Bloomberg Línea — Mexican startup Casai, which also operated in Brazil, has officially shut up shop after just four years, with the short-stay rental company selling the remaining assets of the portfolio that still existed in Mexico.
The apartments that belonged to Casai are now under the management of Blueground, Charlie, Wynwood House, Capitalia and Oasis Collections.
For the startup, which resulted from the merger of Mexico’s Casai and Brazilian company Nomah, two of the largest operators in the property rental segment, neither the money of celebrities such as Daddy Yankee or the funding from Silicon Valley venture capital giant Andreessen Horowitz (a16z) could save it, and the company’s operations in Brazil wound down at the end of January.
For Nico Barawid, the company’s CEO and co-founder, when Casai started operating, the short-term rental model in Latin America “did not exist”.
“Now the ecosystem is thriving, and I’m proud of the legacy our team has left,” he said in a LinkedIn post.
There was also room for self-criticism and reflection on what he thinks he could have done differently so that, eventually, Casai might have seen a different outcome.
“Entrepreneurs start companies because they imagine the asymmetric and highly unlikely end state, but often overlook the highly likely pitfalls along the way,” he said.
According to Barawid, at the company’s peak, there were reserves equivalent to nearly $30 million in annualized revenue. “Our team designed and operated about 50 buildings with 1,600 units and signed contracts with more than 2,000 people across Mexico and Brazil.”
According to the developer, at the operating level, the company had about 25% margins and was on track for the entire company to be profitable in January or February of this year.
According to Barawid, the company operated under the assumption that it would only need one last round of financing that would lead to profitability, and that this would be possible because “all the financial signs were pointing in that direction”. But those expectations never materialized.
Reduced liquidity in the venture capital market due to higher interest rates around the world, particularly in the United States, meant that Casai’s business model was not the one most favored by venture capitalists to produce returns, according to the executive.
This loss of momentum was already evident, in a way, a year ago, he said.
In August 2022, Casai announced its merger with Nomah, a company in the same sector that was owned by the Brazilian unicorn Loft. It received capital from Andreessen Horowitz, Monashees (which went on to retain a stake in Casai) and Loft as a result of the share transfer.
Bloomberg Línea anticipated talk of that transaction in July 2022, when Casai laid off employees in Mexico and Brazil.
Casai and Nomah were not the only proptechs - the name given to startups that operate in the real estate market - that came together in the period of higher interest rates in the market. In December, condominium manager Lello and housing platform Housi sealed a partnership to share their services.
Barawid’s reflections on what went wrong at Casai, posted on LinkedIn:
- Lesson 1: “I wish I had invested in a better financial infrastructure and tools from the beginning [...] Our business was complex because of our strong operational component, with the frequent and small debts that this implies. And our receivables were spread across multiple channels with their own idiosyncratic payment schedules. For a few years, we tried to build in-house ERP modules and hired consultants to do it for us. But anyone who has tried to implement ERPs knows that adoption is key. Because it took us a long time to build solutions, our team already had its own expense workflows. It was a Sisyphean challenge to consolidate data and change behaviors.”
- Lesson 2: “I wish I had invested more in the people on our team. I started Casai caring a lot about culture and feedback, but my Achilles heel was that I saw the HR function as an unnecessary corporate hassle. So we ended up having to catch up on our team’s key motivators: career clarity and leveling, bonus structures, benefits, people analytics insights, employer brand, etc. with little resources. And it turns out that “just wing it, perform well and I’ll take care of you” is not really a productive way to manage an organization.”
- Lesson 3: “Throughout 2021, the sirens of abundant capital and free growth sang melodiously; like Odysseus, I wish I had plugged our ears with beeswax. I wish I had acted as if (1) we had raised $10 million less and (2) we were never getting another dime of investor capital. If I truly believed we would never raise again, the hiring faucet would have turned off much sooner and several deals would have been done. Brinksmanship [going to the edge of risk] in the land of startups is a strategy that only hurts employees in the long run. As a product-market-fit founder, it was easy for me to justify investments that made sense assuming Casai would exist in two years. A bootstrapped entrepreneur doesn’t have that luxury and makes different decisions. Well, Casai doesn’t exist and those investments don’t matter.”
- Lesson 4: “I wish I had asked for help earlier. The CEO fallacy (and honestly, arrogance) is the unshakeable belief that “no one else can understand/empathize”. Of course my team could. I was a worse manager, strategist, fundraiser, advisor, husband and guide dog parent because I actually thought I needed to do everything myself. When I started to open up more with “my” co-founder, “my” team, “my” board and “my” Gerry, I was surprised how much everyone felt responsible for “our” challenges [...] Casai might have had a different outcome if I had asked for support (for company issues and for my mental health) earlier and earlier.”