It saddens me that the first I heard about Campus was news of its closure. On June 18th, the housing startup founded by Thiel Fellow Tom Currier closed its virtual doors, ending a two year experiment in co-living at 34 properties in SF and NYC.
Campus acted as a psuedo-property manager, signing large properties on long-term leases and renting either single or shared rooms to Campus members. Its mission was to build communities within its properties by grouping tenants with similar interests in the same house and allowing relationships to flourish in communal kitchens and lounges. It also provided services to take care of residents’ needs, from basics (toilet paper) to premiums (professional cleaning service), all in exchange for a monthly fee on top of the regular rent. Fast Company reporter Sarah Kessler spent six months in a Campus residence in NYC and wrote a great piece about the experience, concluding, “while Campus, the business, was a failure, Campus, the living situation, was a success.”
Campus CEO, Tom Currier, agrees with Kessler. On the company homepage he says “Despite continued attempts to alter the company’s current business model and explore alternative ones, we were unable to make Campus into an economically viable business… while we are deeply saddened by this situation, we are so proud of the community that has burgeoned over the past two years.”
It is a shame to see such a promising venture fold, as the value built in the community has been widely acknowledged by its residents, many of whom have mourned its loss on social media. The business model rests on being able to charge members a premium to the market rate for living in the community, and Campus clearly struggled to find the right strategy for monetizing its community.
Regardless, I think co-living has a bright future. As urban millenials increasingly value life-enriching experiences and lifestyles that prioritize flexibility and quality, co-living can offer instant access to a community of like-minded individuals and the promise of authentic experiences that are tailored to an individual’s identity. For recent graduates who face the daunting prospect of social isolation in a new neighborhood, this is particularly appealing.
Co-living: WeWork meets AirBnB
Co-living as a phenomenon is somewhere in-between the concepts of co-working, epitomized by the rise of WeWork, and converting spare lodging into guest rooms for travelers, epitomized by AirBnB. Both companies have built hugely successful businesses by utilizing technology to build engaged communities on top of existing infrastructure. This model is extremely appealing because it creates and unlocks value for all stakeholders. Both companies utilize the same model, but offer different value propositions (more on that later).
Today, housing meets the basic shelter needs of people, but there is additional value to be created and unlocked for both landlords and tenants if technology can be utilized to build effective communities. Co-living solutions promise to do just that.
The WeWork Value Proposition: Amenities + Location + Community
It is an understatement to say that WeWork’s locations are cool. Each WeWork office has been beautifully and thoughtfully decorated, and each is located in prime neighborhoods in the sixteen cities in which they operate. WeWork charges its customers a premium to the market rate per sq. ft by offering a potent combination of location, luxury amenities (office bars, ping pong tables, conference rooms etc…) and community. WeWork even sells memberships for people who just want to attend events and be part of the community, without using the space.
This is the same value proposition Campus attempted to emulate for co-living — leasing properties with beautiful interiors in prime neighborhoods of SF and NYC, as well as offering luxury amenities. Campus competitors — Krash, Pure House and the soon to be launched Common — have followed the same route, targeting a premium market segment.
Perhaps the premium market is the only place co-living can succeed right now. It makes sense — if you are charging for community then you need to be targeting the people with disposable income to afford that luxury on top of rent.
The AirBnB Value Proposition: Community + Affordability
But perhaps a budget-conscious model could also work. It is worth noting that AirBnB, despite building a community on top of existing infrastructure in the same vein as WeWork, succeeded because it offered travelers an authentic experience without the frills of a hotel room, at a more affordable price point. Many AirBnB locations aren’t in prime neighborhoods, and almost all of them can’t offer the same luxury amenities as a hotel, but the combination of trust in its community and affordability have seen AirBnB’s product thrive.
Co-Living should follow the AirBnB model
The reason I think Co-Living could succeed by following the AirBnB model, rather than the WeWork model, is the fact that living is closer to travelingthan working.
Work is a productive activity that helps an individual to grow/maintain their own business, or grow/maintain someone else’s business in return for a paycheck. Because of this, primacy of location, a productive environment and expensive amenities are luxuries that can offer a return on investment, and are thus justifiable costs in the eyes of the startups and individuals that utilize the WeWork space.
Living and travel are different — you do not anticipate generating any quantifiable return on investment; instead, you simply want to have the best experience within your budget. Just as many people are willing to stay at a no frills AirBnB on the edge of a city if it frees more of their budget to enjoy their travel, oftentimes people don’t need to live in a prime location (anddefinitely don’t need luxury amenities) if they can have a great experience as part of a community in a more affordable space.
Were I to start a co-living venture today, I’d focus on simple living arrangements in convenient (if not necessarily prime) locations, with basic amenities. Off-campus student housing, for example could allow the niche communities that thrive on campuses (eco-activists, tech enthusiasts, musicians etc…) to have a hub that indefinitely serves their community. Students in those communities might clamor to live in the house that reflects their identity, and be more than willing to pay a small premium for the ability to do so. The same model could work for recent grads who are budget conscious but willing to pay a small premium to avoid social isolation.
Whatever the model that eventually finds the perfect product-market fit, I’m certain that co-living is here to stay.
Until next time!