Unlocking cash by sharing possessions

The sharing economy has changed the world of holiday rentals (Airbnb), vehicle ownership (Zipcar) and transport (Uber, Lyft, Gett).

But what about the plethora of possessions we accumulate but barely ever use – from the camera gathering dust on a shelf to the bone-dry kayak in the garage? Plenty of other people would put them to good use given the chance.

Enter Fat Llama, one of the latest online businesses to join the sharing economy, which has created a marketplace where users can rent almost anything, saving them money and allowing people to unlock value by sharing possessions.

Airbnb co-founder Brian Chesky once pointed out that there were 80 million power drills in America that are used for an average of 13 minutes. “Does everyone really need their own drill?” he asked.

Unlocking cash by sharing possessions

The three founders of Fat Llama had the same thought when they were working on their original business plan of creating a desk-sharing company by leasing offices, renovating them and subletting the desks.

“We found that we were buying tools, drills, ladders and decorating equipment which we just couldn’t sell after we’d finished an office,” says Chaz Englander, Chief Executive. “We could probably have found those items in the same building as the office, but there was no means of renting them from their owners – and that’s how Fat Llama started.”

Within the next ten years, we foresee that the Internet of Things will be showing us almost everything we own online.”

By listing their possessions on the Fat Llama website, the owners can make some money, while the borrowers avoid the cost of purchasing them. And if both parties live locally, borrowing can be done quickly, outside the opening hours of hire shops.

The three co-founders met each other through school and university, coming together in 2014 at what was known as Silicon Roundabout in East London. Chaz Englander had studied accounting and finance, having wanted to get involved with start-ups from a young age.

Rosie Dallas, a graphic designer, is Chief Operating Officer who runs day-to-day business operations. And Owen Turner-Major, Chief Technology Officer, comes from a software background and built the whole platform from scratch in mid-2016.

While others had tried to create similar businesses in the past, Fat Llama’s unique selling proposition was that any item lent out under its scheme is covered against loss, damage or theft up to a value of £25,000 by an insurance-backed guarantee.

This took time to organise because insurers were unfamiliar with the sharing economy and found it hard to quantify the risks involved. Once this was resolved it provided a crucial differentiator for Fat Llama’s offering.

Underwriters will insure anything if the numbers make sense and they can see it will make a profit.”

“Underwriters will insure anything if the numbers make sense and they can see it will make a profit,” says Englander. “The three of us became mini insurance experts to convince them that it would be profitable, while Owen created an algorithm which could assess the risk of individual customers from the way they behaved on our website. It worked, and it learns from any mistakes so that it only gets better – and it convinced an insurer to take us on.”

The risk has turned out to be very low in practice – perhaps one in ten thousand rentals goes wrong. The co-founders put this down to the peer-to-peer nature of the transaction, which creates a bond between them.

Peer-to-peer car hire in the US demonstrates the same phenomenon: their insurance claims ratios are much better than those of rental firms like Hertz and Avis.

The co-founders believe Fat Llama appeals to millennials who are much more environmentally aware than older generations, and see over-consumption as a cause of environmental damage.

As Marianne Johnson, US Consumer Equity Analyst for Pictet Wealth Management, puts it: ‘Millennials today don’t care about cars: cities are growing, smartphone mobility provides freedom, and delayed family formation makes it easier to use public transport.

Since most Millennials live in cities, they are close to supermarkets and able to shop more frequently. Shelf-life, once a major selling point, is no longer an issue.”

‘Since most Millennials live in cities, they are close to supermarkets and able to shop more frequently. Shelf-life, once a major selling point, is no longer an issue.’

Fat Llama, which has already raised $13.2 million from tech investors, is expanding into U.S. cities, having launched in New York in April 2018, with further launches planned for Los Angeles and San Francisco.

‘Within the next ten years, we foresee that the Internet of Things will be showing us almost everything we own online”, says Englander.

“We anticipate that we will become a platform that connects all these items online, allowing people to borrow them unless the owners need them. And that will ultimately reduce consumption, to the joy of Generation Z.”