Dan Lifshits & Ilia Drozdov, Co-founders of Dwelly: BREAKING: Dwelly raised $170m Series B

0:00Hello and welcome back to Scaling Europe show. I'm Seb Johnson. Today we welcome back some very good friends of the show, Dan and Ilia. This is the shortest gap I've ever had for repeat guests. You were on the show five months ago announcing your Series B. Let me ask, what are you doing back so soon? So see you again in five months? Yeah, that's what it feels like at the moment. Let's have another call shadow. But we're announcing our Series B that, yeah, EQT led, EQT growth led, general catalyst tripled down and basically co-leading this round, 170 million dollars total funding, out of which 95 equity, the rest is there.

0:40Amazing. And so you raised, I think it was 69 million five months ago, again, debt equity. five months later you raised this huge series b what's happened you know what's happened in the last five six months that has enabled you to raise so much more money in such a short space of time i think a quick note it was i think 69 pounds so dollars was around nine speed high yeah you're right you're right tomorrow bringing total i think to just about quarter of a billion uh today yeah i think just more and more people kind of understand and there is kind of a higher conviction that services industries will be significantly shaped by AI, especially in Europe where services is closer to probably 70 % of GDP.

1:22And the impact on these industries can be quite significant. And I think the level of service across all of the services industry will be boosted by AI. Amazing. And for those who don't know, you've built this AI native service company four residential lettings where you acquire local operators and then you kind of move them onto your shared ai infrastructure i think when we last spoke you were at maybe 10 000 lettings where are you at today i think we just reached the north of 15 000 and with a few more deals yet are in the process and going right now i think we'll be already approaching just above 20.

2:01that's amazing Yeah, definitely already in top 10 kind of agencies in the UK. And hopefully, by the next time we talk, it's going to be top five. But let's see, fingers crossed. And how's it all going? I mean, how's this process going of acquiring more? I mean, assume the business is doing well, given that you are raising such a big round later on. But what's it been like going on this explosive journey? Yeah, last few months, definitely been busy. But I think that we, I would say, getting quite industrialized in the kind of just the process of acquiring the business, integrating them, etc, etc.

2:37But I think more exciting is obviously all the advancements that you can do with improving level of service, especially with, I think in the last kind of six months with all the multi-agentic models and everything that you can bring more. So kind of, we learned a lot about the different workflows of the business, kind of having acquired already kind of tens of them over the course of like year and a half each since we started in middle 24. And I think together with multi-agentic capabilities it just allows to streamline things much further but now to start focusing more and more on growing this business as an improving level of service of really providing the outstanding experience to the landlords and to the tenants so this would be kind of growing and growing focus of what will be just maybe kind of add a little bit on top of that i think there is a just outstanding kind of opportunity for the industry at all to locate the level of service and to effectively get back to the original proposition where lighting and property managers were closer to the wealth managers for their clients.

3:32But as the regulation was pretty much just widening and widening, I think most of the agencies we see in the market, they just ended up being effectively administrators to make sure that you comply with all the regulations, to make sure that property management requests are being resolved, et cetera, et cetera. And I think with AI, when most of these tasks can be significantly automated, people in the office can get the time back actually to do what kind of in the first place made them be dreaming about this profession to spend more time with landlords to actually ask more often the very kind of question landlords love most like what else can i do for you right because kind of the compliance and property management is dealt with kind of quite quite significantly by ai and people can spend more time uh with the judgment calls with analyzing the kind of yields for landlords with analyzing kind of how the property is performing etc etc etc that's amazing so are you seeing quick uptake once you once you kind of quick improvements once you're kind of bringing them into the business definitely and is that changing as ai is getting better as the fundamental kind of like lms are improving i would say that kind of to the improvement point i think we usually see the thing start to change within three to six months since we integrate the business and then with regards to the capabilities i think that there are improvements happening for sure with regards to the foundation models you also can kind of to be honest use a lot of outsource kind of open source these days obviously the models get better and better but i think that the key thing that you achieve really is just bringing visibility to some of the workflows that before that were just kind of lost and messy and kind of running elsewhere etc etc etc that you just bring to surface so that kind of you before you had to chase a property manager to us like five times what is the update on my bathroom and other things.

5:20Right now, you can be just on the front foot and be proactive to the tenants, to the landlords with regards to what's going on. Obviously, with the foundational models getting better, you get this improvements as well. But I would say that a big chunk of it happened just by design or bringing visibility and just identifying these processes by itself. And when you talk about the integrating of the agencies, how's that going? Is that happening faster or slower than it was six months ago? Is that going better than it was? I think it's going kind of better than it was and to a significant extent actually it's not just the technology but also it's around kind of how we run these integrations because kind of obviously probably kind of year ago, half a year ago, there was a little bit of a shock kind of whether AI is going to take all the jobs etc.

6:04and people were kind of speaking about this kind of less direct, but I think we pretty much kind of understood spending more time with teams that AI is kind of unlocker of all this kind of free time and people can kind of spend more time with clients. So once we started kind of talking about kind of exciting opportunities more kind of openly, the integration happens kind of much faster because actually this makes the job much more exciting than it was. and how are the underlying fundamentals doing you've raised a lot of debt to service to debt you obviously need to have a very strong business model how has that changed in the last five or six months in terms of fundamentals whenever you buy the business it's pretty profitable by design itself and obviously with freeing up some time some of that you reinvest back into kind of growing the top line and better service and everything but by design some people might be leaving the business some people might be kind of not fully on board with the kind of a transformation you're doing so kind of efficiency is by design going up anyways and it implies that effectively serviceability of the debt and other things only improves over time so hence kind of it's it's very stable business by nature and you mentioned you're now kind of the top 10 uh you know you know in the uk ambitions to be top five soon how much more opportunity is there in the uk market and how much more do you want to attack that before you start looking at maybe the rest of europe I think opportunity is enormous and hopefully next time we speak will be much more than 1 billion GMV.

7:34Currently we are around half a billion in dollars in pounds. It's around 350 million GMV rent roll. But the overall market is 5 million properties. And we are just approaching whatever 20 has done set. So we are less than half percent of the market just in the UK. And the whole Europe is at least five times bigger than the UK. And the U.S. is doubling the overall size of Europe, including the U.K. So the opportunity to build a trillion-dollar business here on the table. To give a bit of a sense of the figure, there is just about 20 ,000 agents in the U.K. alone, and all agencies transact, the total rent-roll, total GMV, around$100 billion per year.

8:15So hence, commission is around 10%, implying that the total market is somewhere around$10 billion in the U.K. alone. So I think in the U.K. you can build pretty easy, kind of a few billion IRR business over the kind of course of the next few years, that probably already in the UK alone would be a multi-decker business, like 30, 50 billion worth as a company. So definitely an opportunity to build one of the largest consumer businesses in Europe. And is that the focus? Is there a certain stage that you want to get to, a certain market saturation you want to get to in the UK before you start looking to Europe?

8:47No, I think for us actually kind of scaling across Europe goes kind of slightly independent from the market share in the UK. For us, the key kind of criteria to go abroad is to make sure that UK market is set on the upward trajectory without, let's say, our personal involvement. And I think we are quite close to that. Like we internally call it the market should be GMable, where kind of already leadership in the team, senior leadership in the team can drive further kind of execution of the strategy. And we can start kind of testing the company in terms of consuming kind of additional markets. Obviously, it's not only our own focus.

9:24It's also kind of the readiness of the technology and technological platform itself because kind of going into the market with different language, different legislation, et cetera, et cetera, requires additional effort. And for now, kind of the balance is still towards kind of improving the system for the UK purposes. But I think we are quite close to being able to prioritize international expansion as well. You know, not to go with the UK to build an enormous business, even in the UK, they're a pretty iconic company. But I think that next time we'll talk, we definitely already will be talking about that.

9:52And it'll be a more practical term. Amazing. And can I ask, what's the bigger bottleneck at the moment, right? Because it doesn't seem to be capital. You seem to be well stocked with capital. Is it talent? Is it potential acquisition companies? Is it time to integrate? What is the thing that's stopping you from getting to 20, 50, 100 ,000? I would say hiring. I agree with Dan that it's hiring. And I think we're in a very lucky position that kind of as not first time founders, we purposefully decided to avoid a product market fit basically challenge. So, I mean, there is no need for a product market fit in our case because we are significantly improving already existing products and customers understand what they're buying, etc., etc.

10:31So for us kind of to execute at really fast pace, the biggest bottleneck is hiring. And I would say primarily you're talking about operators and product engineering talent because like effectively what we built yet another quite operational tech enable or yeah, enable operational business. So meaning that all your typical kind of operators of the world, the typical Ubers and deliveries and the others, people that like operational businesses growing at high pace, and I think on the product engineering front, it's also going to not for everyone. We, we, um, competing for the engineers a lot with labs and with other application companies, but I think what we see is that this is specific type of engineer that likes to kind of take some operational process, write a few lines of code and then see how the automation of the real world happens so i think that it's almost like we have some engineers that uh were big fans in the childhood of automating some stuff and we just see this genuine joy almost like as a kid in a candy store when you're kind of seeing what the frontier of the apply the guy looks like and they're like wow i couldn't believe that it can be happened my uh my question to most of the engineers kind of at the last stage of the interview process is pretty much following look and if you need to decide for yourself what excites you more whether kind of you want to be more of a scientist that is you know thinking about particular kind of idea particular solution like months if not years and then solves a very kind of very difficult task and just get and get a joy from it or you're different kind of extreme where kind of you you're just excited about walking on the street seeing basically light and windows and people having nice dinners and you know given that 25 percent of people live in their homes particularly kind of joy and uh quietness during the evening supplied to some extent by us because all the maintenance was dealt kind of automatically there are no issues etc etc because obviously kind of experience around rental home quite uh quite kind of fundamental for the for the happiness of life and we we do impact that uh we hope to believe and engineers should be kind of understanding in which camp they are because we obviously not a frontier lab we will not be providing tasks kind of for you to be kind of a mathematician-like person walking on the streets kind of and thinking about it 24-7 but we do impact lives 24-7 and that's kind of probably the source of excitement for people now that's amazing right there's very clear impacts if you improve your quality of the product there's a very real change in the experience of people living in the homes which i think is amazing can we talk about the round itself so there's a huge round eqt growth general catalyst co-led it what was the round like i mean i feel like there's been a shift in the vc mindset towards these types of businesses across Europe more generally.

13:09It feels like there's a great opportunity for services-led AI transformation companies. Have you seen that shift compared to when you first raised your early rounds to today? Has that been the biggest driver in raising more money? Has it been this sort of like excitement in the VC ecosystem around businesses like yours? Has it been them sort of like watching the, you know, like I know General Carter's been involved already. Has it been them watching the business and watching you operate? What was that process that I just talked a bit about? Yeah, it's happening. I think that AI native services becomes a bigger and bigger topic from being a forbidden word a few kind of years ago, I think, to being one of the most hyped word, where kind of roll up is just one of the angles of how you can use a tactical go-to-market where you're acquiring businesses rather than just growing them organically.

13:51And I think it's happening. The kind of early stage investors having pre-seed seed all over it now. I think that the growth kind of people starting to learn it, but equity is a pretty great example in this space because effectively they've been on their large cap and by outside doing rollups for all of their life. So I think they also start realizing more and more that a lot of service businesses require a fundamental rewire of how kind of they need to be run. And I think a lot of debate happening kind of on that front here now is like, what do the success in this transformation looks like? And I think quite often the answer that they see, to be honest, is the founder energy and the anatomess from day one.

14:26So I think that's what kind of is big kind of change to the traditional roll-ups as you can see and now we're at a little bit kind of on top here i think we've been kind of on the journey where like maybe incidentally but we were slightly kind of ahead of the curve kind of with the idea that the ai will change kind of the services industry and that the ai roll-ups will be kind of a thing to grow then of ai native uh services company itself will be a thing to grow and i think you know we actually something might bigger here because not all service industries possesses kind of the long-term defensibility modes as we do have because kind of in our market what we effectively do through ai enablement of all the kind of operational processes we make the transaction the basic transaction of letting the property and then managing the property effectively scalable as you can imagine right hailing kind of companies right so they made kind of at a few clicks of a button they standardize the flow but in our space historically standardization of the flow was connected to a very kind of limited customer experience because with a few buttons you push clients to just adhere to a standard process but with ai having a deep granular context on the property level on the customer level with the same set of ai agents you can provide a very customized output which allows kind of in our market to make a scalable transaction and actually grow quite fast and hopefully to build the ai native end-to-end transactional platform for three sides kind of tenants landlords and maintenance providers where human element goes into either offline operations we and we have a lot that actually provides us defensibility as well it cannot be fully digital service but also basically spend more time with clients and elevating the level of service so kind of yeah we are on to something much bigger beyond just the eye kind of native services but let's see and as you said the market is massive now look one final question if we do end up sitting down again for another conversation in five six seven months whatever it is what is the one thing that i should ask you if you've achieved you know what is the one thing that i should say hey look six months ago you guys told me that you wanted to do this what is that thing look i think kind of the only north star metric that any company during this time should have is the happiness of customers so if your customers became happier and happier and happier with all the technological advancement the rest will follow the growth will follow the economics will follow so and if you ask do you guys still wake up when someone is unhappy when the system is not working on the integration process some data kind of was not put in the right way.

16:49If we still wake up at night because of that, we should stop. You're going to stay in founder mode forever. Well, look, both, thank you so much for joining me. You guys are absolutely crushing it and a massive congratulations. Thank you for having us. Thank you so much.