STARTUP STAGE: Andes STR buys and manages rental properties for investors

Andes STR

Andes STR wants to grow short-term rental inventory by making it easy for investors to own a portfolio of properties, using machine learnings to determine where to buy.

Andes STR furnishes, markets and manages the properties, including setting rates, handling customer support and coordinating cleaning and maintenance. 

What is your 30-second pitch to investors?  

Andes STR is making beautifully designed and professionally managed short-term rentals available to everyone. We do this by using award-winning machine learning technology to make it easy to invest in short-term rentals, on top of our fully turnkey service where we take care of everything for our investors, resulting in a smart and truly passive income solution. As a result, we increase the number of short-term rental units available and normalize them as a new asset class.

Andes is backed by some of the most prominent venture capital firms in the United States, and we are led by a world-class team with decades of experience. Headquartered in Austin, Texas, the team has experience investing in and managing portfolios of short-term rentals since 2018 across the U.S., Canada and Chile.

Describe both the business and technology aspects of your startup.

Business: We are in the business of finding excellent investment properties, furnishing the units, and providing property management through the life of the investment (e.g., cleaning, maintenance, revenue management, etc.). Being excellent in all these roles entails successful marketing and sales to high net worth individuals and institutions, partnering with leading asset managers and vacation rental service providers, best-in-class property management and guest relations, and being able to stand out as experts and ethical leaders in a rapidly growing industry.

Technology: We are data-driven in everything we do. Doing so requires analyzing significant amounts of data, and thus we are in the business of working with big data. We do so with a team of experienced software engineers and data scientists who employ cutting edge machine learning and AI methodologies. Our revenue prediction models are constantly being refined in new markets or using data from the properties that we now own.

Give us your SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of the company.

• Strengths: only cradle-to-grave STR service provider to real estate investors; much farther down the technology (i.e., big data, machine learning) curve versus peers; differentiated set of relationships with large real estate asset managers will allow us to build a platform for small sellers and large institutional buyers.
• Weaknesses: lack brand recognition and general STR owner-operator experience (outside of two to three people on the management team).
• Opportunities: large institutional capital is currently not served any options to invest in STRs; there are no competitors able to provide end-to-end services combining cutting edge machine learning technology and big data with property management and finance.
• Threats: There is some headline risk if rental guests create issues during their stay. Certain cities and parts of the country are less amenable to STRs in their community and could go as far as banning or material changing the way STRs do business. Over time, there is the threat of competition that vertically integrates to form a true competitor to Andes.

What are the travel pain points you are trying to alleviate from both the customer and the industry perspective?

Our vision is to accelerate the transition to a future where people live mostly in STRs, being free to choose location and duration of stay and not having to worry about paying a fixed rent when the place no longer suits their needs.

So you've got the product, now how will you get lots of customers?

We are in the process of getting the word out to all kinds of real estate investors. This includes individuals who would like to partner with us to find passive income real estate investments, family offices and institutions that are looking to diversify their assets and real estate asset managers who need a technology and property management partner to deploy capital. Individuals have many channels (online forums, ads, private wealth bankers, event conferences), whereas institutions typically work best through word of mouth and trusted intermediaries.

Tell us what process you've gone through to establish a genuine need for your company and the size of the addressable market.

Our total addressable market is larger than we could imagine, as real estate is one of the largest industries by assets in the world. What's more, the STR market is growing rapidly, driven for years by increasing demand for numerous reasons, including changes in vacation, mobile work, and temporary primary home displacement (e.g., remodeling). We have spoken with several large institutional investors and heard of their desire to own portfolios of STRs, but there are no easy options for them today. There is also ton of dry powder held by institutions, looking for opportunities to deploy capital and earn a strong risk-adjusted return.

How and when will you make money?

We generally make money when the customer does, and we pride ourselves on being very transparent with our business model to our customers. There is an initial fee that we charge as part of helping find and broker a transaction, after which we earn a fixed percentage of booked rental revenues (on the lower cost side of the industry) for managing all digital and physical operations.

What are the backgrounds and previous achievements of the founding team?

• CEO: $30 billion-plus in real estate and infrastructure transactions, five years of short-term rental management, founded three startups, MBA from Chicago Booth
• COO: Twenty-five years investing as a venture capitalist, 20 years investing in real estate and short-term rental owner, head of business development at a software startup (increased revenue 4x in three years), Stanford BS/MS Engineering
• CIO: Eight years investing experience with $6 billion-plus in assets, specialized in real estate, four years short-term rental management
• CTO: Twelve years experience in software engineering, co-founded multiple startups and CTO in all of them, successful exit as a founder, built first LATAM iBuyer

How have you addressed diversity and inclusion within your business?

We have a multicultural, geographically diverse set of founders and initial team. We intend to keep it that way and focus on hiring from a wide pool of talent, with a focus on idea meritocracy. Internally at Andes, we focus a lot on empowering individuals with the resources they need to grow and succeed. We believe that our people are our greatest asset, and that everyone should feel comfortable being themselves at work.

What's been the most difficult part of founding the business so far?

We have been growing our business slowly in what is the most difficult real estate investing market in over a decade. Market volatility, higher inflation, interest rate increases and minimal home price declines have made it difficult to find investment deals with good value.

Generally, travel startups face a fairly tough time making an impact - so why are you going to be one of lucky ones?

Every member of our team has a passion for growing the short-term rental market. We sit at the intersection of investment homeowners and guest users and believe that we have the right team to create a next-level experience for both investors and guests. By doing so, we will raise the bar for STRs. We also believe that the post-COVID world has advanced the opportunity to work-from-home and a mobile lifestyle, and that we can help turn this demand into a reality.

A year from now, what state do you think your startup will be in?

In one year we plan to be ramping up our number of managed investment properties by dealing with more asset managers, proving our ability to find and onboard new customers, and preparing for a blockbuster Series A.

What is your end-game? (Going public, acquisition, growing and staying private, etc.

We plan to grow quickly and provide a home for employees who want to advance the world in the spirit of ethical business. We anticipate being opportunistic about going public, or growing and staying private, so as to best serve the long-term needs of our stakeholders and industry.