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South Africa’s largest digital student accommodation platform, DigsConnect.com, has announced the closure of its Pre-Series A seed extension round after securing undisclosed multi-million Rand investment from Launch Africa, Goodwater Capital, Five35 Ventures and Delta Ventures.
The funds will be used to spearhead international growth, with a focus on helping African students in the United Kingdom and United States secure more affordable, convenient, and safe housing.
Launched in 2018, DigsConnect.com has achieved 300% year-on-year growth after university students returned to campus post-Covid. The start-up now lists 1.3 million beds worldwide. The student housing sector is booming, with global investment into purpose-built student accommodation exceeding $16 billion in 2018. Despite the pandemic, this asset class is resilient and still growing rapidly as student enrolment continues to skyrocket.
According to Alexandria Procter, co-founder and chief executive of DigsConnect.com, the tech start-up industry is experiencing a funding winter at the moment.
“The fact that we received so much early support from excellent pan-African and US investors speaks volumes about the strength of the team, the value of our strategic partnership with Student.com, our strategy of early profitability, and sound unit economics.”
Zach George, Launch Africa Ventures general partner, adds, “The DigsConnect.com PropTech marketplace’s revenue traction, smart customer and inventory acquisition strategies, and strong founding team appeals to us as does the substantial total addressable market (TAM) in student housing. This investment provides interesting portfolio connectivity to several of our 115 portfolio companies who are interested in bettering university students globally.”
Goodwater Capital is a Silicon Valley venture capital fund, with a history of investing in consumer facing tech start-ups including the likes of Monzo and Facebook. Their investment cements DigsConnect.com’s position as an up-and-coming international powerhouse in the realm of PropTech.
Five35 has a decade-long track record of venture building alongside some of the smartest female-led founding teams in Africa, backing female-focused start-ups across multiple sectors in Africa.
“As a leading gender-lens fund in Africa, we see our partnership with DigsConnect.com as an excellent opportunity to add-value to a mission-aligned, female-led start-up. Five35 is excited to be supporting Alexandria and her team as they strive to democratise the massive student housing market across the African continent, already seeing great traction and scaling full steam ahead,” says Hema Vallabh, partner at Five35 Ventures.
Delta Ventures is a Berlin-based venture catalyst that has had a strategic relationship with DigsConnect.com for several months already, cementing this partnership by partaking in this round.
This group of highly connected investors will allow DigsConnect.com to scale global operations and significantly amplify its growth strategy.
DigsConnect.com was created from the ground up by Procter, a then 24-year-old student, and co-founder Greg Ramsay-Keal to match landlords with students looking for accommodation. They started DigsConnect.com while they were both student representative council members at the University of Cape Town, after Procter was being inundated with requests from students to help them find accommodation.
Spotting this gap in the market, Procter and Ramsay-Keal built the DigsConnect.com solution to replace the antiquated system currently in place across the country. After initially raising R14 million, DigsConnect.com has now grown to become the largest provider of accommodation for students in Africa, helping students connect with potential housemates and rooms, centralising all types of “digs” in one place and helping to ensure no student is homeless.
During a tumultuous time for businesses over the pandemic, the founding members switched focus from funding to ensuring the company could be self-sufficient. The plan for the business changed from raising money to securing revenue, ultimately helping the company’s growth prospects.
Procter says that changing the company’s entire business model to become self-sufficient was risky, but has paid off in the long run. “It made DigsConnect.com a very attractive, investable and profitable business and we believe that investment should be seen as a tool for amplifying business growth rather than a tool for survival.”
Ramsay-Keal says, “Many of the next generation of African leaders are pursuing their studies in the UK, Ireland, Canada, US and Australia, before returning home to Africa to grow the regional African economies and partake in nation building. It’s incredible to be a part of such a pivotal part of Africa’s development.
“Alexandria and I are committed to incredibly lean structures, so we didn’t want to raise more than we needed to get to the next level of our company’s execution plan – but we ended up being totally oversubscribed and had offers for more than 3x the round size. We ended up slightly increasing the round size to include as many investors as we could.”
Procter concludes, “Turning down potential investors, especially in the current global VC downturn, was very difficult. But Covid taught Greg and I the value of extreme fiscal discipline, and since then we’ve only ever raised and spent strictly what we need to hit our company goals. Massive growth must be predicated by sustainable unit economics.”