RentCheck Raises $2.6M Seed Funding - Get Your Security Deposit Back

The Frustration of Security Deposit Disputes

Many individuals have experienced the difficulty of reclaiming their security deposit when moving out of a rental property. It’s a common scenario where a landlord alleges damages, leading to a dispute over the returned funds.

This situation resonated personally with the founders of RentCheck, as one experienced a similar issue in the late 1990s. The initial frustration stemmed from a disagreement with a landlord, where the claimed damages were disputed, resulting in a legal battle.

RentCheck: A Tech Solution to a Common Problem

RentCheck, a startup aiming to resolve these “he said, she said” scenarios, has secured $2.6 million in seed funding to further develop its automated property inspection platform.

The company was founded in mid-2019 by Lydia Winkler and Marco Nelson, both of whom encountered security deposit disputes. Winkler’s experience involved a small claims court case during her JD/MBA studies at Tulane University.

Winkler explained to TechCrunch that pursuing the claim was a matter of principle, despite the significant time investment – 18 months – required. She meticulously documented the apartment’s condition with photographs, recognizing that many individuals lack the time or expertise to navigate the legal process.

Nelson, a property owner himself, faced similar issues, but from the landlord’s perspective. He found himself frequently documenting property conditions during move-outs to resolve deposit disputes.

“Upon meeting Lydia, we discovered a shared passion for addressing this prevalent problem,” Nelson stated.

How RentCheck Works

Based in New Orleans, RentCheck has developed a web application designed for property managers, with benefits extending to tenants as well.

The platform facilitates remote, guided property inspections. Demand for the service increased significantly with the onset of the COVID-19 pandemic, due to its automated and contactless nature, resulting in a 1,000% growth in properties utilizing the platform – largely through organic channels.

Guided Inspections are a core feature. The system prompts users through each room, specifying what to photograph to ensure comprehensive documentation of floors, ceilings, walls, and windows.

To maintain inspection integrity, photos cannot be uploaded from the user’s existing camera roll. All images are time-stamped within the app. Upon completion, both the inspector and the property manager can digitally sign off, confirming the accuracy of the move-out condition report.

Business Model and Investment

RentCheck operates on a SaaS (Software as a Service) model, charging property management companies a subscription fee based on the number of properties managed on the platform. Subscribers can then conduct an unlimited number of inspections, utilizing residents, internal teams, or third-party vendors, or a combination of these.

The startup has attracted notable investors, beginning with James “Jim” Coulter, founder of TPG Capital, after RentCheck won New Orleans Entrepreneurship Week. Coulter became an early investor in the company’s $1 million pre-seed round.

The seed round saw participation from Cox Enterprises, focusing on multifamily housing, and angel investors including Jim Payne (MoPub, TapCommerce), Ken Goldman (Yahoo, Hillspire), Eric and Wendy Schmidt’s family office, Mark Zaleski and John Kuolt (BCG Digital Ventures), and Brian Long (Attentive). Institutional investors such as Irongrey, Context Ventures, and Techstars also contributed.

Kuolt, former managing director at BCG Digital Ventures and an early RentCheck investor, highlighted the platform’s innovative use of technology to address a significant industry problem. He noted the widespread experience of feeling unfairly treated regarding security deposits and praised the simplicity and effectiveness of RentCheck’s solution.

Market Opportunity: There are approximately 48 million rental units in the U.S., with an average security deposit of $1,000. A substantial portion of these deposits are subject to disputes, representing a significant financial burden for both renters and property managers.