Startups that want to make it easier for people to rent an apartment flexibly in the shorter term are gaining momentum thanks to the rise of remote working. Last week, Dealbook reported that a flexible living startup, Flow, founded by WeWork co-founder Adam Neumann, has closed $350 million by Andreessen Horowitz. Earlier today, londonbusinessblog.com reported that an online rental marketplace, Zumper, has just raised $30 million in a Series D1 funding round led by Kleiner Perkins to better serve people looking for short-term rental options.
utilities, To landa startup that makes it possible for its clients to rent a fully furnished apartment for a month on its platform also says it has received new financing: $75 million in equity financing and another $50 million in debt.
Delta-v Capital led the stock, joined by new and past investors, including Greycroft and Foundry. Landing has now raised $237 million in venture capital and $230 million in debt since its launch in 2019.
We told you about Landing last week in a piece about founder Bill Smith, a serial entrepreneur we called the “anti Adam Neumann” because he’s decidedly understated, he’s conservative when it comes to raising venture capital, and his two previous companies have brought investors nothing but money. (Neumann, by comparison, is a powerful personality, and not everyone got ahead, famouson WeWork’s path to becoming a publicly traded company last year.)
The company works like this: It uses masses of data on prices and demand across the country and focuses on multi-family housing in the US. Through performance marketing and referrals, it then finds tenants for these apartments, signs one-year leases itself, and then quickly moves everything from furniture to utensils for the tenant. (Landing made all of this furniture in Vietnam and shipped it to warehouses in Austin, Phoenix, and Alabama, where it is located.
Renters, who sign up as “members” of Landing for an annual fee of $199, undertake to rent from Landing for a minimum of six months, although they may freely move to other Landing-owned apartments during that period, provided they the company a notice period of two weeks. Smith says they currently stay in one place for an average of six months.
Right now Landing – which is not profitable – makes money by increasing what it pays in rent by more than 40%. Finally, last week, Smith told us that Landing plans to sell its software directly to multifamily owners. “Over time, we’ll be working with owners to bring this product to their building, and it really won’t be a ‘Landing’ lease product,” he said. “They will just join the Landing platform. They will work with our technology and our standards. And, and it won’t be this model of, you know, Landing rents it and commits to that lease.”
Sounds a lot like what Flow is building, based on an “inside” story about Flow in the real estate outlet The Real Deal this week. According to the point-of-sale sources, Flow is basically a service that landlords use to make their properties more appealing to people who want to hop around and still experience a branded, consistent experience.
As with Landing, shorter lease terms and furnished apartments will likely allow Flow to enforce higher rents, notes The Real Deal.
Unlike Landing, Flow itself will own at least some of the multifamily units its members move into. With his ample WeWork earnings, Neumann has already purchased more than 3,000 apartments in Miami, Fort Lauderdale, Atlanta and Nashville, according to Dealbook. It could give the outfit an extra edge. As the Real Deal points out, Flow’s buildings “will also be able to tap into cheaper financing. . . because banks can lend to the properties at the same leverage point offered to apartment projects, or up to 80 percent. Those are more favorable terms than the roughly 55 percent typically offered to hotel developments, essentially creating a high-yield business with lower costs.”
Flow, Landing and Zumper aren’t the only ones spying on flexible living opportunities. Last fall, Zeus Living, which focuses on bringing “flexible living” options to people, raised $55 million in a round led by SIG. Blueground, a start-up for renting out furnished apartments aimed at short and long-term rental, has now been increased $180 million in equity and debt financing last September. Another platform with technology, Placemakr, raised separately $90 million from investors in March.
Another flexible living company is Sentral, whose more than 3,000 properties are owned by Iconiq Capital, the San Francisco-based investment firm whose investors are Mark Zuckerberg and Reid Hoffman; Iconiq is also a big investor in Sentral, the WSJ reported last year.
Expect more players backed by more capital, despite the uneven performance of some companies in the space, including Sonder, a short-term rental startup that went public through a SPAC merger last year and cut a fifth of its workforce last month. as part of a restructuring designed to save $85 million in annual costs. (On the customer review platform Trustpilot, Sonder . receives 1.3 out of five starscomplaining about everything from a lack of hot water in the branded units to bloodstained linens.)
While short-term rentals are complicated due to the many moving parts, more people are adopting nomadic existences due to the ripple effects of the pandemic, and VCs love nothing more than an industry in motion.
“Our Opinion”, CEO of Placemakr tells The Real Deal, is that the more the better. The institutionalization of an asset class is not done by one group.”