Ernesto Gaxha of SplitSpot is on a mission to make renting in cities easy, accessible, flexible.
First of all, how are you and your family doing in these COVID-19 times?
Ernesto Gaxha: Not too bad. Fortunately, my whole family is now vaccinated, and we didn’t have anyone contract COVID-19, as far as we know. I personally had a bit of a rough time with the curtailed social life, but I am fortunate to live with a few good friends, so at least we had each other. COVID and the lockdowns gave me time to really sit down with myself and think about my life and the direction I want it to go, which was a nice side effect of an otherwise terrible pandemic.
Tell us about you, your career, and how/why you founded SplitSpot.
Ernesto Gaxha: I’ve always liked tinkering with things, thinking about how things could be different or better. I’ve seen a lot of different ways people live (I was born in Albania, moved to upstate NY before settling in Boston), and after graduating from college, I worked in finance for a while. Finance is an interesting field, but you’re always working from 30,000 feet above – and I really wanted to feel like I was addressing a real problem at the ground level, and the problem that most inspired me was finding a decent place to rent. When I graduated, finding my first apartment was nightmarish: the broker fees, first and last month’s rent, security deposits, finagling the roommates together, the confusing leasing, and the rigid timeline – it was not a great customer experience, and I thought: why does it have to be this way? The more I learned about the industry, the more I realized that it really doesn’t have to be this way, and that was where the seed of SplitSpot started. I came to MIT with this idea, where I connected with my co-founder David Mazza. We were both motivated by this problem, and it took off from there!
How does SplitSpot innovate?
Ernesto Gaxha: It’s funny – on the face of it, we’re not doing anything particularly groundbreaking or new. We’re really formalizing what’s already happening informally on Craigslist or Facebook Marketplace or between friend circles every day. People find roommates and replace them all the time — but it’s always managed by one of the roommates. Our innovation is that we’re saying we will take on that work and bring it to the next level. We want to prepackage the apartment experience such that it is, off the bat, exactly the product that roommates want, without the messy work and stress of trying to fit the traditional product into the reality of the modern life of a young professional. I think there is a proverbial graveyard of startups that have tried tackling aspects of this problem, but either they focus too much on trying to become a cool viral app and disregard the supply (the landlords), or they try to recreate Airbnb (albeit more long term focused) and become operationally heavy while forgetting the needs of the core roommate market. SplitSpot’s innovation is hyperfocus on generating the exclusive supply that roommates value while also turning that supply into the exact product they want and nothing more.
How has the coronavirus pandemic affected your business, and how are you coping?
Ernesto Gaxha: At first, there were some people who basically got up and left. All of the companies in this industry experienced that. However, because we focused so much on “normal” renters who move in their own furniture and are looking for a longer-term home, the vast majority of our renters didn’t move out. We suffered much lower vacancy rates during the coronavirus pandemic because our renters feel they are at home in their apartments, but also because we offer an easy-to-commit-to product that is better than the traditional rental model. Not only that, but from a supply perspective, landlords became much more eager to work with us in the crisis because they needed to find new solutions to their vacancy problems. Thus, we were able to grow rapidly during the crisis. Finally, the challenges posed in operating during the pandemic actually made our operations leaner, more efficient, and a better overall experience for our customers. We truly came out of the crisis a much better, bigger company.
Did you have to make difficult choices, and what are the lessons learned?
Ernesto Gaxha: We took a big risk in the middle of the COVID pandemic by acquiring a local co-living operator in Boston. It represented an opportunity to instantly grow our company by 33%, but it also represented a huge potential risk, as the operator currently had a 50% vacancy rate and huge liabilities. Ultimately, we were able to negotiate an acquisition of the positive assets of the company in an earn-out agreement that de-risked the deal. The lesson we learned there was that thinking creatively can produce a win-win situation, especially when you think boldly.
How do you project yourself and SplitSpot in the future?
Ernesto Gaxha: I hope that 5 years from now, SplitSpot is the go-to name for roommate living and more. We think that housing has been so resistant to modernization for so long, but the tide is turning, and COVID really pressed the gas on a number of long-term trends that are helping us make this industry better.
Who are your competitors? And how do you plan to stay in the game?
Ernesto Gaxha: As far as I know, we don’t have anyone who is doing exactly what we’re doing, though we often get compared to co-living companies. But we’re more focused on the roommate experience and intermediating the relationship between the property owners and the residents and less focused on trying to create ‘WeWork for housing.’ In many ways, we’re competing with the traditional brokerage industry or the Craigslist process of finding roommates, but ironically we post on craigslist every day and have occasionally partnered with brokers. We see ourselves as creating a new product that addresses an unmet need, and thus direct competition here seems sparse.
Ernesto Gaxha: COVID-19 has shown us that the real estate industry has for too long ignored the evolving market demand for flexibility, simplicity, and customer experience. I’m excited to continue building the future of renting at SplitSpot.
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