Starting up in a new, innovative niche is often requiring you to face stiff challenges. Firstly, you need to face your direct, established competitors; they won’t go easy surrendering their portion of the market. Secondly, you need to navigate through the complex laws and regulations – not mentioning the pushback from your local authorities.
If those are your realities right now, our today’s Q&A guest can surely be your inspiration for moving forward. Meet Alex Lubinsky, the Founder and CEO of Rentberry. His startup is basically smashing the sophistication of real estate rental – and also the status quo.
Read on for his insights on starting up a business, going up against the challenges, and achieve success in the process.
Ivan Widjaya (Q): What is your educational background?
Alex Lubinsky (A): Major in Economics, minor in Business Administration and Slavic Literature
Q: You had quite a successful career in finance, corporate environment. What attracted you to the startup industry?
A: I was first introduced to the startup environment when I created my first company – City Hour. At that time I was working as an M&A investment banker. I was traveling a lot between different countries. My partners and I decided to build a networking tool that would allow people to network with each other much more seamlessly.
When you have a business trip to a specific city, you do not know who is available to meet you. You want to have a networking dinner or grab a semi-formal lunch. You can go to the app and find who is available at these specific time and at this specific location to meet you based on your business interests set in your profile.
LinkedIn does not provide this specific functionality. Let’s say you have a short stay in London and want to take a glimpse at UK legal market. Consequently, you want to meet a London-based lawyer today. You search LinkedIn and find thousands of lawyers. However, you don’t know their availability and if any of them fit into your available time slot. That is where our application comes into play. We decided to create something that will help us at the time and assist other business executives.
The application wasn’t quite successful. We didn’t attract a large audience. We sold the technology and the company in January of 2015.
During our work on CityHour, we experienced how exhausting can be the process of long-term renting. Therefore we decided to employ our problem-solving skill set to build Rentberry.
Q: How you background in investment banking helped you in creating Rentberry?
A: Working in mergers and acquisitions gave me lots of connections in the finance world.
I acquired connections with investors, private equity investors, lawyers. It also allowed me to meet different creative people from different industries. Rentberry is a real estate company. CityHour was a business development platform. Those are the companies from different niches, different industries. Obviously, I did not start those companies by myself. I have partnered with expertise in different fields.
When you work in the corporate environment you meet different people, you get connections. Afterward, those connections help you to run your own business, grow your business and scale your business.
Q: How did you find the community of like-minded people?
A: Finding like-minded individuals is only half of the battle. It is always hard to scale the business. You find two-three like-minded individuals and start your company, but then to make a successful company you need much more. You need to recruit best of the best, people with skills and expertise. At the same time, those people have to share your values and the business vision. You should balance out those qualities.
Q: Why are the major operations of the company based in Ukraine?
A: We need to be cost-effective and do as much as possible with available resources. Cost saving is our top priority. We could open an office in San Francisco, hire 5 people and run out of money. We ended up hiring 45 people. We managed to build the product and scale it. You can do much more with this money in Ukraine than in California.
My partners and I are from Ukraine. We have a strong family and business ties with this country. At the same time, Ukraine has a lot of qualified professionals and a necessary infrastructure to successfully run the company.
Q: Will Renberry eventually replace real estate agents?
A: Buying and selling property is sophisticated endeavor and will always require the help of the qualified professionals.
When you rent something, it is different. You have to pay the agent an equivalent of monthly rent. For what? For opening the door and walking around? Most of the time they are not qualified to answer in-depth questions. You ask about model and power consumption of the air conditioner. And they are speechless, all they can do is to locate the AC in the apartment. In a lot of cases, landlords do the open houses themselves and the agent stands there and does nothing.
Both tenants and landlords get really irritated while working with an agent. And our task is to remove this friction point and the unnecessary intermediary.
Real estate agents provide plenty of assistance for buyers and sellers of property. They aid with documents, provide a legal advice. With renting it’s unclear what is the job of the agent.
Q: Various homeowners association complain that services like Trulia and Zillow provide inaccurate projections of median rent and median purchase price. How will Rentberry manage it better?
A: Zillow and other companies are classifieds. They have limited functionality and therefore limited data points. They show you the price of the listing, photos, and description of the property and that is it. They have no idea if the property actually gets rented out and for how much it was rented out. All they can say is that landlord posting this apartment at $3000. That is the only data point that goes inside their system. We use a completely different method.
We have a closed-loop system. Landlord post a listing at $3,000 and tenants apply and negotiate and eventually, the property is renting out for $3,500. There is $500 difference in the rental value. It can be both, ways up and down. So there is 15% discrepancy if the only data point you collected was the initial listing price. We have much more detailed functionality, auctioning system, signing a contract. We can monitor all of that. Eventually, our system will provide more exact, specific, true data. We are absolutely confident in our data.
Q: What are the competitive advantages of Rentberry?
A: Platforms like Zumper or Trulia have really limited functionality. We are absolutely closed loop system. With us, you can do all the rentals tasks A-Z.
Everything is saved in the cloud: payments, maintenance requests.
Our goal is to eventually integrate the third party service providers such as tenants insurers. So that when you are moving out we can pinpoint moving companies etc.
Ideally, we want to offer various third-party providers through the platform: housekeepers, plumbers, electricians. Essentially we want to create a symbiosis between our platform and company like Handy or build this functionality from scratch. You can go see all the housekeepers that serve your neighborhood.
In a closed-loop system, this integration will allow to collect even more data points and provide an even more comprehensive picture of the market.
Q: Various old news articles outline that Rentberry uses the 25% model, where company collects the difference between negotiated price and the original asking price. Are you still planning to implement this model?
A: The model constantly shifts in order to better accommodate the needs of the market. 3 years ago when we were starting the company we considered this model. However, we decided not to implement it to make the platform simple. Everything is free and we charge for specific functionality. We are not going to come back to this model anytime soon.
In certain regions, Rentberry faced a significant pushback from the local authorities. Seattle issued a temporary ban on all of the rental-bidding platforms, while Australian cities are considering this option. What is the reason behind this hostility?
When people lack the knowledge about a technology they tend to freak out. 11 years ago, when Airbnb started gaining grounds, people were freaking out as well. Airbnb got tons of pushback from local groups. Even now, a lot of local interest groups rally against Airbnb. Essential they argue that services like Airbnb will make people only rent for short-term. The supply of properties will decrease. Consequently, a lot of tourists will flood the area, prices will skyrocket, crimes will go up.
Uber is another good example. The public was concern that taxi drivers will lose jobs. However, they fail to account for tons of new jobs created by Uber. New technologies tend to scare people.
The similar situation is happening with Rentberry. People are concern that auctioning model will drive the prices up. Those people don’t understand the basic economic principles of supply and demand.
Under current shady business model brokers and real estate control all the information, while potential tenants engage in under the table bidding war. Our technology endeavor to balance the market and establish an equilibrium. Where supply and demand balancing naturally, without government or any third party interference. People can see clearly what is the demand for the property and formulate how much they want to offer.
Many thanks for your time, Alex!
Photo credit: YouTube, Rentberry