South African entrepreneurs tap into student housing demand

Alexandria Procter, CEO of DigsConnect

Alexandria Procter, CEO of DigsConnect

DigsConnect is an online student housing marketplace started in 2018 by co-founders Alexandria Procter and Greg Ramsay-Keal in Cape Town, South Africa. Jeanette Clark speaks to Procter about how they built the business.

In 2014, Alexandria Procter, while pursuing her bachelor of science degree, was appointed to the University of Cape Town’s Student Representative Council (SRC) as the head of day students. Little did she know that her life was about to take a turn into entrepreneurship due to a problem she and many of her peers were facing: student housing.

“In my first year, I had accommodation in one of the residences, which was fine, but it was in my second year that I realised how hard it was to find a safe and affordable place to stay. It was a nightmare,” she remembers.

As part of her responsibilities in the SRC, Procter was tasked with manually connecting students to landlords offering suitable accommodation near the campus. In November of that year, she built a straightforward website over a weekend, aiming to automate the process. She had seemingly found a solution to a major pain point, as the site quickly attracted significant traffic.

Greg Ramsay-Keal, who was on the SRC with her, then suggested transforming the site into a fully-fledged business.

In 2016, Procter gave up on the idea of her post-graduate degree to focus on the fledgling venture. Several iterations later, DigsConnect was officially registered and launched at the beginning of 2018.

The first business model

Initially, the platform was exclusive to registered UCT students, with accounts only verifiable through university-issued email addresses. Although the marketplace has evolved over time, Procter asserts that these safeguards have always been a top priority. She emphasises that ensuring safety and security are paramount in persuading prospective tenants and landlords to register.

Revenue generation was not their primary concern during the early stages. However, a turning point occurred when a landlord contacted the founders, expressing a willingness to pay a fee to have his listing prominently displayed in searches.

“We thought we had made it to the big leagues,” Procter laughs. “We opened a Capitec account and received our first payment of R50 (US$2.5).”

The business model proved effective for some time, enabling the company to expand into cities with large universities, such as Pretoria and Johannesburg. The small team visited campuses, taking the time to listen to students and understand their needs. Following these interactions, they began contacting landlords to solicit listings.

By the close of 2018, DigsConnect had amassed more than 2,000 listings. To thank its users, the company engaged in unique guerrilla marketing tactics such as distributing R10,000 in R10 notes at a UCT campus square. The following year, DigsConnect secured R12 million (approximately $608,000) in seed funding from an investor. Everything was looking up.

A necessary change

Then, the world came to a standstill in 2020, with campuses becoming eerily empty due to the Covid-19 pandemic and the consequent movement restrictions imposed by the government.

Suddenly, the pay-for-preferential-placement model stopped working. With no students booking accommodation, landlords stopped paying for their listings to be highlighted.

“It was horrific, but looking back it was the best and hardest lesson I have learned,” Procter says of the business surviving through the pandemic. “It was like an MBA every week, for two years, with all the stress that comes with that. The luxury of time and figuring it out was gone. You have to get your value contribution and unit economics spot on, right away.”

The company opted to switch its revenue model, choosing to charge a commission on the lease value instead. Once a landlord successfully secured a tenant and a lease was signed, DigsConnect would earn a 3.5% commission on the value of that lease. “This was a more sustainable model.”

As economies in other parts of the world began to reopen faster than South Africa, DigsConnect sought international expansion, exploring opportunities and potential partnerships. In 2022, invested an undisclosed amount in DigsConnect and, as recently as February of this year, announced an increased stake in the company., founded in 2011 with its headquarters in Dubai, is an international student accommodation marketplace.

“The partnership gives us access to their global stock,” says Procter. “We rely on them for international placements and they rely on us for South African placements.”

DigsConnect co-founders Greg Ramsay-Keal (left) and Alexandria Procter

DigsConnect co-founders Greg Ramsay-Keal (left) and Alexandria Procter

Not just students anymore

On DigsConnect’s website, it states, ‘Find shared housing for students, expats, and young professionals worldwide.’ Rising rental costs in global cities have made affordable accommodation a challenge for the younger working demographic – a problem Procter believes DigsConnect can solve.

“The majority of our users are still students, but we do have young professionals coming through,” she says. “We’ve added a section in our application form where a prospective tenant can indicate in which category they fall.”

Purpose-built student accommodation trend

Procter points out an interesting trend: the rising number of purpose-built student accommodation – housing specifically built for students by private developers – providers listed on the platform. “Property companies are seeing the demand and realising how big an opportunity this is.”

Large South African property developers like Growthpoint have noted that purpose-built student accommodation often outperform other real estate segments due to fundamentals like high occupancy rates and steady rental income.

“We’ve seen how companies are repurposing and refurbishing office buildings, standing empty since Covid, into student accommodation,” says Procter. “One such client filled up the rooms within a week on DigsConnect.”

An office in the UK and growth in Africa

Currently, Procter splits her time between an office in the UK and one in South Africa.

A physical presence in Europe was necessary since the company started including international listings, says Procter. There was a lot to learn from a more sophisticated student accommodation market. “We are taking some of those lessons back to our bigger landlords in South Africa.”

The company is also in very early stage talks in Nigeria, but for the moment, the focus is on providing students in the rest of Africa with accommodation options when they study abroad.