Growing up, Kevin Song witnessed his Korean immigrant parents build and develop a grocery store business in Brooklyn, New York.
For the family, he recalls, the business was more about earning a living. It was about being an integral part of the surrounding community – from sponsoring Little League games to serving as neighborhood ambassadors.
So when, after two decades of business, her parents had to close the grocery store due to the doubling of rent by a new owner, it was devastating — especially after the family had been paying rent for the entire lease term.
“My parents created a lot of value for their neighborhood, but they couldn’t keep their business going,” recalls Song. “It seemed like illogical indecency.
The experience left a lasting impression on Song. And that inspired him in 2019 to found with with, a startup that aims to help small business owners “benefit from the value they create in their neighborhoods” by becoming “simple and affordable” commercial property owners.
Withco’s mission is to purchase properties and then rent them back to small business owners with the option to purchase the property at a future date. It is a fact that many small business owners can easily secure a lease, but very few can secure a mortgage. And not only that, commercial property owners, when given the choice, often choose tenants with big names like Starbucks rather than lesser-known small businesses.
Song wants to change that.
The company’s model is similar to that of Divvy Homes, which buys homes on behalf of homebuyers and then gives them the ability to save some of their monthly rent for a down payment. But of course withco’s model applies to commercial properties.
“The only thing that separates most tenants from becoming landlords is actually a down payment,” Song said. “And believe me, leasing and mortgages are no longer good for small businesses.”
And today, withco is emerging from stealth with $32 million in funding raised in early rounds ($4 million) and Series A ($28 million). Canaan, Founders Fund, Initialized and NFX are withco’s main investors. Others who supported the company include Investing in Enlightened Hospitality by Danny Meyer, LENX(Lennar’s venture arm), Ken Chenault, Thirty Five Ventures, Will Smith’s Dreamers VC, BoxGroup, Not Boring Capital and Quiet Capital.
A long and impressive list of angel investors has also poured money into withco, including pro tennis player Venus Williams, former HUD secretary Julián Castro, basketball star Kevin Durant, Affirm founder and CEO Max Levchin; Kenneth Chenault, former CEO and president of American Express; Charter founder and CEO Henry Ward; DoorDash founder and CEO Tony Xu; Max Rhodes, founder of Faire, Eric Glyman and Karim Atiyeh, co-founders of Ramp; Opendoor founder Eric Wu, Plaid co-founder Zach Perrett and others (phew!).
Image credits: Founder and CEO Kevin Song / Withco
Keith Rabois of the Founders Fund said his company invests in companies that create or define categories and believes that withco “happens to be both”.
“He and his team have built a win-win business model that benefits not only small business owners, but also commercial real estate and capital markets,” he wrote via email. “withco will create wealth for some of the hardest working people in the country and redefine what it means to be a small business owner.”
Rabois sees withco’s offering as a bridge for small business owners towards ownership.
“Its technology platform is able to quickly identify qualified candidates, enabling the company to be a volume player in the massive, fragmented and long-tail commercial real estate market,” he added.
For Song, withco also means putting more control in the hands of small business owners, who face more challenges than ever before.
“If you do well, a lot of that value is actually taken out, either through medium-term rent increases or through an eventual long-term sale of the asset,” he told Ploonge. “And so it creates this whole systemic problem where it’s become very, very challenging to operate a small business. With our product, we are empowering small business owners to become commercial real estate owners or investors for the first time.”
Song said that, so far, withco has helped companies number the “double digits”. The goal is to end this year with 100 deals.
The New York-based startup plans to use its capital to hire its engineering, product, data science, sales and operations teams. It also plans to expand into new markets nationally and continue to build partnerships with brokers and developers. Withco intends to secure more capital for the purchase of more properties.
One customer, OJ Wilkins of rural cooking company The Carriage House, said the company reached out to him when the property he was renting was up for sale. He said that if Withco hadn’t bought the property and given him a way to work to own it, “the building could have easily been ripped out from under us.”
“We’re not a Burger King or a McDonalds, we’re not a ‘big box concept’, so we often don’t have the same opportunities. Going through a conventional bank at first was not an option.” added Wilkins. “If we hadn’t reached out to Co, we wouldn’t be in a position to go forward on our own.”