Southeast Asia is one of the world’s fastest-growing regions attracting many expatriates and tourists from all over the world. Being an emerging market presents many opportunities for innovative solutions to develop the region and close up the gap between emerging and developed markets. PropertyScout, previously Flexstay Rentals, is a trailblazer disrupting the rental property space in Thailand with digitalisation and automation.
In this session of Startup Conversations, we invited Co-Founder & CEO of PropertyScout, Mario Peng to share with us how he positioned PropertyScout in a fragmented space and how he pivoted the business amidst the COVID-19 crisis which had a huge impact on the rental market.
Starting with some context about you, you started your career in investment banking then private equity, why the shift to the other side of the table as an entrepreneur?
Mario: While private equity and investment banking are intellectually stimulating occupations, I felt to be too far away from the actions/operations; in other words, I didn’t feel like I was building something impactful and valuable for the long-term. Thus, I took a leap of faith to jump into entrepreneurship and took an even bigger leap to do that in a foreign, emerging market country such as Thailand. I have loved building companies ever since and don’t see myself retiring at any time. The proceeds of every exit are just the Seed investment for the next business.
Diving into Flexstay Rentals, was there any backstory that sparked your interest in solving the rental problem in Bangkok?
Mario: Yes, I previously co-founded and exited an online travel agency named HotelQuickly and thus I was familiar with building and growing a (travel) marketplace. In 2019, I started to notice that many of the lessons we learned and the technologies we built could be applied to solving issues in residential rentals in Bangkok (80% of online property information is outdated or fake, unprofessional service, insufficient and unverified content). That’s when I started to dig deeper and launched Flexstay Rentals to bring transparency and professionalism to the real estate industry. After some early iterations which gave me confidence that my initial impulse would work, I was very lucky to find and onboard two perfect co-founders with complementary strengths.
There are many proptech platforms in Bangkok and Southeast Asia, how do you find and position Flexstay Rentals in this crowded space?
Mario: We focus exclusively on residential rentals and we are building a managed marketplace going full into the transaction with our internal agents. We believe to deliver the best results, we have to control the entire value chain with our own, internally trained, and supervised agents. Also, we believe you can only do this right if you focus on one segment. We decided on the rental segments as we believe that this segment has the highest potential to bring most of the value chain online and has a repeat business component.
The rental industry is one of the many industries hit by COVID-19. What did you change or pivot in your business to ride through the pandemic?
Mario: We initially started in the mid-term segment hoping to piggyback on the marketing efforts of AirBnB and Co to kickstart the business, build the technology for the long-term rentals, and then add long-term to our portfolio. Covid-19 started right at the moment when we were ready to market our mid-term rentals on Airbnb, which significantly reduced the leads. We quickly needed to accelerate our plans and moved completely to the long-term rental segment.
While the pandemic is a large challenge for the rental industry, do you see any opportunities for Flexstay Rentals amidst the crisis? How are you seizing the opportunities?
Mario: The pandemic is certainly a large issue for property owners as they need to reduce rental rates or accept low occupancy. Since we don’t own or lease any of the properties, it’s less of an issue for us. In addition, most real estate companies depend heavily on property sales, which is much more volatile than rentals. In short, most real estate market participants are having challenges and need to deal with those. We just raised an oversubscribed Seed round of USD 1.1m and are pushing heavily ahead with big investments into tech development and agent recruiting, focusing on building an operational excellence machine, and building up market share. Once the pandemic subsides, we should be in a good position to profit from an upswing.
Solving a painful problem is an essential step for all entrepreneurs. On the other hand, some of the world’s largest companies were started by creating products (iPhones, Windows) entirely new for people. Would you advise entrepreneurs to solve an existing painful problem or create an entirely new product?
Mario: It depends on your risk appetite, financial backing, and personal preferences. I think it’s very difficult to build a product or service to solve a potential future problem and only very few people will succeed in doing so. Thus, for the majority of entrepreneurs, I would recommend building a product or service to solve a current problem.
Flexstay Rentals recently raised a round with AngelCentral’s Syndicate, what was the experience like?
Mario: We had a great experience from the start. Der Shing immediately understood the potential of the business and the founders, we did quick due diligence, two pitch sessions, and the funds were raised. It was a very fast and efficient way to raise funds, and Der Shing continues to advise us also after the raise. I highly recommend raising from AngelCentral.
Looking to the future, where would you want to bring Flexstay Rentals in the next 3-5 years’ time?
Mario: In 3-5 years, we aim to be present in multiple countries in South East Asia with a tech stack that enables our agents to be 10x more productive than other agents in the market. We look at what an agent is currently doing and try to digitize or automate as many of those processes as possible arriving at the point that the agent “just” needs to do the viewing.