As a founding member of WeWork Labs, the shared workplace area big’s enterprise arm, Matthew Shampine helped rework the world of business actual property. Now he’s taking up South Korea’s deposit-heavy residential actual property market, one rental at a time.
Living in cramped, unaffordable residences stays an unglamorous actuality for a lot of adults. When Matthew Shampine, the Korean-American cofounder and CEO of house rental startup Dongnae, moved to Seoul along with his spouse and new child daughter, he noticed a chance to reshape that actuality in South Korea.
“I actually, actually needed to do one thing that may have probably the most impression on probably the most variety of folks,” says Shampine, 39, in a video interview. “You’ll be able to ask anybody right here, however Koreans have a powerful affinity in direction of residential actual property … we will change your complete expertise, all over, and cater to their wants.”
Born in South Korea, Shampine was adopted in the USA, and grew up in New Jersey. In 2007, he returned to Korea for a Korean-American adoptee convention and reconnected along with his organic household. There, he made it a mission to return for good—and do good for the nation.
Shampine joined WeWork in 2011 and cofounded WeWork Labs, the office-sharing firm’s startup incubator. In 2018, he grew to become basic supervisor of WeWork Korea, the place he met Dongnae cofounder Insong Kim, who serves as the corporate’s chief technique officer.
Collectively, the pair launched Seoul-based Dongnae in 2020, with the purpose to make transferring into an house extra inexpensive and accessible. Its key product, Dongnae FLEX, gives short-term, fully-furnished rental properties with low deposits, interesting to recent graduates or vacationers unable to cough up the exorbitant deposits—as a lot as 350 months of lease, the startup says—which might be usually required of Korea’s residences.
From left: Suzie Lee, Chief Income Officer; Matthew Shampine, cofounder and CEO; Insong Kim, cofounder and Chief Technique Officer; Sunju Yook, CFO
Courtesy of Dongnae
“The way in which our product has come about is we actually allow folks to stay the residences that they wish to,” Shampine says. “We unlock all these new choices since you’re not restricted by the sum of money you might have put aside for a deposit.”
To this point, Dongnae has opened its doorways to each native and worldwide buyers. Its $21 million collection A funding spherical in March included NFX, which has backed the likes of Lyft and Doordash, and proptech-focused MetaProp, a backer of Airbnb, together with Korea’s oldest funding fund Daol Funding and Hana Monetary. The recent capital introduced the startup’s complete funding to roughly $34 million, following its $4.1 million seed spherical in December 2020 and $700,000 pre-seed around the yr prior. Dongnae declined to reveal its present valuation.
“Residential actual property is the most important asset class right here in Korea,” stated Kyung Kuk-hyun, managing director at Daol Funding, in a press release about Dongnae’s newest funding. “Dongnae’s unbelievable progress paired with their sturdy monetary partnerships with main monetary establishments make this funding compelling.”
Over 80% of Korean family wealth is in actual property, in comparison with roughly 35% in the USA, however homeownership has confirmed more and more tough. The typical worth of an house in Seoul, the nation’s capital and most populated metropolis, doubled between 2017 and 2021 to over $1 million. Housing fashioned a centerpiece of Korea’s newest presidential debates, with newly elected President Yoon Suk-yeol pledging to chill down the market and assemble 2.5 million new houses nationwide over his five-year time period.
Protestors rally in opposition to Korean actual property insurance policies on July 25, 2020 in Seoul.
Chris Jung/NurPhoto by way of Getty Pictures
Renting shouldn’t be at all times a better different. Korea’s rental housing market largely depends on jeonse, a singular cost system requiring tenants to supply massive upfront deposits. Generally known as “key cash,” these lump sums are as much as 80% of a unit’s sale worth—the typical jeonse worth for residences in Seoul was roughly $516,000 in August, whereas sure districts may attain as much as $572,400, in response to figures from KB Kookmin Financial institution.
The widespread follow of taking out loans to unlock “key cash” provides to Korea’s deepening family debt disaster, which topped 104% of Korea’s GDP in June. Among the many nation’s high 5 lenders, jeonse debt reached $106.4 billion final June, up from $37.8 billion that month in 2017. Over half of the excellent loans stemmed from adults of their 20s and 30s, who owed $63 billion.
Extra Koreans are transferring out of the high-deposit rental system. Of the full 258,313 lease transactions for residences and homes in April, 50.4% of them had been for month-to-month leases, not jeonse, in response to Korea’s Ministry of Land, Infrastructure and Transport—the primary month since 2011 that jeonse didn’t lead transactions.
Shampine hyperlinks the transfer away from jeonse to the evolving wants of younger professionals, who’re rethinking conventional beliefs of marriage, child-rearing and homeownership. Along with the “releasing” sensation of dwelling with out debt, short-term property leases present these adults the chance to discover extra impartial and versatile dwelling preparations, whereas prioritizing their careers or friendships – an house’s faculty district is much less essential than its proximity to work or location in a “cool neighborhood,” he says.
“For folks of their late 20s and early 30s, the concept of being impartial out of your dad and mom is completely different than being impartial when it comes to not having a roommate,” says Shampine. “You’ll be able to each work collectively and actually have a tremendous house. Prior to now, right here in Korea, your choices had been both dwelling in a very small co-living area, or an officetel (a constructing with workplaces and residential models) with no facilities in any respect.”
House buildings of the southern Seoul metropolis skyline and Han river.
ED JONES/AFP by way of Getty Pictures
Dongnae started as a list platform for potential renters to ebook visits with property businesses, however it met restricted success. Shampine says his workforce didn’t foresee “cultural dynamics” that curbed demand for his or her product. “We realized right here in Korea, it’s very simple to go to any house advanced across the metropolis, or have a sort of connection to a brokerage, to only ask for a tour everytime you need,” he stated. “So the idea of going via an app and to ebook [a tour] for like, the upcoming weekend, simply did not actually appear that enticing.”
The preliminary lack of success prompted “good and wholesome,” albeit painful, reflections on the enterprise mannequin, Shampine says. Conversations with prospects, brokers and workforce members on the bottom knowledgeable Dongnae’s purpose of “changing into the availability, as a substitute of looking for the availability.” In July final yr, Dongnae pivoted from house listings to serviced residences. On the shut of its newest funding, the startup stated its properties spanned 60 house complexes—now, they span 80, throughout 12 districts in Seoul.
Wanting ahead, Dongnae plans to increase its dwelling providers provided to residents, tapping into Korea’s thriving marketplace for furnishings and life-style items. Different startups growing options for dwelling areas have discovered appreciable success. In Might, inside design platform oHouse raised $182 million to develop into the most recent Korean unicorn, at a valuation of roughly $1.6 billion.
Shampine hopes to usher in a broader cultural shift. “Once I personally mirror on how WeWork modified business actual property right here, from renting area and co-working to precise environments contained in the workplaces, I actually hope that we’re capable of do one thing comparable from a residential perspective,” Shampine says. “Making it a greater expertise … for the brokers, for the landlords, and particularly for the tenants.”