A fully furnished one-bedroom apartment in midtown Manhattan is available for rent for the week between Christmas and the New Year. It’s within walking distance of Times Square, stocked with a washer and dryer, and costs $200 a day—less than half the nightly rate at most hotels in that part of the city. You wouldn’t know about it unless you attend or have attended one of a few dozen universities.
That’s because the apartment is listed on iCircl.com, a website launched in April by Jaime Contreras and Tal Snir, two MIT Sloan MBA grads. The site is dedicated to easing the process of short-term leasing for college students and grads.
Much as in the early days of Facebook, only those with an e-mail address that includes an ‘.edu’ extension can register, create profiles, and post details on property listings that can be filtered by city and date listed. Members interested in subletting properties for a weekend, short break, or entire semester can reach out directly to hosts that post rental properties. Before asking or answering any questions, both property owner and interested renter know they have one thing in common: college attendance. “That key characteristic builds a certain level of trust,” co-founder and Chief Executive Officer Contreras explains. “That trust is crucial to the community we aim to build and is what makes this site different.”
As part of a second-year marketing course at Sloan, Contreras, 33, and Snir, 30, conducted surveys revealing that only 15 percent of respondents felt comfortable subletting their homes to strangers, while 75 percent said they felt comfortable subletting to someone they had something in common with … such as enrollment at a university. A certain level of confidence is crucial with short-term lending because leasers have to contemplate who they want around their belongings and who they want knowing they’ll be out of town, Snir says.
Plentiful Demand—and Supply
Contreras came up with the idea for iCircl last fall, as he was beginning his second year at MIT. A year earlier, he had started a small car rental service, using his own 2003 Toyota RAV4, and charging interested friends and colleagues $5 an hour or $40 a day to borrow it. After having succeeded with the car service, and having watched his friends travel a lot for job interviews and graduate school visits, he decided to try to connect the demand for safe, convenient, short-term apartment sublets with their supply.
Over coffee early in November, Contreras suggested the idea to friend and classmate Snir. “By that point I already had about 30 friends asking me to ask other friends if they needed a place or knew of a place to stay,” Contreras says. “There was clearly a market.” Snir loved the idea.
By February 2011, they had added two people to help develop the website. On Apr. 24 they launched the initial version, which was open to business students at seven top-tier programs, including Harvard Business School and Chicago Booth. To spread the word, the duo recruited a group of student ambassadors at each school. Costs were kept to a minimum so the operation could fund itself.
In one month iCircl accumulated nearly 2,000 registered users and more than 300 property listings, of which more than 33 percent secured a renter. Since then, Contreras and Snir have opened access to all students at 30 schools across the country.
Melding the Enterprise With School
Starting the company during their last semester at Sloan meant that Contreras and Snir were able to utilize classroom lessons and professors as they worked out details for the site. Associate professor of marketing Catherine Tucker provided crucial guidance as they conducted the research (helped by MIT undergrads who polled the masses) that proved their hypothesis about the importance of trust when building an online community.
Now they’re applying the lessons learned in advertising courses to spread the word and lessons in entrepreneurship to monetize the site. One such class was New Enterprises. “[That course] helped us and continues to help us think through all of the different business fronts we need to worry about, from financials to marketing to product development,” Contreras says.
A potential roadblock for iCircl was the question of whether or not it was legal for renters to sublet their apartments. Contreras and Snir have not found this to be a huge issue. “Only a sub-segment of all leases are signed with a clause against sublets,” Contreras says. “For those where the clause is included, we have started to hear about landlords that are willing to negotiate with tenants.”
Free—For Now—in Beta Phase
The New York-based operation currently has four employees and two contractors and is in the beta phase, providing its services for free. The pair hopes to institute a transaction fee of 3 percent to 6 percent of the agreed rate by the spring of 2012 that will be charged to the host of the property, and a fee ranging from 9 percent to 12 percent to the guest, if a rental agreement is successfully reached through the site. As part of the transaction fee, Contreras and Snir are considering adding perks such as key pickup and drop off, apartment cleaning, and a concierge service. There will not be a charge for signing up or perusing listings. The co-founders are also considering fundraising and are in talks with angel investors. “But the focus now is on getting the word out and developing the product,” Snir says.
Marketing has been the company’s biggest challenge. The iCircl co-founders partnered with a start-up in Boston called ThriveHive to help track marketing activities and see how successful fliers, school newspaper ads, and social media efforts have been in getting the word out about iCircl. According to Snir, alumni—which are a big part of the target market—are very difficult to reach. “Most alumni communication channels are weak,” Snir says. “With e-mails hardly read and calls missed.”
In the site’s next version, Contreras and Snir are thinking about adding a place to network professionally. For instance, a law student traveling to a new city for interviews at different firms might not want merely a place to stay, but to meet other lawyers, too. “iCircl can be a source for that,” Contreras says. “It offers peace of mind with its closed network—something you want when you’re renting a place or meeting a new person.”