Rentomojo, a startup pioneering an interesting alternative for furnishing homes in India, has landed $5 million in fresh financing to further scale its business. The money was provided by Accel and IDG Ventures, and it follows a $2 million raise last November from the same investors.
The 18-month-old company’s thesis is simple: it doesn’t make sense for most people in India to buy furniture and appliances for their place of residence. Instead, Rentomojo wants to free people from the burden and cost of ownership but letting them rent what they need instead.
Renting isn’t commonplace for home items, but the benefits — lack of commitment and cheaper prices — feed into trends that are accentuated in India, Geetansh Bamania, CEO and founder of RentoMojo, told me in an interview.
Indian workers, he explained, have, on average, a low disposable income (6,000-7,000 INR or around $105) which makes stumping up for expensive items tricky. They are also likely to move cities regularly, he argued that typically an average young worker moves location every two or three years. That makes owning physical assets impractical since you either cart them around with you, or are forced to go through the pain of selling them second-hand before you move.
Using Rentomojo, a consumer simply returns the asset and completes any remaining rental contract that they had agreed. The average contract for payments is eight months in duration, and Bamania said that typical customer is paying $30 per month for their item/items.
Rentomojo claims to have 10,000 active customers right now across six cities in India. Bamania is aiming to reach 10 million rental apartments to date within the next year. (In other words, to have placed items in a cumulative 10 million homes.)
Beyond the problem that Rentomojo is looking to solve, the most interesting part of the company is arguably the way it manages the potentially capital intensive process of ensuring supply. Bamania said the company initially procured and kept its own stock, but then he had a mind-shifting thought, why not treat the assets like an investment?
Turning the model on its head, Rentomojo began working with banks for asset financing. So financiers essentially pay to buy the assets, and then take a cut of the rental returns that each one makes. Bamania suggested that, typically, every $100 of input yields $10 in revenue per month, although a (undisclosed) portion of that is passed over to banks, with Rentomojo making its revenue from that, too.
“Renting as subscription model was capital intensive, we turned capex into opex and built a financial tech model,” Bamania explained. “It’s a win-win for those who own the asset and those who use it, too.”
He added that the new capital will be used to strengthen the company’s tech platform — which manages the asset finances and physical location — and grow its team of 160, most of whom are in the field.
“The industry doesn’t require that much capital didn’t want to raise what we didn’t need,” Bamania explained.
On the subject of financials, he said that the company is “unit economic positive” — in other words: not losing money on transactions — and that it wants to reach a $12 million annual run rate “very soon.” Right now, he said, the business is at around $3 million in annual run rate. That applies to review across its platform and it includes the money paid out to partners.
“The biggest hinderance [we face] is awareness,” he added of the challenges. “When a disruption needs to happen, awareness needs to be created. Subscriptions will displace commerce and take over the buying concept in time.”