The idea of ownership in the American economy has changed so much in recent years that it’s easy to forget the once high level of importance placed on it. If we think back, most of us can remember at-least one conversation with our parents about Uber or Airbnb that resulted in a lecture about the dangers of using other people’s things.
Ajith Mohan Karimpana, the founder and CEO of Furlenco, headquartered in India, explains that the country is going through the same paradigm shift in how millennials value and prioritize ownership. In short, they couldn’t care less. They travel frequently, seek opportunity, and emphasize experiences over inanimate objects.
Despite similar pushback to that seen in the U.S., Karimpana, an ex-Goldman Sachs banker, was able to build a company that allowed these upwardly mobile young folks to protest against the burden of “things” by not having to buy them at all. To start, Furlenco is focused on furniture rental, but Karimpana doesn’t see it as the end of the road.
The company is announcing that it just closed a large fundraise consisting of $15 million of equity, led by Lightbox Ventures and Axis Capital and $15 million of debt, from banks, NBFCs, individuals and family offices, for a total haul of $30 million. A raise of this size in the United States would signal product market fit but in India that’s a far understatement. Debt rounds of that size are rare in the country and hint that Karimpana is not only right so far about consumer behavior, but right that the rental model can be cashflow positive in serious way.
To be clear, calling Furlenco the Airbnb of furniture would be a misnomer. The company is more like the love child of Ikea and Jonny Ive with enough Airbnb spunk to disrupt the Indian furniture market high up in the food chain. Furlenco employs a large staff of designers to actually create better furniture from scratch. The pieces are designed with longevity in mind, utilizing a lot of solid wood that can easily be refurbished.
People often poke fun at millennials because they seemingly want it all, but Karimpana sees that personality trait as a market opportunity rather than an annoyance. His team is building high-quality reclining chairs that not only have better ascetics but that can be swapped out and replaced more easily than a cell phone. Tired of the way a room looks? Swap. Moving from Bangalore to Pune for a new high paying tech job? Swap. The process is designed to be effortless and less costly than selling furniture and repurchasing every time a major life event throws a wrench into things.
“You shouldn’t rent because you need to rent, you should rent because you want to rent,” touts Karimpana.
That plan seems to be working out because Furlenco has shipped $20 million worth of furniture to date to 15,000 homes. And despite that fast growth rate, furniture utilization remains above 95 percent, which means that the company doesn’t need large warehouses to store unrented items that are losing money.
Like any good founder story, Karimpana explains that his idea was rejected by 30-40 venture capitalists before one finally took notice. The process of closing a $6 million Series A took over a year. Ultimately Lightbox Ventures took the gamble on the cost intensive business model.
Designing and building furniture may not be cheap, but it does lend itself well to raising debt. See, Furlenco is now essentially a financial instrument backed by physical collateral. Karimpana notes that the nature of the company’s subscription based model also means that forecasting revenue is a rather predictable and easy task. Churn with furniture tends to be low and each customer is significantly more substantive in terms of their overall contribution than someone like a Netflix subscriber.
Potential customers on the fence about adopting the rental lifestyle, and concerned that there might not yet be enough choices to personalize the design of a home, can find comfort in Karimpana’s aggressive plan bring 1-2 new products to market every quarter. Karimpana also has a thesis around the nexus of furniture and electronics that will be interesting to watch as Furlenco moves to provide other innovative rental solutions.