Dongnae, a South Korea-based startup that helps tenants find premium apartment rentals, has closed $16.4 million (20 billion KRW) in equity and $4.1 million (5 billion KRW) in debt. The Series A funding brings its total funding raised to approximately $34 million (40 billion KRW).
Investors include NFX, Daol Investment, Hana-Magna, Hana Financial, MetaProp, Fursys, Han River Partners, Flybridge and Maple. WeWork co-founder Miguel McKelvey also participated in the equity financing.
Former WeWork executives Matthew Shampine, who previously served as Managing Director at WeWork Asia, and Insong Kim founded Dongnae in 2020.
Shampine, co-founder and CEO of Dongnae, told TC he wanted to work on something meaningful after leaving WeWork. Shampine noticed residential real estate was big in South Korea but also knew he didn’t know enough, especially about the local proptech space, he said. Matthew spent the next couple of weeks setting up meetings to talk to industry people in the local residential real estate, proptech, and startup space.
“Real estate had been my life for the last ten years, so that was always on the top of my mind and before coming out to Asia, I had worked with Adam on the early planning for WeLive, which sparked an interest back then in residential,” Shampine told TC. “Reflecting back on my experience looking at apartments in NYC and then doing it again in Korea, I started to piece together what would eventually become my next company.”
Dongnae says its first mission is to tackle South Korea’s unique residential rental system, called “Jeonse.” This rental contract allows tenants to rent an apartment at no (or little) monthly payment by putting up a large lump sum deposit that averages $600,000 (700 million KRW) in Seoul for a two-year lease.
Dongnae FLEX provides curated premium apartment rentals with lower typical renter’s housing deposits by approximately 98%. Shampine said that the company works with landlords to provide premium apartments to renters with a low deposit and fixed monthly rent.
Additionally, its Dongnae PLUS enables tenants to access home services, ranging from the appliance and furniture rentals to internet/cable and scheduled recurring. To provide a fully online experience, it offers 3D virtual tours of its units powered by Matterport, and the renters can sign the lease via e-contract.
“We are excited to make great homes accessible and affordable to renters in Korea. Almost all rental properties have a high deposit, with less than one percent of units having a deposit of less than $16K,” Shampine said in a statement. “What’s more Dongnae FLEX is also a valuable solution for landlords and brokers, as it enables them both to increase their earning potential on their apartments.”
Dongnae claims it currently manages more than 60 of the top apartment complexes in Seoul and Pankgyo, South Korea’s Silicon Valley.
Two months after announcing its seed extension round in May 2021, the startup pivoted the business. “Almost everything has changed since we pivoted the business in late July of 2021,” Shampine said.
All apartments listed on its website are homes managed by Dongnae, meaning that the company no longer has an external listings platform. The size of its team has doubled to about 40. Dongnae now has more than 80 official local brokerage partners that the company calls Dongnae Premium Partners, according to Shampine.
“Dongnae partners closely work with local brokers and other proptech platforms, as our offering is much closer to a fintech platform that helps customers access managed, premium apartments across the city with a significantly lower deposit,” Shampine said.
More than 80% of its users are local Koreans; most of them are young professionals working in the city, Shampine noted. As Korea continues to ease the restrictions on Covid, Dongnae sees a steady increase in the number of foreign customers, he added.
Shampine said its offering is ideal for foreign business executives and diplomats, given the low housing deposits and the difficulties of moving large amounts of currency across borders. In addition, its resident management service is available in Korean, English, Chinese, and Japanese, which appeal to foreigners moving to Korea.
With the Series A proceeds, the firm plans to accelerate geographic expansion across the Seoul metropolitan area, bolster its relationships with local brokerages and invest in technology and data to build out its proprietary tools for users. Dongnae will roll out the iOS and Android applications and home services marketplace this year.