Smooth, which offers an instalment-payment service for the upfront costs of renting a home in Japan, announced on June 29th that it had secured roughly ¥700m ($4m) in the first close of a Series C funding round. The entire amount was raised in equity.
The company was founded in 2019 and is headquartered in Tokyo.
Registered under a METI-administered scheme, Smooth offers instalment payments for rental move-in costs
It is worth first explaining the costs involved in renting a home in Japan. Tenants are typically billed by the landlord or a property management company for the following:
- Key money deposit (shikikin): one to two months’ rent
- “Gratuity money” (reikin): one to two months’ rent
- Agency fee: one month’s rent
- Rent paid in advance
- Fire insurance (often around ¥20,000, or $120, for a flat)
- Lock-replacement fee (roughly ¥10,000-20,000)
- Guarantor-company fee: 0.5 to one month’s rent
Shikikin is broadly equivalent to a deposit in other countries. Reikin is paid to the landlord as a token of gratitude for being allowed to move in, and the agency fee goes to the estate agent that arranged the let. A guarantor company is a firm that provides a service in place of a personal guarantor. Tenants in Japan are often required to have a guarantor who takes on joint liability should they fall behind on rent, and guarantor companies offer this as a paid service.
Between these various costs, moving into a new home in Japan can mean paying five to six times the monthly rent, or more, upfront. In some countries only the deposit, advance rent and fire insurance are required; landlords outside Japan might well envy the country’s commercial customs.
Smooth offers a service that lets tenants pay these upfront costs in instalments, spread across three, six, 12, 24, 36 or 48 payments. The interest rate charged on the instalments stood at 18% a year at the time of writing.
Those wishing to use the service enter their name, income and other details online, triggering an immediate assessment that indicates how much can be paid in instalments. Smooth advertises that results can be returned in as little as 30 seconds.
Tenants have long been able to negotiate instalment payments for upfront costs directly with landlords or estate agents. What sets Smooth apart is that it holds the proper registration. The company is registered as an individual credit-brokerage business (kobetsu shinyo kounyu assen gyo) under the Ministry of Economy, Trade and Industry (METI). According to Taku Koizumi, Smooth’s chief executive, only around 150 companies in Japan hold this registration. The list of registered firms includes financial institutions alongside consumer-credit companies well known to ordinary Japanese, such as Orient Corporation and JACCS.
Funds to be used for hiring ahead of an IPO
The first close of the Series C round brought in JIC Venture Growth Investments, a state-backed fund, as a new investor. Existing investors also took part, including Maezawa Fund (the fund of angel investor Yusaku Maezawa), the venture-capital firm XTech Ventures, and CyberAgent Capital, CyberAgent’s corporate venture-capital arm.
The funds will go towards hiring ahead of a planned stock-market listing and towards improving the service, the company said. The announcement also publicised that Smooth is recruiting for positions including a general manager to oversee IPO preparations.
Mr Koizumi, Smooth’s chief executive, said: “Moving house is an important step tied to each person’s individual hopes—a new job, a new school, life with a new family. We will keep striving to fulfil our mission of making moves that bring people closer to their wishes a reality, for more and more people, and aim to be a company that meets the expectations of all our stakeholders.”
