Eyeing Sun Belt expansion, shared-living startup Bungalow raises $75M Series C
Renters continue to flood secondary markets even as NYC, SF bounce back, CEO says.
The shared-living rental platform Bungalow is expanding into five new cities after securing $75 million in Series C funding.
The hedge fund Deer Park Road, an alternative asset manager and first-time investor in Bungalow, led the round, and all of the startup’s major existing investors, including Atomic, Founders Fund, Coatue and Khosla Ventures, participated. The Series C raise brings the company’s total funding to more than $150 million.
“For this round we wanted to be really strategic and bring a lead investor with deep real estate experience,” co-founder and CEO Andrew Collins said.
With the new funding, San Francisco-based Bungalow is moving into the Phoenix, Tampa, Miami, Atlanta and Houston markets, bringing its total U.S. city count to 21.
Millennial and Gen Z renters continue to flood into secondary cities even as the New York and San Francisco markets recover from their pandemic slump, Collins told The Real Deal. Traffic on the app more than doubled in the second quarter, surpassing pre-pandemic level.
“We’re seeing really strong growth in demand post-Covid in the Miamis, the Austins, the Denvers,” Collins said. “Covid accelerated a lot of the demographic trends we were already seeing before, with the shift out of major metropolitan cities to the next tier.”
Bungalow, founded and launched in 2017, began as a spin on co-living, the business model that, with varying degrees of success in recent years, aimed to give young white collar workers access to expensive cities via densification and shared space.
Shaken by the pandemic, the company now bills itself as a property management alternative — as Collins put it, an “Airbnb for long-term rentals involving roommate living.”
Homeowners sign a master lease with Bungalow, and Bungalow helps them renovate and furnish the properties. Through its app, the company helps prospective renters match with housemates.
The company offers flexible four to eighteen-month lease terms and allows its renters to move between Bungalow apartments or homes across cities without breaking their lease. The average resident signs a twelve-month agreement.
The flexibility provided by these arrangements is key in the post-pandemic environment, Collins said.
“We’ve seen this emphasis on the hybrid work-life balance in the post-Covid environment,” Collins said. “Young people really demand something more flexible and want the ability to move around. … At the same time, people are really craving rich social networks and community.”
Big-city living and social interaction were not priorities during the pandemic. Cash-strapped during the depth of the crisis, Bungalow was reportedly missing payments to its landlord partners, and was said to be struggling with growth targets even before it began.
Collins said shared-apartment renting is on the rebound, and the company’s platform allows prospective housemates to communicate Covid-related concerns.
“People are ready to get back to living,” he said. “And people, I think, recognize the importance of communities and friendships and want to live with others now.”
Recently, Bungalow expanded into the single-family rental market, which Collins described as core to the company’s growth plans. Bungalow works primarily with mom-and-pop operations, but Collins said the company is in talks with the large institutional owners who have moved into the single-family rental market en masse in recent years.
“We’ve also had a few institutions reach out and we’re evaluating potential partnerships there too,” Collins said.
Bungalow says its services help apartment and single-family home owners achieve, respectively, 30 percent and 50 percent higher net operating income than they otherwise would.
“The platform allows them [homeowners] to gain access to tier one neighborhoods and tier one markets,” he said. “Instead of running the same playbook through the Sun Belt, we can actually help them access and make the cap rates work in LA, in Dallas, in Austin.”