19 November 2015
How did FlatClub start and where is it now?
FlatClub really started with a need of my own- to rent my apartment when I was away and specifically to someone I can trust, and as a first-year student at the London Business School, I also saw a lot of my friends struggle to find a place to stay during exchange programmes. It’s difficult to find accommodation for a few months in popular cities. There is a lot of supply for holiday stays or long term stays, but it’s very hard to find affordable accommodation for medium term stays. I thought, I could actually try to solve this and started out with my market research. After speaking to more than 300 people, it was clear that there was an unsolved problem, for which I had a solution.
I built a basic proof of concept and launched the platform with 5 apartments and 1 email to the LBS community. Two weeks later, we had 70 apartments and our first booking. I then approached my friends at other universities to send the email and six months later we hired our first employee! Of course at that time, in 2011, I hadn’t imagined that years down the line we would have a team of 50 employees managing more 100,000 listings and customers from all over the world who are using us every day!
How much time did you spend on market research?
I’d say I have been spending the last 5 years on research! For me, research doesn’t stop! Yes, I did spend 3 months only on research before we even wrote the first line of code, but since then research has always continued. The most important thing is to keep talking to the customers, I still stay connected to users, I chat with them online or directly on the phone, to understand what the pain points are and how we can provide a better solution for them, especially when we focus on our niche of offering a budget accommodation for stays of a few months.
Is it necessary to have a co-founder who is a tech expert to start a new venture?
A technical co-founder is ideal, but it is also very hard to find someone who will not only know to code but also be a visionary and become the CTO. For us, what made sense was first to test, so we worked with some developers to build a very simple proof of concept website to see how users interact with it and will they even use it? This worked out perfectly well for us, initially we outsourced this part of the business and gradually, as we started to grow we hired in-house developers and now that our operations have expanded; we have an outstanding CTO on board.
What were the challenges you faced when expanding to foreign markets?
I think the challenge of going to a new market is that every market is unique. Clearly, some things can be replicated but many times we need to adapt and learn the local culture, regulations, nuances in language and understand what’s important for people & what’s not. Thinking that we can just translate the message, just doesn’t work. You really need to localise yourself and in that aspect, being based in London is a huge advantage! London being a hub for all nationalities, it was easier to recruit people with local knowledge of the markets we were going into. At FlatClub, London we have more than 18 nationalities in a team of 30 employees. When asked what the advantage of being in London is? This is one them – access to an international pool of talent.
What are the operational issues specific to FlatClub and how do you tackle them?
Definitely, sourcing and recruiting technical talent is a very difficult, especially in London, where there is a shortage of candidates with technical skills and their demand is very high. Getting the best talent to work for us is a challenge.
Another challenge is the type of business we build. We are a marketplace and a challenge for every marketplace is that we are actually running two business – One business is to attract hosts, give them a good experience, retain them and the other is to bring guests and provide them with a good experience too. We always need to balance the demand and supply and optimize it, and to do it over multiple locations is challenging. There is a lot of complexity in this business, but that’s part of the fun!
Which area requires more attention – getting hosts or attracting guests?
Well, both are equally challenging and also connected to how we manage the demand and supply balance in different markets, in some markets we need more resources to attract hosts and vice-versa in others. It’s not only about bringing them to the site, but also giving them a good experience and making sure that they actually get what they want. And what we like most is when guests become hosts and hosts become guests and we have some very interesting stories of such cases – A lady from London went with us to Dublin for a few months and when she came back, she really liked the experience and started to rent out rooms in her apartment. Initially she started with one and then the second and then the third, and started to make really good income. We actually changed her life and the way she makes money!
What is your competitive advantage to other players in the market?
The London host I mentioned earlier didn’t want a b&b model where people come and go for a couple or more nights. With us, she had students from the best universities staying for a few months as she provided accommodation for interns, with a Lloyd’s of London insurance for free to cover any potential damage. Our supply market is strong which enables us to provide the perfect accommodation, especially in terms of budget.
We equip our guests with relocation guides, flexible financing options and a range of other services which can be helpful while moving to a new city.
We also offer a unique service – LiveDemand. In traditional short stay marketplaces, hosts create listings and guests browse and book those listings. However, with the addition of the free service LiveDemand, FlatClub offers the inverse. Hosts are able to browse for guests and make offers directly to them.
What are the three factors that you think influenced investments in FlatClub?
It is a combination of few factors- Strong team, Traction & most importantly Affirmative Feedback from customers that we have created a value adding service in the market.
How would you describe your funding experience in London?
For me as an Israeli, from the start-up nation, I do compare the markets and I’ll be honest, it is easier to raise finance in Tel Aviv or the U.S. on higher valuations. But for me, it has been an exciting experience to see how London has developed over the last 6 years that I have been living here. And from a very small number of start-ups to a booming market and it’s really exciting to see how the whole ecosystem works. Few of the government initiatives like were a game changer. We were the first company in the UK to raise money on the SEIS and it helped us in closing our first round. After this, it was much easier to raise the first £200,000 but again the next round of £1m became difficult, because naturally there were more players in the market, though not from the same industry but competing for the same resources. The matching funds, like the London Co-investment Fund, play an important role in bridging the gap between the seed to a series A and supporting companies.
What is your vision for FlatClub?
Continuous expansion and growth are our main objectives at this point. We have grown really fast in the last few years, to give an example – at the start of 2015 we had 25,000 listings and as of today we have over 100,000 listings! As for our vision, we want to make moving to a new location on a budget easy and solve a global problem.