Startup Corner: Deposify
Written by Chris Lemmon
Jon Bayle, the founder and CEO of US-based FinTech startup Deposify, chats to FStech’s Chris Lemmon about the firm’s technology, funding and UK ambitions
What prompted you to establish Deposify back in 2014?
My background is as a mergers and acquisitions lawyer, having worked mostly in technology for companies and investors, and on exit we used to act as escrow agent in the event of holdback to cover warranty and indemnity claims. I thought that escrow could be an everyday thing automated by technology, and the best first use case was in security/rental deposits, where deposit management and dispute resolution is a problem.
What services does Deposify currently provide?
Deposify is an Escrow-as-a-Service financial technology company providing escrow (trust) accounts for security deposits to landlords, tenants and real estate agents. To do so we provide banking, payments, compliance and dispute resolution services. For example, in Boston Massachusetts, landlords are required by law to create an escrow (joint bank) account for security deposits. Failure to do so can result in treble damages plus costs payouts to tenants, calculated off the value of the deposit. For Boston landlords, we provide mobile-first trust accounts, online payments (meaning no need for cash or cheques), we help keep landlords compliant with local security deposit law (such as an obligation to pay interest on the security deposit annually), and offer dispute advisory and resolution services in the event that a deposit related dispute arises (keeping landlords and tenants out of Housing Court).
Which technologies does the Deposify platform use?
Aside from myself, the founder team are technologists with a background in gaming. Tony Kelly, our COO, was CEO of a global gaming company and Dave Brennan, our CTO, has worked on nine of the top 10 game titles globally. Our approach is to take technology innovations from gaming and apply to these FinTech – from security and back-end to micro-financial transactions. As a FinTech, our tech stack mirrors bank-level infrastructure and security when managing our users’ data and funds.
What difficulties have you faced in establishing yourself in the market?
We operate in a regulated space – from FinTech compliance generally to understanding local real estate law and practices in each new market. This informs product development and technology investment and is always front of mind in our decision making.
You currently have offices in Dublin, Boston and New York. What are your plans for growth, and are you planning on bringing Deposify to the UK?
Security deposit law and FinTech regulation varies state by state in the US – we will be in three US states by the end of 2017 (adding New Jersey), and should be in 10+ US states by the end of 2018, giving us access to a market of 10+ million rental properties. Security deposits in the UK are regulated and would require Deposify to be authorised as a custodian scheme operator. It is just a question of when we enter the UK market, as we believe security deposits create similar problems for landlords and tenants in the UK, and that our technology solution is part of the broader trend in real estate where property management is becoming cashless and paperless.
What funding and support have you received? Do you have any plans for further funding rounds?
Deposify raised $1.4 million in 2016 and is venture backed by Delta Partners (an Irish venture capital firm), Enterprise Ireland and private investors from Dublin and New York. We will be making an announcement on our next fundraising shortly.
Outside of your particular field, what do you see as the most exciting developments in the financial technology space?
In technology, ICO fundraising with cryptocurrencies is interesting – though not for us. Partly given the size of the raises and source of funds, but also because it is a very innovative structure – it has the potential to offer the liquidity and pricing optionality typical of the public markets, albeit with uncertainty over regulation by the SEC and others. Voice is also going to be transformational – we're moving beyond keyboards. In business, I think we are seeing a ‘re-bundling’ of financial services by challenger banks partnering with other FinTechs in foreign exchange to lending – as traditional banks appear to be limiting their scope to a few complex and remunerative activities like mortgages. I think we will see further consolidation in FinTech, and possibly an increase in M&A activity to drive customer and product acquisition.