Roughly 4 years ago, the New York City Department of Buildings released an interactive map of every single elevator in the city—84,000 as of 2018.
In the interactive view, the elevators populate the map like lights on a city skyline; in America’s most populated city, there is seemingly no end in sight to the amount of (and need for) elevator supply.
And today, if that interactive map extended across (America), the constellation would be striking—over 8 million properties have active elevators in their buildings.
I love investing in companies with huge (and growing) addressable markets (TAM). So you can imagine my delight in investing with AuditMate (elevator Saas), a company founded by elevator expert Ashleigh Wilson, who’s found the market leading solution that all eight million buildings need.
A Massive Industry, A Fast-Growing Need
The vertical transportation sector is large and booming; it’s projected to grow from $122 billion in 2020 to $183 billion by 2027. The industry is an oligopoly dominated by four very large, very traditional companies that have tens of billions of dollars in ever-expanding market cap (Otis at $38 billion, Schindler $30 billion, Kone at $30 billion, and Thyssenkrupp, which recently sold its elevator division to a private equity group for $20.4 billion). It’s also ripe for disruption, which is just the type of industry that makes for a great investment!
Money At High Altitudes
The elevator industry generated $104 billion in revenue in 2018 and is expected to grow to $183 billion in 2027. If you look at the revenue streams of any of the four elevator giants, it becomes clear that a significant portion of their profits are realized not from sales, but from maintenance. Maintenance services are the most attractive segments in this niche, generating 50% of revenue but an incredible 75% of the industry profits. Otis alone maintained approximately 2.1 million customer units in 2020. It’s an area that’s vulnerable to fraud and mismanagement, which means it’s also an area that’s perfectly positioned for disruption and PropTech innovation.
Strong Demand: Considered Critical Infrastructure For All Multi-Level Real Estate Properties
From high-rise buildings to hospitals and hotels, elevators are considered critical equipment. People need to get up and down, to work and to home; the lift has to work. But the vital importance of elevator function makes it possible for vertical transportation companies to overcharge for services and take advantage of customers. In Europe, for example, there are five breakdowns per year, per elevator. Elevator companies bill at a premium for repair services, and use the opportunity to push new (and often unneeded) equipment or upgrades.
Elevator Problems: Confusion and Waste
Elevator maintenance contracts are confusing, inflexible and one-sided, and real estate management teams lack the expertise and bandwidth to internalize the 40-50-page documents that represent those agreements. This is where AuditMate steps in. By automating the details of maintenance agreements, AuditMate (an elevator Saas) can save customers the costs of invoices and repairs, and extend the life of the equipment through more regularly scheduled maintenance and more diligent, ongoing oversight. The result can be a reduction of costs by a significant 25%.
Every property manager understands that elevators require proper maintenance; the risks to user safety and convenience are too great, and the costs of breakdowns and callback invoices too high. Any seasoned property manager can recount horror stories of high stress elevator triage and wasteful billing for unnecessary or inappropriate repair work. But elevator management ranks in the top three pain points for property managers, and accounts for anywhere from 2.5%-5% of a building’s operating costs (according to the BOMA 2021 report). If there was a solution that could mitigate those costs without compromising protocol or safety, I don’t know a single manager who wouldn’t jump at the chance.
Strong Value Proposition
Ashleigh‘s team of experts cuts through the confusion with clear value delivered right from the start. AuditMate conducts a complementary (and highly compelling) contract analysis for potential customers, using the prospective client’s own data to highlight areas for immediate savings. Ashleigh did this for our properties, and it was eye-opening! This business practice reminded me of how we would create demos and build personalized mock-ups of videos for our potential customers when I was leading Vungle. When you personalize your pitch in this way, it draws customers in emotionally and makes the value proposition tangible.
Success Stories—Already On The Way Up
My partners and I saw the opportunity straight away and committed immediately. During our due diligence, we interviewed others who are using their service. Over and over again, we heard the desperation of property managers to solve the pain point, and an eagerness to hear more about a solution that would alleviate the issue.
Current clients told us stories of how AuditMate had saved them literally millions of dollars and solved contractual restrictions that were causing headaches internally. They found that value was added from the get-go with their free initial contract analysis. And almost all of them reported that the initial cost was recouped via savings in elevator maintenance and reduced time investment.
A Strong Team With A Depth of Experience
Ashleigh is scrappy and aggressive, with a big vision for her company in an industry she knows so well. She has surrounded herself with other industry experts who join in her aim toward those lofty goals. Collectively, she and her team have 117 years of industry experience, which gives them first hand insights into the customers’ problems over many business cycles and market environments.
With her stepfather working for Schindler Elevator Corporation for 40 years and an uncle also at the company, Ashleigh literally grew up in the elevator industry. When she graduated from college, she was recruited into the global executive program at Schindler. She spent five years there and saw firsthand how the company profited directly from contract confusion and a focus on elevators, not on the people whom those elevators served.
With a desire to revolutionize the industry, she determined that such transformation could not be done within its current framework. She got the idea for AuditMate in September 2019 and initially introduced it to family and friends who were already privy to the problem.
Launching the product at the start of the pandemic was actually beneficial for this startup, as potential customers had the time to slow down, review their contracts and get the education they needed to see the value AuditMate could bring. As buildings now see a return of tenant demand, property managers who were able to integrate AuditMate’s solutions are far better prepared for the return to activity.
A Sparse Competitive Field
In looking at the competitive environment, there really isn’t a lot to talk about. The other options could more accurately be described as consultancies rather than software applications, many of which have problematic conflicts of interest. Typically, consultants have expertise in one or two areas, while AuditMate (elevator SaaS) brings expertise in procurement, inspection requirements, legal limitations, maintenance contracts, risk analysis and modernization. Their nuanced understanding of the business makes them highly attractive in an already sparse competitive environment.
The company has gained traction very quickly and holds aggressive growth plans for the next few years. The team has onboarded 43 properties from 36 customers so far and expects 10X growth in their ARR in the next two years.
Future Growth Potential
The challenges in elevator and escalator management are universal, which means there is a goldmine of opportunity here to disrupt this industry with a PropTech solution to a problem that almost every property manager repeatedly encounters. I’m excited to see the prospects for AuditMate (elevator SaaS) go up and up!