$30/Night Rooms Make Him $60,000 Per Day | PadSplit CEO Atticus LeBlanc

Atticus LeBlanc, CEO of PadSplit, rents furnished rooms for under $30 a night, has 25,000 of them filled tonight, and owns none of the real estate. PadSplit is the largest co-living marketplace in the US: 82 units at the end of 2018, 34,000 today, over $250M a year in rent flowing through the platform, and 70% growth three years in a row. In this interview, Nathan Latka breaks down the marketplace business model behind it: an 8% take rate (roughly $60,000 per day), the 10-day rent clawback that funds customer acquisition, an 8-day average room refill time, and a 9.5-month average stay where 25% of tenants stay 12+ months. Atticus also explains why he chose the Airbnb model over owning property like Invitation Homes, how real estate investors and small landlords earn higher yields renting by the room, and how a crowdfunding partner is buying up performing PadSplit homes. On the funding side: 77 investor meetings for his 2021 Series B and one yes, $40M in total equity raised, and a new Orix credit facility that landed after he got the company near break-even. He answers "hell no" to a $150M all-cash offer and explains why. Topics: affordable housing, co-living, real estate investing, rental property, proptech, marketplace business model, two-sided marketplace, take rate, venture capital vs debt financing, public benefit corporation, bootstrapping to break-even, Atlanta startups. Subscribe on YouTube: https://www.youtube.com/@NathanLatkawatch?sub_confirmation=1 Subscribe on iTunes: https://podcasts.apple.com/us/podcast/top-founders/id1023761733 Subscribe on Spotify: https://open.spotify.com/show/3AA9buFn8oxJf8WSDOUks5 Looking for funding? Visit https://founderpath.com/

• 0:00Speaker 00

  How do we help solve the affordable housing crisis one room at a time while leveraging housing as a vehicle for financial empowerment? And that's, that's what we're here to do.

• 0:06Speaker 01

  You're supplying 34,000 units available per month. How many right, right now today are filled?

• 0:12Speaker 00

  Today, we're at like 25,000 that are, that are filled.

• 0:15Speaker 01

  If you have 25,000 filled as of today, and you told me the average nightly rate across your platform is 30 bucks a night, times an 8% take rate on that, that would be, I mean, what? That's like $60,000 a day.

• 0:27Speaker 00

  Right now, I mean, like, we're, we're grossing over $250 million a year. We're growing 70% year over year and have for about the past three years.

• 0:41Speaker 01

  Hey, folks. My guest today is Atticus LeBlanc. He's a serial entrepreneur and Yale graduate who's worked in affordable housing since 2005. He founded PadSplit in 2017 as a public benefit corporation after winning an affordable housing ideas competition in Atlanta. Has experimented with shared housing models all the way back since 2009. Atticus, you ready to take this to the top?

• 1:00Speaker 00

  Let's do it.

• 1:02Speaker 01

  All right. What got you so passionate about this space? Was it just sort of a hobby you just couldn't let go of? It just took you over in college or something?

• 1:08Speaker 00

  Yeah, no, I mean, not exactly. I was certainly always interested in housing, but I first rented a room when I moved to Atlanta in 2002. And from there, ended up being able to purchase my first house, which really changed the, the, the trajectory of my entire career and really the rest of my life. So we talk about solving housing as a vehicle for financial empowerment. And for me, that was certainly true. And then it happened a couple of times over, but yeah, encountered in 2009, two folks that were living, renting rooms right next door in a house next to one that I had vacant. And they were living on social security income and just didn't qualify

• 1:49Speaker 00

  for any housing option anywhere in metro Atlanta. And it seemed clear that, that this was an option that was both more affordable for them and more profitable for the investor. And so just continued to ask why, why this didn't exist at a much wider scale.

• 2:03Speaker 01

  Interesting. I mean, this is no joke. You've got some serious scale. People can look at the website, but when you look at the traffic, I mean, 68,000 hits per month and a 66 domain rating. I mean, there's some serious activity happening over here. So walk us through, I mean, the hard part about models like this is the chicken and the egg problem. So if I reviewed the site back on launch day in 2017, what would I have seen back then?

• 2:23Speaker 00

  Oh, man. We've been through many iterations since then, Nathan. I mean, we've always been a marketplace, though. I think that's the first, first thing that's really important here is we've, we've never owned the inventory. And the idea was always this two-sided marketplace where the, the people who were struggling to pay their rent could qualify for units and get in almost immediately. And that inventory was always going to be offered by third parties, generally mom and pop investors, but increasingly, we're seeing more and more owner occupants. I think the, the major thing that you would notice between 2017 and today is just the inventory overall. We, we're in 40 states and we can list anywhere in the country. At the time, we finished

• 3:07Speaker 00

  2018 with 82 units and we have 34,000 roughly today. We're the largest marketplace for co-living in the US. So that's, that's probably the biggest single difference.

• 3:18Speaker 01

  That's insane. I mean, okay, so I want to come back to that 34,000 units. Sorry, is that defined by number of beds? Or like, what if there's one unit with two beds?

• 3:25Speaker 00

  Yeah, great, great question. So it's basically, think of it like a per household. So in a, in a shared housing environment, it's an individual bedroom. So we provide, it's typically access to private rooms in shared homes for this 50% of Americans that can't afford their rent. But it could just as easily be a, a studio apartment that is furnished with all utilities included, because every unit has to be fully furnished, it has to include all utilities. But it could be an accessory dwelling unit in the backyard. And whether it's a bedroom, an apartment, or this accessory dwelling unit, we count each one as an individual unit, because it means that you have one household, typically a single person, but increasingly, we're seeing more families, and, and they can rent that unit. So it's just a rentable unit of any kind.

• 4:08Speaker 01

  Some people could say, wait, this just feels like Airbnb, but like for, for, if your budget's lower. But that's, I don't think that's actually what you're doing here, right? How would you respond to that?

• 4:15Speaker 00

  Yeah, a couple of key differences. Like, the first and most obvious is if you were going to look at like the average cost per night for our units, you're, you're going to be less than $30. So it's a lot cheaper than Airbnb. The, the, the more complex and nuanced answer is that our marketplace is relational rather than transactional. And what I mean by that is when you book an Airbnb or even an Uber, you have a specific moment in time that you are rating, when you rate that transaction and that individual experience. Well, in housing, you have a move-in experience, and then you have a living experience on day seven, and a different experience probably

• 4:59Speaker 00

  on day 32, or 185, or 372. And like, your journey as a consumer changes across that life cycle. And so the technology and the infrastructure and all of the systems need to be built around that relationship, rather than just the individual transaction. And as any marketplace, like, we ultimately sell trust. And we need to maintain trust at all of those different anchor points in, in the relationship. So it's pretty complex.

• 5:31Speaker 01

  What's the average length of stay?

• 5:34Speaker 00

  About nine and a half months on, on average. Like, 11% of users, give or take, will move out within the first month or month and a half. Then you have 25% of all cohort users who will stay for more than 12 months. And like, the first co-living property that I opened in 2009 that I was referencing earlier was the, the third person who moved in there, she's still there today, 17 years later, living in the exact same room, still paying week to week. And like, the reason we ultimately build weekly is just because it's much more user-friendly, it's much easier to budget around, it's often how a lot of the workers get paid. But yeah, it's just like how we live versus monthly or, or daily, which is, which is more complex.

• 6:17Speaker 01

  We already know the, the supply side. You're supplying 34,000 units available per month. How many right, right now today are filled?

• 6:25Speaker 00

  So today, we're at like 25,000 that are, that are filled. For us, we look much more at how quickly are we filling rooms? And how bookable are those rooms? Because our hosts will set pricing. If you set pricing for a, a very small bedroom at $1,000 a week in Jacksonville, Florida, guess what? Like, it's not going to get filled and there's, there's no amount of marketing I can do to fill that room. And, and so you look at, okay, well, how bookable is this actual room in terms of the quality, the pricing, photos, et cetera, and, and just how available is the owner? But then separately, how quickly can you refill those rooms? And if I added a unit yesterday, it's not realistic for me to expect that it's going to be filled today. But across the platform,

• 7:08Speaker 00

  we know that the average time to refill an individual unit is about eight days, which from an apartment perspective is blazingly fast. And if you're in, in many markets where there's higher demand, it could just be a couple of hours, because there are no showings and people could be moving in 48 hours later after that, after that booking. And so it's just much faster than, than like a traditional residential experience. But, but it also means that the metrics are different.

• 7:34Speaker 01

  Okay. So I think I understand the model now. You've walked through the marketplace. How do you make money?

• 7:39Speaker 00

  So we make money because if we source the resident into that unit, we take the first 10 days of that stay to help recover a, a good portion of that marketing expense. And then we get paid 8% of ongoing transactions. So we only get paid when our, our hosts actually get paid, which is a key differentiator with our marketplace compared to what we refer to as demand aggregators, like a, like a Zillow or Realtor.com or Apartments.com, where you're paying for leads. We, we are absolutely aligned with the incentives of, of the owner, so that we only get paid when they get paid.

• 8:17Speaker 01

  So let me try and do some random math here. If you have 25,000 filled as of today, and you told me the average nightly rate across your platform is 30 bucks a night, times an 8% take rate on that, that would be, I mean, what? That's like $60,000 a day, right? Something like that?

• 8:34Speaker 00

  Your math would be better than mine if you can do all of that in your head, Nathan. But, but yeah, we're, right now, I mean, like, we're, we're grossing over $250 million a year in, in transaction revenue.

• 8:47Speaker 01

  Where was it one year ago? I mean, that's the way to value the growth of the business, right?

• 8:50Speaker 00

  Yeah, so we're, yeah, we're, we're growing 70% year over year and have for about the past three years.

• 8:57Speaker 01

  Where did you, was there ever a moment between 2018 and your rapid growth now where you said, holy crap, this model's just not going to work. I'm shutting this thing down?

• 9:05Speaker 00

  Short answer is no. And there have been some brutal, brutal downs, but also some, some great ups. And I think for me, I just, I knew that it only ended when I said, I quit. And I knew that I was never going to say quit.

• 9:21Speaker 01

  One of the patterns that I'm studying deeply right now, sort of in this age of AI, is this concept of sort of ABC, which is atoms plus bits plus capital. You're a really interesting example of this, because I see on your LinkedIn, you're not just doing the bits side, the digital, PadSplit. You're playing in atoms as well, I'm guessing, with Striant Investments, real estate investment, construction company. So you're, you're owning the full stack, from what I understand. Tell me how you think about sort of just the new world we're going into and the vertical alignment between your digital and physical worlds?

• 9:52Speaker 00

  Striant's a totally different business. Like, that was what I, I started many years ago, and ultimately evolved into this idea behind PadSplit. But even though Striant is a host, we only have like 90 doors.

• 10:07Speaker 01

  Okay, so that's actually smaller than I, smaller than I would have thought.

• 10:10Speaker 00

  It's, now we have other assets, but, but for, for, for PadSplits, like, yeah, we're only at like 90 individual units on, on PadSplit. So it's, it's really tiny by the grand scheme of things. But you're right in that, in your atoms versus bits comparison, in that like,

• 10:30Speaker 00

  We, the product, if you will, is not just the marketplace. The product and the experience that any consumer has is very much informed by not just the home itself and the platform and our customer service, but their other roommates. And so the complexity of this particular business gets pretty intense pretty quickly as you start to compile, okay, well, this unit with these five or six other roommates and trying to identify which one of those things may be negatively or positively impacting the overall experience for that, for that customer gets to be pretty wild, pretty, pretty quickly.

• 11:15Speaker 00

  And I think the, one of the biggest learnings for us early on was, you know, we, we initially tried to control as much of that experience as possible, just through brute force. And like setting more rigorous standards around every element of the business. But ultimately what we realized was just, you can't be an expert in every market and every housing type and every relationship and every decision. And so you have to trust the people who are closest to the problems with the agency to actually go solve those problems. And what we can do as a marketplace is provide better information, better customer service

• 11:59Speaker 00

  overall, and frankly, most importantly is, is better incentive alignment between all of the parties so that we can get to the, the best outcomes that are, that are possible.

• 12:09Speaker 01

  My follow-up question to that would be, anyone that sits on GMV can basically build an individual pro forma for the underlying physical asset. For example, we lend at Founder Path, we are a debt firm, right? We lend money to software companies. We, we lend money to a lot of software companies that sell to waste management companies. All those waste management companies need dump trucks, like waste trucks, and they're funding the dump trucks, right? You sit on the, so in other words, you know how much this one here in Austin, Texas, you could rebuild their pro forma because you, you sit on the revenue. My follow-up question would be, you know, could you go roll up all the physical assets? But it looks like there's so much fragmentation here, it actually would not make sense. This isn't like one building with 30 beds you could roll up selectively. These are like literally individual, really spread out.

• 12:50Speaker 00

  Yeah. So, so they are. I mean, but there are some of these funds, Mogul is one, where it's a crowdfunding platform, where they are buying existing performing pad splits from lots of these different owners and then reselling shares in those assets. Yeah.

• 13:07Speaker 01

  Yes, exactly. Do you have a partner, you have a partnership with them?

• 13:11Speaker 00

  Oh, we do, we do. And, and so they own a bunch of pad splits that are performing very well because they did the math and saw, well, gosh, on a, on an overall yield basis, this is fantastic. And you just can't find a, a comparable type of investment in real estate because you're, you're filling these units, you're getting a really high yield. And the, the difficulty historically has been aggregating enough of these things where you can have that yield across a large enough denominator.

• 13:42Speaker 01

  Economies of scale, yeah.

• 13:44Speaker 00

  Exactly. But for, for me personally, and this kind of circles back to your first question around the, the mission, like, I had a choice early on about, did we want to be, we kind of had three options. Like, did you want to be a marketplace like Airbnb? Did you want to be a, a masterlessy like WeWork at the time? Or did you want to be the underlying owner like Invitation Homes? And for me, it was abundantly clear which choice to take because in the, even though Invitation Homes was a massive company and very stable, they had 60,000 houses or so at the time, Airbnb had 6 million units. And so if my goal is to solve the problem and ultimately solve the housing crisis, then

• 14:29Speaker 00

  it's super clear, I'm going to go choose this Airbnb model because I don't need to own more real estate.

• 14:35Speaker 01

  Tell me more about how you funded the business. So you bootstrapped or you raised capital?

• 14:38Speaker 00

  So, so we bootstrapped initially and then I raised from VCs in 2019, mostly West Coast, but some here in Atlanta as well. And then, yeah, we, we've gone through our Series B. Our, our Series B was 2021 though, so it's been, it's been a while. We're, we're now able to, to get debt capital, not that we're, we're closed off to equity funding going forward, but we've, we've always been a little bit of an ugly duckling. And it's not like you can pattern match your way into, into a decision to invest in this business. And let's be honest, like PropTech in general, hasn't been having its, its best run here in the last couple of years.

• 15:18Speaker 00

  So we're in a lot of people's anti-portfolios, I think, at this stage of the game. And we've just had to be really lean in the way that we've operated and, and tried to, try to stay as close to break even as we can.

• 15:32Speaker 01

  But, you know, those 2021 days, I mean, there were people raising crazy amounts of money at ridiculous valuations. Did you sort of fall into that trap at all with your Series B in 2021?

• 15:41Speaker 00

  No. No, no, we never, we never did. But yeah, I mean, I had 77 meetings for that Series B and one yes.

• 15:48Speaker 01

  Oh, my gosh.

• 15:50Speaker 00

  So we didn't, I didn't have a ton of options, but, but we only needed one, Nathan. So that's, that's another part of the story. But yeah, but I mean, it's certainly colored my thinking on funding for the business since then was like, we got to get to, to break even as quickly as possible so that we can control our own destiny.

• 16:09Speaker 01

  If I like split out that Series A and B, was that like a 20 million Series B, then a 10 million Series A or sort of like that?

• 16:15Speaker 00

  Yeah, yeah. So, so we've raised about 40 million equity total, total for the company at this point.

• 16:20Speaker 01

  What should founders or what can they learn from you about how to negotiate a good debt deal if they're thinking about using debt instead of equity?

• 16:27Speaker 00

  Well, I mean, listen, the most obvious thing is have options, right? I mean, if you have more than one player at the table, then, then you're in a good position. Other than that, it's just, it's just a question of how, how willing are you to say no? And are you in a position to be able to say no? And so one of the reasons after going through that, that Series B experience was, look, I want to be able to say, whether it's a debt or an equity investor, to say, I would like your money, I can use your money, I think you're a valuable partner, but under no circumstances do I need it. And, and, and simply being in a position as a company to say, I don't need this money, I think is, is by far the most powerful piece of advice I could give.

• 17:10Speaker 01

  What have you learned about what you think a founder should optimize for if they are sitting on three or four debt term sheets?

• 17:15Speaker 00

  Like real gut check, who do you think you can trust? Who's shooting you straight? People will ultimately show you who they are if you give them an opportunity. And who maybe slid something into some term sheet or the actual loan docs at some point in time versus who's the person who's just been totally straight up with you from day one? And one of the things I generally appreciate about debt relative to equity is like that relationship is usually pretty clear cut. I can pay you off, right? If, I can, I can always pay you off and like, that is, that is the end.

• 17:49Speaker 01

  Yep, yep. Guys, if you want to learn more just about the world of, you know, debt with private software companies and marketplaces, the biggest lenders into this space are the public, there's about 16 publicly traded BDCs that do most of these deals. They've got about 30 billion today outstanding specifically to software exposure. So whether it's Ares or Blackstone or Blue Owl, you know, all these publicly traded firms are publicly saying, hey, these are the weighted average interest rates we're charging. They're generally coming down over time from a high of like 11.4% in Q3 2023, down to about 9.2% in Q4 2025. Atticus, I'm bringing all that up because again, people I think underestimate, there are a lot of companies that use debt to scale and keep their equity and it makes a great outcome for the founder as long as it doesn't blow you up.

• 18:31Speaker 00

  Yeah, yeah, exactly. And I think we are blessed with, with an outstanding CFO and, and that's another key part of this puzzle that we haven't talked about at all is someone who always has their eye on the dial to make sure you're not going to blow up and that can run projections across all these different scenarios and all these different term sheets.

• 18:51Speaker 01

  You just recently closed a deal. I mean, it was public knowledge, ORIX put it up on their website. Yeah. So why, why ORIX? Why were they the right choice for this new funding?

• 18:58Speaker 00

  Yeah. So, so in our case, we had been looking for a line of credit previously and we had closed a line of credit with a bank and, and got great terms. And we were, we were just in a position where ORIX had approached us, we'd talked to them previously. And they said, hey, we know that you just, you closed a deal with this bank, we know them, we like them. If they were able to underwrite it, we think that we'll be able to. And yeah, much like lots of these funding events, it was a relationship that, that had started in, being built two years prior. And so when they stepped up, we weren't out there looking for this type of funding. But when it showed up in our laps, we said, well, yeah, we, I think we can make this work and, and let's go.

• 19:41Speaker 01

  So do these guys take out any prior debt you had on the balance sheet? Or are they like stacked now, like some people, people do unit tranches, like an A piece, a B piece, et cetera?

• 19:49Speaker 00

  So, so they, they would have, but in this case, we didn't, we didn't need them to. So we've got, we've got a line of credit and this, and this facility.

• 19:56Speaker 01

  Got to give your team some love too. What's your team size today? How many folks full-time?

• 19:59Speaker 00

  240 folks.

• 20:00Speaker 01

  Holy mackerel. How many of them, I guess, what's the split? Is it mainly engineers or, I mean, what's the split?

• 20:05Speaker 00

  So that includes our customer service team, which is our largest, which is about 100 people. Engineering's still pretty large, but we've got, we've got a lot of mouths to feed.

• 20:14Speaker 01

  Yeah, that makes a lot of sense. And then how are you, I mean, is AI going to dramatically impact your business at all?

• 20:20Speaker 00

  So, I mean, I don't think it will impact us in, in a negative way. We're, we're talking about moving people into physical spaces. I mean, you're talking about apps, right? Until AI starts paying the rent, like.

• 20:32Speaker 01

  Yeah, it's a long way.

• 20:35Speaker 00

  But, but at this, but at the same time, like it's absolutely impacting our overall business and how we approach business. And I mean, customer service case in point, as you can imagine, and the variety of tickets that, that we have that are coming in from residents who are sharing homes together. Like, and, and the, the capability of any individual personal agent to leverage AI to answer that, answer that question appropriately is, is massive. Search algorithms, the amount of data that, that you have and can, can leverage to just get smarter about how you conduct the business. There are lots and lots of ways that, that we are absolutely just improving our productivity.

• 21:18Speaker 00

  But I'm not particularly worried about AI threats to the business. And our ability to, to generate demand for these units is not something that I think AI, at least in its current form, is, is able to replicate. Brand matters. And, and I'll say again, like we sell trust. So at the end of the day, that's really tough to, to replicate entirely, especially when you're talking about moving real people into, into real spaces.

• 21:49Speaker 01

  All right. Last question. If someone comes to you and offers you 150 million all cash to sell the company today, do you take it?

• 21:54Speaker 00

  Hell no. That's easy.

• 21:56Speaker 01

  That was a quick, that was a quick answer.

• 21:58Speaker 00

  I was only able to start this, this business because I basically had my, my finances covered through my work with Striant, which is still around and still flourishing. And this was really about solving the problem and, and how do we help solve the affordable housing crisis, one room at a time, while leveraging housing as a vehicle for financial empowerment? And that's, that's what we're here to do.

• 22:20Speaker 01

  Guys, there you have it. Atticus, if people love this interview and want to follow your story, where can they find you online?

• 22:25Speaker 00

  Yeah. So you're going to find me on LinkedIn more than anyplace else. Otherwise, just go to padsplit.com.

• 22:31Speaker 01

  Really great mission, really great growth story here, a really great cause in general as a public benefit corporation. Atticus, thank you for taking us to the top.

• 22:38Speaker 00

  Absolutely. Thank you, Nathan. If you enjoyed that interview, you should click here to subscribe to the channel so you don't miss new interviews every Tuesday. If you've got some free time and want to listen to the next interview right now, click right here. Lastly, subscribe wherever you get your podcasts. We're on Spotify, Apple Podcasts, and here on YouTube.