How PadSplit Grew to 34,000 Co-Living Units and $250M+ in Annual Rent Processed at 70% Year-Over-Year Growth (Interview with Atticus LeBlanc)

Opening: Mission and Scale

Atticus LeBlanc

00:00How 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.

Nathan Latka

00:06You're supplying 34,000 units available per month. How many right right now today are filled?

Atticus LeBlanc

00:12Today, we're at, like, 25,000 that are filled.

Nathan Latka

00:15If you have 25,000 filled as of today, and you told me the average nightly rate across your platform is $30 a night, times an 8% take rate on that, that would be, I mean, that's like $60,000 a day.

Atticus LeBlanc

00:27Right now, I mean, like, we're grossing over $250,000,000, a year. We're growing 70% year over year, and and have for, about the past three years.

Nathan Latka

00:41Hey, 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, are ready to take us to the top?

Atticus LeBlanc

01:00Let's do it.

Atticus's Background and Origin Story

Nathan Latka

01:02Alright. What got you so passionate about this space? Was it just sort of a hobby you you just couldn't let go of? It just took you over in college or something?

Atticus LeBlanc

01:08Yeah. No. I mean, not exactly. I was certainly always interested in housing, but I 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 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

01:34times 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 for any housing option anywhere in Metro Atlanta. And it seemed clear that this was an option that was both more affordable for them, and more profitable for the investor, and so just continue to ask why, why this didn't exist

02:01at a much wider scale.

Nathan Latka

02:03Interesting. 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 in 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 this site back on launch day in 2017, what would I

02:21have seen back then?

Atticus LeBlanc

02:23Oh, man.

From 82 Units in 2018 to 34,000 Today

Atticus LeBlanc

02:24We'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 never owned the inventory. And the idea was always this two sided marketplace where

02:41the 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 major thing that you would notice 2017 and today is just the inventory overall. We were in 40 states and we can list anywhere in the country. At the time, we finished 2018

03:08with 82 units and we have 34,000 roughly today. We're the largest marketplace for co living in The US. That's that's probably the biggest single difference.

Nathan Latka

03:18That's that's insane. I mean, So I wanna come back to that 34,000 units. Sorry, is

03:22that defined by number of beds or like what if there's one unit with two beds?

How PadSplit Defines a Unit

Atticus LeBlanc

03:26Yeah, great great question. So it's it's basically think of it like a per household. So in a shared housing environment, it's an individual bedroom. So we provide, it's typically access to private rooms and shared homes for this 50% of Americans that can't afford their rent. But it could just as easily be a studio apartment that is furnished with all utilities included.

03:46Because 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.

PadSplit vs Airbnb: Key Differences

Nathan Latka

04:08Some people could say, wait, this just feels like Airbnb, but like for for...

04:11If your budget's lower. But that's...

04:12I don't think that's actually what you're doing here. Right? How would you respond to that?

Atticus LeBlanc

04:15Yeah. A couple key differences, like, the first and most obvious is if you're gonna look at, like, the average cost per night for our units, you're you're gonna be less than $30. So it's a lot cheaper than Airbnb.

04:29the 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 on day 32 or 185

05:01or three seventy two. 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 the relationship. So it's pretty complex.

Average Stay, Retention and Weekly Billing

Nathan Latka

05:31What's the average length of stay?

Atticus LeBlanc

05:34About nine and a half months 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 twelve months. And like the first co living property that I opened in 2009 that I was referencing earlier was the third person who had been there, she's still there today, seventeen years later, living in the exact same

06:00room, still paying week to week. And, the reason we ultimately bill weekly is just because it's much more user friendly, it's much easier to budget around, it's often how a lot of workers get paid. But yeah, it's just like how we live versus monthly or or daily, which is, which is more complex.

Occupancy and Room Refill Speed

Nathan Latka

06:17We already know the the supply side. You're supplying 34,000 units available per month. How many right right now today are filled?

Atticus LeBlanc

06:25So today, we're at like 25,000 that are that are filled.

Nathan Latka

06:28Okay.

Atticus LeBlanc

06:28For us, we look much more at how quickly are we filling rooms, and how bookable are those rooms. Because our host will set pricing. If you set pricing for a very small bedroom at a thousand dollars a week in Jacksonville, Florida, guess what? Like, it's not gonna get filled, 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

06:50of the quality, the pricing, photos, etcetera, 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 gonna be filled today. But across the platform, 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 many markets where there's

07:20higher demand, it could just be a couple hours. Because there are no showings, and people could be moving in forty eight hours later 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.

How PadSplit Makes Money

Nathan Latka

07:34Okay. So I think I understand the model now, you've walked us through the marketplace, how do you make money?

Atticus LeBlanc

07:39So we make money because if we source the resident into that unit, we take the first ten days of that stay to help recover a good portion of that marketing expense. And then we get paid 8% of ongoing transactions. So we only get paid when our hosts actually get paid, which is a key differentiator with our marketplace compared to what we refer to as demand aggregators, like a Zillow or realtor.com or apartments.com, where you're paying for

08:08leads. We are absolutely aligned with the incentives of the owner, so that we only get paid when they get paid.

Nathan's Take-Rate Math, $250M GMV and 70% Growth

Nathan Latka

08:16So let me try

08:18and 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 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?

Atticus LeBlanc

08:33Your 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 $250,000,000 a year in in transaction revenue.

Nathan Latka

08:47Where was it one year ago? I mean, that's the way to value the growth of the business.

Atticus LeBlanc

08:50Yeah. So

08:51we're, yeah, we're we're growing 70% year over year and and have for about the past three years.

Nathan Latka

08:57Where did you... Was there ever a moment between 2018 and your rapid growth now where you said, holy crap, this model is just not gonna work. I'm shutting this thing down.

Atticus LeBlanc

09:05Short 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 gonna say quit.

Nathan Latka

09:21One 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

09:44from what I understand. Tell me how you think about sort of just the new world or going into and the vertical alignment between your digital and physical worlds.

Atticus LeBlanc

09:52Striant's 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.

Nathan Latka

09:52Okay.

10:07So that's actually smaller than I

Atticus LeBlanc

10:09Yes.

Nathan Latka

10:09Smaller than I would have thought.

Atticus LeBlanc

10:09It's... Now we have other assets, but but for for for PadSplits, like, yeah, we... 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,

10:30we, 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

11:05be negatively or positively impacting the overall experience for that customer gets to be pretty wild, quickly. 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

11:41type 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 overall, and frankly, most importantly, is better incentive alignment between all of the parties so that we can get to the best outcomes that are possible.

Nathan Latka

12:09My 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 Founderpath. We are a debt firm. Right? We lend money to software companies. We we lend money to 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...

12:30So 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.

Atticus LeBlanc

12:51Yeah. So so they are. I mean... But there are some of these funds. Mogul is one where it's a a crowdfunding platform where they are buying existing performing PadSplits from lots of these different owners and then reselling shares in those assets. Yeah.

13:09Yes. Exactly.

Nathan Latka

13:09Do you have a partner... Do you have

13:10do have partnership with them?

Atticus LeBlanc

13:11We do. We do. And and so they own a bunch of PadSplits 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

Nathan Latka

13:11Yeah.

Atticus LeBlanc

13:11You'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

13:39have that yield across a large enough denominator.

Nathan Latka

13:42Economies of scale.

Atticus LeBlanc

13:43Yeah. 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 master lessee like WeWork at the time? Or did you wanna be the underlying owner like Invitation Homes? And for me, it was

14:11abundantly 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 6,000,000 units. And so if my goal is to solve the problem and ultimately solve the housing crisis, then it's super clear. I'm gonna go choose this Airbnb model because I don't need to own more real estate.

Funding History: Bootstrap to Series B

Nathan Latka

14:35Tell me more about how you funded the business. So you bootstrapped or you raised capital?

Atticus LeBlanc

14:39So, so we bootstrapped initially, and then I raised from VCs in 2019, mostly West Coast, but some here in Atlanta as well. And then, we've, we've gone through our Series B. Our, series B was 2021 though. So it's been, it's been a while. Yeah. 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

15:07not 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. So

15:19we're in a lot of people's anti portfolios, I think, at

15:22this stage of the game.

15:24And we've just had to be really lean in the way that we've operated and and try to try to stay as close to breakeven as we can.

Nathan Latka

15:32But the, you know, those twenty twenty one 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?

Atticus LeBlanc

15:42No.

Nathan Latka

15:42Okay.

77 VC Meetings and One Yes

Atticus LeBlanc

15:43No. We never we never did. But yeah, I I had 77 meetings for that series B and one yes.

Nathan Latka

15:49Oh my gosh.

Atticus LeBlanc

15:50So I didn't have a ton of options, we only needed one, Nathan. So that's not a part of the story. But it certainly colored my thinking on funding for the business since then, was like, we got to get to break even as quickly as possible so that we can control our own destiny.

Nathan Latka

15:50If I like split out that series A

16:11and B, was that like a 20,000,000 series B, then a 10,000,000 series A, or sort of like that?

Atticus LeBlanc

16:15Yeah. Yeah. So so we've raised about 40,000,000 equity total total for the company at this point.

How to Negotiate a Good Debt Deal

Nathan Latka

16:20What 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?

Atticus LeBlanc

16:27Well, I mean, 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 series B experience was, look, I want to be able to say,

16:50whether 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 simply being in a position as a company to say, I don't need this money, I think is by far the most powerful piece of advice I could give.

Nathan Latka

17:09What have you learned about what you think

17:12a founder should optimize for if

17:13they are sitting on three or four debt term sheets?

Atticus LeBlanc

17:13Like 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 I

17:37generally appreciate about debt relative to equity is, like, that relationship is usually pretty clear cut. I can pay you off. Right? If

Nathan Latka

17:37Yeah. Yeah.

Atticus LeBlanc

17:37I can I can always pay you off, and, like, that is that is the end?

Nathan Latka

17:49Yep. Yep. Guys, if you wanna 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 30,000,000,000 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

18:12we're charging. They're generally coming down over time from a high of, like, 11.4% in q three twenty twenty three down to about 9.2% in q four twenty twenty five. 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.

Atticus LeBlanc

18:31Yeah, yeah, exactly. And I think we are blessed with an outstanding CFO. 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 gonna blow up and that can run projections across all these different scenarios and all these different term sheets.

The ORIX Credit Facility

Nathan Latka

18:52You just recently closed a deal. Mean, it was public knowledge. ORIX put it up on their website. Yeah, so why ORIX? Why were they the right choice for this new funding?

Atticus LeBlanc

18:58Yeah, 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 just in a position where ORIX had approached us. We 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, we think that

19:19we'll be able to. And yeah, much like lots of these funding events, it was a relationship that had started 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

19:39we can make this work, and, and let's go.

Nathan Latka

19:40So 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 unitranche, like an A piece, a B piece, etc.

Atticus LeBlanc

19:49So, so they, they would have, but in in this case, we didn't we didn't need them to. So we've got we've got a line of credit in this in this facility.

Team Size and AI's Impact on the Business

Nathan Latka

19:56Gotta give your team some love too. What's your team size today? How many folks full time?

Atticus LeBlanc

19:59240 folks.

Nathan Latka

20:01Holy mackerel. How many of them... I guess, what's the split? Is it mainly engineers or... Mean, what's the split?

Atticus LeBlanc

20:05So that includes our customer service team, which is our largest, which is about 100 people. Engineering's still pretty large, but we've got a lot of mouths to feed.

Nathan Latka

20:15Yeah, that makes a lot of sense. And then how are you mean, is AI going to dramatically impact your business at all?

Atticus LeBlanc

20:20So I mean, I don't think it will impact us in a negative way. We're talking about moving people into physical spaces. I mean, you're talking about atoms, right?

20:30Until AI starts paying the rent, the answer is no.

Nathan Latka

20:33It's a long way.

Atticus LeBlanc

20:35But at the same time, 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 we have that are coming in from residents who are sharing homes together.

20:53And the capability of any individual personal agent to leverage AI to answer that question appropriately is massive. Search algorithms, the amount of data that you have and can leverage to just get smarter about how you conduct the business. There are lots and lots of ways that we are absolutely just improving our productivity, but I'm not particularly worried about AI threats to the business, And our ability to generate demand for these units is not something that I

21:30think AI, at least in its current form, is able to replicate. Brand matters. And I'll say again, we sell trust. So at the end of the day, that's really tough to replicate entirely, especially when you're talking about moving real people into real spaces.

Would He Sell PadSplit?

Nathan Latka

21:49All right, last question. If someone comes to you and offers you $150,000,000 all cash to sell the company today, do you take it?

Atticus LeBlanc

21:55Hell no. That's easy.

Nathan Latka

21:56That was a quick, that was a quick answer.

Atticus LeBlanc

22:00I 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.

Nathan Latka

22:20Guys, there you have it.

22:22Atticus, if people love this interview and want to follow your story, where can they find you online?

Atticus LeBlanc

22:25Yeah. So, you're gonna find me on LinkedIn, more than any place else. Otherwise, just go to padsplit.com.

Nathan Latka

22:31Really 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.

Atticus LeBlanc

22:39Absolutely. Thank you, Nathan.

Nathan Latka

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