September 12, 2016
Beautiful, comfortable communal housing.
Housing growth has not kept up with job growth in many cities. In the last 5 years, the San Francisco Bay Area has added ~300k jobs while only adding ~50k housing units. This has created a problem in both supply and cost, with housing costs now taking more than 50% of household income for medium income earners ($83k). From 2006 to 2016, average rent has gone from $800/m to over $3,000/m. Medium income renters are also the largest growing market segments (vs high and low income) but have seen the least growth in housing options (only 6% of new production).
Starcity is creating a new supply of comfortable communal housing in the cities where people want to work and live. We’re starting with San Francisco, where we have two buildings filled up, with 26 residents moving in the months of September and October.
Starcity creates housing through adaptive re-use. We reconfigure existing residential and office buildings as well as convert boutique hotels to group housing.
We build welcoming and authentic homes with:
+ Ample community space – living/dining rooms, work and social space, media/entertainment rooms and more
+ Industrial kitchens – restaurant-grade appliances
+ Amenities – On-site laundry, hi-speed WiFi, bicycle parking, roof garden, weekly cleanings
+ Staff – Concierge + knowledgeable and courteous team
Our units are secure and private. Personal rooms are nano-suites of 120 – 300 sqft and include:
All the essentials: queen-sized bed, closet, sink, toilet, shower
Smart-home enabled tool powered by Mosaic
High ceilings and natural light
Layouts designed and organized for reduced footprint
Total liveable area for each resident = 400-500 sqft when including communal area
Our community is diverse and comes from all walks of life. 63% are female and 49% earn less than $100k/year.
We are starting in the Bay Area, where the annual market for rentals is $44B. The rental market in the US is $1.2T and America’s rental population is expected to grow by 4.2 million people between 2015 and 2025, according to a recent Harvard study.
Specific cities where our model scales (Locations where renter population is outpacing urban supply): New York, Chicago, Dallas, Washington D.C., Boston, Auton, Phoenix, Minneapolis, Seattle, Portland, Denver
Membership costs range from $1,500 to $2,400 based on location and duration. Our all inclusive membership includes a private room as well as communal area cleaning, 24/7 staff, on-site laundry, utilities, wi-fi, cable, and a wonderful community.
We also save members time and money by offering a Premium Services on top of monthly membership.
We use an asset light model. We partner with well known local developers and real estate lenders to finance all hard costs and construction. We focus our operations on a great customer experience and building great software to make the communities run smoothly.
Traditional – Typical market rate landlords provide a high cost option with often very average design and experience. For example, a 1 bedroom apartment in SF is $3.5k on average, and a 2 bedroom is $6k.
Co-living startups – WeLive and Common are luxury developments that are well designed but have high cost.
Other housing supply options such as single room occupancy, subsidized housing and micro units, while providing low cost options are often at the sacrifice of design and experience.
Starcity provides great design and experience at a low cost, 50-70% cheaper than a studio / 1 br in SF.
We have created 26 units in only 3 months and have a pipeline of 625 units in San Francisco. This progress was created in 12 weeks, we entered Y Combinator with just a team and a company.
We have 25 years combined experience in real estate, software, hospitality and law.
We’ve worked on 3.8 Million Square feet of real estate transactions.
We’ve built software and have shipped multiple products.
Jon Dishotsky, CEO – 10 Years as a leader in commercial real estate and philanthropy. Cushman & Wakefiled, Custom Spaces, UC Davis Graduate. 3.8 million square feet of real estate deals, top donor to Habitat for Humanity.
Jesse Suarez, COO – 4 Years as an entrepreneur and attorney building dev teams and co-working space. Savvy, The Vault, UC Davis Law, UC Berkeley
Josh Lehman, CTO – 4 Years as an entrepreneur building software and teaching coding. Savvy, Hack Reactor, UC Santa Cruz
Mo Sakrani, CPO – 4 Years as an entrepreneur designing software and co-working space. Savvy, The Vault, UC Davis Law, Brandeis
Advisors from Weebly, Spirit Living Group, Presidio Bay Ventures, Andreessen Horowitz, Structure Properties, and Scribd.
Investors include – Trip Adler, Jared Friedman, Pete Koomen, Zack Pardey, Ben Boyer, Jude Gomila, Othman Laraki, Immad Akhund, Kima Ventures, Index Ventures, and Soma Ventures.
FROM URBAN US
While some cities struggle with lack of housing supply, even the most developed cities have forgotten square footage (urban blight). Starcity is taking the opportunity to efficiently increase housing density via reuse.
Another critical aspect of housing is affordability. At specific segments, in this case middle income, this is often overlooked. Teachers and civil servants are often unable to live in the cities they serve. We also know of uber and lyft drivers who collaborate on temporary housing just to have an option for staying in the city on working nights. Some communal housing communities are tackling this by asking those who can to subsidize the incubation of roommates who are more in need. What happens when rental price is determined by fairness?
Also, it’s possible to be overly optimistic about the civic impact, but increasing interactions at the community scale holds some promise for civic engagement too.
Housing seems like a simple supply and demand question but is influenced by factors like lifestyle preference and increased economic mobility. How will Starcity attract and retain customers?
A sense of community helps but efforts like WeLive seem plastic. Community doesn’t seem like something that can be forced, though it’s an attractive value add to the co-living demographic. What is Starcity’s approach to creating community?
Choosing to start a family can also affect housing options. Few co-living solutions have explicitly made it clear how solutions adopt to this demographic.
Retaining pricing levels that are affordable to middle income earners seems like a social mission at odds with market forces (low supply + high demand = higher prices). We’ve seen many new firms adopt a B-Corp structure in order allow for additional stakeholders and social missions that may be at odds with maximizing for profits. Where does affordable housing stack in Starcity’s core goals and how does that affect the business?
Finally, the co-living space isn’t new. There are waves of new options while incumbent property managers are adopting solutions to increase the density and value of their inventory by promoting co-living. What about Starcity’s team or strategy is positioned to rise above the noise? (Customer acquisition? Supply acquisition? Community building? Brand?)
Providing value add services like personalized comfort can also lead to opportunities for energy efficiency. Partnerships make sense early on, but is there an opportunity to resell value added products for water and energy conservation?
One more lifestyle choice that affects renters is the choice to own a home. When does communal renting make sense to offer fractional ownership?