A student housing startup with ₹50 Cr profit🏡
The market, the user and the insight behind right value add.
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When Nestaway and Zolo stays have flat out been a cash burn story, why is another student housing startup getting ₹175Cr in capital funding? We are talking about Amber, a student housing marketplace. Let’s dig in to the story.
Let’s go back to 2015.
VCs were funding student housing startups left, right & centre. Take Nestway for example - it raised $115 Million (~₹800Cr) before it was sold in a fire sale for $11 Million (~₹80Cr).
Nestaway isn’t alone.
There were at least 10+ student housing startups that started and shut down in the 2015 to 2018 era. This begs the question - What’s wrong with the category? To answer this let’s understand the business model of these student housing startups.
First, you have students on one side of the platform who are looking for private/sharing housing during college/ university. On the other hand, you have apartments with house owners who want to generate rental income.
Most housing startups operate in one out of the three models.
Full stack: This is the Zolo stays model. They lease the entire property building and sublet the apartments to individual tenants. They manage the community spaces within the building and some even offer cleaning and tiffin services. This is a high cash-flow intensive model.
Marketplace: This is the Amber model. They don’t focus on managing the property but only handling the discovery of the property and of course, making a commission from every booking.
The semi-stack: This is the Nestaway model. Nestway used to sign a service agreement with house owners & take care of getting tenants, collecting the monthly rental, and paying for maintenance & repairs of the property. They are sort of middlemen when it comes to any recurring payments but don’t lease the property in their name - making it less cashflow intensive.
What did Amber crack, really?
First → the market it went after.
Most of their website traffic comes from the United Kingdom (17%), India (16%), the United States (13.6%), Australia (7.6%) & Canada (3.7%). This is because of the inventory they have. They focus on student housing near global universities.
Global market meant high appetite to pay from this college teen/ master’s graduate students. No wonder most pricing starts at $455 per week if you are looking at housing near Harvard University (Boston, US).
Second → the entry point in the customer journey.
The substitute for finding student housing for those going abroad for a master’s education is either expensive hotels or unreliable local listings. You only know if you are in deep trouble once you land in that country. This is core to Amber’s success.
Ask any student going abroad for education and they’ll you about their anxiety to find a suitable place to stay (that’s also close to their university). Amber’s 4+ rating on trust pilot is solid proof of its experience post booking a property from any part of the world before you even enter the country. This trust is what students are ready to pay money for.
Third → Building a lead machine for house owners.
The student housing industry is quite organized in the West. But private accommodations/ house owners don’t always have the right marketing engine. Think about the Airbnb hosts who have the best spaces, but don’t know how to solve discovery on the Airbnb platform.
Amber uses a combination of freelance / contract photographs of these housing spaces & physically verifies the property to avoid fraud and customer surprises during check-in. This is very similar to how Airbnb does it with it’s network of freelance photographers.
Amber’s core growth loop has a referral program that fits in perfectly with the whole flatmate theme.
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Fourth → the cruel paperwork.
The biggest issue with outside students staying at these rentals is how much paperwork they must do before moving into the property. Because these students don’t have a credit score in that country, random things can come during this process - Amber solves it right from the booking flow.
The whole flow has an interesting piece - adding flatmate preferances. This makes the whole piece interesting. You can now split the expenses with a flatmate & et preferances while doing it.
What’s the tailwind for Amber?
Just in India - 30,00,000 students went abroad in the last 6 years to pursue higher education. Over a million students worldwide enter the US every year for a bachelor’s or graduate education. Add the UK numbers to it and you have a ~2 million serviceable market from immigrant students.
Few pages from the Airbnb playbook.
Airbnb cracked supply density well. Something that Amber is trying to do with solving housing around universities. This also means it will be a supply play soon as it can imagine. Amber has the chance to become the Airbnb of student housing and the market is at the right point in time with everything coming together.
That’s all for now.
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