Coliving solves pains for tenants and developers
Christopher Bledsoe is the CEO of coliving startup Ollie, and will join the “New Age of Tech Enabled Real Estate” panel at Shadow Summit 2019. We spoke with him about the struggle of building a product before its category exists in the marketplace, and why it’s so damn hard to make ends meet in New York City.
Coliving is a relatively new term in commercial real estate. What does it mean?
When my brother and I started the business in 2011, ‘coliving’ didn’t exist. But there were pain points in the marketplace that needed to be solved.
The evolution of coworking has been super helpful to coliving. This idea of having a work experience oriented around hospitality and community — the hotelification and communalization of working — it’s not a huge leap in their mind to hear the word coliving and by extension get a sense of what coliving might be about: an inclusive lifestyle, built around community.
We talk about the 4 Cs that make up coliving: cost savings, convenience, comfort, and community. What does cost savings mean? 15-40% savings versus a comparable living experience in a conventional class-a style studio apartment.
You mentioned pain points in the market that needed to be solved. What are they?
The first pain point is affordability. When my brother moved to New York as a 23 year old in 2005, he needed to make ends meet. He wasn’t a struggling artist; he was in finance and earning a pretty decent salary — but that still wasn’t enough to afford and qualify for the opening price point product in the official housing market (at the time, close to $2,500 a month, which implied he needed to earn close to $100,000 a year).
The second pain point emerges when you try to bend the existing housing stock to meet a budget. He took a 1 bedroom apartment, subdivided the living room into 2 additional bedrooms, and listed them on Craigslist. One of the bedrooms he created out of the living room had no air conditioning. The wall was awfully flimsy, with no special noise attenuation.
Roommate compatibility is another pain point as well. Who didn’t clean the bathroom this week? How do you split the bills?
All of these pain points are eminently solvable, but they take money to solve.
So at Ollie, the model was very focused at first on eliminating the negatives. One of the first things you’ll experience is our roommate matching algorithm, Bedvetter. Craigslist doesn’t offer such a service. And in terms of comfort, our units are not only professionally designed, the furniture transforms. Beds become sofas, so bedrooms have living room functionality. Coffee tables pop up to become TV trays. Desks unfurl to become dining room tables. We may not be able to give space back to people, but we can do the next best thing, which is drive functionality back into their unit. The consumer cares more about functionality than space.
There’s extra insulation between walls for noise attenuation, and temperature control in all of the bedrooms.
Plus, housekeeping and other chores are taken care of. Our goal is to help people be the best version of themselves they can be, so returning time and money frees them to self-actualize in a way they wouldn’t be able to if they were working all the time merely to pay the bills.
Is coliving a viable solution for the lack of affordable housing in major cities?
I recognize that affordability is a relative term, so solving the affordability crisis in a Class A luxury high rise building might be only getting it low enough to a point that can support a $50-100k income earner — so what about all those people who don’t make $50k a year? It’s a fair question, but you’ve got to start somewhere. Being able to open up the market for luxury Class A space that would have otherwise been available strictly to a $100k+ earner is a pretty big step all on its own.
Right now, we are generating 30% more profit for the building. That profit is considered a necessary risk premium by today’s capital markets. The [coliving concept] is still in its nascent days, not as proven out yet as investors ideally want it to be. The quicker that changes, the quicker we have proof points in the market and get institutional investors comfortable with this category of coliving, less and less risk premium will be required by them. When less of a premium is required, we can sharpen our rents even more — and instead of delivering the enhanced profit to the investor, deliver reduced rents to the consumer.
What advice do you have for fellow proptech founders?
In the venture world, the advice we often hear is fail fast. Identify failures, cut losses, and move on. It took my brother and I 400 meetings in 3 years (from 2011 to 2014) to get our first “yes.” And our first “yes”? That 42-story building took 4 more years to actually deliver. With an app, in 6 months you know if you have a winner on your hands or not. In the proptech world, the real estate cycle, the life cycle of a building, doesn’t lend itself to that philosophy. My advice is the opposite: persevere. Iterate through it, work through it, but if you have a good idea that feels inevitable, the opportunity for innovation is so deep. Stand for something. If you believe it, figure out how to make it happen, even if it doesn’t happen overnight.
Do you believe it’s possible to do well by doing good?
I inherently believe you can do well by doing good, and in fact, I think you can do even better by doing good. We think of our mission — to humanize housing — through the lens of Maslow’s Hierarchy of Needs. But I don’t just ask our team, how are we humanizing housing, I ask them to think about each rung on the ladder as a value chain. With each rung we get right, we have an opportunity to be more relevant to more of our members in more ways, and the brand then has the opportunity to “margin up.” Ultimately, the way we do well by doing good — which means to generate margin without being counterproductive to our focus on affordability — is by shrinking per capita space requirements by 50% while shrinking rents by 30%. This difference creates profit.
To hear more from Chris, grab your ticket for Shadow Summit!