The idea of renting a phone or other consumer equipment is more or less foreign in many parts of the world - there are very few people with a smartphone in their pocket that is not their property. Until April 2020, this opportunity was not available to the Bulgarian consumer. Then came Addit.tech, the platform for renting equipment for a period of 1 to 18 months.
"Our goal is to change the attitude of consumers towards the constant purchase of new electronics and to give them an adequate and budget-friendly alternative," says one of the company's five founders, Ani Bachvarova. A variety of gadgets are available for rent - from smartphones, smart watches and laptops to headphones, vacuum cleaners and more.
The company Rentronics, through which Addit.tech operates, was registered in 2019, and the project is headed by Ani Bachvarova, Vladimir Kolev, Ivaylo Petkov and Asen Assenov. The four have known each other for years and have worked together on joint projects in the past. As they were discussing a similar rental model they had seen in Western Europe, they decided to try it in Bulgaria. Later, they were joined by Strahil Radovski, who has experience in corporate finance and fintech startups.
Initially, the company was received BGN 200,000 worth of private equity financing, which was used in the development of the website until its launch in April 2020. Since then, they have attracted debt financing, starting with the Logos financial house in the amount of BGN 300,000. Later, they borrowed BGN 400,000 from the Bulgarian-American Credit Bank and BGN 300,000 from the state-owned Bulgarian Development Bank. Bachvarova says the money from the debt financing is being used to expand the company's portfolio by purchasing new devices to be rented out.
Sofia Angels Ventures and Angels Club have also recently invested in the company, providing 555,000 euro in venture capital. The investment is aimed at supporting the future development of Addit.tech, hiring a larger team and developing a new business branch - a market for refurbished second-hand electronics.
"We will offer renewed electronics. We will be buying old devices, repairing and selling them," says Strahil Radovski. "We aim for the most attractive look for the customer, as if he is buying a new product, and any missing accessories will be added by us." The purchase of devices is already possible on the Addit website - if a user likes a product for rent, he can pay a certain number of installments to acquire it. The new platform will be a specialized trading platform, which will include older models from the portfolio of Addit.tech, which are no longer being rented.
How to rent a widget
Addit.tech works on a relatively simple principle - the customer chooses a device, estimates how long he needs it for, with a minimum rental period of one month and a maximum of 18 months. He then signs an electronic contract. The gadget arrives by courier and in case of need for repairs 75% of their cost is covered by Addit. "The whole process, from the order itself to the delivery - everything is digitized," says Bachvarova. That is why the team is fairly small - only four people work in the Addit office, and the whole team consists of nine.
"One of our fears was how difficult it would be to give away a device for a second time," Bachvarova says. However, it has turned out that returned products are rented out again relatively quickly, and as the portfolio grows, so does the demand.
Currently, the Addit portfolio contains about 600 devices. At the time of the company's conversation with Capital Weekly, only 30 of them have not been leased. This implies the need for a larger portfolio, which is the biggest expense of the company. The team chooses what electronics to buy according to customer demand - the devices come only after someone makes an order to avoid unnecessary storage of goods with low demand. According to Bachvarova and Radovski, Apple products are definitely the most frequently rented items.
Bachvarova is a fan of two other categories, away from everyday technology - children's products and drones. "It makes the most sense to rent these, not buy them," she says. Radovski, for example, who recently became a father, took advantage of the company's services and rented a stroller and basket for his baby. He says that when he returns them in six months, someone else will be able to take advantage and save investment in products that everyone is wondering "which basement to store them in". Addit.tech will win because it will lease out the assets several times before they become unusable and will thus extend their life.
The average rental period of a device so far is about 12-13 months, but it is getting shorter. This means that if in the beginning customers saw Addit as a service for deferred acquisition of devices, now they realize that they do not need to acquire an asset, but to use it while it works for them, Radovski believes. "We offer the greatest flexibility on the market, which is why we are now seeing a high percentage of returning customers."
Before the profits - big expenses
They both admit that the company still does not generate net profit, although the business plan is working. Radovski is convinced that the model is financially sound and it must reach a certain scale of the product portfolio in order to generate enough revenue and cover all of the company's costs. He says that one of the biggest challenges is the need for a huge investment to expand the inventory, which is why debt capital is so necessary for the business plan of Addit.tech.
They expect the next big step to be to grow their B2B line of operation. They believe that there is a huge potential in cooperation with business customers, as they offer affordable electronics that do not require huge investments. In addition, Bachvarova adds, renting devices also facilitates administrative work - "renting is just an expense and makes accounting easier".
They say they expect more and more people to turn to the services of Addit.tech. On the one hand, due to the significant increase in the cost of electronics, but also because logistically new models are becoming increasingly inaccessible. "If you try to find the latest iPhone model, you will realize that it is practically undetectable," Radovski says.
In addition to renting out electronics and opening a new online market for second-hand devices, Addit.tech is determined to support the idea of a green economy and start offering the option for recycling unusable devices, and it is still looking for a partner to cooperate with on this matter. "The recycling of goods will grow more and more from now on," Bachvarova concludes.