Meet the Korean apartment rental startup disrupting the overheating housing market

Meet the Korean apartment rental startup disrupting the overheating housing market

As a founding member of WeWork Labs, the venture arm of the shared office giant, Matthew Champagne has helped transform the world of commercial real estate. He now handles the deposit-filled residential real estate market in South Korea, one rental rate at a time.


TheLiving in cramped, unaffordable apartments remains a not-so-glamorous reality for many adults. When Matthew Champagne, Korean-American founder and CEO of apartment rental startup Dongnae, moved to Seoul with his wife and newborn daughter, he saw an opportunity to remake that reality in South Korea.

“I really wanted to do something that would have the most impact on the greatest number of people,” Champagne, 39, says in a video interview. “You can ask anyone here, but Koreans have a strong affinity for residential real estate… We can change the whole experience, along the way, and meet their needs.”

Champagne was born in South Korea, adopted in the United States, and raised in New Jersey. In 2007, he returned to Korea to attend a Korean-American adopted conference and reconnected with his biological family. There, he made it a mission to go back for good — and do good for the country.

Champaign joined WeWork in 2011 and co-founded WeWork Labs, the office-sharing company’s startup incubator. In 2018, he became the general manager of WeWork Korea, where he met the co-founder of Dongnae Insong Kim, who is the company’s chief strategy director.

Together, the couple launched Seoul-based Dongnae in 2020, with the goal of making moving into an apartment more affordable and accessible. Its flagship product, Dongnae FLEX, offers fully-furnished short-term rental properties with low deposits, attracting new graduates or travelers unable to pay exorbitant deposits — up to 350 months of rent, the startup says — that are usually required of apartments. Korea.

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“The way our product has turned out is that we really do enable people to live in the apartments they want,” Champagne says. “We unlock all these new options because you are not limited by the amount of money you have set aside for the deposit.”

So far, Dongnae has opened its doors to At the local and international levels investors. March NFX’s $21 million Series A funding round included, that supported the likes of Lyft and Doordash, and proptech-focused MetaProp, a supporter of Airbnb, along with Korea’s oldest investment fund Daol Investment and Hana Financial. The new capital brought the startup’s total funding to nearly $34 million, after an initial round of $4.1 million in December 2020 and $700,000 the year before. Dongnae declined to reveal its current assessment.

“Residential real estate is the largest asset class here in Korea,” Kyung Kook Hyun, managing director of Daol Investment, said in a statement about Dongnae’s latest financing. “Dongnae’s impressive growth paired with strong financial partnerships with leading financial institutions makes this a compelling investment.”

More than 80% of a Korean family’s wealth is in real estate, compared to about 35% in the United States, but home ownership is proving increasingly difficult. The median apartment price in Seoul, the country’s capital and most populous city, doubled between 2017 and 2021 to more than $1 million. Housing has been the focus of recent presidential debates in Korea, as newly elected President Yoon Seok-yeol pledged to calm the market and build 2.5 million new homes across the country during his five-year term.

Leasing is not always an easier alternative. The rental housing market in Korea is largely based on jeonse, a unique payment system that requires tenants to make large deposits up front. Known as “principal money,” these totals amount to as much as 80% of a unit’s selling price — the average price of jeonse apartments in Seoul was about $516 000 in August, while some areas could be as high as $572,400, according to figures From KB Kookmin Bank.

The widespread practice of taking out loans to unlock “main funds” adds to the deepening Korean household debt crisis, which exceeded 104% of Korea’s GDP in June. Among the country’s five largest lenders, Johnson’s debt reached $106.4 billion last June, up from $37.8 billion that month in 2017. More than half of the outstanding loans originated from adults in their 20s and 30s, who owe $63 billion. .

More Koreans are moving out of the high-deposit rental system. Of a total of 258,313 rental transactions for apartments and homes in April, 50.4% were for monthly rents, not jeonse, according to Korea’s Ministry of Land, Infrastructure and Transport — the first month since 2011 that the city of jeonse didn’t lead the deals.

Champagne connects the walk away from work with the evolving needs of young professionals, who are rethinking traditional ideals of marriage, child-rearing and homeownership. In addition to a sense of “liberation” from living without debt, short-term property rentals offer these adults the opportunity to explore more independent and flexible living arrangements, prioritizing their careers or friendships – an apartment’s school district is less important than proximity to work or a location in a “cool neighborhood” , he says.

“For people in their late twenties and early thirties, the idea of ​​independence from your parents is different from the idea of ​​independence in terms of not having a roommate,” Champagne says. “You two can work together and have a really nice apartment. In the past, here in Korea, your options were either living in a really small shared living space, or an officetel (a building with offices and condominiums) with no amenities at all.”

Dongnae started as an listing platform for potential tenants to book visits with real estate agencies, but has had limited success. Champagne says his team did not anticipate the “cultural dynamics” that limited demand for their products. “We realized here in Korea that it is very easy to go to any apartment complex around the city, or have some kind of contact with a brokerage, to request a tour whenever you want,” he said. “So the concept of app review and booking [a tour] For example, the upcoming weekend, it wasn’t really attractive.”

Champagne says the initial lack of success prompted “good and healthy,” albeit painful, musings on the business model. Conversations with clients, brokers, and team members on the ground informed Dongnae’s goal of “becoming the sourcing, rather than the sourcing quest.” In July last year, Dongnae switched from apartment listings to furnished apartments. Concluding its latest funding, the startup said its holdings spanned 60 apartment complexes — and now spans 80 in 12 districts in Seoul.

Looking to the future, Dongnae plans to expand its home services to residents, taking advantage of the burgeoning Korean market for furniture and fashionable goods. Other startups developing solutions for living spaces have had great success. In May, interior design platform oHouse raised $182 million to become the latest Korean unicorn, with a valuation of nearly $1.6 billion.

Champagne hopes to usher in a broader cultural shift. “When I personally think about how WeWork is changing the commercial real estate here, from rental space and co-working to actual in-office environments, I really hope we can do something similar from a residential perspective,” says Champagne. “Making it a better experience…for brokers, landlords, and especially for renters.”

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