AppFolio Stakes Out Territory in Field of Property Management Software

Goleta startup fueled by business acumen of founders and an enthusiastic customer base

From its headquarters at 55 Castillian Drive in Goleta, AppFolio is building its brand by creating unique, easy-to-use software for the property management industry.
From its headquarters at 55 Castillian Drive in Goleta, AppFolio is building its brand by creating unique, easy-to-use software for the property management industry. (AppFolio photo)

By | Published on 09.06.2010

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For many people, creating and implementing new technology software is as alien a concept as learning to speak a dead language fluently. However, the driving force behind any new software is usually fairly simple, and follows the same rules as any other incipient business: forecast a need in a particular market — then fill the need. Oh, and it’s always nice if you can make a few dollars in the process!

That is exactly what local technology gurus Klaus Schauser and Jon Walker, co-founders of tech startup AppFolio, had in mind when they launched their company in 2006. Based on the response they’ve gotten to date, it seems they’re speaking just the language their customers want to hear.

AppFolio — a name that Walker says reflects the company vision of “building a portfolio of business applications for various different vertical markets” — is currently focused on creating unique, easy-to-use software for the property management industry. Walker and Schauser had known each other for years, but when the duo began talking in 2005, both of them on the heels of other tech ventures, they discovered they had a similar idea thread about an emerging market.

“Klaus and I met up and we had a very similar, strong belief that Web-based software was going to be the future,” Walker told Noozhawk. “It’s interesting because, most times, technology is pushed from the business side, and consumers adopt it later. But we noticed an interesting trend where consumers have been pushing ahead with Web-based software like Gmail and Hotmail, while most businesses are still a little behind, using either old desktop software or client-server based software.”

The first market that the newly formed tech team decided to explore was property management. What the validation team discovered was that the vast majority of property managers were unsatisfied with their existing software programs.

“A lot of times a small-to-medium business doesn’t have an IT staff, so doing things like backups and handling security are really difficult, not to mention prohibitively expensive,” Walker explained. “That’s the real opportunity that we saw, where with Web-based software, the vendor takes care of all the IT functions at a much higher level, and at lower cost.”

Once they had decided on the first market to target, it was time to round out the team. Walker and Schauser knew they needed to bring in a ringer to complete their high-tech triumvirate and they found the missing piece in current CEO Brian Donahoo.

Donahoo has an extensive business management background and was senior vice president for products and services at Expertcity/CitrixOnline from 1999 to 2007, growing the company to $240 million in annual revenue from its early startup phase. Donahoo was the product executive responsible for the planning and launch of GoToMyPC, GoToAssist, GoToMeeting and GoToWebinar. The GoTo product line services millions of individual users and more than 40,000 small businesses globally.

Of course, the business acumen of both Walker and Schauser is quite formidable, as well. Schauser was founder and CTO of Expertcity/CitrixOnline from 1999 through 2006. He was also the visionary behind GoToMyPC, GoToAssist and GoToMeeting. As a computer science professor at UCSB, Schauser has been widely published as a research scientist with extensive experience developing scalable, highly parallel computing environments. Schauser received his Ph.D. from UC Berkeley.

Walker’s resume is equally impressive. He was CTO of Versora, which provides open-source Windows to Linux migration software. Versora was sold to Kaseya in 2006. Prior to Versora, Walker was CTO and vice president of engineering for Miramar Systems, which was sold to Computer Associates in 2004. During his tenure, he led the development and quality assurance organization team of 30 engineers and was responsible for the creation and delivery of products. The software developed under his direction has been deployed to more than 20 million computers worldwide. Walker teaches software engineering as an adjunct professor at Westmont College’s Computer Science Department and has deep ties to the Santa Barbara community as a Westmont alumnus.

Today, AppFolio’s three-man operation has mushroomed to around 60 employees at its headquarters at 55 Castilian Drive, and the company boasts customers in every state, as well as in Canada. Due in large part to the credibility and track record of Walker and Schauser, the burgeoning company has already been able to raise $30 million in venture capital. The three main investors are Cisco Systems, BV Capital and the Investment Group of Santa Barbara.

Surprisingly, despite AppFolio’s location on the West Coast, analytics show a fairly even customer division across the country. Aimee Miller, vice president of marketing, explained why she thinks word has spread so quickly about the company.

“We have been really active on the two Web sites that we host, which are propertymanager.com and greenpropertymanagement.com,” said Miller, who is also a transplant from the Citrix team.

“We provide free Webinars, and we have a lot of articles with relevant material for property managers to be able to run a better business. We are also lucky to have very vocal and very happy customers, so really our top source of new business is through customer referrals. The power of that has been amazing.”

According to Walker, the positive customer response is incredible — although not surprising.

“Our big advantage is that we are so customer-feedback focused,” he said. “We’re getting to be a pretty large company now, and we are getting hundreds of customer feedback e-mails every day, and we send those out daily to every person in the company. So everyone in the whole company is exposed constantly to what customers are saying and doing.”

In addition to customizing software to fit the needs of individual businesses, AppFolio provides 24/7 support to all its customers, and it is quite active in the local community. It has partnered with UCSB to offer student internships in the company, and Schauser’s long-time ties to the university have proven to be a special entrée into the tech world for many young graduates. In December, more than 40 employees participated in the inaugural Santa Barbara Marathon, and Walker and Schauser always encourage the members of their team to engage in similar community-building events to stay connected and give back.

Looking toward the future, Walker says that while AppFolio is thrilled to have created a solution for property managers, the larger goal is to build business solutions for a number of different organizations. As the company continues to expand, the leadership team is researching and evaluating the benefits of expanding into other markets. In fact, there is an entire team within the company that is dedicated to finding the next segment of business that can most readily benefit from a customized software solution. After all, filling the needs of the Web-based software market is the purpose for which AppFolio was created.

“The next step is to find another vertical market where we really think that we can make a difference in helping them grow their business and build new product,” Walker said. “But right now, we’re not really in a hurry; it’s not as though this market is saturated.

“We are just continuing to make a real difference in the property management industry, which is a great benefit for us as a company obviously,” he said. “But it also truly helps out our clients in the small-to-medium business market.”

Noozhawk contributor Kevin McFadden can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk or @NoozhawkNews.

It's not all work for AppFolio's nearly 60 employees. The Goleta startup recently enjoyed a company picnic at Goleta Beach.
It’s not all work for AppFolio’s nearly 60 employees. The Goleta startup recently enjoyed a company picnic at Goleta Beach. (AppFolio photo)

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