Monday, Oct 8th
The Burn Rate
The VC-Backed Bodega

In the 1930s, there were at least 1,500 Jewish delis making pastrami sandwiches in New York City, but now there are fewer than 20. What’s common among the survivors, like the iconic Katz’s Deli, which has thrived for more than 130 years? Here’s a hint: it’s not the quality of the pastrami.

Small businesses like Katz’s have only been able to survive because those businesses have owned their buildings. Owning has allowed NYC institutions like Katz’s to focus on making the best pastrami sandwiches without worrying about paying rent on time. While Katz’s has been lucky, the majority of SMBs have not been as fortunate:

“My parents had a grocery store in Clinton Hill, Brooklyn. They ran the store for about 20 years. After that time, they got a phone call one day from their new landlord, saying: We’re really sorry, but we’re going to double your rent next month. And if you can’t pay it, we’ve got a different idea for what the neighborhood should look like.”

“About a week later, they parked a wrecking ball crane in front of the store. We lost the business in a month, and we actually lost our home a few months after. I was 11, asking my parents the hard ‘why’ questions.”

These are the words of Kevin Song, founder & CEO of Withco—a Brooklyn-based startup helping SMBs avoid displacement using a unique lease-to-own model—as he recounts the motivation for founding his company.

As Song describes, “Whether you're a stockbroker who lived in Brooklyn or a family who ran a small store, the forces that cause gentrification impact individuals equally when a small business disappears. That systemic misalignment is what creates the gentrification in the first place, but it all comes back to real estate.”

Currently, for small business owners, there are two main financial products in the market. One is a mortgage, which would have been a great solution for Song’s parents had they been able to afford it or had the know-how. The other is a lease, which is what most small business owners have to take—it's a short-term relationship with the space.

It’s counterproductive for SMBs—if they succeed, they end up displacing themselves. And it’s a tragedy, not just because the business owner loses, but because the entire community loses once they’re gone. Withco was founded to fix this.

The company works with SMB owners all over the country to help build a path to ownership. A business will lease your space like any other landlord, whether it’s the one you’re in or one you want to grow into. Every year you pay rent, Withco gives you a down payment credit that you can use to eventually buy the property. Withco sets the price from day one, so you know exactly what you’ll pay at the end of the term.

This type of system creates a different kind of relationship—a win-win model. Withco wants to sell your business the property, so the company treats you differently.

It used to be that if you didn’t fit the bank’s criteria, you didn’t have access to credit. But now, in-house tech at companies like Withco has opened up more options that might just save your corner store bodega.

Withco has raised over $32M in funding across Seed ($4M) and Series A ($28M) rounds from Founders Fund, Y Combinator, Reddit’s founder Alexis Ohanian, and others.

Learn more: With.co

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