When Lessen reached unicorn status with a valuation of more than $1 billion in 2021, the Scottsdale-based real estate tech startup was riding high on its rapid growth.
By the following year, the company was at an inflection point.
Lessen, which connects property owners with service providers, wanted to manage smaller ticket repair and maintenance jobs, but estimated it would take years to build the complex technology it needed to elevate the company into a proptech leader, said Jay McKee, founder and CEO of Lessen.
After a phone call and a series of meetings with Mike Rothman, founder of Chicago-based facilities maintenance technology firm SMS Assist, McKee saw synergies between the two companies and the potential to create a centralized technology platform, allowing contractors, painters, plumbers and electricians to act as one and perform work at a national level that was not previously possible.
In 2023, Lessen acquired SMS Assist for $950 million, marking one of the largest deals in proptech history. The acquisition paid off for Lessen, boosting the company’s valuation to more than $2 billion, while expanding its reach to residential and commercial property owners that manage more than one million locations nationwide.
Lessen ranked No. 2 on the Inc. 5000 list of the nation’s fastest-growing private companies in America in 2024. The company has nearly 1,000 employees and offices in Chicago and Scottsdale. Its platform has more than 30,000 vendors that complete 3.5 million work orders annually.
“We’ve unlocked all these synergies, had zero customer churn, improved our operational efficiencies across several areas, and launched a bunch of new products this year,” McKee said. “When we sold the idea and concept to our investors and board, there was a lot of risk. I think what we learned over the last year was that we could actually integrate the two companies successfully and get prepared for big things in the future.”
What prompted the acquisition of SMS Assist? Did you face challenges in closing the deal?
When I started Colony American Homes in 2012, we were buying real estate assets. We recognized servicing real estate was harder than buying it. If we can build the technology and make it our core business, we can alleviate — or lessen — the costs for our clients and be a conduit between the client and the vendor because both sides of that marketplace are valuable. We started in 2020 and by the time we got into 2022 we’re like, ‘Wow, we need to go manage these smaller ticket repair and maintenance jobs.’ It was going to take us years to build the complex tech we would need to have to be an industry leader.
SMS Assist didn’t successfully SPAC like they tried to and they were seeking some alternatives to their approaches and management team. I knew their founder and I reached out to him on the phone and said, ‘Hey, we should probably do something here.’ Then, we sat down at my house and talked about a merger. The premise of acquiring SMS Assist was to take all their mature technology and merge it with our up-and-coming ideas to make a larger, more productive company. The challenge in doing so was getting the capital. At the end of 2022, the private equity and venture capital markets were effectively dead. There was just no money. All of these unicorns that came into fruition in 2020 and 2021 were not making any money. The hardest part and biggest challenge was showing a path to profitability, scale, operating leverage and protection of respective capital partners’ capital. It was extremely difficult.
We had to create one of the most complex transactions in proptech history to get this deal done. Even some of my partners today can’t believe it actually got done.
Do you have advice for emerging startup founders and entrepreneurs? I advise a lot of founders now and I’m telling them, ‘Don’t under appreciate how dramatic the change in lifestyle will be.’ If you want your company to be successful, there’s no such thing as work-life balance. In my opinion, everyday is a work day. It’s just how you manage it. The travel should be enormous, the availability to your investors, employees, partners and entire organization is relentless, and people just don’t appreciate how much sacrifice they’re going to need to put in to be successful.
I talk to founders about proper capitalization of the company and knowing who you choose as investors will determine if you’re successful or not. Then, how do you structure the deal with those investors? How do you manage control problems and how do you get to profitability? A lot of these technology companies don’t clearly have a path to becoming EBITDA or cash flow positive, and that is the biggest thing I’m seeing in the markets right now. I tell founders all the time, ‘You just can’t burn capital forever.’ It doesn’t work.
What are your near- and long-term goals for Lessen? The first thing we did is transitioned the business to profitability. We’re approaching $1 billion in revenue. We’re doing over 10,000 jobs a day right now. What’s next for us is taking all the insights and data from our current customers and finding ways to help them perform even better, so we can leverage broader and new customer relationships. Meanwhile, we’re providing a whole new set of developer tools for service providers on the other side of the marketplace. We’re launching a product that’s very similar to ServiceTitan. Our vendors are excited about it. We’re providing Advantage Marketplace, which lets vendors buy materials at significantly discounted prices. Then, we’re also providing other tools to our vendor affiliates to increase their business efficiency. That’s become more than half of our growth, so we’re really promoting better business tools and capabilities for our 30,000 vendors. We think it’s going to significantly increase the profitability of our business in 2025 and 2026.
The McKee File
Title: Founder and CEO
Company: Lessen
Education: Bachelor’s degree in business, Arizona State University
What activities do you enjoy in your spare time? Lessen requires that I travel three to four days a week. When I’m in a market, I’m efficient as possible. I try and stack the day as full as possible when I’m working on the road. When I’m home, I enjoy spending time with my three daughters and my wife who I’ve been with for 25 years. We enjoy going to concerts, exercising, hiking, all sorts of outdoor activities and family travel. I’m a big believer in family. I’m fortunate that I get to enjoy three great kids and a great spouse. Outside of family stuff, I enjoy golfing.
A Day in the Life
We asked Jay how he spends a typical workday:
5 a.m. — Wake up, read the news and catch up on emails while enjoying a cup of coffee.
6:30-7:30 a.m. — Fitness. Lifting weights, riding my Peloton or doing core exercises.
8:30 a.m. — Arrive at Lessen’s Scottsdale office and participate in a series of in-person and Zoom meetings, including important executive strategy sessions with direct reports. Interact with Lessen’s board, investors, employees, clients, vendors or external parties seeking to work with us.
6 p.m. — Leave office
7:30-8:15 p.m. — Enjoy family dinner with my wife and three daughters.
8:15-10 p.m. — Typically, I’ll watch sports games with my wife and daughters. Or my wife and I will go over any of the future family planning items that we need to consider.
10-11:30 p.m. — Follow-up emails to clients or my team and prepare for meetings the following day.
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