Wisconsin Startups Join War of Apartment-Hunting Websites
In addition to the listings on venerable Craigslist, a dizzying array of apartment-hunting websites already exists, from HotPads and StreetEasy (both acquired by Zillow, for $16 million and $50 million, respectively) to ForRent.com, Rent Jungle, PadMapper, and Rent.com. And new companies are constantly joining the raging battle to connect would-be renters with apartments.
In an unusual twist, three of these recent startups are based in Wisconsin—Abodo in Madison, and RentCollegePads.com and Find My Spot in Milwaukee. All three have had promising beginnings, and are now scaling up their businesses after early successes with customers.
Why so many competitors? The underlying reason is that trying to corral apartment listings from landlords is a mind-boggling challenge. No company has yet truly figured it out. “I’d say there’s probably no clear winner today, and there’s definitely room for smaller startups to disrupt the current” market, says Neil Doshi, managing director and Internet and interactive media analyst for CRT Capital Group in Pleasanton, CA.
In fact, the stories of the recent Wisconsin startups fit the classic scenario of frustrated entrepreneurs setting out to fix an issue they experienced personally. Abodo, for instance, was founded in February 2012 by three University of Wisconsin-Madison grads who felt that apartment hunting in Madison “just plain sucked,” as Abodo’s website so eloquently states. “The reason you keep seeing [apartment rental startups] pop up is the problem hasn’t been solved,” says Alec Slocum, Abodo’s co-founder and CEO. It’s easy to buy a TV or music online, or to stream movies from Netflix, he adds, but it’s hard to find the best apartment.
The three Wisconsin companies aim to make that process a lot easier. How they fare over the long run will depend on ensuring their technology is solid and getting traction with both property managers and renters, Doshi says. Concentrating on a specific market segment, like off-campus housing (with RentCollegePads.com) or corporate relocations (as with Find My Spot) will also help, he says.
Here’s a detailed look at the three startups and their prospects:
As college students and then as graduates of UW-Madison, Abodo’s three founders—Slocum, Chad Aldous, and Adam Olien—searched for 10 apartments between them in Madison. In most of those searches, they ended up ditching Craigslist and apartment-hunting websites, and simply walked neighborhoods on foot looking for “For Rent” signs. “We thought there had to be a better way,” they write on Abodo’s website.
One key, they realized, was making it easy for landlords to list properties online. But in their company’s early goings it took a lot of “sweat” and “pounding the pavement” to sign up the landlords, some of whom had only advertised in street pamphlets, not online, Slocum says.
“Using a pamphlet that sits on the street corner to reach college students that are on computers and on smartphones just doesn’t make sense anymore,” Slocum says. “To reach those people you’ve got to be where they want to be. That’s been the value proposition [of Abodo] from day one.”
The co-founders made phone calls, sent e-mails, and—perhaps most importantly—strolled right into property managers’ offices. Slocum says he personally visited Mullins Apartments’ downtown Madison office 26 times before he won their business. Mullins is now one of Abodo’s biggest customers, Slocum says, with more than 40 rental houses and about a dozen apartment complexes, according to the Mullins website.
That hard work paid off. Within a year, almost all the major landlords in Madison were listing their properties—and 50,000 renters had used the site, Abodo says. In Madison, that puts them way ahead of the big players. A recent search found 713 listings in Madison on Abodo’s website, compared with just 65 on Apartments.com.
The co-founders originally set out to create a business serving just the Madison area. In fact, their original name for the company was MoveInMadison.com. But last year Abodo went through the startup accelerator program in Madison run by gener8tor, which invests in early-stage companies that go through its business boot camps in Madison and Milwaukee, similar to the Techstars and Y Combinator programs. (Disclosure: gener8tor is an Xconomy Wisconsin underwriter.) Now Abodo has bigger ambitions. It plans to have listings in 100 cities by the end of 2016, Slocum says.
It’s focusing on mid-sized cities like Milwaukee, Pittsburgh, and Columbus, OH, where there are fewer high-rise apartments. As a result, the bigger players, like Apartments.com, have big gaps in their listing inventory because they generally don’t include rental houses and smaller apartment complexes. Slocum believes that these markets are underserved, and offer an opportunity for Abodo.
Moving beyond Madison, however, requires a shift in strategy. With just seven employees, all in Madison, the company can’t put boots on the ground in new cities to work with property managers in person. Instead, Abodo partly boosts its listing inventory by allowing smaller properties—houses and apartment complexes with fewer than 15 units—to advertise on the site for free. For the most part, Abodo generates revenue in the industry’s traditional way, by charging large apartment complexes to list on its site. But the free listing option, which Abodo has offered since the company’s inception, gives property managers an incentive to list smaller properties for which they typically didn’t want to shell out advertising dollars, Slocum explains.
“It’s a gamble for us,” Slocum says. But he believes that landlords will step up with listings because Abodo can deliver more renters in its markets than the big sites can. “Our bet was that by delivering a better interface, a better platform that had more data, renters would come back [to Abodo],” he says.
Listing with Abodo was a no-brainer for Tallard Apartments, because the company’s entire property portfolio—94 buildings near UW-Madison, primarily single-family houses as well as small apartment buildings—falls under the free listing option, says Tallard co-owner Pete Lemberger.
Tallard’s units typically fill up quickly, but the company does take out ads in the student newspapers for specific buildings that haven’t secured tenants. Before Abodo, it had chosen not to advertise on apartment listing websites because “it’s a big chunk of money and they were never as interactive” as Abodo’s site, Lemberger says. He likes that Abodo’s website allows prospective renters to see all of Tallard’s apartments at one time on a map, a feature that Tallard’s website lacks.
It’s hard to gauge how many Tallard renters have come via Abodo, but Lemberger says his firm has gotten value from listing with Abodo.
“If they approach us at some point and say, ‘Things are becoming cost-prohibitive, we need to start charging fees,’ I guess we cross that bridge when we get there,” Lemberger says.
To attract even more renters, Abodo is launching a “neighborhood guide” feature, hiring local bloggers to write posts for the site that highlight local attractions like good restaurants, Slocum says. Abodo will also launch a mobile app in the next three months.
So far, the strategy is paying off. Abodo now lists more than 45,000 apartments in six cities, primarily in the Midwest, and more than 300,000 renters have used the site, Slocum says.
“Our attack has been we go city by city and we build these really dense, really up-to-date, large inventories,” Slocum says. “It takes us longer to get to scale, but once you get to scale, you’re solving the problem in a more effective way. You’re the equivalent of a local broker, as opposed to a national broker.”
Slocum declined to provide specific numbers, but says Abodo grew revenue 1,000 percent year-over-year in 2013, with sales projected to grow another 800 percent this year. Abodo’s Madison site is profitable, but the company overall is currently in the red as it sheds cash expanding to new cities. The expectation is that each market will become profitable by year two, he says. As part of its rapid growth plans, this year Abodo intends to more than double its current staff.
In the long term, though, Abodo could come up short against the “larger, well-funded businesses” like Apartments.com, ForRent.com, and Craigslist, CRT Capital Group analyst Doshi warns. “You have to be really differentiated in order to go after the larger swath of the rentals market,” Doshi says.
RentCollegePads.com (RCP), in contrast to Abodo, is aimed at a specialized niche, focusing on off-campus housing for college students. It was founded two years ago by Dominic Anzalone while he was an undergraduate at University of Wisconsin-Whitewater, an hour southwest of Milwaukee. Apartment searching was the worst part of the college experience for Anzalone and his five roommates, he says.
“Everybody was procrastinating, and nobody wanted to look together,” Anzalone says.
They were underwhelmed by the number of local listings on general apartment websites and Craigslist.
“There was just nothing that we knew was college-friendly,” Anzalone says. So he decided to build such a site himself.
RCP generates listings by reaching out directly to property managers through e-mail and cold calls. In subsequent meetings, RCP hooks the landlords through its “simple” and “affordable” platform for listing properties online, Anzalone says, without sharing prices.
“We’re simplifying college housing for landlords and students,” he says. “We’re taking away the barrier that’s in between them.”
The company has also partnered with some universities, such as Marquette University in Milwaukee, which lends credibility to RCP among landlords and students, Anzalone says. No money changes hands in these university partnerships, but the schools promote RCP to students on their own websites. The value for colleges is they are helping students find housing, while avoiding the headache of running their own apartment websites and keeping the listings up to date, Anzalone says.
These strategies have enabled RCP to get listings for more than 8,200 apartments in five cities in Wisconsin and Illinois since launching the site six months ago. More than 120,000 college students have used the site to search, Anzalone says.
RCP also includes an interactive message board that integrates with students’ Facebook profiles, allowing potential roommates to chat and see each other’s favorite properties on the site, Anzalone says.
RCP makes money by charging landlords to advertise their properties on the site. Anzalone declined to share specifics, but says RCP is profitable and generating revenue from each campus on its site. Next school year the startup could grow revenue by as much as 700 percent, he says.
Anzalone funded RCP’s startup costs himself using savings from summer marketing internships and money he made from stock investments during college, he says. He is bootstrapping the company, meaning he is growing the business through revenue from customers, rather than taking on outside investments or bank loans. RCP doesn’t expand to new campuses until it has sufficient funds. Anzalone says that strategy has allowed RCP to grow more quickly and be more profitable than going the venture capital route—but he would consider taking money from investors if the situation felt right.
The revenue stream so far has been enough for him to hire two full-time employees, two part-time employees, and to outsource the development of the website to a company that Anzalone declined to disclose. “I think having the customers or the revenue decide how we grow is the best way to do it,” Anzalone says. “By doing that, we’ve established a lot of lean mechanisms, a lot of lean practices. A lot of times when people take on money, maybe you don’t establish all of those facets as easily.”
The path ahead, however, won’t be easy. For one thing, RCP is up against other companies doing college housing websites, including ForRent University, an affiliate of ForRent.com that has listings for campuses nationwide.
RCP’s website also has stirred up tension between the startup and Abodo. Slocum claims RCP’s Web developers copied some exact text and images from Abodo’s website. He says he’s met with Anzalone to discuss the allegations and to threaten to send a cease and desist letter if RCP didn’t modify its website. RCP made some changes, but most of Slocum’s concerns were not addressed, he says. Slocum declined to provide Xconomy with copies of documents that he says back up his claims.
In response, Anzalone told Xconomy that Slocum’s allegations about the website are “false and defamatory.”
“Because of increasingly common Web standards and freely available templates, businesses pursuing similar markets often end up with similar-looking websites and functionalities. The website is not what creates our value,” Anzalone says. “We listened to Alec’s concerns and did an internal review to ensure that our website was not inadvertently [the result of plagiarism] in any way by any of our subcontractors.”
Abodo hasn’t sent the cease and desist letter, although the option is still on the table, Slocum says. Abodo so far has chosen not to pursue legal action because it doesn’t want to involve lawyers, because the move could harm Wisconsin’s startup ecosystem, and because Abodo’s leaders don’t think the alleged plagiarism has affected their company’s growth, Slocum says.
“It’s something that we don’t really spend a lot of time thinking about or worrying about,” Slocum says. “We’re happy [RCP is] here. We have no personal qualms with them.”
For his part, Anzalone called Abodo “a worthy competitor with a bright future.”
As for RCP’s future, the challenge will be enacting its game plan quickly, says RCP advisor Matt Cordio. Cordio is the co-founder and executive chairman of Startup Milwaukee, the group that runs the downtown Milwaukee co-working space, 96square, that houses RCP and Find My Spot, among other startups.
RCP has “a very large market that they can attack,” Cordio says of college campuses nationwide. “It’s just about execution, hiring the right sales team, and scaling.”
Find My Spot
Find My Spot founder and CEO Heather Johnston also was frustrated by limited apartment-hunting options. She is a mechanical engineer by training whose jobs required her to relocate 11 times in 13 years. The process proved to be difficult because she was often relying on Craigslist, a dubious proposition that left her at the mercy of sometimes flaky building managers and online photos that at times made the apartments seem nicer than the reality, she says.
“You spend your nights and weekends combing Craigslist and scheduling appointments with building managers who don’t show up or need to reschedule,” Johnston says. “There’s just an endless string of issues that can come up.”
So she quit her last employer, Harley-Davidson, and founded Find My Spot in October 2012.
“I realized that renters weren’t provided with the same level of service as homeowners, which is kind of ironic because 62 percent of all relocations in the U.S. are renters,” Johnston says.
Some companies manage these relocations internally, while others outsource to relocation firms, Johnston says. The issue is that relocation firms like Sirva and Cartus often refer moving employees to local real estate agents who have a strong incentive to encourage customers to buy a house or a condo because the broker receives a commission when a mortgage is signed. With rentals, on the other hand, most realtors receive minimal compensation when a customer signs a lease, Johnston says.
“The biggest problem is the mismatch between the renter’s wants and the financial incentives of a realtor to push you into buying,” Johnston says.
Find My Spot solves this problem by signing companies to annual contracts, promising to work directly with their human resources department and the individual employees who are moving to help place them in apartments within a four-day span.
The relocating employee meets one-on-one with a Find My Spot “neighborhood expert,” who shows the customer around the area and helps pick a suitable neighborhood. Then the customer enters his or her job start date, along with desired neighborhood and apartment features, into Find My Spot’s Web tool. The website spits out suggested apartment matches drawn from listings provided by local property managers and apartment developers, including vacancy data.
“We can literally tell a renter that unit 701 in Park Lafayette is vacant on your move date and has, say, 85 percent of what you’re looking for,” Johnston says.
The property managers pay a one-time, up-front fee to list on Find My Spot, and in return they get referrals for “optimal tenants” who have “reputable jobs,” Johnston says.
The startup’s “neighborhood experts” also pre-screen all the apartments in person to make sure they’re of a certain quality before Find My Spot lists the units, Johnston says. She admits this requires time and effort during the initial launch in a city, but she says the screening work decreases after that.
The promise of finding the highest-quality apartment match for customers within four days is the key selling point for Find My Spot. That quick turnaround is important since most employees typically have a tight time frame with their start date, and a successful apartment search ensures that employers don’t need to spend money on temporary housing at a hotel, Johnston says.
Milwaukee is the pilot city for Find My Spot. The startup so far has signed up several companies and organizations. It helped more than 100 educators move to the city last year for the Teachtown MKE initiative, an effort by the Greater Milwaukee Committee and Milwaukee Public Schools to attract and retain new teachers amidst a wave of retirements. This year Find My Spot is expected to help more than 250 teachers move to Milwaukee through Teachtown, Johnston says.
One satisfied customer is Mary Ann Taylon, who relocated from Omaha, NE, last fall with her husband, Charles, a surgeon who took a job with Medical College of Wisconsin. The couple sought an apartment because his job is a three or four-year commitment (with a potential extension), and they chose to keep their Omaha house. A local realtor connected them with Johnston to find a rental, Mary Ann Taylon says.
Taylon, 63, remembered previous lousy experiences helping her three children move to new apartments while they were in college, a process that could take a week of online searches and in-person tours. With Find My Spot, it took virtually one day. Taylon filled out a two-page form with desired characteristics of the apartment and surrounding area. Johnston came back with three suggested apartments (this was before Find My Spot’s Web tool, which launched this year), accompanied Taylon on a tour of all three units while she visited Milwaukee for a day, and Taylon and her husband settled on an apartment on Milwaukee’s east side, she says.
“I dreaded this process of finding a place. I knew it could take a long time,” Taylon says. “We got it done in a day. That was great.”
Johnston wants to expand Find My Spot to three more cities outside the state, assuming she secures enough funding through a seed round that she plans to start raising in May.
Find My Spot was profitable within four months, and revenue from contracts signed this year has already exceeded all of 2013, Johnston says.
Find My Spot’s competitors include Chicago-based UrbanBound, Johnston says, which raised $5 million in venture capital last year. It’s not exactly a direct competitor, since it provides a Web-based platform that educates moving employees about their new city and connects them to service providers, like moving truck companies, rather than finding apartments directly.
The long-term challenge for Find My Spot will be moving past early adopters and convincing traditional businesses that this is a useful tool they should pay for. But Find My Spot is getting some early interest from larger corporate relocation firms that could turn into business partnerships, sources of investment, or potential acquirers, Johnston says.
“They see that this technology is needed,” Johnston says. “Some [of their] clients haven’t realized technology can impact the relocation industry in a big way.”
Even in this crowded field of apartment-hunting websites, the three Wisconsin companies have found niches and strategies that give them a shot at succeeding, according to the founders and their advisors. The tougher question is why there’s such a concentration of these startups in southern Wisconsin.
“It validates that Wisconsin really was underserved in the apartment listing market,” says gener8tor co-founder Joe Kirgues.
Cordio, the RCP advisor and Startup Milwaukee co-founder, says it demonstrates that there’s no perfect solution for apartment seekers—yet.
“Maybe one of these three companies can be that perfect solution,” Cordio says.