As a former business school student, Nitzan Yudan knows how difficult it can be to find affordable accommodation in capital cities.
Half-way through an MBA program at London Business School, he struck a summer internship with American Express. He wanted to rent out his London flat and generate some extra income, but wasn’t sure who he could trust in his prized property.
“I saw people struggling to find a place for three months,” Nitzan says. So he came up with the idea for FlatClub, an online platform that would let him advertise his flat to trusted rentees – and find short-term accommodation for his internships abroad.
His placement that summer turned into a full-time job offer with Deutsche Bank. “I planned to accelerate my finance career,” Nitzan says of his MBA degree. But after test-launching the property portal with the LBS community, he received rave reviews. “I had five flats when I sent one email. After two weeks we had 70 flats posted,” he says. “The need was there – I decided it would be my career.”
Nitzan is the co-founder and chief executive of FlatClub, an exclusive community for short term renting within trusted networks. By matching users with people who want to rent out their properties for a few weeks or months at a time, Nitzan is fulfilling a gap in the rental market.
He reckons FlatClub is 80% cheaper than hotels – prices are more akin to long-term rentals, which are cheaper than the holiday booking services that populate the market.
A room costs £800 a month on average, rising to £1,600 for a full house, depending on size and location. The average age of its users is 32. Many of them are business school students; many more are university alumni.
The proliferation of the short-term lettings concept and house-sharing platforms such as such as Airbnb and Spareroom have led to a panoply of websites seeking to match home owners with renters.
But Nitzan thinks his platform is different to anything else on the market. While most focus on short, holiday-style stays, FlatClub competes in the medium-term rental space.
“Lots of platforms offer holiday rentals but we wanted our customers stay for longer,” he says. The average stay when the company was founded in 2010 was 16 days. Today it is 30 days.
FlatClub targets students by offering data based on previous users’ experiences – such how long it takes to commute to local campuses, and whether there are other students in the area using the service – and by offering discounts for certain universities.
Business schools can establish “clubs” within the platform, which offers accommodation near campus. These clubs have been set-up at schools including LBS, INSEAD and NYU.
“We’re leveraging the fact that we have so many people that have used it in the past,” Nitzan says. FlatClub has about 75,000 users, and has partnerships with 50 universities and business schools.
The London-based company employs 17 staff, with a few dotted around the US. Nitzan launched the business with Tomer Kalish, who is CFO. The pair met while studying for MBA degrees at LBS.
They have utilized their business school network. FlatClub was housed in the LBS incubator for a year, while two professors were early-stage investors. “The support of the business school was phenomenal,” Nitzan says from his offices in London’s Tech City. Alumni post flats on the site, and refer students who need accommodation.
Studying for an MBA gave him a platform to launch, as well as a network from which to draw customers from. LBS is different in that its MBA is run over 15-21 months, compared to the one-year model favoured at most schools in Europe.
The extra time acted as a “safety net” for Nitzan to develop and test the business plan. “The business wouldn’t exist if I didn’t do an MBA,” he says.
FlatClub’s growth has been impressive. This time two years ago it had just 2,000 properties listed, but has swelled to have more than 20,000 properties today.
However, such growth has its problems. There were too many users for the website to handle, and Nitzan had to suspend registrations for nine months. It proved costly.
“We stopped advertising completely,” he says. Nitzan completely re-wrote the platform’s code. “It was not an easy decision, but it was either we keep firefighting or say that it’s the time to invest and build,” he adds.
FlatClub has received plenty of investment. The founders raised $1.5 million in November last year in a funding round led by MLC50 and David Wolfe of BrandJourney and InterCapital, who joined the company’s board of directors, among others.
The capital has been used to develop new technology but also expand FlatClub’s presence across Europe and the United States.
The company’s main revenue stream is derived from fees. It charges between 6% to 15% of every booking, Nitzan says.
FlatClub launched a radically new function last month which allows users to post requests for accommodation and hosts to make offers. Peer-to-peer marketplaces traditionally let hosts post listings which guests bid for.
Nitzan says that finding the right match is critical, and that this new service –LiveDemand, which was launched by London Mayor Boris Johnson – will allow hosts to find trusted guests for their properties.
All the company’s stays are covered by Lloyds of London, the insurance group.
FlatClub expects the biggest demand for this new service to be in London, New York and Munich, based on a trial with 400 property owners.
London, however, will be seen as the crown jewel. The company says that five-million overseas visitors flocked to the British capital last summer, while new government legislation has paved the way for the end of rules that prevent the short-term renting of private homes in the UK.
Even so, Nitzan has a global ambition. The focus now is getting their platform into new locations, and improving the user experience.
David, a leading venture capitalist, says: “Nitzan identified a niche, created a solution and has demonstrated that this is a fast-growing market with an appetite for FlatClub’s services.”
It’s been four years since Nitzan turned down a job offer with Deutsche Bank, but the MBA clearly has no regrets.
“It was not an easy decision,” he says. “Looking back four years now, I was talking about this idea with my wife in our kitchen, and now tens of thousands of people are using it… There were lots of hard decisions. But I think it paid off.”
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