As a founder of WeWork Labs, the venture arm of the shared office space giant, Matthew Shampine helped transform the world of commercial real estate. Now he is conquering the South Korean real estate market with a lot of deposits, rent by rent.
lLiving in cramped, unaffordable apartments remains an unglamorous reality for many adults. When Matthew Shampine, the Korean-American co-founder and CEO of the startup Dongnae, moved to Seoul with his wife and newborn daughter, he saw an opportunity to change that reality in South Korea.
“I really, really wanted to do something that would have the most impact on the greatest number of people,” said Shampine, 39, 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, completely and responsive to 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 Korean-American adopted conference and reconnected with his biological family. He made it a mission to return for good and do good for the country.
Shampine joined WeWork in 2011 and co-founded WeWork Labs, the company’s office-sharing startup incubator. In 2018, he became general manager of WeWork Korea, where he met Dongnae co-founder Insong Kim, who is the company’s chief strategy officer.
Together, they launched Seoul-based Dongnae in 2020, with the aim of making apartment moving more affordable and accessible. Its lead product, Dongnae FLEX, offers short-term, fully furnished rental properties with low deposits, appealing to recent graduates or travelers unable to cough up the exorbitant deposits — a whopping 350 months’ rent, the startup says — which typically are required from Korea’s apartments.
“The way our product came about is that we really empower people to live in the apartments they want,” Shampine says. “We’re unlocking all these new options because you’re not limited by the amount of money you’ve set aside for a deposit.”
So far, Dongnae has opened its doors to: both local and international investors. March’s $21 million Series A funding round included NFX, who has supported the will of Lyft and Doordash, and proptech-focused MetaProp, a backer of Airbnb, along with Korea’s oldest investment fund Daol Investment and Hana Financial. The new capital brought the startup’s total funding to approximately $34 million, following its $4.1 million seed round in December 2020 and $700,000 pre-seed round the year before. Dongnae declined to disclose his current rating.
“Residential real estate is the largest asset class here in Korea,” Kyung Kuk-hyun, director of Daol Investment, said in a statement regarding Dongnae’s latest financing. “Dongnae’s incredible growth combined with their strong financial partnerships with leading financial institutions make this investment attractive.”
More than 80% of Korean households’ wealth is in real estate, compared to about 35% in the United States, but owning a home is proving increasingly difficult. The average price of an apartment in Seoul, the country’s capital and most populous city, doubled to more than $1 million between 2017 and 2021. Housing has been at the center of the latest presidential debates in Korea, with President-elect Yoon Suk-yeol promising to cool the market and build 2.5 million new homes across the country over his five-year term.
Renting is not always an easier alternative. The Korean rental housing market largely relies on jeonse, a unique payment system that requires tenants to make large advance payments. Known as “key money,” these lump sums amount to up to 80% of a unit’s retail price — the average jeonse price for apartments in Seoul was about $516,000 in August, while certain districts could reach as much as $572,400, according to figures. from KB Kookmin Bank.
The widespread practice of borrowing to free up “key money” is contributing to Korea’s deepening household debt crisis, which amounted to more than 104% of Korea’s GDP in June. Jeonse’s debt among the five largest lenders in the country was $106.4 billion last June, up from $37.8 billion that month in 2017. More than half of the outstanding loans came from adults in their twenties and thirties. , who owed $63 billion.
More Koreans are getting out of the high-deposit rental system. Of the total 258,313 rental transactions for apartments and houses in April, 50.4% were for monthly rent, not jeonse, according to the Korean Ministry of Land, Infrastructure and Transport – the first month since 2011 that jeonse led no transactions.
Shampine connects jeonse’s transition to the changing needs of young professionals, who are rethinking traditional ideals of marriage, parenting and home ownership. In addition to the “liberating” feeling of a debt-free life, short-term real estate rental offers these adults the opportunity to explore more independent and flexible living arrangements, while prioritizing their careers or friendships – an apartment’s school district is less important than the 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 the sense of not having a roommate,” Shampine says. “You can both work together and have a really great apartment. In the past, here in Korea, your options were either living in a very small co-living space, or an officetel (a building with offices and housing units) without any amenities.”
Dongnae started out as a listing platform for potential tenants to book visits with real estate agencies, but it had limited success. Shampine says his team didn’t foresee “cultural dynamics” that would hold back demand for their product. “We realized that here in Korea, it’s really easy to go to any apartment complex in the city, or have some sort of connection with a real estate agency, just ask for a tour whenever you want,” he said. “So the concept of going through an app and booking [a tour] because the coming weekend just didn’t seem all that appealing to me.”
The initial lack of success led to “good and healthy,” albeit painful, reflections on the business model, Shampine says. Conversations with clients, brokers and team members on the ground told Dongnae’s goal to “become the offer, rather than hunt for the offer.” In July last year, Dongnae made the switch from apartments to serviced apartments. At the end of its latest funding, the startup said its properties spanned 60 apartment complexes — now they span 80, spanning 12 districts in Seoul.
Looking ahead, Dongnae plans to expand its home services to residents, leveraging the thriving Korean market for furniture and lifestyle items. Other startups developing living space solutions have had great success. In May, interior design platform oHouse raised $182 million to become the latest Korean unicorn, valued at approximately $1.6 billion.
Shampine hopes to usher in a broader cultural shift. “When I personally think about how WeWork has changed commercial real estate here, from renting space and co-working to real-life environments in the offices, I really hope we can do something similar from a residential perspective,” Shampine says. “Making it a better experience… for the real estate agents, for the landlords, and most importantly for the tenants.”