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The next generation pit-stop

 

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June 8, 2013

I came across Breather today. The moment I saw it I knew it would be a hit.  Small wonder they’ve already raised $1.5m!

Breather calls itself the ‘zipcar for rooms’. The premise is simple, if you’re in the middle of a city and you need a place to relax, work quietly, or simply take a breather for a short while, then all you need to do is log in to the app, select the nearest Breather room, and book it online. A Breather room is a fully furnished room, complete with a couch, desk, wi-fi and electrical outlets, which you can book for a few hours. It’s a shared space except you don’t share it with anyone else while using it. Once you book it, you can unlock the room with your phone using Lockitron. Like Zipcar, you only pay for as long as you use it. Pretty cool huh?

Breather is positioning itself as a place for you to find some privacy in big, crowded cities. As people become more mobile, and travel around a lot more, Breather seems to provide a very attractive value proposition to them. From big-company execs to startup founders to the growing generation of digital nomads, Breather has something for every one. Need a room where you can work on a presentation before you met with investors, or maybe a space to relax for a bit between meetings? Now you know where to go!

The Breather model is a classic example of innovation in the crowded real-estate industry. You have houses and apartments as permanent living spaces. Hotels and hostels provide temporary spaces with a minimum stay of one day. Then came AirBnb with it’s disruptive model of home owners renting out unused rooms or apartments for short stays. This opened up so many more options for travelers looking for a place cheaper than hotels but with more privacy than hostels.

But what if you want a place to stay or work in for less than a day? Traditionally people would camp at coffee shops or other wi-fi hotspots. While the coffee shop is still popular, especially with young entrepreneurs and writers, it can sometimes be too loud, crowded and uncomfortable. Then came the co-working space with common work spaces for some coding or e-mailing, private rooms for meetings, and lounge to relax and sip coffee. Still, co-working spaces aren’t completely private, and some of the more popular ones can get really crowded. As an entrepreneur at Start-Up Chile, I know how true this is.

With AirBnb and co-working spaces growing so popular so quickly, the industry is practically begging for a solution to the problem of private, temporary spaces. Taking a cue from existing startups in the sharing economy such as Zipcar for cars and  SoBi for bikes, Breather has come up with a model that makes you wonder why you didn’t think of it first. As Michael Carney said in his PandoDaily article, it feels like an idea whose time has come.

Breather hasn’t even launched and it’s already secured $1.5 million in funding. Sure, the idea sounds awesome and we’ve seen other resource sharing startups take off, but that doesn’t mean Breather would as well. It’s practically creating a new sub-industry, but that could also be a major risk because no one knows what direction it could take. So what makes it such a great investment?

To start with, Breather has a great founder in Julien Smith. He’s an established entity in the startup world. He’s an entrepreneur, blogger, speaker and New York Times bestselling author. Most importantly, Julien has social proof and the right connections. When investing in an early stage startup, team is always important, and on paper Breather seems to have that down.

Speaking of connections, Breather already has a great network of suppliers, and that’s only set to grow. Lockitron is already set to provide the room locking/unlocking functionality. They’ve already got partnerships with property managers in New York City. Not that that would be a major problem because homeowners and other property owners would always be willing to rent out unused spaces, as we’ve seen in AirBnb. Next comes their network of cleaners to maintain the rooms. As time goes by they will add more supplier for furniture and similar requirements.

Breather has no major fixed costs or complicated infrastructure needed up front, which is great. All rooms will be provided on a revenue sharing basis. Cleaning and maintenance will ideally be a monthly cost which scales up as the number of Breather spaces increases. The model is capital efficient and after some initial investment in securing partnerships and building a team, Breather will likely reach positive cash flow without requiring more capital.

Scalability is Breather’s biggest advantage. As popularity grows in New York, it would be very easy for Breather to grow into other cities. If all goes well they’ll have property owners in other cities begging to sign them up before they even think of expanding to that city. The idea of course is for Breather to conquer the market in USA and quickly expand globally.

As for the market, if Breather plans to have a presence in every major city in the world then you don’t need an Excel model to say that it’s pretty big. Every year there are more travelers, and more digital nomads and business people city-hopping. In fact, Breather can also be used for residents as a place to host a lunch or teach a class.

The risk of course is that it’s an entirely new market. Recently AirBnb and other similar sharing economy startups have been facing legal issues. Who knows what regulatory issues might come up with this model. I’m no expert on this so I’ll leave it to others to figure it out.

Another risk is the misuse of the system. How will Breather ensure that the service is safe for consumers as well as suppliers? If there are cases of people trashing rooms, or breaking in, they might see an exodus of property suppliers. What of the Lockitron system? Can it be hacked to open rooms without authorization? There will always be someone trying to abuse the system, so it remains to be seen how Breather tackles these.

Ultimately, it’s an exciting new world for Breather, its users and its investors. Count on a number of copycats sprouting up all over the world. It will be interesting to see how Breather grows and if it capitalizes on its first-mover advantage. I for one look forward to using the next generation pit-stop.

So what are your thoughts on Breather? Good investment or bad?

 

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