Starcity Works to Builds the Future of Urban Housing with $30MM in Funding

Starcity, Avalon Bay, San Francisco, Bullpen Capital, PeakState, Reshape, PayItFwd,
Image Courtesy of Starcity


Four years ago, we came up with the concept of Starcity. We joined Y Combinator in the summer of 2016 with just a team and a dream. I had no idea that we would come so far in such a short period of time. 

As of early 2020, Starcity has just under 500 units in operation across San Francisco, Oakland, and Los Angeles, with a current committed development pipeline of approximately 2,000 units. We have another 10,000 units across the country and internationally that we’re in the process of negotiating and analyzing. 

We’re excited to announce that we just recently completed our Series B and extension fundraise totaling $30M. Participants in the round are Bullpen Capital, Deciens Capital, PayItFwd, PeakState, Reshape, Y Combinator Continuity, and many more. We added Dan Kimmerling (Deciens) to our board and Raaid Hossain (PayItFwd) as a board observer. 

We’ve raised venture capital at the corporate level to fund the initial proof of concept, and then from there, expansion, research & development, g&a, and partially to take a general partner position in our developments. Our investors are looking at the long term i.e. Starcity is the AvalonBay or Equity Residential of the future and will eventually IPO. 

We will continue to raise real estate capital from co-general partners, limited partners, and lenders to fund our developments. These are real estate investors who are looking for a return over a certain hold period and are typically family offices, high net worth individuals, private equity funds, and asset managers. 

We’re proud of this milestone, however, we must be clear. It has been a hard road to get here. We have been close to failure many times, but our mission is so near and dear to us that through force of will and good fortune, we continue to have a bright future. Even during the current pandemic, the Starcity portfolio is stable and members are speaking out about how much coliving means to them. “I think about what if this would have happened while I was in my own studio alone in a high-rise,” says Julia Test, a 34-year-old photographer, and member in Starcity Venice. “It would be so horrible. I would be so lonely.”

The Starcity Way

Starcity’s approach is different from other groups in the Coliving space. We are set up as both a developer and operator with full-stack real estate acquisition, design, entitlements, construction management,  and property management capabilities. We love working on all aspects of development to maintain a keen focus on project details, and we enjoy having skin in the game when the opportunity presents itself. 

Being a developer means that we do everything from acquiring a piece of land or building to getting the rights from a city government to allow us to build our product, to designing what will be built, to overseeing and spearheading the construction, and finalizing the community to be ready for operations. 

Being an operator means that we run the community once it’s ready. Everything from furnishing it, to doing the marketing to get potential members, to touring and moving them in, helping create connections for our members, running the operations of the building from maintenance to repairs, and ensuring long term quality control.

Why combine the two business models? By building and operating the product, our members can trust that we will deliver the best possible product that we can each time we put one out. 

With each new community, we learn information that helps inform design and infrastructure on upcoming communities being built in real-time. This closed-end product control and iteration are only afforded to some of the best companies and brands. While it’s difficult, perfecting the core competencies of multiple businesses at once is far more valuable than a siloed approach.

The Starcity Mission 

Our mission has not changed since our founding day. We want to make great cities accessible to everyone. And make the living arrangements delightful and sustainable so that people can stay in cities for the long-term. We set out to do this by redefining the meaning of home. Innovative interior-design that increases livable space and smart technology that reduces waste has been and will continue to be at our core.

Creating a meaningful amount of high-density housing is a big, complicated challenge. Building involves navigating physical, capital, political, and emotional pressures, which can often be in conflict. Unless the cost of navigating that process becomes very inexpensive and constructing buildings become cheaper, the market will only produce highly subsidized housing (low-income) and the most expensive product (luxury). This is the current situation in many great cities.

First, a few key facts to keep in mind:

  • 7 million new renters enter the market to find housing every decade in the United States and spend $1.1T annually on apartment housing
  • Apartment living was the fastest-growing segment of the housing market over the last decade
  • 43% of apartment dwellers live in multi-family developments in urban settings, which translates to 35 million urban renters

Why are these facts important? Because, unfortunately for renters, inflation-adjusted rents have increased by 64% since 1960, while real incomes have not kept pace. The share of an average wallet for rent has shot up by 22% in just the last two decades for middle to low-income renters.

This pushes renters into stressful situations such as:

  1. Commuting longer distances to areas where housing supply is less expensive
  2. Moving into buildings that aim to fit more residents into the existing housing supply at a higher density and lower comfort
  3. Apply to a lottery system for subsidized housing where the chances of getting affordable housing is similar to winning the lottery
  4. Paying 50-60% of their income toward housing costs in an expensive modern high-rise
  5. Playing craigslist sublease roulette where they don’t know what kinds of roommates they’ll get 

Consumers want modern, on-demand, community-oriented housing products in urban settings, but housing supply isn’t able to keep up with demand, and hotels aren’t a viable long-term option.

Developers point to the inflexibility of banks and extensive regulation as reasons why 99% of new developments have the same format and little in the way of community. Regions like the San Francisco Bay Area and the boroughs of New York City would have to build supply at peak capacity for 50 years to create a meaningful reduction in costs for renters.

This is where Starcity comes in. We’re building a new category of housing called coliving. Designed to make great cities accessible to anyone, Starcity offers its residents a comfortable living experience with a private, fully furnished bedroom, and private or shared bath, complemented by warm, inviting shared kitchens and living spaces. Our priority is to make it so that our residents feel like they’re part of a greater community from day one, while always feeling at home.

We try to find underutilized multi-family, hotel, and commercial spaces or build ground-up developments to create coliving communities, adding to the city’s housing stock without displacing a community’s longtime residents.

With community-building at its core, Starcity works with local community stakeholders, government agencies, and nonprofits to understand the communities we enter, offer volunteer and engagement opportunities to our residents, and attempt to become a source of energy and opportunity for the neighborhoods in which we offer housing. 

Our Promise To Consumers

The relationship between landlord and tenant has been fraught with strife for centuries. “I inhabit a weak, frail, decayed tenement; battered by the winds and broken in on by the storms, and, from all I can learn, the landlord does not intend to repair.” – John Quincy Adams, 1846 

It doesn’t have to be that way. Starcity’s goal is to reset that relationship. This is one of the main reasons we call our customers “members”, not tenants. 

We operate by “The Golden Rules” – our guiding light to member interactions. They help the community team (our operations folks) execute on Starcity’s mission by building strong communities where members are listened to and cared for. They also act as operating principles cross-departmentally to ensure that every touchpoint for our members is exceptional.

Be Proactive

  • Respond within one business day
  • Stay ahead of issues and changes – communicate clearly/directly 
  • Maintain a 360 view at all times – how can we innovate over the status quo?

Lead with Empathy

  • Keep member issues private
  • Communicate with warmth & understanding
  • Take a walk in their shoes

Consider Members First, Always 

  • First question – what’s the impact on the member(s)?
  • Second – what’s the impact on the community as a whole?
  • Third – what’s the impact on Starcity?
  • THEN decide
  • When members are happy, Starcity is happy!

We aspire to provide a product that is at a discount to the market. Coliving at a premium does not yet exist because, at the end of the day, the customer is still making a sacrifice on the size of their private space. We give them a lot in return – flexibility, fully furnished rooms, events, etc. – however it’s still important that they feel they’re getting real value. This is what’s called the “coliving differential” at each development. We like to provide a 20-30% discount to new construction studios in that given neighborhood. This is also an affordable-by-design product, meaning, it’s not publicly subsidized, nor is it rent-restricted, however, there is a natural breaking point on the upside of pricing where people just won’t pay that much because there are other available options out there. As noted, coliving at a premium is not a market that is currently viable, and likely ever will be. 

We focus on the best zip codes in or near the best cities for two main reasons. One, these are areas where there is a high concentration of jobs and job growth. We are focused on empowering our customers and by allowing them a foot-in-the-door in the most out-of-reach cities in the world, they can increase their likelihood of having a much better quality of life. We also feel strongly that if we don’t find a way to create entry-level housing, this could jeopardize the positive global trend of urbanism because those great locations are only accessible to few. Second, many at this company survived a recession that was pretty brutal. However, during those times, the only places that had steady, albeit slow, growth was the top urban cities in the world. The secondary and tertiary markets did not do so well and many languished for a decade or are unlikely to come back. We’re doubling down on the best locations in the world to insulate ourselves to build a long term solution.

The Path Forward 

The Starcity master plan hasn’t changed since day one: 

  • Build communal housing out of existing buildings.
  • Use that money to build ground-up communal housing.
  • Use that money to build family-oriented communal housing, aka vertical neighborhoods.
  • While doing above, also improve the services and benefits for the neighborhoods we grow in, while maintaining their character.

There are 45 global cities that fall within our scope of expansion. These cities are experiencing a strain on housing supply, have favorable development stock, are GDP powerhouses, have a high daytime worker population (a great correlation for an opportunity), and are progressive enough to be open to new living arrangements. 

West Coast Commercial Real Estate News