Tenant Inc., a Newport Beach-based software startup backed by firms in the self-storage industry, has raised an additional $25 million.
“We’re growing like crazy right now,” founder and Chief Executive Lance Watkins told the Business Journal.
The financing, a third seed funding round, brings the total amount the company has raised to about $37 million, Watkins said.
Watkins did not identify the investors, saying they are “strategics, meaning that they are in the storage industry.”
“We now have over 100 strategic investors in the United States and internationally, most of which are self-storage facility owners who are actively utilizing our products,” Watkins said.
Watkins, who owns Storage Outlet with facilities throughout Southern California—the chain has local spots in Huntington Beach and Fullerton—started Tenant in 2019 to provide an online platform for self-storage businesses.
Tenant’s cloud-based software automates processes for critical tasks such as completing rentals, collecting revenues, and managing delinquencies.
Payment processing and protection plan are also handled.
Watkins says his company provides a “complete vertical that runs your storage operation from all your consumer screens where customers find you and interact with you and rent your space.”
How a group of self-storage owners came to invest in Tenant dates to a dispute at an industry meeting in 2019, when a key software provider used by many in the sector announced new restrictions.
“It prompted the owners to stand up and give passionate speeches about why these restrictions were horrible for our businesses and the industry,” Watkins said in a video on his company’s website.
As a result, the storage operators pooled their funds to invest in Tenant to build an infrastructure “that doesn’t place restrictions and truly gives them the tools to operate their businesses the way they want to.”
The self-storage industry is a highly competitive and fragmented market, an estimated 73% of which is owned by independent facility operators, as opposed to large corporations, according to Tenant.
It’s also booming.
About 52.6 million square feet of new U.S. self-storage space is scheduled to be completed this year, a 38% increase over 2022’s deliveries, according to the website StorageCafe (see story, page 8).
Customers of the software company include A-1 Self Storage in San Diego, Derrel’s Mini-Storage in Fresno and Kennards Self Storage in Australia.
Watkins is also looking to expand abroad, particularly Commonwealth countries.
The company will use the $25 million in new funds to further advance product development, expand customer support and sales, and increase their platform integration.
“Our investors initially saw the need for a product that would streamline storage facility operations and provide a better tenant experience,” Watkins said.
Up to this point, Tenant has not relied upon institutional investors, although it’s a consideration going forward.
The company now has about 100 employees, with almost 50 working in offices at 4920 Campus Drive in Newport Beach and 19100 Von Karman Ave. in Irvine.
“We’re continuing to increase our sales team. We’re increasing our onboarding team, our customer service team,” Watkins said. “We have a line of sight to break even.”
The company declined to disclose its annual revenue, but says the amount has tripled in the last 12 months.
More than 1,300 properties utilize at least one of Tenant’s products, according to Watkins.
Tenant in February announced the acquisition of Storelocal, the largest private membership program of independent self-storage operators.
“The combined company will have the backing of over 200 strategic self-storage investors and over 1,500 self-storage membership subscribers,” Tenant said in announcing the Storelocal deal on Feb. 14.
Technology Helps Self-Storage Boom
Commercial brokerage Cushman & Wakefield says the self-storage industry is benefiting from advances in technology.
The sector is evolving with new technologies, including “artificial intelligence and automation, to help maximize operating efficiencies and create more certainty in operating cashflows,” a March report from the brokerage firm said.
Cushman said self-storage investment volume surged coming out of the pandemic, peaking at a quarterly high of approximately $13.5 billion in the fourth quarter of 2021.
It said that was largely comprised of sizable portfolio investments by institutional capital.
“Transaction volume remained above $2.5 billion per quarter through 2022 despite the significant interest rate hikes that were deployed by the Federal Reserve beginning in March 2022,” the report said.
“Secular demand trends will continue to drive favorable long-term results for self-storage,” according to the Chicago-based brokerage, which has local operations in Irvine.