Firsthand case: how Igor Kalganov’s IT service “33 Elephants” began to compete with real estate managers

Photo: Vladislav Shatilo

Igor Kalganov has been working in IT for over 10 years. "33 Elephant" is a service of long-term rental and sale of housing, which provides legal services, insurance and assistance to tax authorities, as well as monitors the condition of the apartment throughout the entire rental period.

"We are, in fact, the replacement of a professional manager, because we are doing everything that he and the owner of the property, which he gave to the management," said the founder. The company "33 Elephant" has 28 employees.
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The central part of the project is a CRM system that coordinates the work of managers, photographers, cleaning and service companies and other contractors. Due to the large number of services offered by the service, the cost of these services is quite low, so the company can offer customers favorable terms. The very same site and mobile applications, in fact, are only marketing tools. A personal account, for example, allows you to automatically pay for services, transfer money for renting an apartment, use other services from the company's partners.

Like many other startups, the project has changed the business model, as they say, in the course of the play. Igor Kalganov agreed to answer several questions about the service, its development options and future plans.

How many times have you changed the business model?

We brewed once, when we switched from one-time sales to package sales. Everything else is an additional opening of new channels.

In September 2014, Kalganov and Ponomarenko presented the product to the market. At first, the 33 Elephant company offered a set of various paid services: checking residents, generating contracts and announcements, taking photos. For a month, the project earned only 1 thousand rubles. “It became clear to us that the model does not work, because people are not willing to pay for anything, ” Kalganov said . “We put a 1000-ruble bill in a frame and began to think about changing the approach.” By this time, 20% of attracted investments were spent — mainly on development and remuneration.

In the new version of the project, it was decided to bet on complexity. Old and new services were packaged in two packages - “Security” (occupants' check, replacement of lock larvae, comprehensive insurance of the apartment against fire and flooding, third-party civil liability) and “Comfortable apartment” (minor repairs, cleaning after the residents left, quarterly check apartments) - worth 1,5 thousand rubles and 1 thousand rubles. The fee was to be charged on a monthly basis, regardless of whether the client uses the services or not.

How do you assess the volume of the real estate market in Moscow?

In Moscow, about 300 thousand apartments are leased. The average check, according to CIAN and Avito, will be in Moscow about 40 thousand rubles. 144 billion rubles [300 thousand * 40 thousand * 12 months] - the volume of this market. The ceiling for the service - 10% of the market. More precisely, 10% is not a ceiling, which in principle can be achieved. This, as practice shows, is actually the service-reached limit of the market. Our commission ranges from 5% to 10%. We can talk about the revenue potential in the Moscow market up to 1 billion rubles a year.

As soon as we start to occupy a serious market interest, the competition will increase significantly. This story will go to major players like CIAN , Yandex , Avito, and so on. But the "33 Elephant" service may well take 10% of this market.

The market in the regions of the Russian Federation is much lower in terms of checks, so there are a lot of questions for it. But we look closely at overseas markets. There are excellent markets in the USA, and there is a very similar to the Russian market in Israel. In Singapore, in general, a quarter of the population is the highly paid expats with whom this product, as they say, is shown.

What is the purpose of scaling your business?

There are two options - scaling to other regions and entering new areas related to real estate. We started with a long-term rental property because there were no competitors there at all. Nobody seriously dug this market in Russia. There were some experiments, but there was no such deep study as we did.

In the short-term lease there is AirBnB, there are agents and agencies in the sale of housing, with whom it is quite difficult to compete at the very start. However, we knew in advance that renting was just the start. And then there will be a sale, then there will be commercial real estate, then there will be suburban real estate, land, interaction with developers, and so on.

Now we are beginning the second stage of growth, when we have already entered the segment of real estate sales - secondary real estate in Moscow and suburban real estate in the Moscow region. Additionally, we are preparing to enter the US market: the product has already been localized, and a lot has already been done.

Is the service suitable for those people who rent their apartments for a long time or at low cost?
If the apartment is in the lowest segment for the price, then most likely it is not our client. But again, there are exceptions, because we solve problems that all owners have. It depends more on whether the owner came across them or did not come across them. Our task is to tell him about how it happens, what happens. If he did not take it from the very beginning, but once faced a problem, he would know who to come to.

However, in the low price segment, we have fewer contracts. The main price segment is 30-60 thousand.

How much are you willing to invest to win shares from existing players in the US market?

The American market is very interesting in terms of structure. In the market there is one large corporation Zillow Group , which bought all the major market players. There are startups that appear and develop, but Zillow is the main player and monster of the market. They have an accelerator, which is sharpened exclusively for real estate projects, and we are considering just such an entry into the American market - through partnership with major players.

When do you plan to go on self-sufficiency? Or do you want to attract money first?

If we take into account only the direct costs of servicing an escort package, the apartment is profitable for us. Our main expenses now are the employees' fund: development, design, management, and so on. Maintenance costs are extremely low. Therefore, our task now is to increase the volume, scale and make marketing cheaper.

With regards to our plans "to achieve self-sufficiency or attract money, and then go to self-sufficiency" ... time will tell.

The founder of the service also shared tips that he addresses to novice startups:

Gain a strong team at the start

At some point, the project founder stops days, and sometimes weeks, in the office. Then everything depends on the team that was assembled at the start of the project, because it is these people who continue to do the project exactly as they see it - in accordance with the goals and objectives that were brought to them.

And the project, in fact, already lives without a founder. Because when investment attraction begins, there are eternal meetings with investors, or an active partnership, or access to other regions, the work of the team manifests itself. And from those people whom the founder will select at the start, it will depend on what happens at this moment with the project.

To hire a specialist, you need to understand in this area. The competence of the project founder should cover all areas - from the technical part to design, marketing, UX. If you have some kind of competence is weak, then you need to quickly graduate or rely on luck, hoping that you are lucky with the person you hire. We are expanding mainly in waves. It was the first wave, when we recruited a technical team. There was a second wave when we formed the commercial and operational blocks. We expect that there will be a third wave soon.

Communicate with the whole market from the start

Even if you have not begun to do anything - go and get acquainted with everyone who works in this area - with competitors, potential partners, funds that are interested in this segment, and strategic investors.

We have a good relationship with the big players, which we have been building for one and a half of the two years that the project exists. In the second year, they are already gradually turning into something important. The sooner the company starts it, the easier it will be in the future.

Think about scaling a business from day one of the project.

It always makes things easier, but there may be problems with scaling a business. The beauty of an IT startup is that at some point a multiple growth begins, and you need to cope with this growth. And for this to be a team.

Use the service yourself and ask friends

It is important to pay for it, to pay a fair market price. Then there is the most honest feedback. And there is an understanding of how customers use it. I am against giving someone a free hand: I use my service myself, I pay for it myself, and I know the pros and cons as a consumer. Then it is easier to see some mistakes, shortcomings in work, difficulties and so on.

The most important thing is to be able to knock on a closed door.

The most important thing is to be able to knock on a closed door, even if it is shut before your nose. This happens regularly. In general, projects are perceived by market players in very different ways: including as competitors. The ability to knock on a closed door sometimes brings a new circle, a new level of agreement.

Any market in which a startup operates is small, and the circle of people there is limited. The ability to restore relationships really gives new horizons.