Meet the Korean apartment rental startup disrupting a boiling housing market
As a founding member of WeWork Labs, the subsidiary of the shared office space giant, Matthew Shampine helped transform the world of commercial real estate. Now he’s taking on the deposit-heavy South Korean residential real estate market, one rental at a time.
LLiving in cramped and unaffordable apartments remains a grim reality for many adults. When Matthew Shampine, Korean-American co-founder and CEO of apartment rental startup Dongnae, moved to Seoul with his wife and newborn daughter, he saw an opportunity to reshape that reality in South Korea.
“I really, really wanted to do something that would have the most impact on the most people,” Shampine, 39, said 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, all the way, and meet their needs.”
Born in South Korea, Shampine was adopted in the United States and raised in New Jersey. In 2007, he returned to Korea for a conference on Korean-American adoptees and reconnected with his biological family. There, he made it his mission to come back for good and do good for the country.
Shampine joined WeWork in 2011 and co-founded WeWork Labs, the office-sharing company’s startup incubator. In 2018, he became managing director of WeWork Korea, where he met Dongnae co-founder Insong Kim, who serves as the company’s chief strategy officer.
Together, the couple launched Seoul-based Dongnae in 2020 with the aim of making moving into an apartment more affordable and accessible. Its key product, Dongnae FLEX, offers fully furnished short-term rental properties with low deposits, appealing to new graduates or travelers unable to cough up the exorbitant deposits – up to 350 months rent, according to the startup – which are generally required of Korean apartments.
“The way our product was born is that we really allow people to live the apartments they want,” says Shampine. “We are unlocking all these new options because you are not limited by the amount of money you have set aside for a deposit.”
So far, Dongnae has opened its doors at both local and international investors. Its $21 million Series A funding round in March included NFX, who supported people like Lyft and Doordash, and proptech-focused MetaProp, a funder of Airbnb, as well as Korea’s oldest investment fund Daol Investment and Hana Financial. The new capital brought the startup’s total funding to around $34 million, following its seed round of $4.1 million in December 2020 and its pre-seed round of $700,000 the previous year. Dongnae declined to disclose its current valuation.
“Residential real estate is the largest asset class here in Korea,” Kyung Kuk-hyun, managing director of Daol Investment, said in a statement on Dongnae’s latest funding. “Dongnae’s incredible growth, coupled with its strong financial partnerships with leading financial institutions, makes this investment attractive.”
More than 80% of Korean household wealth is in real estate, compared to about 35% in the United States, but home ownership is proving increasingly difficult. The average price of an apartment in Seoul, the country’s capital and most populous city, doubled between 2017 and 2021 to more than $1 million. Housing has been at the center of recent Korean presidential debates, with newly elected President Yoon Suk-yeol pledging to calm the market and build 2.5 million new homes across the country during his five-year term. .
Renting is not always an easier alternative. Korea’s rental housing market is largely based on the jeonse, a unique payment system that requires tenants to provide large upfront deposits. Known as “purses”, these lump sums represent up to 80% of the sale price of a home. Seoul’s average apartment price in jeonse was around $516,000 in August, while some neighborhoods could reach as high as $572,400, according to figures from KB Kookmin. Bank.
The widespread practice of taking out loans to release “key money” adds to the worsening household debt crisis in Korea, which exceeded 104% of Korean GDP in June. Among the nation’s top five lenders, jeonse’s debt hit $106.4 billion last June, up from $37.8 billion that month in 2017. More than half of outstanding loans were from adults in their twenties and thirties, who owed $63 billion.
More and more Koreans are leaving the high-deposit rental system. Of the 258,313 apartment and house rental transactions in April, 50.4% were for monthly rentals, not jeonse, according to Korea’s Ministry of Land, Infrastructure and Transport – the first month since 2011 where jeonse has not conducted transactions.
Shampine links the abandonment of jeonse to the changing needs of young professionals, who are rethinking traditional ideals of marriage, child-rearing and home ownership. In addition to the “liberating” feeling of living debt-free, short-term property rentals offer these adults the opportunity to explore more independent and flexible lifestyles, while prioritizing their careers or friendships. — an apartment’s school neighborhood is less important than its proximity to work or location in a “cool neighborhood,” he says.
“For people in their late 20s and early 30s, the idea of being independent from your parents is different than being independent in terms of not having a roommate,” Shampine says. “You two can work together and really have an amazing apartment. In the past, here in Korea, your options were either to live in a very small co-living space or in an officetel (a building with offices and living units) without any amenities.
Dongnae started out as a listing platform for potential tenants to book viewings with real estate agencies, but it met with limited success. Shampine says his team didn’t anticipate any “cultural dynamics” that would dampen demand for their product. “We realized that here in Korea, it’s very easy to go to any apartment complex in the city, or have some kind of connection with a brokerage agency, just ask for a visit when you want,” he said. “So the concept of going through an app and booking [a tour] for example, the upcoming weekend, just didn’t seem so appealing.
The initial lack of success prompted “good and healthy,” if painful, thoughts about the business model, Shampine says. Conversations with customers, brokers, and field team members informed Dongnae’s goal of “becoming the supply, instead of seeking the supply.” In July last year, Dongnae moved from apartment listings to serviced apartments. At the close of its latest funding, the startup said its properties spanned 60 apartment complexes — now they span 80, spread across 12 neighborhoods in Seoul.
Looking ahead, Dongnae plans to expand its in-home services offered to residents, tapping into Korea’s booming market for furniture and lifestyle items. Other startups developing solutions for living spaces have met with considerable success. In May, interior design platform oHouse raised $182 million to become Korea’s latest unicorn, at a valuation of around $1.6 billion.
Shampine hopes to usher in a broader cultural shift. “As I personally reflect on how WeWork has changed commercial real estate here, from space rentals and coworking to real-world environments inside offices, I really hope we can do something similar d ‘a residential point of view,’ says Shampine. “Making it a better experience… for brokers, for landlords and especially for renters.”