Business analysts work with organisations to help them improve their processes and systems. They conduct research and analysis in order to come up with solutions to business problems and help to introduce these systems to businesses and their clients. Steve Coogan takes a deep drive into Badi, a proptech startup!

Badi

Foundered by Carlos Pierre and Alvaro Córdoba on 25th September 2015, Badi is a room rental platform that allows anyone to advertise, find and book rooms from anywhere in the world. 

The platform aims to unlock available rooms throughout the world. 

Badi has succeeded in raising Series B round totalling $45 million from Spark Capital, Mangrove Capital Partners and different US investment funds.

The main objectives of Badi are: 

1. Create a hassle-free product to make it easier for users to find a place to call home
2. Create a sense of global community and belonging
3. Help cities combat negative effects of population growth
4. Provide the power to roam and relocate

Business Model

In essence, Badi uses technology to deliver value for landlords and tenants who want to use a spare room instead of a hotel or an individual let of an apartment.

The business canvass has been used to extract data to identify the model and how they create value and their current strategy and to eventually make a profit.  

Whilst no direct interview was conducted, the press releases and other content found left a large enough footprint to obtain the data required.

Strategy Position

It’s Badi’s goal to make flat renting more efficient as they see a global shortage of homes – from 2050, 54% – 64% of the global population will be moving to cities. 

The two founders at Badi have developed a strong team. They both studied at MSc level in either Business Administration or Finance to leverage their skills to create a company. Four years on, they have recruited a team of 144 including a CTO, previously a Google engineer (Alberto Betella). The hiring of Betella could have been an investor play to allow them to raise their service B round of funding, as he started shortly after the closing round in March 2019 (as per Crunch Base).   

The structure of the company is always evolving to either help with their strategic position in the marketplace or to develop their product. This is validated via their employment and innovation strategy, whereon they hired Dela Requena Borràs (Brand Manager), who was shipped in two years after inception (June 2017 – August 2018) to execute a rebrand after monitoring and assessing and responding to their learnings. This coincided with a round of funding of $10m in February 6, 2018 and monitoring their market position and improving their unfair advantages, always building on the last interaction. Whilst Badi advertise as a global company we can see from their hiring policy that they are strategically attacking the US market with hires from Senior Sales and Marketing Operations along with City Launcher. All other vacancies are for Barcelona at HQ, directed at acquiring skills for software development, UX and copywriting.   

From the strategy canvass, we have compared Badi with Spareroom for a direct comparison of their competencies and how they havbusiness analyst consultant e carved out a blue ocean strategy. Airbnb doesn’t look to be a direct competitor as most people I have spoken to associate Airbnb as a weekend or two-week holiday platform. Badi mostly mirrors Airbnb’s competencies and supersedes them in areas like price and company culture (as per Glassdoor’s).

Badi is free in the UK and they have partners such as Stripe for payment in other territories.

This is all tied into a global strategy and allows them to attract VCs such as Spark, Goodwater and Maygrove.

From the Strategy Canvass above we can see that Badi has created a blue ocean strategy from its direct UK competitors such as Spareroom (UK) and others, which is displayed in the illustration below. From the canvass, Badi looks very similar to Airbnb – they are not directly competing in that market but there is some crossover. They are currently free in the UK but other territories may charge. There have also been remarks in the press that Badi is like ‘Tinder for roomsharing’, which is in tech alignment (Territory Specific).

Market & Industry – Strengths

Badi operates in the real estate market helping landlords rent rooms and tenants rent at a cheaper price. The top down market assessment has been adopted to assess the opportunity, along with some assumptions of the number of people who may use the service with a modest market share of 10%. This is predicted to be a growing market. The share economy is growing as is predicted on where the market is heading.

A macro benefit of the market in the UK is the Rent a Room (tax relief) which is currently up to £7,500 a year tax-free. This could also be used in marketing material, of which I’ve not directly seen to date.

Badi’s current customer segment of Spareroom’s globally is being executed with pace and agility. As they travel through the S Curve of strategy they have also opened up new market opportunities and have started to compete in different segments.  

Using Porter’s 5 forces above I’ve used the most relevant competency of Badi for analysis.

Threats: There is a low barrier to entry to this market but an incumbent will have to be well capitalised for marketing and technology advances in this marketplace. Requiring a $45m investment could be seen as a barrier to entry. Along with a strong structured business and superior competencies as well as innovation cycles present.

Bargaining Power (Buyers)

Badi has a unique offering with features such as UX and AI, and it’s free and simple to use, as well as for users to transfer to.

Substitutes

There are substitutes displayed in the graphic (Figure 4):

Bargain Power (Suppliers)

This is a relatively low cost market but Badi is currently offering it for free.

Rivalry Amongst Current Competitors

There is a lot of rivalry in this space but Badi is by far the strongest competitor in today’s market of spare rooms.

A direct/indirect competitor such as Airbnb competes in the same space – spare rooms – but Badi isn’t yet concentrating on other segments such as holiday lets or house swaps. Other incumbents have raised $13m as per the Competitive Comparison table in reference below.

Business Advantages & Threats

Badi faces fierce competition in the marketplace with a handful of the competitors also raising large funding rounds and having access to human resources. However, Badi’s execution and strategy have allowed them to achieve a lot in a short space of time.

Advantages

The mass advantages of Badi is its resources, such as the $45m fund, plus the deployment of the capital into its human resources that’s resulting in a better performance than its rivals. In my opinion, this success has opened up opportunities to enter into other markets that may not initially have been identified as an opportunity at the outset. Badi has taken advantage of technology evolution as companies like Spareroom wouldn’t have been aware of the use of AI, UX, V/C funding as it is today, and seeing Airbnb as a competitor or a potential customer segment to target. The political uncertainty of Brexit could also work in its favour as people will be more cost-conscious and will seek alternative ways to improve income especially as jobs are being cut, such as at HSBC and JP Morgan. This is also a global standpoint. The market is also due to expand with a global population growing from 7bn to 9.8bn by 2050. 

Threats

Using the PESTLE and SWOT framework ‘Weakness & Threats’ we can see how they both relate to one another, clearly outlining how external factors can influence the business at no fault of its own. Above we mentioned the bedroom tax and its impact, if removed, could affect volumes or a lawsuit against Badi for not outlining the risk of having to pay tax. As a global company it’s potentially difficult to keep up to date with such changes in legislation and they could find themselves facing a lawsuit. There are also jurisdiction challenges with technology and laws, such as one territory having one law and another territory having another. This could pose threats to the company. Other threats could be the likes of an event such as the mass shooting at an Airbnb Halloween party (Appendix) or a sexual assault, which could put pressure on the platform policies and whether they can roll out globally. 

Is the sharing economy going to change because it hasn’t always been a cultural feature, as ownership was more prevalent previously? Is the globalisation era coming to an end as trade wars with US, China and Brexit take effect? There could be a world war in the mix too. Another weakness and threat is a change in policy like the letting fee ban in the UK could affect landlords appetite to let spare rooms with no security. 

Weakness

The business weaknesses are that it’s currently free and that a price introduction may cause issues if this assumption of a price introduction is the model to make Badi profitable. A new incumbent could create a new blue ocean strategy in five years whilst Badi is trying to become profitable from pressure from the investors. Also, having such a young team can be both an advantage and a disadvantage as the internal management of people within the organisation can be affected by a lack of experience of managing people. With such growth new issues will arise and the skills need to be either acquired or honed, which takes time to mature. 

Current Strategies

Badi is constantly taking market share with Spareroom as target market on a global scale. This has been carefully executed and constantly being changed from brand strategy, pop-up marketing tactics and cities around the globe along with ads on tubes, buses and adwords.

Alternative Strategies & Directions

> Demonstrating an advanced understanding of how all identified strengths, weaknesses, opportunities and threats impact the viability of the business.
> Drawing upon this assessment to develop viable alternative strategies or directions to achieve business growth and sustainability. 

> Successfully combining all findings to identifying several strong alternative strategies or directions for the business.

Badi has an exceptional execution to market from creating their own blue ocean to delivering their offering to the global market, with access to this community they have, and continuing to create their own alternative markets to enter into. For example, the Airbnb space and Zoopla with sales and letting, as they have confirmed in a press release that property is the largest commodity in the world at $271tn. They could also offer products for the home and for travel as their market is likely to require both. With an active audience they could also create a ‘Badi Eat’ as people will already be using the app. They could also create partnerships with airlines to provide discounts/rewards to their community. Another suggestion is a gym offering as they have a young and active community looking to optimise their offering. This is something that other app marketplaces don’t offer. Thus, Badi creating another blue ocean.

Comparative Strategic Assessment

From a community and market point of view this strategy could initially seem a little strange and could undermine their brand but we have seen many companies adopt such strategies such as Uber Eats, Apple going from home computers into music (iTunes) and phones (iPhone) and Amazon literally doing everything under the sun from selling products to acquiring companies such as Ring and the launch of AWS. 

They may have some churn but eventually over time these verticals make sense to the user, and the company can increase potential growth of their overall position and opportunities to be more profitable.

Tools & Reflection

My assessment of the frameworks from the module is that there are a lot of them and you could use frameworks for frameworks sake. However, I’ve used the ones that were appropriate for Badi. I’m sure if someone else used them on this business or if I used the tools kit of framework on a different business I may use them differently or others that may be more relevant. 

The frameworks are a structure to capture thought and data points on a given environment and are tools to be used for the correct task and to observe a company’s internal capabilities and external environment, in order to be able to make more of an informed discussion.

What I have learned from the frameworks is how to identify opportunities and threats, and have visualised weak spots and hot spots within industry sectors or a broader marketplace, and the ability to strategically position a company in a given marketplace. I could see that you get too carried away with the frameworks and could waste lots of time if not used appropriately, whilst pushing my thinking of how to design a company from a structured and positioning point of view, which enables advantages if executed correctly.

The limits of the frameworks are that they may tell you something and you decide to act on an assumption or data point but another competitor may decide to press forward. In the case of Uber, they decided to go ahead with a global taxi app even though there were many legal issues ahead of them. So ultimately it’s the decision-making of the entrepreneur that decides the limitations, opportunities and appetite for risk.

Study Reflection 

Joining a group late initially went against me but later a new member joined the team which made the experience more valuable, sparking new ideas that I didn’t see from the assignment as a whole, so in reflection worthwhile but choose a group carefully as it will have an effect on the results and could be the same for a startup.

Reference

Badi

https://jobs.Badi.com/

https://Badi.com/blog/en/category/about-Badi/Badi-news/

ONS

https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpfirstquarterlyestimateuk/previousReleases

UN

https://www.un.org/development/desa/en/news/population/world-population-prospects-2017.html

Tinder for flatmates? New app will help you find your perfect roomie – Evening Standard

https://www.standard.co.uk/tech/flatmate-finding-app-uk-Badi-a3842546.html

https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpfirstquarterlyestimateuk/apriltojune2019

Source Airbnb: https://www.theguardian.com/us-news/2019/nov/06/halloween-party-shooting-killed-five-response-airbnb-policy

Job losses Bloomberg

https://www.bloomberg.com/news/articles/2019-08-15/banks-announced-almost-50-000-job-cuts-this-year-led-by-europe

The Independent

https://www.independent.co.uk/news/business/news/hsbc-job-cuts-losses-bank-europe-asia-uk-latest-a9145616.html

Appendix

Interview Questions (not used)

How do they use AI?

What’s the value add?

Competition?

Why did you think of building it?

Where did you start and how did you get here?

How do you use AI?

How do you manage safety for both parties

Any issue with breakages, sexual safety etc

What’s your biggest fear?

What’s the vision?

What’s the long term goal, exit raise for IPO?

When did you rebrand and why?

Marketing channels? 

Has a sharing engine

Currently free to use

Competitive Comparison

Telephone call with Spareroom (UK). Pricing model: For free after 7 day anyone contact you, early bird upgrade £10.99 7 day upgrade features +24.99  21.99 2 / 4 week upgrade 

Pricing Model (UK)

Spareroom Balance sheet (attached)

Cost of sale as remained the same for the passed x2 years. However, the revenue is down by 22%, They have new incumbents and could think internally that sales are down but more than likely being disrupted. Also displays market size in UK.

Press Release information

Talent 

Dela Requena Borràs head of product now at Fluff 2018 -2019 for rebranding

Hires Google’s Former Senior Engineering Lead, Miguel Andrés Joins The AI Driven Room Rental Marketplace from Silicon Valley as CTO Also responsible for strategic development areas at Google, San Francisco.

The company, which started in 2015, is experiencing constant growth and has managed to reach 1.5 million users and more than 200,000 rooms listed in four years, in addition to being present in major European capitals, such as London, Paris , Madrid, Barcelona and Rome. This year also saw the announcement of a successful Series B round of $30 million and places the company as the key player to transform the real estate sector.

During 2019, Badi aims to expand the workforce to 100 people, currently there are 65, with the positions of: COO, Chief Operating Officer, General Manager for the main markets and Vice President of Growth, among others. This will see Badi continue to fulfill its mission whilst also attracting international talent.

Lead investors are Silicon Valley VC Goodwater Capital

Tao-Tao, COO of one of the booming German tech companies GetYourGuide and join lex Finkelstein from Spark Capital,

Real estate is the largest commodity in the world, with an estimated $217 trillion valuation. Home ownership in Europe has collapsed within 20 years, so more and more people are looking for non-binding and flexible accommodation option. However, the offering is not responding to demand, which is why the price of rents are continuing to increase.

State: by 2050 the total population living in cities will increase from 54% to 64% There will likely be a shortage of homes for people living in cities, this will lead to an increase in smaller living units or rooms.