Jay McKee, founder and CEO of Lessen in Scottsdale, has high hopes for his young company.
“I think we're going to build a brand that people know about in five generations, I really do. And I want it to be here in Arizona,” he told the Business Journal. “We’ll hit over 50 (million in revenue) this year, we'll do over 150 next year, and we could have $1 billion in revenue within five years.”
Lessen, which opened for business on Jan. 1, 2020, is a startup tech company that connects property portfolio owners to service providers such as plumbers, house cleaners, electricians, roofers or general contractors.
On Thursday the company announced that it raised $35 million in Series A funding. McKee says this is just the beginning.
Today the company employs 150 people in 15 states, but it's looking to fill an additional 300 jobs in the next six months.
In order to accommodate the growing team, McKee said the company is in negotiations to build out a 15,000 to 20,000-square-foot space at either the Galleria in Scottsdale or the Watermark in Tempe.
Lessen serves as a connector between property owners and more than 800 service providers on the platform, but it also provides some services itself, with more than 1,000 Lessen contractors on its books.
For large institutional landlords that have tens of thousands of properties, the Lessen platform gives them an efficient way to clean, renovate, repair and turn properties on a large scale.
The round was led by California-based Fifth Wall, which specializes in supporting proptech companies. Fifth Wall is also leading the special purpose acquisition company, or SPAC, that is set to take Scottsdale’s SmartRent public later this year.
Dan Wenhold, a partner at Fifth Wall, will join the Lessen board of directors as part of the capital raise.
The Lessen Series A funding also had participation from Khosla Ventures, General Catalyst Partners and Navitas Capital. The company has now raised $44 million in outside funding thus far.
McKee said Lessen raised this round with a $146 million valuation and that the company is hoping to close Series B funding in the next year at a valuation seven to 10 times greater.
Solution to a problem
In 2012 McKee founded Colony American Homes in Scottsdale, a residential real estate company that went on to own tens of thousands of single-family homes across the country. Colony merged with Starwood Waypoint Residential Trust in 2015 before merging with Invitation Homes (NYSE: INVH) in 2017.
McKee said that proptech startups are flourishing in Arizona because real estate executives encountered issues in the marketplace and they’ve since gone on to create tech-driven solutions to remedy those problems.
“This whole web of real estate operators turned into some of the real estate tech companies,” he said. “I think prop tech, with a real estate institutional focus of how do you solve macro institutional real estate, is absolutely forming here.”
Lucas Haldeman, the founder of SmartRent, previously worked with McKee at Colony; Jerry Coleman co-founded Invitation Homes before co-founding Offerpad and Elevation Home Energy in Chandler; Opendoor and Zillow also have Arizona roots.
McKee, who has lived in Arizona since 1992, said he’s seen the state’s economy evolve in the past two decades and that he expects more and more startups to form here.
“I've watched the progression go from golf, hospitality, title escrow real estate, to where it is now. I think we have more of an infrastructure, it's more of a culture now,” he said. “It's going to take a few more years to continue to promote that, but I want to have an active role in that.”
Renewed perspective
The Covid-19 pandemic disrupted supply chains, forced remote work, closed schools and killed more than 3 million people across the globe.
As a result, McKee said that last summer many institutional landlords started outsourcing their service work due to fear of the virus and Lessen’s business boomed.
“It was very hard to operate with everyone working remotely, like who could they count on to get stuff done? And our phones started ringing,” he said. “We grew very controlled or conservatively through the end of 2020 and then 2021 was really like OK, let's go.”
McKee said the company’s revenue is growing about 20% per month this year. Summertime last year was an inflection point for the young company, but it was also a dire time for McKee personally.
He said he tested positive for Covid-19 this time last year and he was incredibly sick for three weeks. That brush with the pandemic reminded him to appreciate all he’s got.
“I feel like I have a second lease on life. ... It was a big eye opener for me,” he said. “There's a lot of times you start to not really recognize the things that you have in life and I took a really hard look and said things are really, really good.”
