PocketList’s Rapid Rise and Fall

Armed with nearly $4 million, a list of prominent investors and tens of thousands of users, the apartment rental platform PocketList looked like a startup poised to take off.

CEO and co-founder Nick Dazé touted the proptech software that let potential renters get an inside peek at apartments before being listed as technology that “turned the entire rental market on its head.” He sold it as a way for landlords to save billions of dollars by cutting down turnover time between tenants and assured renters access to honest, up-to-date information about units before they went online.

Investors — who poured a record amount of money into seed startups last year — hardly needed convincing. Dazé closed a $2.8 million seed round last April led by David Sacks’ Craft Ventures.

“It’s no surprise that renters have flocked to the service,” said angel investor Spencer Rascoff, co-founder of Zillow and dot.LA, in announcing the raise.

By July, PocketList had unveiled the app in Los Angeles with plans to launch in San Francisco and San Diego by the fall. Seattle, Chicago and New York were next.

Users could rate apartment features like natural lighting and parking in the neighborhood. There was a question and answer page for past tenants to field concerns and a chat function for landlords and prospective renters. The idea was to make renters feel like they had unvarnished insight into a unit, much the way Yelp lets users rate restaurants.

But the rollouts in new cities never came. Even before PocketList went live, renters across the country stopped signing new leases as the pandemic cast a pall over the economy. Landlords — now navigating eviction moratoriums and mounting bills — didn’t have the money or the inclination to spend on new apps, Dazé said.

In the last week of April, the CEO and his co-founder Julian Vergel de Dios gave notice to eight remote employees and around 20 investors that the company would be closing operations for good.

“I spent from February until last week fundraising,” Dazé told dot.LA during the first week of May. “The ultimate pause of us beginning to wind things down is that we struck out on fundraising and few very, very large customer deals we’ve been working on for several weeks fell through.”

Dazé attributed PocketList’s undoing to the declining renters’ market and a reeling economy that kept many landlords from buying in. But in the world of venture deals, losses don’t always mark the end of a company. It’s the absence of investor faith.

“For a lot of seed investors, it’s almost like buying lottery tickets,” said UCLA Anderson School of Management professor Olav Sorenson.

“The odds of it paying off are low, but if it does pay off, you could make a lot of money,” he said.

Investing capital in early-stage startups is risky and uncertain. It’s nearly impossible to collect data on startups that fold given that most close shop quietly, according to Pitchbook spokesperson Kayla Gordon.

But, according to Sorenson, roughly half of all startups that raise seed money will close a Series A. The seed round supplies entrepreneurs with enough money to prove to investors their business can be successful.

That metric of success depends on investors. Most venture-backed companies in this stage don’t turn a profit, but some can show enough potential for growth to entice investors back.

The Pandemic and Proptech

Investors’ appetite for early-stage startups waned a bit last year, with these riskier companies pulling in $44 billion in capital compared to $47.1 billion in 2019, according to Pitchbook data.

It was a particularly rough year for proptech companies. The industry was hit harder than other parts of tech, such as ecommerce, which flourished during the pandemic as consumers moved online. Venture investments in real estate technology companies plummeted by half to $9.1 billion globally in 2020 compared to 2019, according to Pitchbook.

Most of that drop off came from flexible and co-working office spaces,…