Blog 27: Obligo
Removing the friction of apartment rental deposits
Company: Obligo operates a financial platform designed to increase fairness, trust, accountability and transparency in the tenant-landlord relationship. The company's platform helps qualified renters to keep their cash deposit and only pay if their landlord has a claim and provides secure and limited access to a bank account, enabling landlords to bill renters up to the deposit amount in case there is a claim, effectively replacing security deposits.
HQ Location & Year Founded: New York, 2018
Founders: Roey Dor and Omri Dor are co-founders and brothers. Roey (CEO, interviewed, pictured left) is a former Israeli fighter pilot as well as an entrepreneur and operator in the real estate sector. He graduated from the University of Haifa with a degree in economics. Omri (COO) is a software engineer who has worked at companies like Google and Facebook, as well as in cybersecurity for the Israeli Defense Forces. Omri studied computer engineering and physics and graduated top of his class at Technion - Israel Institute of Technology.
Funds Raised and VC Investors: Over $50 million from 10D, 83North, Alumni Ventures, Digital Horizon, Entree Capital, HighSage Ventures, La Maison Partners, MUFG Innovation Partners, Rainfall
Where did the idea for Obligo originate?
Our original idea was a lot wider. Omri, my co-founder and brother, and I were discussing the apartment renting experience as a whole. We felt like it should be more like an Airbnb experience, but realized we should initially focus on building trust between landlords and renters. Trust is the reason why someone would come and stay in a room rented through Airbnb. It is because a third party introduces trust into the relationship. Uber is another example with the idea of getting into a stranger’s car. Or buying a bike through ebay, for that matter. The issue is trust.
What is the key problem that Obligo intends to solve?
We help to solve the issue of trust between renters and landlords. The specific problem that we decided to focus on first was the burden of security deposits. Early on, we saw this problem as the source of our product-market fit. Renters don’t like having thousands of dollars tied up, which many times they struggle to afford. Even landlords see keeping a deposit as a burden, as it is cash that they essentially “sit on” for a long stretch of time. Obligo’s solution removes the need for both sides to have to deal with rental deposits. Our vision is making the move in and move out processes as simple as a hotel check in and out.
How are you most differentiated as a service?
Rental deposit alternatives were not invented by Obligo. Existing solutions come primarily from insurance in the form of surety bonds. There are problems with these products. Landlords might not like handling insurance due to occasional scrutiny or the question of “will I get paid?” Secondly, there is an issue around accountability. Renters frequently misunderstand insurance and when they are or are not covered. Landlords want renters to take care of the apartment and pay for anything they break. The third reason why landlords take a deposit, in part, is to check the renter’s liquidity. The fact that a renter can’t afford to put down a deposit is not a good sign for the landlord.
For these reasons, we did not opt for an insurance model and instead took inspiration from the hospitality industry. There is the hotel example of pre-authorizing a card. When you check into a hotel, they swipe your card and provide a credit preauthorization in lieu of a cash deposit. This solution is more aligned with the goal of security deposits. The hotel knows there won’t be any scrutiny and that Visa will wire the funds immediately. The accountability piece is very transparent and having available credit gives comfort to landlords that tenants will be able to pay their rent.
Our product handles both move-in and move-out. At move-in, renters can choose to pay a traditional deposit electronically or connect their bank account and provide a pre-authorization without locking up any funds. The amount of the pre-authorization is equal to the size of the deposit for potential future use by the landlord. When a renter moves out, if there are no charges, we will release the hold. If there is a charge, we ask the renter first how they would like to pay, including the option of no-interest installment plans. We will resort to tapping the pre-authorization amount only if the renter takes no action within 14 days.
What are the company’s key accomplishments to date?
Obligo currently has access to millions of units through partnerships with industry property management software, as well as leading property owners and managers across 50 states. Obligo is the obvious choice for sophisticated partners who wish to embed a deposit-free solution into the renter’s move-in flow. Our goal is to provide a holistic flow for both residents and landlords.
What lies ahead in the plans for Obligo?
In terms of go-to-market, we will continue to partner with property management software giants to become the new standard for security deposits across the nation. We are also looking more holistically at move-in/move-out experiences, such as renter screening, open banking data, general collections, basically trying to create better experiences for both renter and landlord.
Ron’s Take
Innovation is all about the marriage of technology and problem solving. The system of holding rental deposits has been widely understood and accepted for decades, in spite of this placing a burden on landlords and a financial penalty on renters. Many renters simply do not have the savings and liquidity to tie up hundreds or thousands of dollars on a deposit for months or years. The requirement is also a source of economic injustice. The Obligo alternative system to deposits will free up the housing market to more renters and will be equally appreciated by the landlords who keep deposits not for profit, but as an insurance system. Anything that brings down the cost and complication of merely seeking housing will be a benefit that all can appreciate.
Disclaimer: Alumni Ventures invested in the Series B round of Obligo in fall 2021.