Any new venture is about developing trust, gaining industry experience and insights, and stabilizing your revenue growth to expand over time. All of these require determination and hard work, but an equally important resource – if not more important – is capital.

How to Fund Your Coliving Startup

Acquiring capital is the first truly difficult task many young entrepreneurs have to go through. However, it can get easy based on the industry you are looking to start out in. And if you are on the lookout to start a coliving business, you are in for some luck. In the last two years, the funding secured for coliving ventures and startups has gone up by 600% globally!

So if you know what you’re in for, let’s get started on how you can secure capital to fund your coliving business.

Point Zero: Self Invest

Self-investment is non-negotiable; if you do not invest in your own business, why should anyone else? After all, you are your biggest cheerleader, and you should be!

When you set out to build something from scratch, you do not have any proof of your intent and zeal that the world can tangibly observe. In such a case, outside investing options for the business do not work.

You have to build something by yourself with your own money to have as proof of your venture and your endless efforts for it. When you start putting your resources into it, it also reflects that making a profit is important to you. Such security is necessary for acquiring any resources from others.

When you set up a starting point, figure out the niche of coliving you want to explore, and explore the possible coliving business model and revenue assessment systems, you can then look to reach out to others and seek investments or funds for the growth of your business.

Based on your end goal, requirements, and product roadmap, here are the multiple ways in which you can acquire funds for your coliving business:

Invest Against Future Rentals

This option is great for business owners who are looking to make steady growth, and establish their venture by setting up quality standards, and finalizing on a revenue breakup model.

Coliving, while a community-based option for residence, in the beginning, starts out as a kind of rental operation. Rental operators invest against future rental cash flows all the time, and young entrepreneurs who are looking to make a mark in the industry might be unaware of this opportunity.

When you have just set up your business, your hopes are high but you don’t know how much exactly you should expect as monthly rental income. Moreover, this amount also fluctuates from time to time depending on the target market for your venture.

However, in a quarter or so, you should have a fair idea of how much inflow is likely every month. You can borrow and invest from formal or informal sources, including making payment adjustments with landlords, suppliers, and other important contributors to the business set up accordingly.

You can then invest this money into marketing and branding, and then streamlining your business experience for tenants. Overshooting is neither advisable nor safe, but steadily building a reliable structure is an effective way to improve business and clear all debts before expansion in other locations and areas begins.

This way you can also set up a name for yourself in the market and industry, which itself will have countless benefits from a branding perspective. If you are looking for more tips and tricks on how you can improve marketing efforts, regardless the size of your coliving business, you should check out our in-depth guide on marketing coliving business which we put together in conversation with industry veteran Christine McDannell, Founder of Kndrd, and host of The Coliving Code show.

Partner with property owners

Providers like landlords and builders are mandatory for your business to exist in the first place. It isn’t surprising that rent is also the biggest expense you have to incur in your business.

While some financial quarters may be well-performing, there may be times when business takes an unexpected hit. A live example is the times we are living through, amidst a global pandemic that has left us all dumbfounded about the state of the market and left a giant hit on the industry as a whole.

In such situations, rent may be the biggest contributor to your slow-down. Hence, working out a deal with your property owners/providers can be a great way to reduce the financial burden from your own shoulders. You can learn other means to manage finances in tough times with our Rental Operator vs COVID-19 e-book.

You can set up a revenue-sharing arrangement with your property/rental space provider, which means they will get the rent paid in proportion to occupancy. You can make this adjustment by pointing out your reliability and it shouldn’t be very hard since you will anyway pay them well as per rent standards. Moreover, signing with them for a long term contract means they will find you credible, and you will have a fixed amount of rent to pay for a longer period of time.

If you are working with a developer or builder, this might even be a great opportunity to look at business expansion. You can promise a construction company to offer them occupancy and thereby provide them with rent on projects that are still under construction and thereby negotiate rental payments, rates, and maybe even settle on a revenue-sharing model.

This can also assist you in expanding your business, and with paperwork and business skills you can save more money than you would spend!

Get Investment from Providers

Another important reason the coliving industry is booming in developing countries around the world is that it provides guaranteed quality in a space that has had the concept of shared living in place for a long time.

This is because coliving spaces focus on the quality of living, which includes provisions like well-planned interiors, hygienic living conditions and fresh fabrics and beddings, clean and inviting plumbings, modern and optimised kitchen and cooking facilities.

All of these are also a place where any coliving operator spends much of their resources. This is crucial for business because clients are really focused on these important things. And this might take up a lot of money if you are starting out your coliving business.

To reduce the cost of furnishing and basic maintenance over a period of time, you can strike a deal with providers like your interior decorators to pay them over a longer period of time while promising them that you will use their services exclusively across properties and locations.

This means they get a long-term client, while you get to prolong the duration of payments so you don’t have to sign big cheques all at once.

Seek Private Equity

Angel investors are always looking to make profits by helping out small businesses that are showing all signs of growth in the years to come. Since the coliving industry is, in fact, a hot one, private equity investors have lent and invested a bunch in ventures.

If you are comfortable with having investors in your business, this is a great option for you. For the most part, investors will let you run operations at your will and discretion as long as the paperwork is there to show that you are meeting targets and setting u achievable goals to deliver on set timelines.

While you can run your business and make a decent profit, in the long run, you can exponentially expand a small business into something much bigger with the help of these funds.

You can negotiate private shares as your business grows, and if you wish you can even buy out these investors at a later stage. If you are an entrepreneur who enjoys the thrill of setting up operations, you can also sell your shares to the investors, or remain a shareholder while setting out on another business adventure!

Look for Venture Capital

Venture Capital is not the funding option that works for all businesses. Venture capitalists are looking for huge returns and they are looking for them quickly. The smallest amount of capital a venture capitalist would be willing to sign a cheque for is at least five hundred thousand dollars.

Hence, venture capital funding is meant for a business that has already reached a stable stage where expansion and customer satisfaction have all been attended to well established. To push such a thriving business into the larger space with the right boosting of money can make all the difference.

However, this also requires a track record of stability and a projection of profits that is able to materialize. Venture capitalists aren’t patient like angel investors, many-a-times they don’t even know how a start-up builds itself brick by brick with every step counting as a giant leap in the long run. This funding option can only work if you strike at the right time when you know the market is right and allows you to multiply growth over time with just the right capital.

Borrow from the Bank

Oftentimes in the start-up game, there isn’t room for the official money borrowing mechanism. Most entrepreneurs are looking for support in terms of their investors and partners, and a bank cannot meet these flexible requirements of a dynamic business model.

However, this does not have to discourage young business owners from borrowing money from the single most trusted source. There are two kinds of loans you can consider from the bank: (a) personal loan, and (b) business loan.

If you are looking for an early stage loan on a new business, you may not be able to get it in the name of your business. You can get a personal loan, though, and pay it back as your business makes money.

If you have been in business for at least three years with your books showing you have been profitable, it shouldn’t be difficult getting a loan in the name of the company either.

Other than the bank you can also consider private loans, but this is to remind you that the tried and tested way to kickstart a business is always going to be relevant despite changing market trends.

Moreover, getting loans from banks also gives you the option to avail government schemes or aids that your state might offer, and these can definitely help sustain your business and boost it while you retain full ownership of the operations.

In conclusion

The coliving industry is fresh still and has a lot of room for experimentation and improvement. Setting up a business now is guaranteed to have great returns as we’re only seeing the start of the phenomenon.

Experts are constantly projecting much higher growth in the sector post the Coronavirus pandemic which is currently slowing down growth, but will eventually lead to a much-increased demand for affordable quality housing.

So while you focus on setting up a great business, you should also remember that the coliving business, like many others, is a business of people. More specifically, it relies on building a community that is self-sustaining and ever-welcoming.

A community is the true functionality of a coliving business, and if you are unsure how to propagate a movement based out of your brand, you should read our guide on how to build a coliving community.

By building a community for your coliving business, you can accelerate growth in unique ways that truly work with the target demographic of millennials, who are looking for meaningful relationships and support in social interactions, along with networking benefits and a breath of relief from hectic lifestyles.