Meet The Korean Apartment Rental Startup Disrupting A Red-Hot Housing Market

As a founding member of WeWork Labs, the shared office space giant’s venture arm, Matthew Shampine helped transform the world of commercial real estate. Now he’s taking on South Korea’s deposit-heavy residential real estate market, one rental at a time.

Living in cramped, unaffordable apartments remains an unglamorous reality for many adults. When Matthew Shampine, the Korean-American cofounder and CEO of apartment rental startup Dongnae, moved to Seoul with his wife and newborn daughter, he saw an opportunity to reshape that reality in South Korea.

“I really, really wanted to do something that would have the most impact on the most number of people,” says Shampine, 39, in a video interview. “You can ask anyone here, but Koreans have a strong affinity towards residential real estate … we can change the entire experience, all the way through, and cater to their needs.”

Born in South Korea, Shampine was adopted in the United States, and grew up in New Jersey. In 2007, he returned to Korea for a Korean-American adoptee conference and reconnected with his biological family. There, he made it a mission to return for good—and do good for the country.

Shampine joined WeWork in 2011 and cofounded WeWork Labs, the office-sharing company’s startup incubator. In 2018, he became general manager of WeWork Korea, where he met Dongnae cofounder Insong Kim, who serves as the company’s chief strategy officer.

Together, the pair launched Seoul-based Dongnae in 2020, with the goal to make moving into an apartment more affordable and accessible. Its key product, Dongnae FLEX, offers short-term, fully-furnished rental properties with low deposits, appealing to fresh graduates or travelers unable to cough up the exorbitant deposits—as much as 350 months of rent, the startup says—that are typically required of Korea’s apartments.

“The way our product has come about is we really enable people to live the apartments that they want to,” Shampine says. “We unlock all these new options because you’re not limited by the amount of money you have set aside for a deposit.”

So far, Dongnae has opened its doors to both local and international investors. Its $21 million series A funding round in March included NFX, which has backed the likes of Lyft and Doordash, and proptech-focused MetaProp, a backer of Airbnb, along with Korea’s oldest investment fund Daol Investment and Hana Financial. The fresh capital brought the startup’s total funding to approximately $34 million, following its $4.1 million seed round in December 2020 and $700,000 pre-seed round the year prior. Dongnae declined to disclose its current valuation.

“Residential real estate is the largest asset class here in Korea,” said Kyung Kuk-hyun, managing director at Daol Investment, in a statement about Dongnae’s latest funding. “Dongnae’s incredible growth paired with their strong financial partnerships with leading financial institutions make this investment compelling.”

Over 80% of Korean household wealth is in real estate, compared to roughly 35% in the United States, but homeownership has proven increasingly difficult. The average price of an apartment in Seoul, the country’s capital and most populated city, doubled between 2017 and 2021 to over $1 million. Housing formed a centerpiece of Korea’s latest presidential debates, with newly elected President Yoon Suk-yeol pledging to cool down the market and construct 2.5 million new homes nationwide over his five-year term.

Renting is not always an easier alternative. Korea’s rental housing market largely relies on jeonse, a unique payment system requiring tenants to provide large upfront deposits. Known as “key money,” these lump sums are up to 80% of a unit’s sale price—the average jeonse price for apartments in Seoul was approximately $516,000 in August, while certain districts could reach up to $572,400, according to figures from KB Kookmin Bank.

The widespread practice of taking out loans to unlock “key money” adds to Korea’s deepening household debt crisis, which topped 104% of Korea’s GDP in June. Among the country’s top five lenders, jeonse debt reached $106.4 billion last June, up from $37.8 billion that month in 2017. Over half of the outstanding loans stemmed from adults in their 20s and 30s, who owed $63 billion.

More Koreans are moving out of the high-deposit rental system. Of the total 258,313 lease transactions for apartments and houses in April, 50.4% of them were for monthly rentals, not jeonse, according to Korea’s Ministry of Land, Infrastructure and Transport—the first month since 2011 that jeonse did not lead transactions.

Shampine links the move away from jeonse to the evolving needs of young professionals, who are rethinking traditional ideals of marriage, child-rearing and homeownership. In addition to the “freeing” sensation of living without debt, short-term property rentals provide these adults the opportunity to explore more independent and flexible living arrangements, while prioritizing their careers or friendships – an apartment’s school district is less important than its proximity to work or location in a “cool neighborhood,” he says.

“For people in their late 20s and early 30s, the idea of being independent from your parents is different than being independent in terms of not having a roommate,” says Shampine. “You can both work together and really have an amazing apartment. In the past, here in Korea, your options were either living in a really small co-living space, or an officetel (a building with offices and residential units) with no amenities at all.”

Dongnae began as a listing platform for potential renters to book visits with property agencies, but it met limited success. Shampine says his team did not foresee “cultural dynamics” that curbed demand for their product. “We realized here in Korea, it’s very easy to go to any apartment complex around the city, or have a kind of connection to a brokerage, to just ask for a tour whenever you want,” he said. “So the concept of going through an app and to book [a tour] for like, the upcoming weekend, just didn’t really seem that attractive.”

The initial lack of success prompted “good and healthy,” albeit painful, reflections on the business model, Shampine says. Conversations with customers, brokers and team members on the ground informed Dongnae’s goal of “becoming the supply, instead of hunting for the supply.” In July last year, Dongnae pivoted from apartment listings to serviced apartments. At the close of its latest funding, the startup said its properties spanned 60 apartment complexes—now, they span 80, across 12 districts in Seoul.

Looking forward, Dongnae plans to expand its home services offered to residents, tapping into Korea’s thriving market for furniture and lifestyle goods. Other startups developing solutions for living spaces have found considerable success. In May, interior design platform oHouse raised $182 million to become the latest Korean unicorn, at a valuation of approximately $1.6 billion.

Shampine hopes to usher in a broader cultural shift. “When I personally reflect on how WeWork changed commercial real estate here, from renting space and co-working to actual environments inside the offices, I really hope that we’re able to do something similar from a residential perspective,” Shampine says. “Making it a better experience … for the brokers, for the landlords, and especially for the tenants.”