As a founding member of WeWork Labs, the venture arm of the shared office giant, Matthew Shampine helped transform the world of commercial real estate. Now he is tackling South Korea’s deposit-heavy residential property market, one rental at a time.
LLiving in cramped, unaffordable apartments is still an unglamorous reality for many adults. When Matthew Shampine, the Korean-American co-founder and CEO of apartment rental startup Dongnae, moved to Seoul with his wife and newborn daughter, he saw an opportunity to reshape this reality in South Korea.
“I really wanted to do something that would have the biggest impact on the most people,” Shampine, 39, says in a video interview. “You can ask anyone here, but Koreans have a strong affinity for residential real estate … we can change the whole 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 co-founded WeWork Labs, the office-sharing company’s start-up incubator. In 2018, he became general manager of WeWork Korea, where he met Dongnae co-founder Insong Kim, who serves as the company’s chief strategy officer.
Together, the pair launched Seoul-based Dongnae in 2020, aiming 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 college graduates or travelers unable to cough up the exorbitant deposits — as much as 350 months’ rent, the startup says — typically required by Korea’s apartments.
“The way our product has come about is that we really enable people to live in the apartments they want,” says Shampine. “We’re unlocking all these new options because you’re not limited by how much money you’ve set aside for a deposit.”
So far, Dongnae has opened its doors to both locally and internationally investors. The $21 million Series A funding round in March included NFX, who have supported 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 roughly $34 million, following its $4.1 million seed round in December 2020 and $700,000 pre-seed round the year before. Dongnae declined to disclose its current valuation.
“Residential property is the largest asset class here in Korea,” Kyung Kuk-hyun, CEO of Daol Investment, said in a statement about Dongnae’s latest financing. “Dongnae’s incredible growth together 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 about 35% in the US, but home ownership has proven increasingly difficult. The average price of an apartment in Seoul, the country’s capital and most populous city, doubled between 2017 and 2021 to over $1 million. Housing took center stage in Korea’s latest presidential debates, with President-elect Yoon Suk-yeol pledging to cool the market and build 2.5 million new homes across the country during his five-year term.
Renting is not always an easier option. Korea’s residential rental market relies heavily on jeonse, a unique payment system that requires tenants to provide large upfront deposits. These lump sums, known as “key money”, are up to 80% of a unit’s sales price – the average listing price for apartments in Seoul was about $516,000 in August, while some districts could reach up to $572,400, according to figures from KB Kookmin Bank .
The widespread practice of borrowing to unlock “key money” is contributing to Korea’s deepening household debt crisis, which topped 104% of Korea’s GDP in June. Among the nation’s top five lenders, jeonse debt reached $106.4 billion last June, up from $37.8 billion that month in 2017. More than half of the outstanding loans originated from adults in their 20s and 30s, who owed 63 billion dollars.
More Koreans are moving out of the rental system with high deposits. Of the total 258,313 rental 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 transition from jeonse to the evolving needs of young professionals, who are rethinking traditional ideals of marriage, child-rearing and home ownership. In addition to the “liberating” feeling of debt-free living, short-term rental properties allow these adults to explore more independent and flexible living arrangements while prioritizing careers or friendships—an apartment’s school district is less important than its proximity to work or location in a “cool neighbourhood”, he says.
“For people in their late 20s and early 30s, the idea of being independent of your parents is different than being independent of not having a roommate,” says Shampine. “You can both work together and really have a fantastic apartment. In the past, here in Korea, your options were either to live in a very small shared room, or an office tent (a building with offices and residential units) with no facilities at all.”
Dongnae began as a listing platform for potential tenants to book visits with real estate agencies, but it had limited success. Shampine says his team didn’t foresee “cultural dynamics” dampening demand for their product. “We realized here in Korea that it’s very easy to go to any apartment complex around town, or have some kind of connection with a brokerage house, to just ask for a tour whenever you want,” he said. “So the concept of going through an app and ordering [a tour] for example, the coming weekend just didn’t seem that attractive.”
The initial lack of success led to “good and healthy”, if painful, reflections on the business model, says Shampine. Conversations with customers, brokers and team members on the ground informed Dongnae’s goal to “become the supply, rather than chase the supply.” In July last year, Dongnae went from apartment listings to serviced apartments. At the end of its latest funding, the startup said its properties covered over 60 apartment complexes – now they span over 80, across 12 districts in Seoul.
Looking ahead, Dongnae plans to expand its home services offered to residents, tapping into Korea’s booming furniture and lifestyle goods market. Other startups developing living space solutions have found significant success. In May, interior design platform oHouse raised $182 million to become the latest Korean unicorn, valuing it at roughly $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 are able to do something similar from a residential perspective,” says Shampine. “Make it a better experience … for the brokers, for the landlords, and especially for the tenants.”