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Small businesses get the opportunity to buy their building instead of renting, via a celebrity-backed startup

Posted by sayam

February 28, 2022

Kevin Song launched New York-based Withco in 2019, along with co-founder Taylor Savage, in an effort to enable small businesses being squeezed out by high rent to purchase their property. Song was inspired to launch the startup after his own parents had to hand over the keys of their grocery store business in Brooklyn, which they’d run for 20 years, when the landlord doubled their rent.

“My parents created so much value for their neighborhood but didn’t get to keep their business,” Song told TechCrunch. “It felt like an illogical indecency.”

Funds raised

Withco has raised $30 million from venture firms such as Founders Fund, Initialized Capital, NFX and Canaan Partners, as well as luminaries such as tennis pro Venus Williams, NBA star Kevin Durant and former Department of Housing and Urban Development Secretary Julián Castro.

Other big-name investors include Danny Meyer’s Enlightened Hospitality Investments, Lennar’s venture arm LENX, Will Smith's Dreamers VC, and the founders and CEOs of Affirm, Carta, DoorDash, Invitation Homes and Opendoor.

The premise

Many small business owners lack the capital to make a down payment, as well as the expertise to navigate the complexities of a commercial real estate purchase. Withco’s lease-to-own business model gives such owners the opportunity to gain equity in the property they are renting.

Withco focuses on small, single-tenant businesses that are up for sale for less than $5 million. The company purchases the commercial properties on behalf of prospective business owners, whose monthly rent is put toward a down payment. Eventually, they can buy the building for a pre-agreed price.

How it helps

Rent is one of most business owners’ biggest costs, second only to labor. While small business owners may qualify for a lease, few have the necessary capital to make a down payment for a favorable mortgage.

Meanwhile, it’s not uncommon for favorite local stores to close when a new landlord jacks up the rent. Withco aims to help such small businesses become their own landlords and buy the buildings they currently rent so they don’t get priced out.

How it works

By analyzing the financial data of businesses it seeks to partner with, Withco identifies whether the enterprise is a good candidate for the rent-to-own model. The platform acquires commercial real estate costing less than $5 million in partnership with renting small business owners across the U.S. It works to transition them to full ownership over the entire lease-to-own cycle as a financial business consultant.

For now, the startup is working mainly in the Midwest, Southeast and Texas. These are the areas of the country with a high density of small business owners, many single-tenant commercial properties in the $5 million price range and strong real estate fundamentals — three things Withco is looking for. The lease-to-own model can also work in more expensive real estate markets, but by focusing on less expensive properties, it can work with more small businesses.

“Every business owner that we support and every property that we buy, we're putting a new business owner on his or her path to ownership making a huge impact,” Song told Forbes. “So now we're trying to scale this into a platform that can do hundreds of thousands of deals every single year.”

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sayam

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Small Businesses

Small businesses get the opportunity to buy their building instead of renting, via a celebrity-backed startup

Funds raised

The premise

How it helps

How it works

Authors

sayam

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