In 2020, Cipriano Echavarría was working at Morgan Stanley in New York and weighing his next career move when he noticed a plaque on his desk. Among the names of people who had sat there before him was David Vélez.

He looked up the name. Vélez was not only a fellow Colombian from his hometown of Medellín, but also the founder of Brazilian digital bank Nubank. Echavarría took a photo of the plaque and messaged him on LinkedIn, asking for career advice.

It turned out that Vélez had an opportunity for Echavarria: Nubank was about to announce its expansion into Colombia and hire a launch team. By late 2020, Echavarría had returned home to join it, with plans to eventually start a company of his own.

Now Echavarría’s Medellín-based startup, Palomma, has raised $10 million in Series A funding led by Mexican venture firm Cometa to expand its financial services business for landlords, tenants and property managers, Crunchbase News has exclusively learned.

The financing brings Palomma’s total funding to $14 million, including $4 million in previously undisclosed funding, according to Echavarría, its co-founder and CEO. Participants include Volpe Capital, Clocktower Technology Ventures, Tekton Ventures, Simma Capital and Yango Ventures, alongside existing investors Y Combinator, 17Sigma, Nido Ventures and Norte Ventures.

Palomma says its annual recurring revenue has grown thirtyfold in 18 months to about $3 million. It processes about $130 million in monthly rental payments, serving more than 200,000 tenants through over 500 property managers in Colombia. It estimates $1.5 billion in annualized rent payment volume.

The company will use the funding to expand in Colombia, develop additional AI and financial products, and prepare to enter other markets. It is considering Mexico, Brazil and the Spanish-speaking U.S. market, although Echavarría said Colombia remains the priority.

“We want to win Colombia,” he said in an interview.

Finding a business in rent payments

Palomma’s business combines software that helps property managers handle leasing inquiries, customer service and collections with a payments system for collecting rent and paying landlords. Those relationships let it sell financing, rental guarantees, and other financial products to tenants and property owners.

After nearly two years at Nubank, Echavarría went on to found Palomma with Felipe Monsalve and Nicolás Gómez del Campo, MIT-trained engineers with experience at Meta, Cobre and JP Morgan. The founders entered Y Combinator in January 2023 intending to build an account-to-account payments processor for Spanish-speaking Latin America. Growth was largely flat during the first year, Echavarría said. But then property managers began asking for help collecting rent.

It soon became apparent that there were problems on both sides of the transaction. Tenants paid rent early in the month, but got their paychecks in twice-monthly installments. Meanwhile, landlords depended on rental income but struggled to borrow against it or protect themselves when tenants stopped paying. Property managers handled collections and payouts through labor-intensive processes, Echavarría said.

Rather than acquire tenants and landlords as customers individually, Palomma decided to reach them through the companies managing their properties.

The team decided, “let’s basically use the property managers as a distribution channel,” Echavarría recalled.

From software to financial services

Property managers get access to Palomma’s AI software, which handles tasks such as leasing conversations. It then offers to process their rent payments. Those payments give the company a record of rental income and tenant payment histories that it can use to assess applicants for financial products.

From there, Palomma offers services for both tenants and landlords. Palomma Plus gives tenants rewards and credit-building benefits, while Palomma Advance lets landlords collect up to 12 months of future rental income upfront. Palomma Protect covers rental income if a tenant defaults. The company is also developing Palomma Flex, which would let tenants split their monthly rent into two installments.

Property managers pay a subscription fee for the AI software, and Palomma earns a percentage of rent through its payments and financial services.

Getting customers to adopt more of its services has helped drive Palomma’s growth. The company reports net revenue retention of 390% after 12 months, meaning revenue from an existing group of customers nearly quadrupled, even after accounting for customers who left or spent less.

Overall, the decision to combine AI leasing software, payments and financial services reflects Echavarría’s view of what it takes to build a large business in Latin America. He pointed to U.S. companies such as EliseAI, Bilt, TheGuarantors and Flex as comparisons for different parts of Palomma’s business.  Echavarría believes that reaching a similar scale in Latin America requires a wider range of products.

“In the U.S., you can build one solution and be really large because the market allows it,” he said. “In Latin America, if you want to be really large, you need to do all the things.”

Managing the risk

AI also helps decide which tenants qualify for rental guarantees. Palomma’s leasing agent communicates through WhatsApp and collects application documents. The company claims that it can then deliver an approval in under 30 seconds. The company draws on information from leasing conversations and rental payment behavior to assess applicants.

The company’s rental guarantees put Palomma on the hook if tenants don’t pay. The startup initially takes on that risk itself, but Echavarría told Crunchbase News it was working to finalize a partnership with an insurer that would share the risk and let Palomma offer more guarantees.

The startup is also using AI to keep its team small. As of Nov. 4, it had 18 employees, up from about 14 when it closed its Series A roughly three weeks earlier. A single customer service employee works alongside AI agents to support the roughly 200,000 tenants paying rent through Palomma’s platform, Echavarría said.

The startup operates on the premise that AI can make real estate financial services cheaper to provide, much as mobile technology helped digital banks compete with lenders that maintained large branch networks. Longer term, Palomma also plans to expand beyond rentals into homeowners association payments and residential property transactions.

Pepe Bolaños, managing partner at Cometa, said Palomma stood out for its founding team and the opportunity to modernize Latin America’s fragmented rental market. In Colombia alone, nearly 8 million households rent their homes, he noted.

“We look for companies tackling markets where outdated processes create an opportunity to build a proprietary data asset that can be leveraged and monetized through AI,” he wrote via email.

Bolaños pointed to Echavarría’s experience helping scale Nubank, and Monsalve and del Campo’s technical and financial backgrounds. In roughly 18 months, Palomma grew to process around $130 million in monthly rental payments and serve more than 200,000 tenants with about 14 employees, he said.

“That kind of execution is unusual. It convinced us that this team has what it takes to build a much larger business,” he added.

Unlike competitors focused on individual services, Palomma combines rent collection, tenant screening and rental guarantees, gathering data throughout the process, Bolaños said. Directly processing payments gives it insight into tenant behavior that can improve underwriting, flag potential defaults and support new financial products, while AI helps automate operations.

“We believe the combination of distribution, proprietary payment data and AI gives Palomma a competitive advantage that can become stronger as the company grows,” he said.

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Illustration: Dom Guzman