INSUBCONTINENT EXCLUSIVE:
A Chinese startup that’s taking a dorm-like approach to urban housing just raised $500 million as its valuation jumped over $2 billion
Danke Apartment, whose name means “eggshell” in Chinese, closed the Series C round led by returning investor Tiger Global Management
and newcomer Ant Financial, Alibaba’s e-payment and financial affiliate controlled by Jack Ma.Four years ago, Beijing-based Danke set out
with a mission to provide more affordable housing for young Chinese working in large urban centers
It applies the co-working concept to housing by renting apartments that come renovated and fully furnished, a model not unlike that of
The idea is by slicing up a flat designed for a family of three to four — the more common type of urban housing in China — into smaller
units, young professionals can afford to live in nicer neighborhoods as Danke takes care of hassles like housekeeping and maintenance
To date, the startup has set foot in 10 major Chinese cities.With the new funds, Danke plans to upgrade its data processing system that
deals with rental transactions
Housing prices are set by AI-driven algorithms that take into account market forces such as locations rather than rely on the hunches of a
The more data it gleans, the smarter the system becomes
That layout is the engine of the startup, which believes an internet platform play is a win-win for both homeowners and tenants because it
provides greater transparency and efficiency while allowing the company to scale faster.“We are focused on business intelligence from day
one,” Danke’s angel investor and chairman Derek Shen told TechCrunch in an interview
Shen was the former president of LinkedIn China and was instrumental in helping the professional networking site enter the country
“By doing so we are eliminating the need to set up offline retail outlets and are able to speed up the decision-making process
What landlords normally care is who will be the first to rent out their property
The model is also copyable because it requires less manpower.”“We’ve proven that the rental housing business can be decentralized and
done online,” added Shen.Photo: Danke Apartment via WeiboDanke doesn’t just want to digitize the market it’s after
Half of the company’s core members have hailed from Nuomi, the local services startup that Shen founded and was sold to Baidu for $3.2
Having worked for a business whose mission was to let users explore and hire offline services from their connected devices, these executives
developed a propensity to digitize all business aspects, including Danke’s day-to-day operations, a scheme that will also take up some of
This will allow Danke to “boost operational efficiency and cut costs” as it “actively works with the government to stabilize rental
prices in the housing market,” the company says.The rest of the proceeds will go toward improving the quality of Danke’s apartment
amenities and tenant experiences, a segment that Shen believes will see great revenue potential down the road, akin to how WeWork touts
software services to enterprises
The money will also enable Danke, which currently zeroes in on office workers and recent college graduates, to explore the emerging housing
market for blue-collar workers.Other investors from the round include new backer Primavera Capital and existing investors CMC Capital,
Gaorong Capital and Joy Capital.China’s rental housing market has boomed in recent years as Beijing pledges to promote affordable
apartments in a country where few have the money to buy property
As President Xi Jinping often stresses, “houses are for living in, not for speculation.” As such, investors and entrepreneurs have been
piling into the rental flat market, but that fervor has also created unexpected risks.One much-criticized byproduct is the development of
so-called “rental loans.” It goes like this: Housing operators would obtain loans in tenants’ names from banks or other lending
institutions allegedly by obscuring relevant details from contracts
So when a tenant signs an agreement that they think binds them to rents, they have in fact agreed to take on loans and their “rent”
payments become monthly loan repayments.Housing operators are keen to embrace such practices because the loans provide working capital for
renovation and their pipeline of properties
On the other hand, the capital allows companies like Danke to lower deposits for cash-strapped young tenants
“There’s nothing wrong with the financial instrument itself,” suggested Shen
“The real issue is when the housing operator struggles to repay, so the key is to make sure the business is well-functioning.”Danke,
alongside competitors Ziroom and 5I5J, has drawn fire for not fully informing tenants when signing contracts
Shen said his company is actively working to increase transparency
“We will make it clear to customers that what they are signing are loans
As long as we give them enough notice, there should be little risk involved.”
