create a business serving just the Madison area. In fact, their original name for the company was MoveInMadison.com. But last year Abodo went through the startup accelerator program in Madison run by gener8tor, which invests in early-stage companies that go through its business boot camps in Madison and Milwaukee, similar to the Techstars and Y Combinator programs. (Disclosure: gener8tor is an Xconomy Wisconsin underwriter.) Now Abodo has bigger ambitions. It plans to have listings in 100 cities by the end of 2016, Slocum says.
It’s focusing on mid-sized cities like Milwaukee, Pittsburgh, and Columbus, OH, where there are fewer high-rise apartments. As a result, the bigger players, like Apartments.com, have big gaps in their listing inventory because they generally don’t include rental houses and smaller apartment complexes. Slocum believes that these markets are underserved, and offer an opportunity for Abodo.
Moving beyond Madison, however, requires a shift in strategy. With just seven employees, all in Madison, the company can’t put boots on the ground in new cities to work with property managers in person. Instead, Abodo partly boosts its listing inventory by allowing smaller properties—houses and apartment complexes with fewer than 15 units—to advertise on the site for free. For the most part, Abodo generates revenue in the industry’s traditional way, by charging large apartment complexes to list on its site. But the free listing option, which Abodo has offered since the company’s inception, gives property managers an incentive to list smaller properties for which they typically didn’t want to shell out advertising dollars, Slocum explains.
“It’s a gamble for us,” Slocum says. But he believes that landlords will step up with listings because Abodo can deliver more renters in its markets than the big sites can. “Our bet was that by delivering a better interface, a better platform that had more data, renters would come back [to Abodo],” he says.
Listing with Abodo was a no-brainer for Tallard Apartments, because the company’s entire property portfolio—94 buildings near UW-Madison, primarily single-family houses as well as small apartment buildings—falls under the free listing option, says Tallard co-owner Pete Lemberger.
Tallard’s units typically fill up quickly, but the company does take out ads in the student newspapers for specific buildings that haven’t secured tenants. Before Abodo, it had chosen not to advertise on apartment listing websites because “it’s a big chunk of money and they were never as interactive” as Abodo’s site, Lemberger says. He likes that Abodo’s website allows prospective renters to see all of Tallard’s apartments at one time on a map, a feature that Tallard’s website lacks.
It’s hard to gauge how many Tallard renters have come via Abodo, but Lemberger says his firm has gotten value from listing with Abodo.
“If they approach us at some point and say, ‘Things are becoming cost-prohibitive, we need to start charging fees,’ I guess we cross that bridge when we get there,” Lemberger says.
To attract even more renters, Abodo is launching a “neighborhood guide” feature, hiring local bloggers to write posts for the site that highlight local attractions like good restaurants, Slocum says. Abodo will also launch a mobile app in the next three months.
So far, the strategy is paying off. Abodo now lists more than 45,000 apartments in six cities, primarily in the Midwest, and more than 300,000 renters have used the site, Slocum says.
“Our attack has been we go city by city and we build these really dense, really up-to-date, large inventories,” Slocum says. “It takes us longer to get to scale, but once you get to scale, you’re solving the problem in a more effective way. You’re the equivalent of a local broker, as opposed to a national broker.”
Slocum declined to provide specific numbers, but says Abodo grew revenue 1,000 percent year-over-year in 2013, with sales projected to grow another 800 percent this year. Abodo’s Madison site is profitable, but the company overall is currently in the red as it sheds cash expanding to new cities. The expectation is that each market will become profitable by year two, he says. As part of its rapid growth plans, this year Abodo intends to more than double its current staff.
In the long term, though, Abodo could come up short against the “larger, well-funded businesses” like Apartments.com, ForRent.com, and Craigslist, CRT Capital Group analyst Doshi warns. “You have to be really differentiated in order to go after the larger swath of the rentals market,” Doshi says.
RentCollegePads.com
RentCollegePads.com (RCP), in contrast to Abodo, is aimed at a specialized niche, focusing on off-campus housing for college students. It was founded two years ago by Dominic Anzalone while he was an undergraduate at University of Wisconsin-Whitewater, an hour southwest of Milwaukee. Apartment searching was the worst part of the college experience for Anzalone and his five roommates, he says.
“Everybody was procrastinating, and nobody wanted to look together,” Anzalone says.
They were underwhelmed by the number of local listings on general apartment websites and Craigslist.
“There was just nothing that we knew was college-friendly,” Anzalone says. So he decided to build such a site himself.
RCP generates listings by reaching out directly to property managers through e-mail and cold calls. In subsequent meetings, RCP hooks the landlords through its “simple” and “affordable” platform for listing properties online, Anzalone says, without sharing prices.
“We’re simplifying college housing for landlords and students,” he says. “We’re taking away the barrier that’s in between them.”
The company has also partnered with some universities, such as Marquette University in Milwaukee, which lends credibility to RCP among landlords and students, Anzalone says. No money changes hands in these university partnerships, but the schools promote RCP to students on their own websites. The value for colleges is they are helping students find housing, while avoiding the headache of running their own apartment websites and keeping the listings up to date, Anzalone says.
These strategies have enabled RCP to
