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Dongnae: Korea's Redfin? Startup Tackles Real Estate Issues

Source: Dongnae

Dongnae – a prop-tech startup co-founded by ex-WeWork Korea GM and MD of WeWork APAC – secured KRW 4.5 billion (US$ 4.1 million) funding as a Seed round stage.

Flybridge led the investment. MetProp, Goodwater Capital, Maple VC, and various angel investors in South Korea and the US participated in the funding.

The total funding amount for Dongnae is US$ 4.8 million.

What makes DONGNAE different from other prop-tech startups in South Korea?

Founded by Matthew Shampine (Cha Min-geun) in May 2020, Matthew realized a massive hole in the South Korean market’s very fragmented real estate market.

TechCrunch compared the DONGNAE to Redfin (NASDAQ: RDFN) in the US market. DONGNAE is positioned to be the nation’s first real MLS (multiple listing system).

Most real estate agents – Budongsan or Junggaesa – are located in almost every neighborhood.

Compared with the US, the number of agents is similar to that of the USA, where the population is six times higher than in South Korea.

As the agents are small, the thousands of agents(brokers) in the South Korean market only represent a limited number of properties.

Furthermore, due to the technological environment, there is no real MLS in the South Korean market.

Of course, there are services showing pictures or videos of real estate on the platform, but the real deal happens in real face-to-face meetings.

They position themselves as mediators between buyers/renters and sellers. This means that the negotiation is not 100% made from the buyer/renters’ interest perspective.

How shall DONGNAE generate its revenue?

DONGNAE is now under development, and its feature will go live this Spring.

Dongnae plans to partner with the brokers to centralize all the listings into its platform.

The company will offer a Tinder-like experience for buyers, letting them swipe left and right. By the action, its algorithm shall ultimately recommend the best fit for the buyer.

The revenue will be generated by taking a buyer-side fee, around 8% of the total transaction.

Why is Proptech important in the South Korean market?

The South Korean press criticizes the Moon Jae-In government’s policy failure regarding the regime’s real estate price increase.

According to the Citizens’ Coalition for Economic Justice, Seoul’s housing price increased 34% three years after the inauguration.

If we look at the apartment type housing price, the price increased by 52% while the previous regimes showed 25% during the same period. Apartments occupy 62.3% of the total housing types in the Seoul area.

An ordinary worker with an average wage – around US$33,400 – in Seoul should deposit 27 years of their earnings to purchase a three-bedroom apartment in Seoul.

The South Korean real estate market problem lies with two significant issues: Information asymmetry and the market price generated by the sellers’ setting without any invisible hand.

It is a colossal lifetime investment from a buyer’s perspective but remains whether the price is right and affordable to pay.

I have seen Matthew’s working style to drive business and go-to-market while he was at WeWork. I have a great expectation of the tech-driven prop-tech service merging its solution and data to make the market more transparent. Jesse Middleton General Partner Flybridge Capital Partners.

Let’s see what happens!