Starting in an innovative new niche often forces you to face difficult challenges. First, you have to face your direct and established competitors; they will not easily give up their market share. Second, you must navigate through complex laws and regulations – not to mention the refoulement of your local authorities.
If these are your realities right now, the Q & A guest of today can surely inspire you to move forward. Meet Alex Lubinsky, the founder and CEO of Rentberry. His startup is fundamentally breaking the sophistication of buying and selling real estate – and also the status quo.
Read on for his ideas on starting a business, meeting challenges and achieving success in the process.
Ivan Widjaya (Q): What is your educational background?
Alex Lubinsky (A): Major in Economics, Minor in Business Administration and Slavic Literature
Q: You had a rather successful career in finance, in a business environment. What attracted you to the startup industry?
A: I first discovered the startup environment when I created my first business, City Hour. At the time, I was working as an investment banker in M & A. I traveled a lot between different countries. My partners and I decided to create a networking tool that would allow people to network much more easily.
When you are doing a business trip in a particular city, you do not know who is available to meet you. You want to dine in a network or have a semi-formal lunch. You can go to the app and find out who is available at that specific time and at that specific place to meet you based on your business interests set in your profile.
LinkedIn does not provide this specific feature. Let's say you have a short stay in London and want to take a look at the UK legal market. Therefore, you want to meet a lawyer based in London today. You are searching for LinkedIn and find thousands of lawyers. However, you do not know their availability and if one of them matches your available time slot. It's where our app comes in. We decided to create something that will help us at the time and help other business leaders.
The application has not been very successful. We did not attract a large audience. We sold the technology and the company in January 2015.
During our work on CityHour, we experienced how the long-term rental process can be exhausting. So we decided to use our problem solving skill set to build Rentberry.
Q: How did your experience in investment banking help you create Rentberry?
A: Working on mergers and acquisitions has given me a lot of connections in the world of finance.
I acquired links with investors, private investors, lawyers. It also allowed me to meet different creative people from different industries. Rentberry is a real estate company. CityHour was a business development platform. These are companies from different niches, different industries. Of course, I did not create these businesses by myself. I have partnered with experts in different fields.
When you work in a business environment, you meet different people, you have contacts. Later, these connections help you manage your own business, grow your business, and grow your business.
Q: How did you find the community of like-minded people?
A: Finding like-minded individuals is only half of the battle. It is always difficult to change the business. You find two or three like-minded people starting your business, but then to make a successful business, you need a lot more. You must recruit the best of the best, people with skills and expertise. At the same time, these people must share their values and vision of the company. You should balance these qualities.
Q: Why are the main operations of the company based in Ukraine?
A: We must be profitable and make the most of the available resources. Cost saving is our top priority. We could open an office in San Francisco, hire 5 people and run out of money. We ended up hiring 45 people. We managed to build the product and adapt it. You can do a lot more with this money in Ukraine than in California.
My partners and I are from Ukraine. We have strong family and business ties with this country. At the same time, Ukraine has a lot of qualified professionals and infrastructure needed to successfully run the business.
Q: Will Renberry eventually replace real estate agents?
A: The purchase and sale of a property is a sophisticated business that will always require the assistance of qualified professionals.
When you rent something, it's different. You must pay the agent an equivalent of monthly rent. Why? To open the door and walk around? Most of the time, they are not qualified to answer in-depth questions. You ask questions about the model and the energy consumption of the air conditioner. And they are speechless, all they can do is locate the AC power in the apartment. In many cases, the owners themselves open the doors and the agent stands there and does nothing.
Tenants and landlords are really irritated when they work with an agent. And our task is to remove this point of friction and the intermediate useless.
Real estate agents provide a lot of help for buyers and sellers of property. They help with documents, provide legal advice. With the rental, it is unclear what is the job of the agent.
Q: Various homeowners' associations complain that services like Trulia and Zillow provide inaccurate projections of median rent and median purchase price. How will Rentberry handle better?
A: Zillow and other companies are classified. They have limited functionality and thus limited data points. They show you the price of the list, pictures, and the description of the property and that's all. They have no idea if the property is rented and how much it has been rented. All they can say is that the landlord has posted this apartment for $ 3,000. This is the only data point that enters their system. We use a completely different method.
We have a closed-loop system. The landlord posts a list of $ 3,000 and tenants apply and negotiate and eventually the property is rented for $ 3,500. There is a difference of $ 500 in the rental value. It can be both, from top to bottom. So there is a difference of 15% if the only data point you collected was the initial listing price. We have much more detailed features, auction system, signing a contract. We can monitor all that. Finally, our system will provide more accurate, specific and true data. We are absolutely confident in our data.
Q: What are the competitive advantages of Rentberry?
A: Platforms like Zumper or Trulia really have limited functionality. We are absolutely closed loop system. With us you can do all the A-Z rental tasks.
Everything is saved in the cloud: payments, maintenance requests.
Our goal is to eventually integrate third party service providers such as renters insurers. While when you move, we can identify moving companies, etc.
Ideally, we want to offer different third party suppliers through the platform: housekeepers, plumbers, electricians. Essentially, we want to create a symbiosis between our platform and a company like Handy or build this feature from scratch. You can go see all the maids who serve your neighborhood.
In a closed-loop system, this integration will collect even more data points and provide an even more complete picture of the market.
Q: Various old articles point out that Rentberry uses the 25% model, where the company collects the difference between the negotiated price and the original asking price. Do you still plan to implement this model?
A: The model is constantly changing to better meet the needs of the market. 3 years ago, when we launched the company, we considered this model. However, we decided not to implement it to make the platform simple. Everything is free and we charge specific features. We will not be back on this model anytime soon.
In some areas, Rentberry has suffered a significant decline from local authorities. Seattle has issued a temporary ban on all rental-calling platforms, while Australian cities are considering this option. What is the reason for this hostility?
When people lack knowledge of a technology, they tend to panic. Eleven years ago, when Airbnb started gaining ground, people panicked too. Airbnb has had a lot of hindsight from local groups. Even now, many local interest groups are mobilizing against Airbnb. Essential they claim that services like Airbnb will make people only rent for the short term. The supply of properties will decrease. As a result, many tourists will flood the region, prices will skyrocket, crimes will rise.
Uber is another good example. The public was concerned that taxi drivers would lose their jobs. However, they fail to explain the tons of new jobs created by Uber. New technologies tend to scare people.
The similar situation is with Rentberry. People are worried that the auction model will drive up prices. These people do not understand the basic economic principles of supply and demand.
Under the current shady business model, brokers and real estate control all the information, while potential tenants engage in the bidding war under the table. Our technology strives to balance the market and establish a balance. When supply and demand balance naturally, without the intervention of the government or any third party. People can clearly see what the demand for the property is and what they want to offer.
Thank you very much for your time, Alex!