The lowdown on raising one of NZ’s biggest-ever seed rounds

I’m talking to Toby Thomas-Smith while he’s walking (fast) in central Sydney to his next meeting.

He’s been doing a lot of that lately since he and his two co-founders of property subletting company Kiki raised US$6 million (NZ$9.6 million), believed to be one of the largest New Zealand seed investment rounds. Typically in this country, startups raise around the $1 million to $2 million mark in a seed round compared to an average US$3.6 million in the US.

It gave the now US-based company a post-money valuation of US$28 million prior to even launching in New York in early October. No wonder the high-energy Thomas-Smith is pumped.

The round was led by Australasian venture capital firm Blackbird, which is understood to have invested US$4.5 million.

“It’s not everyday that three early-20s Kiwis get backed by one of the biggest seed cheques Blackbird has ever written,” he says. “We definitely had imposter syndrome, but it was just validation that ‘hey look, people are actually starting to believe in what we do’.”

Other investors include seasoned entrepreneurs from New Zealand and overseas: Airtasker co-founder Jonathan Lui; Bowen Pan, the Kiwi expat who served as Meta’s founding product lead for Facebook Marketplace; ex-Bumble executive Michelle Battersby; former early Atlassian employee turned startup advisor and investor Matt Ryall; Vend founder Vaughan Fergusson; Halter founder Craig Piggott; tech entrepreneur Guy Horrocks; and Auckland-based incubator and VC fund Phase One Ventures.

Thomas-Smith describes the funding round as “surreal” after the first term sheet with Blackbird was signed and others started piling in. His mentor Mahesh Muralidhar from Phase One Ventures (now a National candidate for Auckland Central) called him and started crying on the phone.

Muralidhar, an early employee in Canva, says the successful round was “personal for him” and there are a number of young Kiwi founders brave enough to go global from day one that will see these size of cheques written.

It also validates his advice to startup founders: be patient, stay lean, spend an inordinate amount of time with customers that will inform you about the problem you need to solve, and then once you believe in something, go big.

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The seed

After finishing their university degrees, Thomas-Smith and Jack Montgomerie launched the EasyRent app in Auckland in 2021 to rent out student flats left empty over the summer.

Landlords didn’t like the idea and it fell flat. The co-founders then did a pivot, raising around $200,000 in a pre-seed round to launch a platform to streamline the subletting process by matching those listing their properties short-term with people looking to rent on that basis.

Alex Nicholson entered the picture as the third co-founder and early last year they took a risk, turning off the New Zealand website and relocating to a bigger market in Sydney. They proved the concept worked in the beach suburb of Bondi where 5,000 people rented or rented out a home via EasyRent over the next 12 months for an average duration of 32 days, putting $3.6 million through the platform.

It has an invite-only model with the slogan ‘no weirdos’ of friends recommending friends they trust to ensure those letting the homes are vouched for.

This year they turned off the tap in Australia to take a punt on going big in the US market. Now based in New York, the co-founders posted a cheeky photo on social media to promote a rebrand from EasyRent to Kiki, showing Thomas-Smith stripped down to his Speedos on a New York subway.

It was that global ambition that got Blackbird’s attention after it had turned down earlier funding requests from the young co-founders.

Blackbird partner Sam Wong, who runs its New Zealand operation, says it had been building a relationship with Thomas-Smith (who is CEO) and was impressed by the startup’s progress since raising a pre-seed round and operating in Sydney last year.

“Once the team decided to tackle the US or another international market it became a fit for the big ambition Blackbird likes to see,” she says.

Thomas-Smith says the startup went with Blackbird rather than a US lead because of Wong.

“She was like 'I will do absolutely anything to build this world with you. I can’t lose one of the best things to come out of this side of the world in this last generation',” he says. “She also wasn’t just going to be there as a silent partner; she was going to be loud and proud and go up against the world with us to make this happen and that stood out for us.”

Wong says it is more important than ever to invest in big, category-creating businesses with global potential, despite a pullback in VC capital. The investment is “the right amount to allow Kiki to achieve its seed round goals without worrying about the fundraising environment in the short term”, she says.

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Lessons learnt

Thomas-Smith says he’s learnt a bit from trying to raise money in New Zealand and Australia and has some advice for others looking to do the same.‍

1. ‍Go to the US: Going to the US was like a “breath of fresh air”, he says because investors got the concept straight away and saw its potential. He’d recommend others, particularly those with a consumer product, to try to raise in the US once they’ve proven early traction.
2. ‍Be confident: You need to be confident about your business and know it like the back of your hand when pitching.‍
3. Think big: Investors are looking to take a big punt rather than write small cheques, he says. “You have to show them how you are going to return their entire fund within 10 years. If you can’t do that there is no point having the conversation.”

Thomas-Smith puts the investor interest in the seed round down to it becoming more obvious the startup was building something that people really cared about. They now just have to pull it off.

“It doesn’t matter what kind of cycle we are in now, this is a long-term play like 10 to 15 years; it’s not a quick exit-type of business and investors saw that and said ‘oh my God if you guys do pull this off, it could be bigger than Uber or Airbnb’. “

“We went from having a .00001 percent chance to now having a 1 percent chance so there’s still a 99 percent chance it won’t work but I’ll take that 1 percent every day of the week,” says Thomas-Smith.

The traction the startup achieved in Sydney during the past year through highly efficient marketing and product execution convinced Blackbird the team has a unique insight into the market it is chasing.

“Consumer behaviour change is incredibly hard to do. Lots of people have great ideas for better solutions but it is exceptionally rare to be able to get consumers to adopt a new behaviour. Toby has demonstrated the ability to build a cult-like community, and brims with energy and ideas about how to tackle New York,” says Wong.

Kiki’s high-growth plan is to grow the team from three to 25 within 10 months and it’s signing a co-working office space in New York that will be open at no cost for any of the platform's users (what Thomas-Smiths calls 'Kikiers') and their friends to work alongside them.

Hiring is now a priority and Thomas-Smith has posted on social media that he’s seeking what he calls “uncut gems” to fill three key executive roles – and is targeting women.

Some 70 percent of those using Kiki’s platform are women and it makes sense to get more women into the team to reflect that, he says.

“We’re not going to hire based just on gender, we want to get the best person for the role but we want to be exposed to everyone and not have the platform built by just guys. We’re looking for people to join the founding team who will be literally ringing the IPO bell with us.”

Kiki’s plan is to launch in one New York suburb – either the East Village or Williamsburg – in early October and follow in other neighbourhoods once word gets around. It is limiting users to Australians at the outset.

“We’ve learnt from doing this in Sydney and New Zealand that the more niche we make our audience the quicker it spreads. If you try to target everyone at once it doesn’t work, but if you build a product specifically just for a couple of people they’ll fall in love with it and bring in all their friends,” says Thomas-Smith.

Users interested in signing up for the waitlist have to submit selfies along with their Instagram accounts and Kiki will accept the top 10 people each week based on how many friends they invite and how many people share their Instagram stories.

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The trust factor

Thomas-Smith says they’re solving a US$220 billion problem – that’s how much money is lost through not sub-letting properties when available.

Kiki’s solution is to build the world’s biggest friend-to-friend sharing network and will succeed or fail depending on whether it can build trust, he says.

It has to find a way to get anyone using its product to feel like a friend of a friend, not a stranger,  and tries to match listers with renters that have similar likes and preferences, says Thomas-Smith.

“Obviously as we grow at scale, we’re working out how to do that and we imagine the future of Kiki as one big village with a thousand mini-villages and everyone in your village all knows each other and feels like there’s people like you using it. That’s going to be very hard; no-one has pulled that off before.”

The Sydney experience was once Kiki unlocked that ability for people to trust someone in their homes, they were then willing to share other aspects of their lives, such as their cars or gym memberships.

“They started sharing their entire lives with their people so we believe there is going to be a completely new form of social network sharing your lives with people in the future. That is like a trillion dollar opportunity.”

Kiki’s targets are ambitious to say the least – it’s aiming for US$16m revenue in New York in the first year by filling 48,000 personal homes.

The next goals are in a year’s time to do a much larger US$50 million Series A round led by a US VC, scale up to 100 staff, and expand across the US to the 10 densest cities, such as Los Angeles and Boston, before heading to Europe and eventually IPO by 2030.