built their team at $3, or $4, or $15 million, and those people have been with them the whole time. The reality is that not every one of those people can be in the same role at $50 or $100 million.”

The team also worked to expand the company’s technology platform to include more features pertinent to property management, including tenant payments and credit card processing.

Explosive Revenue Growth and $580 Million Valuation

As Buildium crossed into profitability, their annual organic revenue growth rate accelerated from 25% to 40%.

The company’s impressive growth and strong market presence made them an attractive acquisition target. In December 2019, Buildium was acquired by a public company for $580 million.

Added Babcoke:

“The two founders knew the product, and they were both engineers that originally built the software platform for their own use. But, they needed a partner to build a great business on top of the strong product. Through this partnership, we were able to quickly scale the business and improve operations, ultimately leading to an acquisition that resulted in a strong gain on our investment within 3 years.”