NEWS: Startup That Provides Affordable Housing to Creatives in LA is Seeking $15 Million. Upstart Looking for Both Equity and Debt Financing…
Hollywood, aka the Land of Dreams. But what happens if that dream doesn’t turn out quite the way you planned?
For Jeremiah Adler, that aha moment was when he turned 30.
He had come to Hollywood to be a screenwriter but hadn’t hit the big time yet.
So, he took a job at a real estate agency and saw how archaic some of the practices were.
“It was an old, stale industry that hasn’t really changed for arguably hundreds or thousands of years.,” Adler said. “You pay money to a landlord, ‘lord of the land’, and they give you an empty box to live in.
Adler had a better idea.
What if, instead of providing people with just a place to live, you provide them with a life?”
And, thus, the idea for Upstart.
The startup currently has eight properties in LA that provide affordable, shared housing for artists, actors, musicians, models and filmmakers
It’s now starting to seek $15 million – in both equity and debt — so it can continue leasing and refurbishing properties in LA and so it can expend into other West Coast cities like San Francisco, Portland and Seattle.
It wants to expand from around 400 members to 2,000, co-founder and CEO Jeremiah Adler told OC Startups Now.
Its seeking a total of $15 million – with half in equity and half in debt – to implement its 18-month plan.
Half would be for the expansion and the other half would be for leasing and building out more properties in LA.
Adler moved to LA from Oregon to write and direct “with big stars in my eyes.”
But as most young people soon find out, living in LA is expensive.
With about $11 left to his name, he was forced to “get an adult job.” It happened to be in property management.
At first, he thought that this would just be his “day job,” and that he would continue to pursue his dreams at night and on the weekends.
He said he absolutely hated being a “boring” real estate guy.
And, he found LA to be “a lonely disconnected city.”
But, he remembered how much he loved working in summer camps as a teenager.
And, with his newfound property management experience, wondered how and if he could create “a super fun living experience,” sort of like summer camp, in LA.
“When we started, everyone thought we were crazy,” he said. “My mom still thinks that. She thinks how can anyone ever want to live like that? But it has that fun, familial vibe and you get to connect with other young, talented, ambitious people and network and collaborate.”
As Upstart transitions from being a scrappy startup (it has about 30 employees now,) it’s trying to figure out now what, precisely, it wants its mission to be.
“Ultimately we want to be able to empower young people to move to anywhere in the world with just $1,000,” which is well less than most security deposits combined with first month’s rent.
Next year, Upstart hopes to bring strategic partners and established artists on board as investors and advisors.
The startup has been bootstrapped, with funds coming from friends and family.
His business partner and co-founder, Sarah Emick, who is also his fiancee, had been working at a magazine in LA.
“I told her I have this crazy idea – move in with me, financially support us, I can use your credit, along with mine, to get as much credit as we can.”
She said Yes. She quit her job. We moved in together and maxed out $60,000 in credit cards and opened our first location in Silver Lake.
The landlord of that property was someone Adler asked to invest in Upstart.
“We thought it would take about $30,000 to open the first location. He had a property he was renovating. I asked him, ‘Why don’t you put in $15,000 and I’ll put in $15,000 from credit cards and it’ll be 50-50. He liked the idea, but wanted more of a financial guarantee.”
Because Upstart could not provide that, he did not invest. But Adler went ahead and invested in the property anyway for the first Upstart location.
“I was terrified that no one would show up. We paid three months rent upfront with the idea that if we could fill it up in three months, we will be doing OK, but if we can’t, we’ll just to bankrupt. Miraculously, on our opening day, we were like 95% full, with a bunch of 18-25 year olds moving here from all over the country, who didn’t know anyone, and were excited to have a group of people to live with, who were as passionate as they were.”
Once the first property filled up, landlords started to see that Upstart could above-market rent ( 5-20%) and that they wouldn’t have to deal with vacancies.
About five months after launching, Adler’s cousin Lorenzo joined the team. Adler convinced him to drop out of college and contribute the inheritance he received after his mother passed away (his mom died unfortunately).
“He said, OK, I don’t like studying anyways,” Adler said.
Adler confesses he’s not a business person. He didn’t take any math classes in college. And he’s never raised anything along the lines of $15 million before.
“Now it’s my job to become an expert in cap tables and family offices. It’s a fun challenge for everyone. We’re confident we’ll complete the raise.”
How It Works
Upstart is not a real estate company. It’s a community building company that master leases properties.
As the master tenant, it applies the Japanese pod hotel to concept to real estate in LA.
Young people sleep in pods in communal rooms, like in a college dorm, and can take a multiplicity of classes in areas like acting and dance throughout all the Upstart properties in LA.
There’s also music recording rooms and video recording rooms for self-taped auditions and the like.
Rent starts as low as $695 per month.
The only money down required is $200 for a “Good Member Deposit.”
Leases are month-to-month.
“You’re sacrificing some personal space, but our price point is half of a studio apartment, plus we give you all these crazy amenities and programming you wouldn’t be able to afford otherwise,” Adler said.
Upstart currently has xxx propreties in LA, all within a few blocks of each other.
Each is a different format based on the architecture of the house.
Some of Upstart’s locations are in houses; others are in multifamily units.
There are about two to three pods per room, with a shared bathroom.
The top floor is residential. The middle floor is typically lounge space. “There’s a dance studio at one, a coworking space at another, recording studio at another, so there’s organic movement between the properties,” Adler said.
The smallest building has 18 people. The biggest one has close to 100.
Age of Residents
There’s no maximum age to apply, but it’s relatively self selecting, Adler said.
‘If you’re 35, you don’t want to be living with a bunch of 23-year olds,” he said. You want to be able to bring a date home. People come from Europe that are here for a six-month visa to try out their career here. Really 18 – 30 is 90% of our members.”
Upstart is targeting other West Coast cities that “are super-expensive and having their own housing crises.,” Adler said.
It will likely go into San Francisco next and then Portland and Seattle at the same time.
San Francisco is more expensive than LA, Adler said. Portland is “changing all sorts of zoning laws now to allow duplexes and single -family homes because there’s such a shortage,” Adler said.
“Ultimately, this is just a really unique way to live,” he said. “It’s not for everyone. And it’s not forever. When you’re 22, young, ambitious and broke and want to move to a city and don’t want to spend three years working at a Starbucks in Michigan (first) to get approved for a security deposit. We want to give people freedom during that really precious time in your early 20s when yore figuring out what you want to contribute to the world, what you’re passionate about. We don’t want expensive rents to push people into careers they’re not passionate about. I gave up on my dream and found a new dream to build this company.” sort of a tragedy in my early 20s.