Adult Dorms Attract Attention Of VCs, As Housing Pinch Grows

Venture capitalists have begun investing in “co-living” spaces for people working at startups, using the “adult dorms” as a way to relocate people quickly to crowded, pricey cities like San Francisco, the Wall Street Journal reports.

Venture capital fund Maveron and Fidelity Investments have invested in the space, which uses startups like WeWork to place new arrivals in rooms of buildings that contain shared kitchens, common areas and sometimes bathrooms. They primarily target millennial workers seeking a fast, simple way to move to pricey metro areas.

The rooms can rent for as much as $1,800 each a month, a return on investment that has many venture capitalists, and co-living startups like Oakland-based Open Door, delighted.

Maveron has backed New York-based co-living startup Common, which offers 51 rooms in five buildings in Williamsburg, Brooklyn, for young talent looking for a quick and easy place to land when they move to New York.

“You have this incredibly large category, which there’s not that much venture activity in, that needs to be reimagined,” Jason Stoffer, a partner at Maveron, told the Journal.”[There is] insanely high consumer demand for reimagining how millennials live in urban environments.”

Open Door, which hasn’t taken any venture funding, has focused on taking over whole properties and then leasing out the rooms, but has said it will now reach out to developers to hopefully partner on new co-living projects for San Francisco talent.

The co-living startup has no connection to Opendoor, the San Francisco-based house-flipping startup co-founded by Keith Rabois, the Khosla Ventures partner.

WeWork, which has raised more than $1.4 billion in venture funding, has predicted it will house more than 30,000 residents at 71 locations by 2018. Almost a quarter of its revenue will then come from co-living.

“Trying to find a place in New York is the biggest headache in the world,” Cole Kennedy, a tech worker in his mid-20s who pays $1,550 for a room in Brooklyn run by Common, told the paper.“It’s jump-starting your ability to make friendships.”

At least one other venture-backed startup has tried and failed in the co-living space. That is Campus, which was backed by Peter Thiel, the former PayPal CEO and investor. It rented apartments at market rates and then sublet them, but it couldn’t generate enough profit to keep from folding last year.

Source: San Francisco Business Times, Riley McDermid
Photo: Co-living targets millennials or even younger workers looking for a fast, simple way to move to pricey metro areas. (Robert Churchill)